The world is finally aware of the severity of Venezuela’s economic crisis — a resource-rich nation that is on track for a brutal GDP contraction for the third year in a row (over 10% for 2016). The conspicuous consequences of interventionist state policies, alongside stringent price and foreign-exchange controls, have gone from inciting ridicule to indignation.
Even when coerced into basements by government mandate, daylong lines for basic goods are hard to hide. International pundits are keen to advocate rational economic policy actions to alleviate the situation. Yet there is one problem: economic development has not been a goal for the Venezuelan government for many years now.
There are plenty of Oxbridge-educated bureaucrats in Venezuela that are capable of coming up with effective solutions for the country’s economic woes; yet everyone in a position of power is blinded by ideology and distracted by revolutionary social justice goals. Therefore, without a regime change there will not be a return to growth.
Today, Venezuela suffers from the world’s highest annual inflation rate of more than 450% (1,150% for unregulated goods). The country is also on the verge of default, having depleted its international reserves after years of unbridled spending and handouts.
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It is one of the world’s most dangerous countries with almost 25,000 homicides in 2014 and more than 90 percent of the murders going unpunished, according to the nonprofit organization Venezuelan Violence Observatory (VVO). Additionally, government institutions are riddled with corruption and allegations of wrongdoing while the citizens suffer the daily consequences.
Like Cuba and North Korea, Venezuela established a foreign-exchange control system more than a decade ago along with ever-stronger price controls, and has now began to ration food as imports tumble and basic good shortages reach almost 30 percent.
For Venezuelan citizens, the economic reality of the country translates to a daily grind to find foodstuffs, household items, and medicines. Countless illnesses that could be easily treated in the past have today become a death sentence, as industry leaders estimate medical supply scarcity has surpassed 60 percent.
The endless lines to await the arrival of food products at supermarkets force many to miss days of work. A new government plan to enforce rationing with fingerprint machines is being rolled out to control the chaos whenever any of the scarce goods arrive. Yet none of these economic difficulties should have come as a surprise to a government that receives policy advice from Havana.
Cubans have been standing in lines for decades, and Venezuelan subsidies have long been the lifeline for the island’s economy. Venezuelan government officials are extremely well versed in the history of economic thought and the consequences brought about by Leninism.
And yet they forge ahead. Because their goal is not to achieve economic growth or development; their goal has always been clearly stated: to construct a 21st-century socialist nation based on a revolutionary system of government that will achieve social justice.
This revolutionary clamor for redemption stems from mistakes and crony capitalism during the country’s democratic era. Yet the reason for poor wealth distribution among the population came precisely from policies based on socialism. The Venezuelan government has complete ownership of the country’s subsoil and the returns which it produces, and country’s inability to diversify away from oil dependency alongside the top-down approach to development created unsustainable growth and benefited only the governing elite and their supporters.
To Hugo Chávez and all of his successors today, despite dire results for the economy, the revolution is what will bring justice to all those who were oppressed in the past. And even while manipulating the truth by pretending to adhere to democratic principles, they have never hidden their true goal. When Chávez first arrived to power, one of his first actions was to change the constitution. Since then, a slew of mandated decrees have created a stranglehold on the private sector, the only productive sector in the country.
— PanAm Post (@PanAmPost) July 27, 2016
In Venezuela, no one can be fired, profits and prices are capped, imports are restricted, dollars are almost impossible to come by, and production minimums still have to be met to avoid fines or imprisonment.
So given the entrenchment in government of the current ideological elites, the economy will get worse before it gets better. The march towards a revolutionary socialist nation will continue. Only a higher level of social unrest from the struggling population will refocus the government’s goals on the economy and democracy.
But one thing is for certain: there is no solution to the economic crisis that includes the current regime or another like-minded one staying in power; promoting dialogue with current leaders will only kick the can down the road.