Socialism: Real-World Failures
“From the Soviet Union, to Cuba, to Venezuela, wherever true socialism or
communism has been adopted, it has delivered anguish, and devastation, and failure”–
President Donald Trump. All politics aside, President Trump’s assessment of socialism is
chilling but very accurate. In America, there is a growing movement among young
individuals supporting socialism, likening it to Nordic countries such as Sweden. These
countries do not paint an accurate picture of true socialism; countries such as Venezuela,
Cuba, and North Korea have adopted economic systems of true socialism. Because of this, it
is important to examine real-world failures of socialism such as Venezuela, Cuba, and North
Korea, all while pointing out the various problems of labeling Nordic countries as socialist
utopias.
What was once a top economic power in Latin America, Venezuela has turned into a
living nightmare. But how could this happen to such a prosperous nation? While people
around the world are seeing the effects of socialism in Venezuela just now, it is rooted in
policies from decades ago. In 1958, Rómulo Betancourt was elected president of Venezuela.
He, among many others during this time in Venezuela, wanted one hundred percent
nationalization of the petroleum sector, along with establishing a welfare state that included
cheap gasoline, free healthcare, free college, and various other social programs (Niño, 2017).
While these types of programs are without a doubt socialist, his policies regarding
eliminating property rights set the foundation of a socialist system. Furthermore, he,
“…followed-up with considerable tax hikes that saw income tax rates triple to 36%” (Niño,
2017). Even with these significant tax hikes, Venezuela still struggled with the increased
spending of their numerous social programs, causing large fiscal deficits.
Even though Betancourt was not able to fully nationalize the petroleum industry, the
nation’s leader in the 1970’s, Carlos Andrés Pérez, was able to fulfill Betancourt’s ultimate
goal; in 1975, he nationalized the petroleum sector (Niño, 2017). Even with the petroleum
sector being nationalized, the Venezuelan government greatly benefitted from high oil prices
during this time. Pérez, during this time, too, continued large social program, contributing
even more so to the countries growing deficits. While the socialist policies of Betancourt
and Pérez did not cause immediate economic disaster, “it laid the groundwork for
institutional decay” (Niño, 2017) that Venezuela has experienced since the turn of the 21st
century.
In 1999, Hugo Chavez was elected president and promised the people of Venezuela
that the country would be made into a socialist paradise. As president, Chavez took over not
only the petroleum industry, but virtually every private industry. He promised the citizens of
Venezuela that these government-run companies would be run better than private businesses,
and the profits would be shared equally by everyone in the country.
Today, Venezuela has turned into a living nightmare. Hyperinflation, food shortages,
and debt refinance are three of the major problems occurring in Venezuela. Hyperinflation
reached 488,865 percent in September of 2018, making even the most basic goods skyrocket
in price (Ellsworth, 2018). The country has experienced severe food shortages. This has
mainly been caused by the implementation of price ceilings. Creating price ceilings, a
government-imposed price limit on how much businesses can charge for items, has caused
producers to see little to no monetary profit, or producer surplus, in creating and selling these
items. This gives businesses no incentive to grow and compete, thus, causing there to be a
shortage in food, and many other items. This idea of stagnation is supported by concrete data.
In 1960, the real per capita GDP of Venezuela, in 2010 U.S. Dollars, was $12,363; in 2014,
real per capita only rose to $13,700 (“Constant GDP per capita for the Bolivarian Republic of
Venezuela”). In an almost 60-year period, the real per capita GDP increased less than $2,000.
Socialist policies in Venezuela today such as loss of private property rights, social
welfare programs, and price controls have caused a strangulation of economic growth,
rewarding failure while penalizing success.
On December 2nd, 1961, Fidel Castro declared, “Marxism or scientific socialism has
become the revolutionary movement of the working class” (“Castro declares himself a
Marxist-Leninist”). Before Castro took over, Cuba was one of the most advanced and
successful countries in Latin America (“American Experience – Fidel Castro – People and
Events”). The Cuban economy was doing incredibly well, per capita GDP as well as life
expectancy were very high. The main problem: income inequality was becoming very
profound. After Castro’s revolution, he vowed to implement socialism in an attempt to lessen
this gap.
The Cuban economy became a state-run system that totally diminished private
property rights. With practically no property rights, this gave the Cuban government full
control of the economy; every private sector of the economy became non-existent when
Castro came into power. The government had, and to some extent still does, “a national
health-care program, government paid education at all levels, subsidized housing, utilities,
entertainment, and even subsidized food programs” (Seth, 2014). Furthermore, “Cuba does
not have a stock exchange – a crucial indicator of a capital-free economy” (Seth, 2014). With
all of these factors being tell-tale signs of socialism, to how much of an extent has it led to
failure and stagnation with little to no forward progress?
The problems stemming from the lack of private protect rights have taken a massive
toll on the economy and the lives of the citizens of Cuba. The country is experiencing a
massive housing crisis. In 2016, it was reported that there was a deficit of 880,000 homes
(Martin, 2017). This massive deficit is due in part to the fact that there are no ownership
incentives to preserve and fix the buildings because they are all controlled by the
government. In a private sector, however, individuals would be driven by potential profit,
causing a problem like this to be nonexistent. In an attempt to mitigate this problem, current
President Raoul Castro decided to allow Cubans, “…to own their own apartments (at a price
set) …” but even still, “…the government is responsible for the structure, plumbing and
