Economics of Liberty

10 Signs Your Country is a Banana Republic: A Cautionary Tale

by Jose Nino

History has shown time and time again that even the greatest of empires can decay and turn into total basket cases. At first, these declines may seem inevitable and outside the citizenry’s control, but they are actually the logical consequences of horrendous public policies put in place by these very governments.

The term “banana republic” is a very fitting description for what these countries devolve into. This term is usually used to refer to politically unstable countries, whose economies heavily depend on the exportation of primary resources such as bananas and other raw materials.

Current day Venezuela is the perfect standard to use when referring to this dreaded economic status, despite it’s main export being oil. Once one of Latin America’s most prosperous countries, Venezuela has turned into an economic basket case thanks to the interventionist economic policies carried out by its government in the past 15 years.

The overwhelming majority of the horror stories that Venezuelans face are universal fixtures of banana republics. Here are some of the most notable features of what a banana republic looks like…..

#1. Scarcity of Basic Goods

The shortage of toilet paper in Venezuela is well documented. Other goods such as diapers, sugars, and cooking oils are also in scare supply. What causes these shortages? Price controls. When governments fix price ceilings, the result is an excess demand and a bunch of empty shelves. Yes, the goods are “cheaper”, but that’s if you’re lucky enough to be at the start of the long line to receive the goods.

You know your country is on the road to banana republic status when basic goods must be rationed by the State.

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