Despite being rich in oil, the Socialists running Venezuela don’t get basic economics. They’ve nationalized almost everything to impose state control over the economy, and imposed price controls. They’re c0ntinually experiencing the lesson that price controls create disincentives for producers, and shortages for consumers of goods. This particular shortage involves toilet paper, toothpaste, and soap. So, they’re using a bunch of their oil money to buy basic necessities from other countries.
Lawmakers voted to approve a $79m credit for the countrys ministry of commerce, which will also be used to buy toothpaste and soap.
The products are currently in short supply in Venezuelan shops. The oil-rich nation relies on imports, but currency controls have restricted its ability to pay for foreign goods.President Nicolas Maduro, who won a narrow majority in Aprils presidential elections, maintains that the countrys periodic shortages of basic goods are the result of a conspiracy by the opposition and rich sectors of society. Mr Maduro has vowed to uphold the legacy of his late predecessor, Hugo Chavez, whose “21st-Century socialism” involved sweeping nationalisation and extensive social programmes.
But analysts say that the governments attempts to impose state control on the economy have created huge imbalances that have led to the shortages.”Price controls, for example, act as a disincentive to local producers, forcing them to cut output,” says the survey organisation Consensus Economics.”
The resulting scarcity forces up inflation, defeating the entire purpose of price controls in the first place.”