Ideas run the world: good ones create freedom and wealth; bad ones, oppression and poverty. Sure, money is important, but money is but a means to an end. Ideas are the end. You are not what you eat; you are what you think.
Politicians in particular fall under the sway of ideas. As John Maynard Keynes put it, "Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. ... it is ideas, not vested interests, which are dangerous for good or evil."
The story of Venezuela, brought from affluence to misery by its own madman in authority, makes this point with singular clarity. In 1914, the discovery of oil on Venezuelan land brought the country vast revenues and produced a relatively free economy. By 1950, Venezuela enjoyed the fourth-highest per capita income in the world, behind only the U.S., Switzerland, and New Zealand. As late as 1980, it boasted the world's fastest growing economy in the 20th century. In 2001, Venezuela still ranked as Latin America's wealthiest country.
 The world's four richest countries in 1950. |
Venezuela's troubles, however, had begun long before.Starting around 1958, government interference in the economy, including price and exchange controls, higher taxes, and restrictions on property rights, led to decades of stagnation, with per capita real income declining by 0.13 percent in 1960 to 1997. Still, it remained a normal, functioning country.
 Between 1960 and 2011, Venezuela's economy grew by magnitudes less than other South American countries. |
Today, the country with the world's largest oil reserves suffers from a severely contracting economy, runaway inflation, despotism, mass emigration, criminality, disease, hunger, and starvation, with circumstances deteriorating daily. Venezuela's economy contracted by 16 percent in 2016, 14 percent last year, and a predicted 15 percent in 2018. Inflation rose by 112 percent in 2015 and 2,400 percent at the end of last year. Economist Steve Hanke of Johns Hopkins finds an annualized rate of 65,000 percent for 2018, making Venezuela's one of the most severe hyperinflations ever. Food shortages led to average weight loss among Venezuelans of 18 pounds in 2016 and 24 pounds in 2017.
What caused this crisis? Foreign invasion, civil war, natural disaster, substitutes for oil, or agricultural plagues? No, none of these. Just bad ideas, pure and simple.
Socialism might have been a proven failure globally, but Hugo Chávez convinced Venezuelans to try it. On becoming president in 1999, he stole, dominated, polarized, and jailed. Benefiting from about $1 trillion in oil sales during his fourteen years as president, he had the means to launch massive social spending programs to secure votes. He could even afford to kill the goose laying golden eggs, replacing competent professionals at the government-owned oil company with agents, stooges, and sycophants. In the grandest socialist tradition, his daughter María accumulated a fortune estimated at $4.2 billion in 2015, according to Venezuelan press reports.
"The trouble with socialism," Margaret Thatcher once observed, "is that eventually you run out of other people's money." Chávez pre-empted that problem by seeking treatment for his cancer in Havana, where, Fox News reports, he "was assassinated by Cuban malpractice." He died in March 2013, about a year before oil prices tumbled, and conveniently bequeathed the disaster that followed to Nicolás Maduro, his still more brutal and incompetent handpicked successor. Once oil revenues shrank, the true costs of Chávez' bankrupt ideas became clear. Venezuela is now sinking into totalitarianism, using military force to keep socialism afloat.
 Chávez and Castro: Would you entrust your fate to Cuban medicine? |
Bad ideas have always existed; but they acquired new importance with the advent of liberalism in the late seventeenth century. Before then, conservatism – respecting tradition while adapting it to new circumstances – had prevailed. An individual king's or religious leader's besotted vision could only progress so far before convention rolled it back. Liberalism rendered tradition optional by optimistically deeming each person capable to think through the great issues from first principles on his own.
Radical ideas proliferated, especially during the French Revolution. The floodgates were opened for theories unmoored from experience and common sense, including conspiracy theories. These ideas incubated through the 19th century and came to terrible fruition after World War I with fascism, Nazism, socialism, and communism. As historian Paul Johnson notes, "The worst of all despotisms is the heartless tyranny of ideas."
The roll-call of tyrants who have imposed their own philosophies over the past century is depressingly long, including Mussolini, Lenin, Stalin, Tojo, Hitler, Ho, Mao, Kim, Nasser, Pol Pot, Mugabe, Assad, Saddam Hussein, Khomeini, and Chávez. They fully understood their own game; as Stalin reportedly observed, "Ideas are more powerful than guns." Each one devastated his fiefdom.
If bad ideas bring horror, their antidote lies in conservative, modest, tried and tested ideas that respect tradition and human nature; not in revolutionary lurches and grandiose experiments but in incremental improvements on customary practices.
At a moment when many Democrats are ignoring the lessons of Venezuela and swooning over socialism, it's back to the barricades in the war of ideas.
 "Make America Venezuela!" |
Mr. Pipes (DanielPipes.org, @DanielPipes) is president of the Middle East Forum. © 2018 by Daniel Pipes. All rights reserved.
Aug. 27, 2018 addendum: After this article was edited, Associated Press reported that Maduro's three stepsons stand accused of siphoning $1.2 billion from the Venezuelan oil company.
May 2, 2019 update: "But what about Sweden?" often comes the rejoinder. It's hardly an economic basked case. Deirdre Nansen McCloskey helpfully replies at "Sweden Is Capitalist." An excerpt:
Sweden in fact is pretty much as "capitalistic" as is the United States. ... If "socialism" means government ownership of the means of production, which is the classic definition, Sweden never qualified. ... None of Sweden's manufacturing or extractive industries has ever been socialized. ... Sweden never followed even the more modest example of America's temporary nationalization of railways during the First World War. ...
When Saab Autos began its descent into bankruptcy, no Swede suggested that the government give the company billions on the security of its worthless stock. When Volvo became a Chinese company, no Swede objected. Compare the determination of the Bush and Obama administrations in proudly capitalist America to socialize General Motors and Chrysler — Chrysler for the second time. ...
Swedish-government spending, true, is very high, half again as large, measured as a share of GDP, as government spending in the U.S. If we could commission the Swedes to come over and run the American government, I'd be willing to feed the beast.
