Wednesday, June 20, 2007

Venezuelan inefficiencies

Some people are excited Venezuela is starting to make their own computers and supply their own food.

Did anyone ever stop to wonder why Venezuela didn't do this before? I can tell you there's a very good reason. It wasn't economically efficient. If making Venezuelan computers and food costs more than importing them, then entering those markets is bad for the Venezuelan economy.

Moreover, if the prices for such goods are being kept artificially low via government subsidies, then it's doubly bad because consumers are paying to have lower prices, whether they buy the goods or not. That means everyone's real income is dropping even more than it normally would with just the inflation due to the increase of currency into the market because of the government making the Venezuelan central bank print more money.

Small wonder there's yet another strike.

Regardless, the price ceilings installed by Chavez are making shortages of many staple goods in Venezuela.