By Isabella Agrusa
In a free market, consumers decide what products they desire to purchase. In making a choice between two products, we essentially elect what we believe to be the best choice for us. This type of economy is consumer-driven, where businesses compete to provide the best products, as well as deciding how much to produce and charge based on the quantity demanded for their product or service.
In a socialist or centrally planned economy, the government controls the prices and the level of output for products and services. The government decides how much to produce and the quantity that they believe the people demand, and most times they get it extremely wrong. Feedback on consumer tastes is delayed by thick layers of bureaucracy making adjustments in the market extremely difficult and sometimes impossible to satisfy those making purchases. How quickly can the government move to correct the prices and outputs to fix the market and to whose desire are they making these decisions? Knowing government, this lends itself to the elite making decisions for the general population that at some point ends up being more beneficial to them than the population as a whole.
According to the International Monetary Fund, the inflation rate in Venezuela is around ten-million percent 1, preventing many from purchasing basic necessities to feed and take care of their families 2. Venezuela was one of the most prosperous nations in South America, but since the introduction of socialist leaders and policies, the country has become repressed in economic freedom 3. The Heritage Foundation ranked Venezuela 179 out of 180 countries for economic freedom, right above North Korea. Venezuela, a nation rich with natural resources especially oil, has become a nation where most cannot afford the basic necessities due to the mismanagement and policies the government has imposed. Some point out the price of oil is at all-time lows but this issue has been around in Venezuela for a long time and their GDP was actually negative in 2009, the year after the highest price for oil in recent history. Socialism just cannot regulate supply and demand as efficiently and methodically as capitalism does.
Isabella currently attends Michigan State and will graduate in 2024.