WHY CAPITALISM WORKS AND SOCIALISM DOESN’T: ARBITRAGE.

But of course, in a world of socialism — that is, where a government attempts to create perfect fairness and justice by means of coercive distribution — arbitrage poses a mortal threat.  Do you understand why?  If not, there are some good examples coming out of Venezuela, not to mention the ongoing saga of “affordable housing” here in New York.

At the Washington Post’s Wonkblog on Monday, a guy named Matt O’Brien reports on the ongoing disaster in Venezuela.  The title of the article is “Venezuela’s death spiral is getting worse.”   I will give serious credit to Mr. O’Brien for actually doing some investigation of what is causing Venezuela’s problems.  (Contrast that to the likes of idiots from such outlets as the New York Times, CNN and Time Magazine, cited in my posts from May here and here, who purport to give reasons for Venezuela’s economic disaster without ever mentioning socialism, price controls, nationalizations, or anything else of significance.)

Venezuela of course has made a run at creating perfect justice and fairness by the device of price controls.  Included among items with controlled prices are most consumer staples, as well as the currency itself.  As a result, the consumer staples with controlled prices have completely disappeared from stores.  As to the currency, you can’t buy anything with a bolivar, so you need to get dollars; but you can’t get dollars at the controlled price unless you are somehow connected.  On the other hand, if you are importing, say, butter, and you have the right connections, you can get the dollars.  Yet somehow butter still does not appear in the stores.  The government blames “hoarders” — but is someone really hoarding tons of butter somewhere?

As Glenn noted on Saturday in regards to Venezuela, “Leftism impoverishes and kills, again and again. But politicians like it because it offers them control, and opportunities for graft. Voters like it because, well, it’s a con game designed to take advantage of greed and envy. Remember, under free markets the rich become powerful. But under socialism, the powerful become rich. Entirely unrelated: Candidate Who Said There Were Too Many Kinds Of Deodorant Buys His Third House.”

And finally, an exit question: Why Couldn’t What Happened In Venezuela Happen Here?

(Via Maggie’s Farm.)