The Bolivian Crisis


Bolivia’s president Evo Morales is a minor league Hugo Chavez. Like Chavez, he is leading his nation down the socialist road to ruin.

The Morales regime has promoted the typical left wing solutions to an economic downturn: price controls, hikes in the minimum wage, subsidies for popular commodities, and the like. Collectively, these measures remove incentives from the private sector, thwarting initiate and innovation, and promoting price inflation, unemployment, and social unrest.

Morales finally figured out that his hefty subsidies were a boon to smugglers and tried to cut them last week. He changed his mind after fuel prices spiked by 80% and union riots all but shut down the country. Morales can’t even seem to satisfy Bolivia’s hard left. Large sums of foreign direct investment have left the nation. Without oil to fall back on, Bolivia’s economy is sliding into the abyss.

So why should we be concerned about a small South American nation like Bolivia? Well, there are lessons for us. First, socialism—especially the heavy-handed version seen in Bolivia and Venezuela—always stunts economic growth. Sure, other factors are involved as well, such as education levels, culture, and natural resource reserves. But all other things equal, free markets promote growth and centrally planned markets stifle it. This is why Bolivia’s neighbors Peru and Chile have grown substantially in recent years.

Second, violence is an inherent component of Marxist ideology. Wealth in market economies is allocated based on economic contributions. Doctors earn more than street sweepers because they perform a task with a higher market value. Wealth in socialist economies is allocated (or at least controlled) in significant part by government. Getting a raise in a market economy is all about working harder or smarter. Getting a raise in a socialist economy is all about securing government favor, which encourages collective disruptive action. The nature of the disruptions vary among countries, whether it’s the murderous regime of North Korea or the destruction of private and public property in anti-government protests in Europe.

Finally, what we are seeing in Bolivia is an amplified version of what we are experiencing in the U.S. Unlike nations like Bolivia, we have the good fortune of starting with a strong, established market-driven economy (more or less). The steps we’ve taken toward socialism in the last 2 years—bailouts, GM, Obamacare, and the like—may not be as drastic as in other nations, but they have been substantial enough to stunt an economy that should have already been well past the current recession. But don’t kid yourself. The welfare state in the U.S. is costing taxpayers more and more. When the day of reckoning finally comes, those in the recipient class won’t go down without a bitter fight. And if you think this can only happen in the developing world, just ask the Europeans.

1 Comment

1 Comment

  1. Len  •  Jan 5, 2011 @10:25 AM

    Bolivia doesn’t have nearly as much oil as Venezuela and the foreign companies haven’t already been there to develop the technology to get it out of the ground. Chavez can screw around with Venezuela for a while because he has oil. Morales can’t.