After the collapse of the Soviet Union, the reincorporation of capitalism into the state-planned economies of Vietnam and the PRC, and the end of the US trade embargo with Cuba, it seems that socialism may be on the verge of giving up the ghost entirely.
However, if there’s any one regime besides the North Koreans that thinks that couldn’t be further from the truth, it’s Nicolas Maduro’s presidency in Venezuela. When the commodity price for oil dropped like lead in 2014, Venezuela, with 95% of its exports being crude oil, seemed doomed. The Hugo Chavez plan of using oil exports to pay for expensive state entitlements seemed all well and good when gasoline was as much as 3 dollars a gallon in the US; now with prices often half that, it’s absolutely bankrupting the Venezuelan government.
Under the circumstances, one might think Maduro would want to cut some of the entitlements his government doles out in order to prevent defaulting the debt. But instead, Maduro decided to slash the imports of food and commercial goods so he could keep up with the debt payments. Now, we see that policy wreaking havoc on the Venezuelan people. Vice News has documented on video the hours of waiting common Venezuelans go through just for a loaf of bread. The first ones to be hurt by Maduro’s policies, ironically, are the very ones he wanted to help with entitlements in the first place- the poor, who can’t afford the massively increasing food prices.
But it’s not just the poor that are suffering. In 2015, Venezuela had inflation rates of over 180 percent, comparable to the Weimar Republic of 1930s Germany. These inflation rates even surpassed the hyperinflation of Zimbabwe, who was forced to start using foreign currency after their dollars were inflated into the trillions. Venezuela seems destined for the same path, only it doesn’t have any reserve of foreign currency to rely upon. Inflation has meant the price of everything, from cars to toilet paper, has increased, while wages remain stagnant.
The economic crash spurned on by this mishandled and excessive government intervention has even affected infrastructure itself. Bus drivers went on strike in Caracas this week, taking to the street and blocking traffic with their vehicles. One of their primary complaints was the government was asking exorbitant prices for replacement parts, forcing them to turn to illegal means like the black market and endangering anyone who decided to ride.
So now that we’re about to hit rock bottom in Venezuela, where do we go from here? I have a few suggestions:
- Oust President Maduro in a recall referendum or the next election. This is the primary short-term goal of Venezuela’s opposition party, Popular Will. Millions of Venezuelans joined them in a march on Caracas, the Venezuelan capital, to peacefully protest against Maduro’s regime two weeks ago. This show of popular support tried to force the government into allowing them to start the second petition required for a recall referendum. The government has yet to answer them, but if the referendum is held before January 10, 2017, Maduro could be removed from office. Otherwise, they will have to wait for the next presidential election, which in these desperate times may be too far away.
- Open Venezuelan trade. Venezuela operates under a closed system of imports and exports, where it only takes in specifically what it wants. This is what allowed Maduro to close imports of food and consumer goods in the first place. Opening up the country to free trade will not only end the food crisis, but will reduce prices across the board for all goods. Already, even Maduro’s government is moving in this direction. Venezuela’s Minister of Foreign Trade Jesus Farias attended a trade conference in Bonaire to discuss opening up trade agreements with the Caribbean.
- Diversify Venezuela’s economy. This is a long-term goal, but just because it won’t happen overnight doesn’t mean it can’t be done. In fact, nothing is further from the truth, it must be done, if Venezuela never wants to suffer under this kind of economic crisis again, it must get its exports away from just crude oil. Instead of using the oil revenue for entitlements, the government should be using it to invest into the Venezuelan economy, helping to provide the capital for start-ups, entrepreneurs, factories, manufacturing, and more. Venezuela’s resource economy is, other than its authoritarian regime, the only thing that’s holding its people back.
This is by no means an exhaustive list of what needs to be done to “fix” Venezuela’s ills, but these are some of the most important developments and certainly the most essential if the country ever wants to be prosperous again.
For the country to be free, however, Maduro and his United Socialist Party need to go. Maduro himself clearly doesn’t actually believe in helping his people. If he did, he wouldn’t have hyperinflated the country, allowed entitlements to bankrupt his treasury, and close imports of badly-needed food to the poor and starving. Instead, Maduro blames the ever-worsening crisis on “right-wing extremists.” How can there be right-wing extremists in a nation that’s been ruled exclusively by socialists for 17 years? If to summarize and to perhaps oversimplify, the developments of these past two years can be reduced to: Venezuela falling into a deep hole; Maduro digging the hole even deeper; and then blaming the west when he can’t pull Venezuela out of his hole.
Whatever the outcome of the next few years as the crisis continues on unabated, we’ll have to watch this nation in particular very closely. Hopefully, for all involved, everything turns out okay.