In fact, we can call this the most literal cover-your-ass operation we’ve seen in some time. Thanks to price controls and government mandates, the manufacturing sector of Venezuela — which once had a solid standard of living based on its oil economy — can’t even produce enough toilet paper and sanitary napkins to serve the needs of the people. Instead of learning its lesson from the socialist failure of Hugo Chavez, his successor Nicolas Maduro has temporarily seized a major paper production facility for violating the rights of Venezuelans by not producing enough price-controlled TP:
A Venezuelan state agency on Friday ordered the temporary takeover of a factory that produces toilet paper in what it called an effort to ensure consistent supplies after embarrassing shortages earlier this year.
Critics of President Nicolas Maduro say the nagging shortages of products ranging from bathroom tissue to milk are a sign his socialist government’s rigid price and currency controls are failing. They have also used the situation to poke fun at his administration on social media networks.
A national agency called Sundecop, which enforces price controls, said in a statement it would occupy one of the factories belonging to paper producer Manpa for 15 days, adding that National Guard troops would “safeguard” the facility.
“The action in the producer of toilet paper, sanitary napkins and disposable diapers responds to the state’s obligation to ensure a steady supply of basic goods for the people,” Sundecop said, adding it had observed “the violation of the right” to access such products.
Yes, that’s how shortages usually start — by declaring a product or service a “right” of the people. When some people can’t afford to exercise that “right,” price controls of one sort or another get applied by the government to back up that “right” by force. Price controls don’t do anything about cost, however, and as profit disappears so does the incentive to produce. Almost inevitably, that results in a government takeover of the means of production or delivery of services, or both.
But enough about ObamaCare. Let’s talk about Venezuela and toilet paper. The Daily Mail provides some of the background on the Chavez-Maduro economic collapse:
President Maduro has cut dollar supplies for importers since winning election in April, creating shortages of goods including toilet paper and butter and stoking one of the world’s highest inflation rates. …
Annual inflation accelerated to 45.4 percent last month from 42.6 percent in July, while the scarcity index measuring the amount of goods out of stock on store shelves reached 20 percent, the central bank said.
The country devalued the official exchange rate to 6.3 bolivars per dollar from 4.3 bolivars in February.
On the black market, one dollar currently buys around 43.97 bolivars, according to dolartoday.com, which tracks the exchange rate on the border with Colombia.
The damage isn’t limited to toilet paper and milk, either. Since the shift to the left by Chavez in the early 2000s, Venezuelan oil production has plummeted by a third. The production rate of 2.3 million barrels a day is its lowest since 1990, and down from a peak of 3.28 million barrels a day in 1997, two years before Chavez won election as President and 3.155 million barrels a day in his first full year in office. The hit to oil income makes it more difficult to keep inflation down and the standard of living up.
Will Maduro learn a lesson from this collapse? Don’t count on it. The state-controlled media is blaming the middle class and the producers for hoarding resources in order to win quick profits (rather than the steady and reliable profits undamaged by inflation that a normal economy would bring, apparently), and hostility toward the socialist utopia built by Chavez and Maduro. Everyone else points to the fact that price controls eliminate any production incentive, and the capital controls that make it impossible to buy the resources for production in the first place. This train wreck probably can’t be avoided short of a full collision.