How Socialism Aggravates Harm from Natural Disasters: The Venezuelan Experience

The destructive side effects of Socialism are amplified by national disasters. Venezuela is an example.

Wall Street Journal’s Mary O’Grady writes, (bold highlights mine)

Most of Venezuela's democratic institutions have been destroyed by Mr. Chávez. But Caracas is still not Pyongyang or Havana, and a groundswell of popular dissatisfaction could yet unseat him. His favored strategy to deal with this risk is spreading government funds around and redistributing private wealth. Yet even as hundreds of millions of dollars have been reallocated under chavismo in the past decade, life for Venezuela's poor has been growing more difficult. Mr. Chávez's popularity has been dropping, as evidenced by the opposition's gains in Congress.

Then came the late November rains.

An estimated 130,000 people were left homeless when the northern tier of the country was hit with torrential downpours that lasted well into December. Their plight has become a main theme in all the president's speeches, and he has been scrambling to find them shelter. They have been sent to live in government clinics and offices, more than 150 hotels and even Miraflores, the presidential palace. At one point Mr. Chávez offered to pitch a Bedouin tent—a gift from the Libyan Moammar Gadhafi—in the garden of the palace to make room for flood victims in his home.

All of this has elevated a structural problem of housing shortages that many of Mr. Chávez's constituents expected him to solve when he came to power. Instead the problem has gotten worse.

According to Aquiles Martini, the president of the Real Estate Chamber of Venezuela, who I interviewed by telephone from Caracas last week, the growing population requires 80,000-100,000 new homes per year. But during chavismo, he says, the country has added, on average, only 40,000 units annually. Venezuela now has a housing deficit of two million units. This explains why so many Venezuelans live in fragile, shanty-town housing and suffer so greatly during natural disasters.

Mr. Martini says 2009 was a good year, with 92,000 new units added to Venezuela's stock. But in 2010 the number dropped to 50,000, and the forecast for next year is still fewer new homes. One reason is the nationalization of companies that produce cement and steel. Venezuelan steel output dropped last year by 40% and cement output by 12%, and this provoked shortages in construction materials.

There are other deterrents. Builders have traditionally protected against inflation, now 30% annually, by indexing their contracts with buyers to cover rising costs during construction. But in 2009 the government outlawed this practice. Last year, accusations that some builders were still trying to hedge led the government to threaten harsh penalties and even jail some individuals. Many private developers have since disappeared. Investors who might like to build an apartment for rental income have also withdrawn from the market because, according to Mr. Martini, landlords no longer have the right to evict if their tenants don't pay.

Natural calamity + a cocktail mix of inflation and many other forms of interventionism= More social suffering.