Today, there are two countries that have a disaster in their economy and in their citizen security. As far as the economy is concerned, I will give my humble opinion; I will leave citizen security to the specialists in this matter.
First socialist lie: "Businessmen are angry and gangsters, that's why we must apply a price control on basic necessities"
The premise followed by the so-called socialist countries is that price control is an economic measure that seeks to control the prices of basic necessities, so that “the poor” can have access to basic necessities at very affordable prices and everyone can benefit from it.
In countries where price control has been implemented, the result has been failure, causing a shortage of controlled products and an increase in prices above the equilibrium price, even greater than that existing before price control. We see these consequences very clearly in the economies of Venezuela and Argentina.
Economic theory is very clear on this point. Price control is nothing more than a price fixed by decree by the Government, which fixes the prices of products below the equilibrium price. The logical result is that producers are not interested in sending products to the market, because it does not generate a “reasonable profit”. As it is so cheap, consumers are happy to get products at that price, although producers who do not see their own needs being met, generating a shortage or shortage in the market.
Prices must be governed by the law of supply and demand, with the market being the best allocator of resources. When a product is abundant, prices will tend to fall, as we can see, as an example in telecommunications and cable television services in Costa Rica. On the other hand, when a product is scarce, its price will tend to rise and as a best example we have the prices of the services of specialists in Costa Rica. The question then arises: how do we correct the problem of high prices for medical services? A simple answer: increasing the supply of specialists throughout the country !!!
It is important that the State acts as an arbitrator. It is not good for the market to act alone either, because there are “market failures” such as monopolies, high import tariffs or externalities, among others; This is where the role of the state is to regulate the economy.
Second socialist lie: "The neoliberal economic models are those that have produced poverty and inequality, therefore it is necessary to establish the socialist model to have a world of social justice, equality and equity"
The models of socialism of the XXI century try to nationalize all the companies that were privatized at the time, because according to them, the capitalist mode of production is the cause of poverty and inequality, and therefore it is necessary to nationalize these companies, like energy, water, electricity and gas.
Let's look at the recent example of Argentina, with the case of Repsol YPF and the application of this “socialist model”. When these companies are nationalized, they become public sector companies again, and for society to have "fair prices" they apply price controls, setting the prices of services below the equilibrium price, worse than if it had been in a model of “perfect competition”. As with these prices it is impossible to obtain profits to be able to reinvest in the business again and buy new machines or to finance new development projects, that is where the crisis and the bankruptcy of these companies due to mismanagement come; because it is more than proven that public sector companies are managed by bureaucrats, and because they do not have the necessary skills to manage a company.Another clear example of what I am talking about is the case of many companies in Venezuela, which are managed by Army Generals. A general may know about arms, but about economics and administration he knows nothing.
Communist China was a dictatorship that was collapsing and as a solution they found opening their economy to capitalism; The capitals arrived and in 25 years they have grown by an average of 10% annually and have lifted many Chinese out of poverty. Although China is not a role model, being a dictatorship that violates human rights, there is no doubt that Capitalism saved the batch from the Chinese communists.
Third socialist lie: "Capitalism generates poverty"
That is why the socialists feel a contempt for foreign direct investment, trying to nationalize foreign companies that bought companies in privatization processes, claiming to "Nationalism" that the oil and gas companies should be state owned.
This is what happened in Argentina with the nationalization of Repsol-YPF, the government applied price controls to gasoline and gas. The price was then set by decree and companies should sell at that maximum price (a price set below the equilibrium price, even lower than if it had been in a perfectly competitive market). As the price did not satisfy the production costs, the Repsol company did not invest in new fields due to the effect of the controlled price.
This is like the government saying that the price of rice would be set by decree with the consequent result that the producers would not be interested in producing, because it does not cover their production costs, then a shortage would be generated. That is what happened in Argentina with the price of gas and gasoline. As the government was interested in nationalizing Repsol-YFP (a private company), it blamed it for its lack of interest in investing in new deposits and appealed to the nationalism of the Argentines, promulgating the law to expropriate the Repsol-YPF company. This creates a bad precedent for foreign direct investment by eliminating legal stability.
As a consequence of these measures that they say in favor of social justice, to better distribute wealth, they end up making poorer people and impoverishing the State apparatus with high fiscal deficits. By maintaining the price controls and subsidies in favor of the poor that they claim to defend and by nationalizing companies, the only thing they have achieved is to drive away foreign direct investment, causing a shortage of foreign exchange, and the Government by supporting the exchange rate (so that the price of the dollar does not rise due to the shortage of foreign exchange) they end up destroying the country's reserves.
That is why I hope, as an economist, that no other Latin American country follows the bad example of XXI Century Socialism, which is only used to make poor people and ruin the economy of a country, produce more citizen insecurity for the poor who manufacture and the violent language of class struggles that Marxism-Leninism encourages.
