Everyone Wants Toilet Paper. Why Doesn’t Venezuela Have Enough?
Americans once used corn cobs. Ow. And oyster shells. Really ow. The ancient Romans kept sponges on sticks in their public restrooms, left in salt water between users. Not ow but eeeeuw. The man who invented toilet paper, he did mankind a great good.
Ask the Venezuelans. A few years ago their country had a functioning economy. People could buy food, and things like aspirin and shoes. Diabetics could get insulin. Venezuelans were set for toilet paper. Now, they can’t even get necessities like those. If they can find them, they have to pay huge amounts of money to get them.
How does this happen?
How It Happens
For many reasons, but a big one is that bad things happen when the state tries to do what it can’t do. Command economies don’t work. Venezuela could get away with it for a while, because the country made so much money from exporting oil. It was money for jam, as my grandmother would say. But then the price of oil dropped and the country suddenly had to depend on the rest of its economy to produce. Which it couldn’t, partly because the state was doing what it can’t do.
Let’s assume the purest of intentions. Let’s assume very smart people. No corruption, no stupidity. Let’s say businesses only want to make a very small profit, just enough to keep the doors open. A best-case scenario, which we never get in real life. They’ll still run out of toilet paper. If not toilet paper, other things people once had in abundance.
They Don’t Have Enough Food, Either
The Venezuelan people suffer worse problems than just the lack of toilet paper.
Unemployment will top 25% this year, up from 7.4% in 2015, CNN Money reports. The economy shrank 18%. The IMF’s predicts inflation will rise to 720% this year. All three figures should get even worse next year.
What does this mean for the people of Venezuela? Among other things, they can’t get enough food and much of the food they can get is bad for them.
Three-quarters of the people have lost an average of 19 pounds in weight, according to the liberal English website The Independent. 30% of school children suffer malnutrition.
The newspaper reports: “82 per cent of the nation’s households are now living in poverty and 93 per cent said their income was not enough to cover their food needs.”
A nutritionist warned that the diet would make future generations of Venezuelans shorter and heavier. “The lack of calcium will stunt growth and excess carbohydrates will make them fat,” he said.
A young mother told the newspaper she gave her 2-year-old a mixture of water and cornstarch when she couldn’t get milk. “And I try to get her to sleep through the morning so I don’t have to worry about her breakfast.”
Why? Because the state replaces the price signals that a market needs to work with instructions from government.
Former president Hugo Chavez tried to tell everyone what to do, and his successor Nicholas Maduro does the same. Governments can do a lot to shape an economy and mitigate its worst effects. They don’t do well telling people what to make, how much to make of it, and how much it should cost.
Take, for example, toilet paper.
Collectivist economies keep running out of it, so much so that it’s a running joke for conservatives. “Venezuela Reaches the Final Stage of Socialism: No Toilet Paper,” runs the headline to a Cato Institute story.
Even four years ago, before the economy got so much worse, the Venezuelan government tried to import 50 million rolls — that’s 50,000,000. Of a product that had once cost just a few cents in their very own grocery stores. Venezuelans have to go to Colombia to get it. People sell black market toilet paper the way people sell drugs in dark alleys.
Here’s The Problem
Why? Because the two presidents thought that good Latin American socialist countries should charge very little for the things people needed. Why should companies profit so much on necessities? They set the prices for lots of things, including toilet paper. What could go wrong?
The production of toilet paper, for one thing. The president doesn’t know how much making toilet paper costs. If he sets the price too low, the people who make toilet paper stop making it. They’re not in business to lose money, so no toilet paper. Even if they were in business to lose money, they’d go broke sooner or later, so then no toilet paper.
Making toilet paper doesn’t take much, compared with making a car or a computer. But still, making toilet paper involves lots of moving parts. You need two different kinds of wood (hard wood and soft wood), water, various chemicals, and bleach. Someone has to grow the trees and cut them down and haul them to the factory. (Which someone had to build. That’s a huge cost up front.) Someone has to supply the water — a lot of water. Other people must make the chemicals and get them to the factory. Someone else has to make the bleach and get it to the factory.
Some of those things may be cheap and easy to get, some expensive and hard to get. Some of them may have been cheap and gotten expensive. Some may be cheap one week, expensive the next. Maybe they get more expensive because the supply runs low or because someone else will pay more for them to make whatever he’s making. Maybe a fire devastates the tree-producing forest or the chemical-creating factory. Maybe the chemical-creating factory decides to make another, more profitable chemical for another industry and stops making it for the paper industry. No one can predict all this, least of all a government agency, however smart and eager the bureaucrats are.
On top of that, the factory needs workers of all sorts. They need to be paid. It needs electricity, lots of it. It has to pay taxes. The delivery trucks cost money and use lots of gas, and that’s something else that may suddenly get really expensive.
The Same Problem
Suppose the government tried to fix the problem by setting the price for the wood, water, etc. That won’t work for the same reason. The state doesn’t know how much it costs to make those things. And even if it did, the price of the things you need to make those goes up and down. If the chemical company starts losing money on the chemicals the toilet paper maker needs, it stops making them. So, again, no toilet paper.
No government agency can know the real price of anything, at least for long. If it knows it today, it won’t know it a month from now. It’ll probably set the prices too low, because it’s trying to help people, or to get their votes. If the state sets the price wrong, as it will, bad things happen. Like the country running out of toilet paper — and other things people need even more, like insulin.