During the recent State of the Union address, Republicans in the audience became quite excited when President Trump asserted that Venezuela’s economic collapse was caused by socialism. Unfortunately, Trump’s assertion, while appealing to Republicans, is a little misleading.
Venezuela’s prosperity has been founded on the huge oil reserves of the country. The economic success and subsequent failure are more related to the collapse of oil prices—once over $100 a barrel, now closer to $50. During the prosperous times, the government - not because it was socialist, but incompetent - was spending their largess away and, in the process, going into hock to Russian and Chinese interests. This may help explain why Russia and China support the current authoritarian government, while the U.S. backs what many see as the legitimate government.
There is apparently plenty of corruption and mismanagement involved as well, but to say the country’s economic failure is cause by something called “socialism” is pretty far fetched. There are many so called socialist states—including, in some listings, the United States. Take for example, Sweden. Many think of Sweden as a model of a socialist state. However, it is also a capitalist country.
If you travel from Fargo-Moorhead down Interstate 94 to St. Cloud, Minn., you will find a manufacturing plant employing about 800 people in the process of making Frigidaire freezers. The factory is owned by A.B. Electrolux of Sweden, one of the largest producers of consumer appliances in the world. You can buy their stock on the stock exchange, recently about $51 a share. The St. Cloud plant and a plant in another part of the U.S. are being closed this year in response to worldwide competition and heavy Trump tariffs on steel—a major component of freezers, washing machines, and other such products. The appliances from these closed plants will be built in new or expanded sites in Tennessee and South Carolina, probably with fewer employees.
I was recently in Texas and saw a large back hoe working in a new housing development. It had a name printed prominently on its side: Volvo. Volvo is a world leader in the production of heavy equipment with operations around the world. As with 80 percent of Swedish resources and businesses, it is privately-owned. It’s stock can be purchased on the Swedish stock exchange.
Sweden is thought of as socialist because it provides broader social services for its citizens than many countries. They pay for this with heavier taxes, including on Electrolux and Volvo. This economic pattern not only provides direct benefits to ordinary Swedes, but the wage gap between high income and average income Swedes is dramatically narrower than in the U.S. And, need it be said: Sweden is not falling apart—despite what President Trump might have one believe.