Venezuela is in big trouble. Recent reports highlight hunger due to food shortages. Protests are turning violent outside of empty supermarkets. In the suburbs of Caracas, the capital city, water is only being supplied once a week and is so dirty that it appears brown and is making people sick. Blackouts are rampant, government offices are closed for all but two half-days a week and public schools are closed on Friday in a desperate attempt to conserve electricity. Venezuela is shutting down. This is turmoil on a scale unknown in a country whose modern history has been plagued by crisis and tumult. Why?
The mid 1990s saw the poverty rate over 60% and inflation peak at 100% in 1996. A collapse of confidence in existing political parties saw Hugo Chavez elected President of Venezuela in 1998. The so-called “Bolivar Revolution” was fueled by promises of massive social spending. The constitution was re-written and the country’s name officially changed to the Bolivarian Republic of Venezuela. These changes were unabashedly socialist and the programs enacted, known as Bolivarian Missions, included housing subsidies, food distribution, educational campaigns and the construction of thousands of free medical clinics as well as mandatory vaccinations. All this was made possible by increasing government control of industry.
Venezuela has one of the largest oil reserves in the world. Petroleum exports account for over 50% of the country’s GDP and make up about 95% of total exports. It also accounts for 45% of the government’s revenue. In the early 2000s oil prices soared and the Venezuelan government had unprecedented funds at its disposal. The oil industry had previously been completely nationalized and in 2001 limits were placed on foreign investment.
Though temporarily advantageous, this link between oil prices and government revenue has proven fatal. Political power gained by promising benefits to constituents goes away if government can not continue to deliver them. When oil prices went up, Venezuela’s spending increased with its prosperity. When they went down the government resorted to heavy-handed intervention, having squandered its temporary financial gains.
The government raised the minimum wage, now it also controls prices, forcing businesses to pay high wages and sell for low profits. It has locked the exchange rate between the Bolivar (Venezuela’s currency) and the US dollar, making it impossible for local businesses to afford dollars to pay foreign suppliers.
In 2007 Venezuela nationalized its electricity and telecommunications industries, both of which were primarily owned by foreign companies. This was yet eyes of investors who had once made the development of Venezuela’s vast natural resources possible. The total number of businesses operating in the country is down to about 30% of what it was before the socialist revolution. The government has devalued its currency numerous times. In 2011 it repatriated $11 billion worth of gold bullion which was being held abroad. However it was quickly spent.
Hugo Chavez was elected to the presidency four times. He was succeeded by his vice president, Nicolas Manduro, after his death on March 5th, 2013. Having since been popularly elected twice, conditions now are worse than ever before.
Manduro has currently declared a national state of emergency for the second time in the past year. National Guard troops are stationed to prevent looting and outbursts of violence. Crime statistics are soaring. Some estimates put inflation as high as 275% and rising to 4-digits by 2017. Citizens are assigned certain days to shop based on their government ID numbers; lines stretch for blocks and many wait all day with small children regardless of burning sun or rain only to be turned away because the stores have run out of food. A recent poll shows nearly 70% believe President Manduro must go.
As is always the case with socialism, the poor, the same people who were seduced by promises of “income equality” and various other forms of state sponsored largesse, are the ones who suffer most when it all falls apart. So if the poor are as poor or poorer than ever, who has benefited from the destruction of one of the world’s top oil producing countries? Once again an overgrown parasitic government has taken its toll by providing opportunity for those in power to plunder and divert funds into their own pockets. Venezuela consistently ranks among the most corrupt countries in the world. When will the world learn that freedom doesn’t mean free things, that government doesn’t provide prosperity? Venezuelans seem to be learning it the hard way; portraits of Hugo Chavez loom over empty shelves in state run supermarkets with the slogan “an achievement of the revolution!” According to Reuters, Manduro supports Bernie Sanders for the US Presidency.
