Another in our occasional series of gobsmacked reports from the land of Bolivarian socialism–Venezuela, the place that sensible economics went to die. The latest is that the authorities there have arrested some bitcoin miners. The charge is apparently that the miners were stealing electricity. But the only reason that people are doing bitcoin mining there, in that land of Bolivarian plenty, is because economic idiocy has made electricity, to all intents and purposes, free. And electricity is the major cost in bitcoin mining.
So, think it through, we’ve an energy hungry process, the government makes energy really cheap, people do the process, government arrests them for stealing the cheap energy.
If it weren’t that these fools are dragging an entire nation down into abject penury this would be funny. Certainly not even Dario Fo could have made this sort of absurdity believable in a story. But Maduro and his chums are doing it for real. Sigh.
And apologies, but they really are:
Recently, the law enforcement agencies in Venezuela cracked down on Bitcoin miners. The arrests were announced by the director of Cuerpo de Investigaciones Cientificas, Penales y Criminalisticas (CICPC) — the country’s largest police agency. Among the arrested were three men and a woman, in the city of Charallave, Miranda state. These people were accused of committing cyber fraud and power theft.
Power theft, Uhuhn.
While Bitcoin mining isn’t illegal in Venezuela, Reason writes that 31-year-old miner Joel Padrón was arrested and jailed for more than three months at the beginning of 2016 on charges of electricity theft.
Well, OK, perhaps it’s true that running 300 mining units (what is alleged) does have an effect upon the electricity supply to others:
In 2016, Venezuelan President Nicolas Maduro briefly enforced a strict electricity rationing program in 2016 as a severe drought diminished its ability to produce hydroelectric power.
And that’s where the abject stupidity comes in. For every mere fool knows that if you have to ration something then rationing by price is the best way to do this. Thus only those things which produce more than the value of the scarce resource being consumed get done. Is this what Venezuela is doing? No, of course not, it’s not what they’re doing at all:
That’s our old friend of freezing prices again. As when they froze the price of toilet paper and the country ran out of it. And at least according to this the price of electricity is, at the black market (and thus real) exchange rate something like $0.2 or $0.1 cents per kilwatt hour. That’s not two or one cents US, that’s one tenth of one US cent. Or some one hundredth of the price in California, or one two hundredth of that in Germany (rough estimates only). All of which sounds great for the people but of course it isn’t. Because price fixing kills things.
So that really is, I am not joking above, what Bolivarian socialism is doing. It has made electricity artificially cheap at which point people do things which thrive on cheap electricity. So then they come along and arrest the people doing what they’ve just encouraged them to do by making electricity cheap.
No, this is beyond Fo–it’s at the outer edges of Vaslav Havel, possibly Tom Stoppard but even the absurdists haven’t tried to make us believe people would do this sort of thing.
And just for any who still think that Venezuela has something that even approximates to an economic policy, a reminder. Price systems have a purpose. They balance supply and demand–they are not just inventions of those who would deprive the workers of their rightful. And any economy which doesn’t use the price system to allocate resources will fail, just as the Bolivarian economy there in Venezuela is failing. We can have socialism, sure we can, we can have social democracy, we can have capitalism even, but what we can’t have is the duo of an economy that functions and the absence of markets and prices.
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