How socialism is destroying Venezuela
Juan Carlos Hidalgo:
MILTON Friedman once said that, if you put the government in charge of the Sahara desert, there’ll eventually be a shortage of sand. No wonder that, after 14 years of socialist government, Venezuela – the country with the world’s largest oil reserves – is currently importing gasoline. This fact highlights Venezuela’s painful descent into chaos, as the economy crumbles and the nation’s social fabric unravels.This is a good summary of some of the mistakes made by the command economy control freaks in Venezuela. Command economies never work, and they are especially bad when run by people who are not that smart.
Venezuela is now witnessing its largest protests in a decade. The government of President Nicolas Maduro has cracked down on demonstrations with unprecedented force, using the National Guard and armed paramilitary gangs. At least 14 people have been killed, with hundreds detained – including Leopoldo López, one of the most emblematic leaders of the opposition – and over a dozen cases of torture reported.
Driving the unrest is a large segment of the population that is fed up with the country’s rapidly deteriorating economy. Despite receiving over $1 trillion in oil revenues since 1999, the government has run out of cash and now relies heavily on printing money to finance itself. The result is the highest inflation rate in the world: officially 56 per cent last year, although according to calculations by Steve Hanke of Johns Hopkins University, the implied annual inflation rate is actually 330 per cent.
The government reacted to skyrocketing inflation by following the typical socialist script: it imposed draconian price controls and has been raiding businesses it accuses of hoarding. As a result, there are widespread shortages of food and medicines, and people have to endure hour-long lines in supermarkets. The scarcity index produced by Venezuela’s central bank reached 28 per cent in January, meaning that one out of four basic products is out of stock at any given time. Somehow, toilet paper is now more valuable than paper money.
The productive sector has been decimated after hundreds of nationalisations and expropriations. Oil now accounts for 96 per cent of export earnings, up from 80 per cent a decade ago. Moreover, due to gross mismanagement at PDVSA, the state oil monopoly, production has dropped by 28 per cent since 2000, the only major energy producer in the world to experience a decline in the last quarter of a century.