Inflation is not an increase in prices.

Inflation is a decrease in the value of a currency.

Hugo Chavez, the socialist leader of Venezuela is giving the world yet another example of how central planning works. Under his leadership the Venezuelan Bolivar is experiencing rapid depreciation. As of April 2010, the Bolivar was declining in value at a 32% annual rate.


The Chavez government has nationalized privately owned oil companies (sixty of them), metal companies, newspaper companies, universities, banks, food supermarkets, the communications industry and general merchandise retailers. The justification, expressly stated in many cases, was to control inflation. Most recently the Venezuelan stores operated by a large retailer based in France were closed by the Chavez government, without notice, only because they raised their prices in tune with inflation.

The government is running most industries, and inflation is “still” rampant so Chavez reasons the problem must be somewhere else. Now he thinks he has found the cause. Venezuela imports most of its food. “Venezuelan businessmen buy abroad, come here and ask for more than it really costs” he said in fractured English. Translation – If businessmen are unwilling to operate at a loss the government will confiscate their businesses and do it for them.

The Financial Times reports:

Chávez seems to think he can decree low inflation. But it’s absurd,” said one local businessman who is broadly sympathetic to the government.

Last week, he said private companies exploited their workers for economic gain, and then sold their goods for inflated prices. He particularly singled out the country’s largest food and beverage producer, Polar, and recommended that the bourgeoisie read more Karl Marx.

But then Mr Chávez was undone by his own socialist project’s contradictions when 30,000 tons of rotting food were discovered at a warehouse run by state oil company PDVSA. Mr Chávez conceded that corruption and inefficiency was involved, but remained undaunted: “This will not divert us from our route toward our main goal . . . Socialism!”

Yet my liberal friends ask what is wrong with Socialism.

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