There is a lot of griping about material contained in your standard introductory economics textbook. For instance, Krugman’s textbook says all sorts of mean things about unions and the minimum wage; namely, that they are responsible for structural unemployment because they push wages past their equilibrium level. Of course, the empirical evidence for both propositions is quite murky and Krugman, in his blog and columns, obviously doesn’t think the minimum wage is such a bad thing.
On one point, however, introductory textbooks are unified and plainly correct: real-life socialism, where the government expropriates private industry, seizes the means of production and tries to direct the production of goods is really, really dumb.
Look, for example, at the Venezuelan auto industry and what Hugo Chavez wants to do with a Toyota plant:
CARACAS—Venezuelan President Hugo Chavez has threatened to expropriate Toyota MotorCorp.’s local assembly plant if it doesn’t produce more vehicles designed for rural areas and increase technology transfer.
Mr. Chavez said late Wednesday the Japanese auto maker needs to transfer more new technologies and manufacturing methods from headquarters to its local unit in Venezuela.
While Mr. Chavez directed most of his criticism at Toyota, he said other auto assemblers, including Fiat SpA and General Motors, are also guilty of not sharing technology from abroad with their Venezuelan units.
Mr. Chavez said his socialist government is going to apply strict quotas regarding the number and types of vehicles auto makers can produce. The president also ordered his trade minister, Eduardo Saman, to inspect the Toyota plant, saying it may not be making enough “rustic vehicles,” a style of all-terrain vehicle that is much-needed in Venezuela’s countryside, where they are often converted into minibuses.
So, we have one element of socialist stupidity: not giving deference to market outcomes of what goods are being produced and thinking that a better way to maximize consumer surplus and welfare is to have the government take over the commanding heights of an industry and make the production decisions.
But it gets even better (or worse):
As a result of low productivity, demand for automobiles far outstrips supply in Venezuela. Demand is also enhanced by subsidized gasoline in this oil-rich nation that makes a gallon of gasoline cost about seven cents.
Eduardo Blanco, who manages a Toyota dealership in the Los Palos Grandes neighborhood of Caracas, said last week that he has 600 people on a waiting list for vehicles, and that only a half a dozen cars arrive at his lot each month.
A classic case of the result of a price ceiling, a shortage! Sometimes Economics 101 (or in my case, Economics 201 taught by the esteemed and very liberal Robert Gordon) is just right.
To get this beyond just making fun of Hugo Chavez’s incompetent economic management, I think it’s important to locate and criticize real examples of command-and-control socialism, just so that when conservatives gripe and moan about mild industrial policy, bank bailouts in crisis or government subsidies to purchase health insurance, we can see how silly they’re being.
No comments:
Post a Comment