The State of New York just made every State, City College & University FREE as of the fall of 2017. We know from Milton Friedman’s achievement in monetarist thought that the fall of Communism, the collapse of collectivism was due to the inability to procure meaningful price signals. Without rules governing the social interaction between free peoples, the entire ideological edifice collapsed.
The last chancellor of The City University of New York decried the time (decades) it took to turn around a famed institution that used to house more Noble laureates than any other teaching institution throughout the world. All that came collapsing when politicos in Manhattan wanted to ‘adjust‘ the unemployment rate in the early ’70’s’ to accommodate a political class unwilling to address anti-war protestors culminating throughout the urban East coast. Witness the late, great Elie Wiesel, having been accosted by students attending his lectures in the parking lot of numerous City University Colleges, he and several other laureates abandoned CUNY (City University of New York) for Boston University.
An identical reality is currently engulfing Venezuela and Saudi Arabia. Having spent their entire lives pampered by a single achievement of oil, both nation states are collapsing. It is obvious where Venezuela is going, possessing 1,600% inflation, a distorted political economy remains in a death spiral that is consuming both its leadership and population. By any reckoning, nearly 75% of its population has lost weight from food scarcity. We should remember this distinct Malthusian famine, for its origin isn’t found in civil wars, genocide, or sectarian conflict. Venezuela did this to itself! A few decades ago Venezuela was in prime condition, often resented by other larger nation states, having its geopolitical orbit waver into Cuban territory, Venezuela always seemed to have pertinent leaders ground its institutions into functioning fiefdoms. With the collapse of oil prices and a powerful northern neighbor exporting refined indigenous petroleum, Venezuela’s entire political economy as a nation state is unraveling fast.
Caracas is a specialist. This means they operate under distinct conditions. If these operating conditions change, the entire edifice dies. Like Neanderthal’s, they were unstimulated because functioning empirical factors either didn’t exist or weren’t acknowledged. When the environment changed, they died. Venezuela’s entire economy is built on exporting oil. Prior to the collapse of western economies in 2008, Caracas was awash in dollars. Without adjusting its currency regime to float, the bolivar remained tethered to a dollar standard unanchored to any functioning reality. Just ask Comrade Mugabe. Its Zimbabwe all over again. Without adjusting the bolivar to fall, every sinew broke in accommodating a cognitive dissonance that eventually led to today’s collapse. Fiscally, when imported dollars became scarce, the bolivar ceased functioning; having no medium to procure price signals, Venezuela is dying.
Prior to Maduro, under Chavez, importers could swap bolivars for greenbacks, by tightening government control of dwindling dollar supplies, Venezuelan imports dried up, prices soared, dollars disappeared and black markets soared.
The entire problem is predicated on dependency. Economic dependency has wrought an inability to function. Enter the House of Saud. Its current liberalization scheme isn’t serious policy of introducing Riyadh to western norms, its an accounting scheme to keep the ruling house in power. McKinsey & Companies blueprint ignored both Friedman and Tocqueville, no mention of the requisite Judaeo-Christian cultural foundations needed to underwrite functioning markets. Anyone with a modicum of working knowledge of capital markets knows that positivist knowledge masks the theology, the moral foundations of liberty that remain the sine qua non that is the West.
Most nation states just build up reserves of hard currencies for future use, some procure sovereign wealth funds to siphon off profits from other capital markets throughout the world; everyone knows that the ruling House of Saud has permanently moved its monies offshore. Nevertheless, the moral, social capital baseline of both the Saudi’s and Venezuela aren’t diversified. Their collapsing while in the process of diversifying. Under Chavez, spending crowded-out growth in foreign exchange reserves. This is Beijing’s plan under One Belt – One Road; it seeks to bankrupt America’s privilege of being a reserve currency. China wishes to mimic in positivist fashion, the ascendancy of western norms. It will fail. Like Nigeria under president Goodluck Jonathan, the dominant political class robbed governing institutions, leaving them permanently undercapitalized.
Is America’s capital base eroding under the pall of entitlements? The only thing saving the American regime is our exorbitant privilege; but this too isn’t enough. . . Like the Saudi’s, Venezuela’s political class sought to buy-off all rivals and political threats. Now that too has ended. The U.S. under Obama’s administration sought the overt expropriation of civil society in distributionist regimes that sought to overtly identity a particular social lumpen and pit them against other citizens. This careless mismanagement is currently unfolding before us, with rising geopolitical costs.
With every opportunity squandered, the Saudi and other export dominated regimes like Venezuela are exhausted in their reach, their need for security. Its all told in their desperation, their willingness to field and accept long-run risks in exchange for short term fixes.
Shakespeare was right, when the King lay dying, the clowns cash in.
Originally published on William Holland’s Blog.