October 16, 2015
Dallas, Texas
Dallas, Texas
When I was a kid, I used to proudly wear
around a T-shirt explaining different economic systems using ‘two
cows’ as a metaphor.
It started off like this:
Socialism: You
have two cows. Give one to your neighbor.
Then
Communism: You
have two cows. The government takes both and gives you some milk.
And
Fascism: You have
two cows. The government takes both and shoots you.
I started thinking about this last week
when I was in Caracas, because it turns out that Venezuela is a real life
example of the two cows metaphor.
It started back in 2001 when the
then-President of Venezuela, Hugo Chavez, introduced a law that called for the
redistribution of land.
According to their ‘Bolivarian
socialism’ pipedream, it was immoral for any single person or company to
own too much land. So the government started confiscating people’s
private property.
And any property owner who resisted was
imprisoned. It makes for the perfect entry on that T-shirt I used to
wear:
Venezuela: You
have two cows. The government steals your land and imprisons you.
Needless to say, the law had an enormous
impact on the Venezuelan cattle industry.
Cattle obviously require a lot of land;
and running a profitable cattle operation often means having thousands of acres
or more.
So when the government started seizing
people’s lands, beef production in Venezuela collapsed. Duh.
They went from being entirely
self-sufficient in terms of beef production in 1998, to, within a few years,
becoming the second largest beef importer in the world.
Unbelievable.
Of course, now they have an even bigger
problem.
Venezuela’s currency is in
freefall, and foreign reserves are dwindling.
So not only has beef production
collapsed, but now the country can no longer afford to import beef
either.
Beef imports to Venezuela are down over
80% this year compared with 2014.
And what little beef does enter the
country is subject to the government’s severe price controls.
This has caused massive shortages and
empty grocery store shelves-- textbook consequences that any high school
economics student could predict.
Prosperity isn’t achieved by
government price controls, redistribution policies, and bureaucratic
regulations.
It’s achieved through freedom. By
giving people the opportunity to work hard and take risks. And letting the
market determine prices and the allocation of resources.
That’s supposed to be what
capitalism is. In fact, that was the last entry on the T-shirt:
Capitalism: You
have two cows. Sell one and buy a bull.
Sadly this is no longer the case.
Certainly the West is in much better
shape than Venezuela. But the vast regulatory apparatus being built in the
so-called ‘free world’ is simply appalling.
Here in the Land of the Free, the
federal government alone issues or proposes over 80,000 pages per year of new
laws, rules, and regulations.
This means that, right now as you read
these words, you are likely in violation of a dozen different regulations that
you’ve never heard of, each of which can carry severe criminal, civil,
financial, and administrative penalties.
Children get chased away from running
lemonade stands. Teenagers get turned in to Homeland Security for going
door-to-door offering to shovel their neighbors’ snow.
Businesses must suffer a constant
onslaught of new regulations, licenses, permits, and taxes.
Meanwhile the government continues to
expand its debts at an astonishing rate, saddling future generations with the
obligation to pay a bill they never signed up for.
And the entire financial system is
manipulated by an unelected committee of central bankers who fix the price of
money (i.e. interest rates) as foolishly as the Venezuelan government fixes
beef prices.
This is not the path to prosperity
either. In fact, if I were to update the T-shirt for today, I would include
these entries:
US government: You have
330 million cows. You milk them down to the last drop, tell them that
they’re the freest cows in the world, then train them to be afraid of men
in caves.
Federal Reserve: You
have two cows. You give them to the banks for free. The banks slaughter them
and eat all the meat. You conjure money out of thin air and buy them two more
cows.
Wall Street: You
don’t actually have any cows. But you rake in billions from selling out
your own customers and illegally manipulating the price of milk. The government
gives you a slap on the wrist.
Silicon Valley: You
have two cows. They don’t produce any milk, and your operation loses $500
million per year. Top VC firms invest in your cows, valuing your company at $25
billion.
US small business: You
have two cows. You cannot sell the milk without a permit. You cannot drink the
raw milk that comes from your own cows. The government fines you $10,000 for
failing to file form BS-01519.
US big
business: You have two cows. You hire the former head of the FDA
to be your corporate ‘advisor’. You get a huge government contract.
Now you have two million cows.
How about you-- any ideas?
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