The conservative line is that socialism (as is its habit) wrecked Venezuela. Is this true? Is something else to blame? Or have I bought into #FakeNews and Venezuela is actually doing great?
This Boston Globe article outlines things pretty well, but I’ll share a personal anecdote as well. Over Christmas, I was having a conversation with my in-law’s cousin, whose family is moving from Valencia to Peru because “everything’s so bad there” [in Venezuela]. She said people are killing zoo animals for food.
Keep in mind that Conservatives equate “socialism” meaning “social safety nets”, “government services” and “corporate regulation” with “socialism” meaning dismantling or expropriating private companies, farms and industries, imposing currency controls, price controls, and restricting access to foreign currency. Venezuela is an example of that later, which has predictably led to shortages and economic collapse.
The government of Venezuela made some huge errors, no doubt about it. But to call those problems the result of “socialism” is simplistic. The much bigger issue is that the government made the stupid decision to tie the entire economy to the price of oil.
Here’s another sad story about women in Venezuela undergoing sterilization because they can’t afford to have more children and there is a severe lack of birth control
Oil was $100 a barrel a few years ago, now it is about $50. However lots of mideast nations have economies heavily based on oil, and they have not seen this kind of collapse.
Supposedly a drought has crippled their hydroelectric generation capacity, causing power shortages.
However I can’t figure out why inflation is so rampant and there aren’t goods on the shelves. they seem to be running low on everything.
The Planet Money podcast addressed this. Essentially they imported everything and used oil money to pay for it. Without the oil money, their ability to import has been reduced and therefore shortages. There was also convoluted processes created to evaluate whether people were allowed to import things, and at what price so that didn’t help either.
A couple of people, including no doubt, the present leaders, believe the US state engages in economic warfare ( leading to regime change on the Hillary model ) and many modes of spoiling against those countries whose philosophies differ from pure Capital and the American Way of Life. Further that it has been doing so against the disobedient little brothers of Latin America for over a century.
Others, including the American State, say this is paranoid nonsense. Plus that the way to recovery and eliminating massive poverty is to stamp out unions, regulations, minimum wages and safety nets and let everyone scramble madly to the top. Plus that Ayn Rand was a good writer.
I think most Middle Eastern governments were smart enough to put some of their oil revenue into buying other assets. When oil prices dropped, these assets could be sold off to maintain a flow of income. The Venezuelan government seems to have spent all its money as it made it.
Inflation is happening because the government is printing money.
There aren’t any goods on the shelves because of price controls. If something costs you $2 to buy and price controls limit the price to $1.50 are you going to lose the money on the sale or leave the shelves empty? If you have inventory are you going to sell it to the price controlled place at $1 or to the neighboring country or the black market at $2?
Sure the price of oil is a major factor. But if you have a 50% drop in your income you would drop buying prepared foods and instead cook from scratch (from flour, sugar…). But government price controls and other regulations are causing a lack of availability of flour, sugar and other basic ingredients.
It is not very useful or very effective to talk about the “Middle Eastern governments” with respect to the management of oil revenue.
There are enormous differences between the Gulf states and their management, which has never been ‘socialistic’ and the cases of the populist states, which you can look to the Algerian case and the Iranian case, both effected by forms of populist semi socialism that you could make a connection to the Venezuelan case (not a direct one but there can be said to be some similarities).
The algerian case perhaps is the cloest as the government has been both heavily Army influenced (if I am polite) and heavily influenced by an ad hoc socialist (not in the stupid American right sense but in the proper sense) populism.
It is clear that the Algerian case is not one of an economic excellence. The contrary, the recourse to the subsidy regimes and the command economy approach copied from the Soviets in part but seeming dear to many of the army backed regimes, has done badly.
but they have never done so badly as Venezuela.
So for the Venezuela, it is not just the very typical failure of the socialist command economy structure, but the special added incompetence of the Chavez power structure and Chavistas.
It’s not really a problem of socialism per se, it’s a more specific problem than that. Socialism was a necessary but not sufficient condition here (that’s to say, a non-socialist economy probably wouldn’t have failed in the specific way that Venezuela did, but there have been planned socialist economies that, whatever their other problems, didn’t have massive inflation, food shortages, collapses in production, etc. either).
In any kind of economy, you (as the government) can do three things with your budget. You can A) spend it on investment in capital goods to ensure economic growth (or at the very least, to ensure your ability to continue to produce goods and services in the future). You can B) spend it on consumer goods for elites, and you can C) spend it on consumer goods for the common people. One of the arguments made by socialists in the past was that by not having an owning class, you could eliminate B) and redirect that money to both A) and C) instead.
Chavez, on the contrary, promised to provide cheap consumer goods (subsidized grocerys, refrigerators, housing, medical care etc.) to the bulk of the population, and he largely lived up to that. Unfortunately, he did so by systematically underinvesting in the oil industry (which was Venezuela’s biggest single export) and redirecting that money to subsidizing imported consumer goods, and also by failing to properly invest in alternative sectors of the economy either. The result of that was that not only did Venezuela not diversify their economy, but they produce less oil than they used to, by a large margin. (The drop in the price of oil doesn’t help either).
This doesn’t have to happen in a socialist economy (eastern European countries invested a very high proportion of their GDP in capital goods, partly because they didn’t have to keep people happy and win elections), but Venezuela ended up trying to implement ‘socialism’ in a very shortsighted way, with predictable results.
The concept that needs to be expanded to explain the situation is the one about the Command Economy:
While even China and Vietnam dumped a lot of their command economy structure and are doing better than before, the immature Maduro has decided to double down on an idea that even the Vietnamese are dropping. Of course not all the Venezuelan economy was/is a command one, but the current leaders have pushed hard to put many parts of the economy towards that.
Venezuela has among the, if not the, largest proven oil reserves on the planet. Lower oil prices do not explain their problems, they would be tits up even at $100 oil. Basically, it’s run by a bunch of goddamn crooks. Price controls never work, they create shortages, and people won’t work for free. It’s gotten so bad the Army was confiscating toys from retailers this Christmas.
Argentina is another example, at the turn of the (20th) century, they were by some estimates, the 3rd wealthiest country in the world. Then you-know-who (Don’t Cry For Me…) showed up. What’s remarkable is how long a country can take to recover, the damage is real and lasts for a very long time.
