Written by Julian Modiano   

An article in the Guardian on Venezuela wondered how a country rich in natural resources, that exports 93 billion dollars worth of petroleum and which used to have significant agricultural production, can be experiencing such severe shortages in basic products. The question is very simple, and its startling that the author of the article doesn’t manage to answer it, because really it’s just basic economics.

The shortage crisis has been ongoing in Venezuela ever since the government began enacting price controls, and has only gotten worse as the controls have increased over the years. It may sound like a great idea to control the prices of certain basic necessities to ensure social justice and make sure that everyone has enough of everything they need. Yet wanting something to be true and having great intentions doesn’t change reality. If it did, surely we’d all live in a better world: because the problem isn’t intentions, it’s that people don’t understand that the right intentions don’t automatically translate into the right outcome.

We have to accept a (perhaps) harsh reality: the vast majority of shopkeepers, food producers, and manufacturers are not in business out of love for humanity, or to provide charity to their neighbors. They entered their businesses after having made certain decisions about how to best use their skills to earn money and make a profit. You can denounce human nature all you like, but this is a pretty basic fact of life (personally, I don’t even understand why you would denounce them for wanting to make a profit anyway).

Having established this simple fact, how do you think businessmen will react to prices being heavily controlled? To being told that they can only profit a certain amount, if at all? Do you honestly think they will begin to make immense sacrifices to make sure everyone can still buy their products? People, and entrepreneurs especially, don’t usually like having to work harder for no reason. There is a common misconception that all of those people don’t contribute anything to society, and that therefore they should have no right to complain if they are forced to make less money, but the truth is that while people can quickly learn how to work in a supermarket, most people cannot be successful entrepreneurs – even with all the resources at their disposal. Karsten Strauss wrote an excellent article for Forbes detailing just how complex working as a business leader can be (his article focuses on CEOs, but the basics should apply to most entrepreneurs).

Lowering prices means that less will be produced (lower supply), although more people will want to buy what is produced (greater demand). Maduro has accused hoarders and black market profiteers of bringing the system down, but what does he expect? When the government provides cheap food to anyone who asks, it should be obvious that some people will take advantage of the situation. Not surprisingly, people have been buying food in Venezuela and selling it in Colombia for huge profits. And when the price of food is drastically lowered and the supply is then reduced, it is evident that people will hoard as much as they can while they still have the chance to. The result? A shortage in regulated products of 47%, with some categories even facing as high as 70% shortages. Hardly a picture of prosperity.

This is why it is vital that people have at least a basic understanding of economics. Venezuelan food shortages are obviously not caused by food hoarders, or by saboteurs trying to undermine the government. Nor are they caused by the honest, reasonable shopkeepers who simply have no intention of making sacrifices without an eventual return. They are directly caused by the policies of an uncontrollable socialist state. Yet ignorance of economics makes these policies possible and even acceptable, policies that clearly make everyone worse off, especially the poor. The Venezuelan government is constantly accusing business leaders of profiteering, as if that is somehow wrong. Yet it is thanks to the millions of people in the world seeking to make profit that we have access to all of the things we do.

Of Course, Maduro, like any good socialist, refuses to take absolutely any blame for the country’s woes. Instead, he continues to accuse all of the regular scapegoats, from the CIA to the petit bourgeoisie. But if the country continues on its current path, they will be missing a lot more than just toilet paper soon. Venezuela is yet more proof that not letting people profit makes things worse for everyone – not that proof has ever mattered to those who believe that making money is evil.