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Archive for the ‘Venezuela’ Category

Looking through an economic lens, what’s the best country in the world?

If your benchmark is economic liberty, then Hong Kong is the answer according to both the Fraser Institute and Heritage Foundation.

If per-capita GDP or per-capita wealth is your benchmark, then Monaco wins the prize.

And you get different answers if you focus on specific features such as competitiveness (the United States) or ease of doing business (New Zealand).

You can also measure national performance by looking at key economic variables.

And that’s what Professor Steve Hanke of Johns Hopkins University has done.

In the sphere of economics, misery tends to flow from high inflation, steep borrowing costs and unemployment. …Many countries measure and report these economic metrics on a regular basis. Comparing them, nation by nation, can tell us a lot about where in the world people are sad or happy. …To answer this question, I update my annual Misery Index measurements.

Hanke explains the evolution of the Misery Index and how he puts together his version.

The first Misery Index was constructed by economist Art Okun in the 1960s as a way to provide President Lyndon Johnson with an easily digestible snapshot of the economy. That original Misery Index was just a simple sum of a nation’s annual inflation rate and its unemployment rate. The Index has been modified several times, first by Robert Barro of Harvard and then by myself. My modified Misery Index is the sum of the unemployment, inflation and bank lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are “bad” and make people more miserable. These are offset by a “good” (GDP per capita growth), which is subtracted from the sum of the “bads.”

You can see the entire list of 95 nations (some countries don’t report adequate data, so they aren’t counted) by clicking here.

And here are the nations with the best scores (remember, this is a Misery Index, so the top results are at the bottom of the list).

Professor Hanke comments on Thailand’s first-place results and Hungary’s second-place results.

Thailand takes the prize as the least miserable country in the world on the 2018 Misery Index. It’s 2018 rank of No. 95 out of 95 countries is a stunner. …Hungary delivered yet another stunner, making a dramatic improvement from 2017 to 2018.  It comes in at No. 94 as the second least miserable country in the world. While the European Union and the international elites have thrown everything they can throw at Prime Minister Viktor Orbán, it’s easy to see why he commands a strong following at home.

Keep in mind, by the way, that Hanke’s list is a measure of annual economic outcomes.

So a relatively poor country can get a very good score. Indeed, they should get comparatively good scores according to convergence theory.

Assuming, of course, that they have decent policy.

However, if you look at the nations with the most miserable outcomes, you can see that many countries don’t have decent policy.

Here’s Hanke’s analysis of the world’s worst performers.

Venezuela holds the inglorious title of the most miserable country in the world in 2018, as it did in 2017, 2016, and 2015. The failures of President Nicolás Maduro’s socialist, corrupt petroleum state have been well documented… Argentina jumped to the No. 2 spot after yet another peso crisis. Since its founding, Argentina has been burdened with numerous economic crises. Most can be laid at the feet of domestic mismanagement and currency problems (read: currency collapses). To list but a few of these crises: 1876, 1890, 1914, 1930, 1952, 1958, 1967, 1975, 1985, 1989, 2001, and 2018.

For what it’s worth, if you look at the actual Misery Index numbers, Venezuela is in first place by an enormous margin. Chalk that up as another “victory” for socialism.

Moreover, I’m not surprised to see that Jordan, Ukraine, and South Africa are doing poorly. Sadly, there’s not much hope for improvement in those nations.

It’s also not a surprise to see Brazil on the list, though there may be room for optimism if the new government can adopt meaningful reforms.

P.S. Professor Hanke noted that Arthur Okun created the first Misery Index. Okun also is famous for his explanation of the equity-efficiency tradeoff. Okun supported redistribution in order to increase equality of outcomes, but he was honest and admitted that this would mean less prosperity. Too bad international bureaucracies such as the OECD and IMF don’t share Okun’s honesty.

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I listed the collapse of Venezuela’s socialist dictatorship as one of my “hopes” for 2018.

That didn’t happen, so I included the same hope in my list for 2019.

But will it happen? David Asman seems very confident in this clip from a recent interview.

I was a bit less hopeful. Or at least more guarded in my ability to predict.

But one thing I can state with full certainty is that I hope it happens as soon as possible.

Though I have become a bit jaded. I no longer share lengthy compilations of everything that is going awry in the country.

As far as I’m concerned, the real debate is now whether a new government will adopt the right policies when Maduro is finally evicted (in other words, is there any hope for Chilean-style economic liberation?).

But there are a couple of stories and columns about the ongoing crisis that caught my eye.

Especially ones written by Venezuelans.

Andres Malave wrote for Investor’s Business Daily about what has happened to his country.

Hugo Chavez took power, promising to usher in shared prosperity for all with his “21st century socialism.” …So, when Teen Vogue tweeted recently, “Can’t #endpoverty without ending capitalism!” my initial reaction was, “Let them come to Venezuela.” Venezuela was once the most prosperous country in Latin America, but today almost 90% of its population lives in poverty. Venezuela’s economy is in shambles. …Venezuela’s misery means that it is not uncommon to see children rummaging through the garbage for food. And as basic medical supplies and medicine run dangerously low, newborns and the elderly die unattended in Venezuelan hospitals. …In a 2006 column, Sen. Sanders wrote: “These days, the American Dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina,” all practitioners of 21st century socialism. …What’s particularly galling about Sen. Sanders waxing poetic about the virtues of socialism is that he looks the other way as socialist leaders live in opulence while the masses starve.

A retired professor who still lives in Venezuela explained the wrenching descent of his nation in the U.K.-based Spectator.

The descent began in the early 2000s when the Hugo Chavez government began to take control of…private companies, the judiciary and the police. The descent turned into a nosedive when Nicolas Maduro came to power and the state tightened its grip on oil production, our country’s main source of revenue. Investors fled and skilled workers emigrated. As living standards plummeted, the response was to print more money. Hyperinflation has been the result. …my friends and relatives have lost a lot of weight. We call it the ‘Maduro diet’. …Not so long ago, I lived as you do. I would have thought it impossible that my country, with its hard-won progress, could fall so quickly into the abyss. The wrong politicians with the wrong ideas can have a bigger effect than anyone can imagine.

I don’t want to discriminate against non-Venezuelans, so let’s look at excerpts from some other authors.

In a column for CapX, Kristian Niemietz points out that Venezuela was supposed to be an example of modern “democratic socialism.”

Chávez fans frequently emphasised the many ways in which Venezuela differed from the old Eastern Bloc. They were especially proud of the fact that there was no apparent conflict between socialist economics and political democracy. They also pointed out that the Chavez government, rather than just nationalising lots of big companies like the socialists of yore, was experimenting with lots of different models of social ownership, looking for alternatives to both private enterprise and conventional state-owned enterprises. And they were right. Chávez and Maduro never tried to imitate the former Soviet Union or any of its allies. They tried, really hard, to build something new. And look how that turned out. …Previous socialist experiments have gone through the same honeymoon period as Venezuela, during which they were widely and enthusiastically praised by Western intellectuals.

Notwithstanding, I’m sure we’ll still hear about how “real socialism hasn’t been tried.”

Actually, I’m open to the argument that what happened in Venezuela was a different form of statism.

Though the end result is always the same.

In the case of Venezuela, it’s like Atlas Shrugged in real life.

Francisco Toro opined in the Washington Post about the recent collapse of Venezuela’s power system.

In a country already trudging through a serious humanitarian crisis, the collapse of the electric grid is a final catastrophe. Venezuelans were already chronically hungry, with large numbers reportingthey lost weight because they could not afford enough food. …The stories coming out of hospitals up and down the country have been harrowing. Only some had working back-up generators, and virtually none were designed to carry a whole hospital over many days. A video of a nurse using a hand pump to try to keep an infant alive has been circulating on social media. Thousands of kidney dialysis patients, unable to receive treatment, may face a slow and agonizing death. …the Maduro government has blamed U.S. sabotage for the power crisis. …sabotage accusations against the United States lack any semblance of credibility: Venezuela’s power grid has been in gradual decline for over a decade. …over the past 12 years, the government has run the grid into the ground. After nationalizing the utility companies, the government simply stopped investing in routine maintenance of power stations or transmission lines, setting off a slow deterioration that has made the grid unstable for years.

A story from Fox looks at the wretched circumstances of ordinary Venezuelans.

Thousands upon thousands of Venezuelans pour into Colombia over the crowd cross-country bridge, their faces gaunt, carrying little more than a backpack. Rail-thin women cradle their tiny babies, and beg along the trash-strewn gutters. Teens hawk everything from cigarettes to sweets and water for small change. …the Venezuelans – many with university degrees or decent jobs in what was once the wealthiest nation in Latin America – are now resorting to whatever it takes to survive. …Women sell their locks to local wigmakers in Colombia for around $10-30, depending on length and quality. Other women sell their bodies. Girls as young as 14 line the Cucuta streets available “for hire,” earning around seven dollars “per service.” …more than 55 percent of the healthcare professionals – doctors, nurses, and others – have left the country. Resident doctors who have stayed in Venezuela earn the equivalent of $24 a month, while specialists make just a little more, at $30.

I’ve saved the worst for last.

BBC reports that Venezuela has become such a basket case that graves are being robbed.

At Caracas’s largest cemetery, Cementerio del Sur, most of the graves have been looted, for jewellery, gold teeth, or even bones, which can be sold for use in rituals. For grieving relatives like Eladio Bastida, who checks on his wife’s grave every week to make sure it’s not been looted, the situation is a metaphor for that of embattled Venezuela as a whole.

As far as I know, Venezuela has yet to experience cannibalism, so I suppose things can still get worse.

But that begs the question. Why did Bernie Sanders and other leftists and socialists lavish so much praise on Venezuela?

And now that the chickens have come home to roost and the economy has collapsed, why are they dodging questions about their past support?

Most important of all, why do they want similar policies for the United States?!?

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With the surprising success of Senator Bernie Sanders in the last presidential race and the more-recent instant-celebrity status of Representative Alexandria Ocasio-Cortez, some are wondering if the United States is about to enter a “socialist era”.

I’ve criticized some of the proposals that are part of this movement, such as confiscatory tax rates and the so-called Green New Deal, so it goes with saying that I’m not a fan.

To learn more about the implications of socialism, let’s look around the world.

We’ll start with Venezuela, which is the focus of a very interesting article in the Washington Post. Here are some excerpts.

Did socialism kill Venezuela? Blessed with the world’s largest oil reserves, this South American nation was once the region’s richest per capita. Twenty years after the launch of the late Hugo Chávez’s Bolivarian Revolution, it is now one of the poorest. …In Washington…Republicans are seizing on Venezuela to score points against those Democrats who have newly embraced the term… But socialism’s role in Venezuela’s collapse, observers say, is not as clear as either side likes to think. At least fleetingly, socialist policies propped up by state petrodollars helped bolster the country’s status as one of the Western Hemisphere’s most equitable societies. But state-heavy policies that distorted prices and exchange rates, coupled with corruption, mismanagement and official repression, turned Venezuela’s economic landscape into scorched earth. …But it is also not communist Cuba or North Korea, where foreign investment and private ownership are strictly limited. …wealthy Venezuelans still own private companies and high-walled mansions in elite neighborhoods. They play golf at country clubs and are taxed at a relatively manageable 34 percent.

This is very fair reporting.

All the main points are accurate: Living standards have plummeted in Venezuela, oil money complicates the analysis, and the economy isn’t quite as statist as Cuba and North Korea.

The article goes on to cite the views of several Venezuelans.

“All the wrongs were created under Chávez,” said Henkel Garcia, head of Econometrica, a Caracas-based financial analysis firm. “The economy only survived as long as it did because of high oil prices.” …Today, roughly a third of the nation, pollsters say, still appears to back socialism — although only half that many remain loyal to Maduro. …With hyperinflation causing acute shortages of food and medicine, more and more former Chavistas, or adherents of Chávez’s ideals, are saying mea culpas and increasingly turning out against Maduro. “Before I die, I want socialism gone from Venezuela,” said Yessid Merlano, a 50-year-old waiter. …Scarcities of food and medicine first surfaced years ago but are now so chronic that he and millions of other Venezuelans have shed pounds and sought work abroad. Before returning to Caracas last year, he spent 10 months working as a laborer in neighboring Colombia, “where all I saw were Venezuelans begging in the streets,” he said. “I feel guilty that I was a Chavista,” he said. “It’s all my fault, all the suffering.”

I’m glad that many Venezuelans now realize that socialism is misguided.

Though I wonder if they will support the reforms that will be necessary once the current regime is deposed (and given the perverse incentives of politicians, I’m even more worried whether a new government will implement those reforms).

The article concludes with some damning data on the country’s economic decay.

State health care, once a pride of the socialists, collapsed as hyperinflation and shrinking resources left hospitals with shortages of syringes and antibiotics, as well as broken equipment too expensive to repair. …Chávez purged skilled managers, engineers and technicians from the state-owned oil giant PDVSA, stocking it with government loyalists. That set it up for a catastrophic failure as global prices fell from record highs. Venezuelan oil output is now at its lowest levels since the 1950s. Industries nationalized by Chávez, who expropriated 1,500 companies, collapsed as regulated prices distorted markets. In two decades, the government seized nearly 5 million acres of productive farmland that has now been largely abandoned. In 1999, there were 490,000 private companies in Venezuela. By last June — the most recent count available — that number had fallen to 280,000.

None of this is a surprise. Venezuela is a basket case.

But that’s not our topic today. We’re focusing instead on whether there are any lessons that the United States can learn from the Venezuelan debacle.

Or, to be more accurate, I think the key question is whether advocates of democratic socialism in America have learned anything from Venezuela’s miserable performance.

Plenty of leftists, including Sen. Sanders, praised the awful policies of Chavez and Maduro.

Now that the chickens have come home to roost and Venezuela’s economy has tanked, have any of them apologized? Or tried to rationalize what happened? Or even expressed second thoughts about the supposed wisdom of socialism?

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Years ago, I shared a joke about American leftists fleeing to Canada.

But since Canada actually has a lot of pro-free enterprise policies (completely decentralized education and school choice, welfare reform and reduction, privatized air traffic control, etc), it doesn’t make much sense for statists to head north.

Last year, I followed up with some humor asking why leftists don’t move to places where socialism actually exists, such as Venezuela.

Well, the satirists at Babylon Bee have big news.

The caravan of Central American migrants heading to the U.S. is going to cross paths with a southbound caravan.

A migrant caravan full of leftists desiring to enter the socialist paradise of Venezuela departed the United States Thursday and began marching toward through Mexico, stating they will demand asylum so they might experience the far better life that socialism offers. …”Everyone there has the same quantity of possessions and food,” said one marcher. “Everyone makes millions of dollars, and very few people work. It’s a real paradise.” The refugees have complex motivations, but the vast majority simply want to see everything socialism has to offer after suffering the amazing benefits of capitalism for too long. …At its current pace, the caravan is expected to arrive just in time for Venezuela to run out of food entirely.

That sounds like a good trade to me.

Venezuela gets a bunch of crazies who will revel in equal levels of poverty (with the exception of the ruling elite, of course), and America will get a bunch of folks who want to work hard for a better life (an outcome that will be more likely since there will be fewer statists offering them welfare and telling them not to assimilate.

Speaking of assimilation, I suspect the leftists will have a very hard time adjusting to life under socialism.

P.S. Sticking with satire, American refugees have also fled to Peru.

P.P.S. If leftists don’t want to leave, maybe they’d go with this proposed national divorce agreement?

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I periodically explain that labor and capital are the two factors of production and that our prosperity depends on how efficiently they are allocated.

But I probably don’t spend enough time highlighting how they are complementary, meaning that workers and capitalists both benefit when the two factors are combined. Simply stated, workers become more productive and earn more when investors buy machines and improve technology.

In other words, the Marxists and socialists are wrong when they argue that workers and capitalists are enemies. Heck, look around the world and compare the prosperity of workers in market-oriented nations with the deprivation of workers in statist economies.

This becomes painfully clear when you read this Wall Street Journal story on the statist hellhole of Venezuela.

Irish packaging giant Smurfit Kappa recently joined other multinational companies abandoning Venezuela…President Nicolás Maduro’s socialist government. But this case comes with a twist. Hundreds of employees, who counted on the Irish company for transport, education, housing and food, continue to show up at work. They take turns protecting idled heavy machinery from looting that has become rampant as Venezuela plunges into hyperinflation and economic chaos. …“Help, we need a boss here. We’re desperate,” said Ramón Mendoza, a Smurfit forestry division worker for 17 years. “We’re so scared because we now know that all the government does is destroy everything, every business.” Their plight underscores the devastation that rural Venezuelan communities face as private companies pull out of a country that was once Latin America’s richest. The economy has shrunk by half over the past four years.

Wow, Mr. Mendoza hit the nail on the head when he explained that “all the government does in destroy everything.”

Maybe he can replace Obama as Libertarian Man of the year. Except he would get the award on merit rather than satire.

But let’s not digress. Here’s more bad news from the article.

Workers who live in the surrounding area had received interest-free loans from Smurfit for their houses. Residents said they no longer can count on the four ambulances that the company paid for to serve communities of tin-roofed shacks. At the Agricultural Technical School in the nearby town of Acarigua, which was entirely financed by Smurfit, nearly 200 children living in extreme poverty used to receive an education, lodging, as well as hot meals that have become a luxury as public schools collapse. Over two decades, many of its graduates had gone on to work for Smurfit. The academic year was supposed to start on Oct. 1. But with no money to feed and transport students, there’s silence in the halls… “It’s like poof,” Ms. Sequera said, snapping her fingers. “Our whole future was taken away.”

Needless to say, the thuggish government of Venezuela has no idea how to fix the mess it has caused.

In recent days, the cash-strapped Maduro administration said it had come up with a solution for the Smurfit plant: That the workers would run it themselves. The government said it wouldn’t nationalize it but named a temporary board to help restart operations. The Labor Ministry offered no details over how it would replace Smurfit’s distribution network through which the company supplied its own subsidiaries abroad. But the workers say they can’t run the plant on their own and insist they want bosses—just not from the government. “We know how to move the lumber from here to the plants. What do we know about finances and marketing?” said Mr. Mendoza.

My heart goes out to the former Smurfit workers.

They simply want to do honest work in exchange for honest pay. But the wretched policies of the Venezuelan socialists have made that impossible.

By the way, I’m not implying that employers are motivated by love for workers. Nor am I implying that workers are motivated to create profits for companies. The two sides are in a constant tug of war over how to slice the pie.

But the key thing to understand is that the pie grows when markets are allowed to function.

Which is why this old British political cartoon is a powerfully accurate depiction of real-world economics.

Indeed, I’ll have to add it to my collection of images that teach economics.

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Ever since 2010, I’ve been pointing out that Venezuela is a horrifying and tragic example of what happens when the private sector in a country is almost completely suffocated by excessive government.

And with the country now in a death spiral, you would think it’s a perfect time for further commentary. I sometimes wonder, though, what I can write that isn’t ridiculously repetitive.

But a couple of recent conversations have convinced me of the need to address two points.

First, it’s important to emphasize that not all statism is created equal. When writing recently about Denmark, I created a chart to show how that country was much more pro-market than France. And that same chart showed that France was much more capitalist than Greece.

And guess which country was the most statist? If you said Venezuela, you’re right.

And the lesson from this data is that the degree of statism matters. Venezuela is a total mess because of total statism, Greece is in trouble because of lots of statism, France is anemic because of run-of-the-mill statism, and Denmark does okay because it’s only statist in one area (fiscal policy).

Imagine you were a teacher and these countries were students. Here are the grades you’d assign for economic policy.

F – Venezuela
D – Greece
C – France
B – Denmark

Second, I want to answer a question that often gets asked, which is how long can the current government survive?

Unfortunately, I don’t have a good answer. That’s partly because bad policy doesn’t cause overnight collapse (Adam Smith noted more than 200 years ago, “there is great deal of ruin in a nation”).

Venezuela historically has propped up its statist regime with oil revenue, but that’s shrinking as an option because of government incompetence.

Thousands of workers are fleeing Venezuela’s state-owned oil company, abandoning once-coveted jobs made worthless by the worst inflation in the world. …Desperate oil workers and criminals are also stripping the oil company of vital equipment, vehicles, pumps and copper wiring, carrying off whatever they can to make money. The double drain — of people and hardware — is further crippling a company that has been teetering for years yet remains the country’s most important source of income. …Venezuela is on its knees economically, buckled by hyperinflation and a history of mismanagement. Widespread hunger, political strife, devastating shortages of medicine and an exodus of well over a million people in recent years have turned this country, once the economic envy of many of its neighbors, into a crisis.

At the end of the day, the regime can rely on force. And Venezuela’s politicians cleverly have put the army in charge of graft and shakedowns, thus earning at least temporary loyalty.

Venezuela’s military has come to oversee the desperate and lucrative water trade as reservoirs empty, broken pipes flood neighborhoods and overwhelmed personnel walk out. Seven major access points in the capital of 5.5 million people are now run by soldiers or police, who also took total control of all public and private water trucks. Unofficially, soldiers direct where drivers deliver — and make them give away the goods at favored addresses. President Nicolas Maduro’s autocratic regime has handed lucrative industries to the 160,000-member military as the economic collapse gathers speed, from the mineral-rich region of the Arco Minero del Orinoco to top slots at the state oil producer to increasingly precious control over food and water.

Moreover, it’s difficult for people to revolt since the regime has followed the totalitarian playbook and banned private guns.

So it’s no surprise that many disaffected people (the ones who otherwise might revolt) are simply escaping the country.

Hundreds turn up each day, many arriving penniless and gaunt… Once they cross, many cram into public parks and plazas teeming with makeshift homeless shelters, raising concerns about drugs and crime. The lucky ones sleep in tents and line up for meals provided by soldiers — pregnant women, the disabled and families with young children are often given priority. …this is happening in Brazil, where a relentless tide of people fleeing the deepening economic crisis in Venezuela… The tens of thousands of Venezuelans who have found refuge in Brazil in recent years are walking proof of a worsening humanitarian crisis that their government claims does not exist. …more Venezuelans are leaving home each month than the 125,000 Cuban exiles who fled their homes during the 1980 Mariel boat crisis.

And the ones who haven’t left still have some options besides starve or revolt.

A few years ago, there were so many donkeys, or burros, in the Venezuelan state of Falcón that they were a problem — herds everywhere, causing highway crashes and blocking airport runways. But over the past three years, the herds have shrunk dramatically as thousands of burros have been slaughtered for their meat by Venezuelans suffering through a near-famine. …The collapse of the Venezuelan economy is radically changing the eating habits in the oil-producing country, where large sectors of the population are being forced to pick through garbage and slaughter domestic animals to sate their hunger. …The clandestine slaughter of the animals also has become a sanitary and environmental problem, Stefaneli added. There are no sanitary controls, and the burro has been disappearing from its native habitats. …Years back, residents of Paraguana used to eat goat, fish and beef. And when those were in short supply they ate rabbits, grains and even iguanas. Burro meat was not liked because it’s tough and smells, even from far away, according to residents who have eaten it. But it has become a necessity for many people.

The bottom line is that Venezuela is in free-fall, but I don’t know where the bottom is. And I don’t know what will happen when the country hits rock bottom.

But if you hold a gun to my head, I’ll predict that the regime somehow collapses in 2020.

P.S. The silver lining of Venezuela’s dark cloud is that we have some grim humor from inside and outside the country.

P.P.S. Venezuela is such a disaster that even the World Bank acknowledged Chile’s market-oriented system is far superior.

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Move over, Crazy Bernie, you’re no longer the left’s heartthrob. You’ve been replaced by Alexandria Ocasio-Cortez, an out-of-the-closet socialist from New York City who will enter Congress next January after beating a member of the Democratic leadership.

Referring to the boomlet she’s created, I’ve already written about why young people are deluded if they think bigger government is the answer, and I also pointed out that Norway is hardly a role model for “Democratic socialism.”

And in this brief snippet, I also pointed out she’s wrong to think that you can reduce corporate cronyism by giving government even more power over the economy.

But there’s a much bigger, more important, point to make.

Ms. Ocasio-Cortez wants a radical expansion in the size of the federal government. But, as noted in the Washington Examiner, she has no idea how to pay for it.

Consider…how she responded this week when she was asked on “The Daily Show” to explain how she intends to pay for her Democratic Socialism-friendly policies, including her Medicare for All agenda. “If people pay their fair share,” Ocasio-Cortez responded, “if corporations paid — if we reverse the tax bill, raised our corporate tax rate to 28 percent … if we do those two things and also close some of those loopholes, that’s $2 trillion right there. That’s $2 trillion in ten years.” She should probably confer with Democratic Socialist-in-arms Sen. Bernie Sanders, I-Vt., whose most optimistic projections ($1.38 trillion per year) place the cost of Medicare for All at roughly $14 trillion over a ten-year period. Two trillion in ten years obviously puts Ocasio-Cortez a long way away from realistically financing a Medicare for All program, which is why she also proposes carbon taxes. How much she expects to raise from this tax she didn’t say.

To be fair, Bernie Sanders also didn’t have a good answer when asked how he would pay for all the handouts he advocated.

To help her out, some folks on the left have suggested alternative ways of answering the question about financing.

I used to play basketball with Chris Hayes of MSNBC. He’s a very good player (far better than me, though that’s a low bar to clear), but I don’t think he scores many points with this answer.

Indeed, Professor Glenn Reynolds of the University of Tennessee Law School required only seven words to point out the essential flaw in Hayes’ approach.

Simply stated, there’s no guarantee that a rich country will always stay rich.

I wrote earlier this month about the importance of long-run economic growth and pointed out that the United States would be almost as poor as Mexico today if growth was just one-percentage point less every year starting in 1895.

That was just a hypothetical exercise.

There are some very sobering real-world examples. For instance, Nima Sanandaji pointed out this his country of Sweden used to be the world’s 4th-richest nation. But it has slipped in the rankings ever since the welfare state was imposed.

Venezuela is another case study, as Glenn Reynolds noted.

Indeed, according to NationMaster, it was the world’s 4th-richest country, based on per-capita GDP, in 1950.

For what it’s worth, I’m not familiar with this source, so I’m not sure I trust the numbers. Or maybe Venezuela ranked artificially high because of oil production.

But even if one uses the Maddison database, Venezuela was ranked about #30 in 1950, which is still impressive.

Today, of course, Venezuela is ranked much lower. Decades of bad policy have led to decades of sub-par economic performance. And as Venezuela stagnated, other nations become richer.

So Glenn’s point hits the nail on the head. A relatively rich nation became a relatively poor nation. Why? Because it adopted the statist policies favored by Bernie Sanders and Alexandria Ocasio-Cortez.

I want to conclude, though, with an even better example.

More than seven years ago, I pointed out that Argentina used to be one of the world’s richest nations, ranking as high as #10 in the 1930s and 1940s (see chart to right).

Sadly, decades of Peronist policies exacted a heavy toll, which dropped Argentina to about #45 in 2008.

Well, I just checked the latest Maddison numbers and Argentina is now down to #62. I was too lazy to re-crunch all the numbers, so you’ll have to be satisfied with modifications to my 2011 chart.

The reverse is true as well. There are many nations that used to be poor, but now are rich thanks to the right kind of policies.

The bottom line is that no country is destined to be rich and no country is doomed to poverty. It’s simply a question of whether they follow the right recipe for growth and prosperity.

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