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Subsidized Venezuelans: The Paradox of a Dependent Society

By: María Gabriela Díaz - Feb 10, 2014, 12:59 pm

EspañolThose officials who enter into politics and follow their heart over their reason take office promising to overcome poverty with more subsidies and state aid. Be they avowed socialists or not, this has been the populist approach that most politicians in Venezuela have adopted over the years.

The needs of the lower classes are, without doubt, a problem that compels attention. However, why is it that to give away free goods and services, or to heavily subsidize them, harms the entire society so much?

Subsidies for food, housing, education, health care, and other services conceal their true cost from the citizen, and therefore, their true value. In theory, such subsidies work as a safety net to protect the individuals from any economic crisis that might hit their pockets. In other words, amid all the tribulations that Venezuelans live through, at least one knows the price of gasoline* will not rise as all other daily expenses seem to.

But there is another curious consequence of these subsidies. They disconnect us from the production chain and economic realities of each product. We do not pay the real price, but one much lower, so we underestimate it.

The phrase “it’s cheap, give me two” was coined as an expression to refer to the country’s oil bonanza of the 1970s, also known as the times of “Saudi Venezuela.” Those days have passed for the country, but the phrase has been used by Chavistas to refer to Venezuela’s excessive consumerism back in the days of the Fourth Republic.

The phrase has held its value, though, because Venezuelans still consume on that approach, especially when the price of goods and services are controlled. We are currently basing our purchasing decisions on false and artificial prices that don’t reflect the true value that they would have in a free society.

Without doubt, the worst consequence of subsidies, and most evident, is trafficking. At times it seems that traffickers are more knowledgeable about economic laws and free trade than those who govern this country. Traffickers, also known as bachaqueros or buhoneros, buy price-regulated products off businesses and sell them on the streets at much higher prices, the real prices.

They simply follow the old golden maxim: supply and demand — something that government refuses to believe. In its place, those in power insist on imposing a model that goes against each and every law of nature.

Of course, the state (via taxpayers) and businesses bear the brunt of this socialist approach, and must pay the gap between the artificial prices and the actual value of the goods they offer — all so citizens “don’t realize” the true face of the economy. The problem is that if the state and businesses go bankrupt, society does as well. In the end, we as citizens pay for the errors of our government.

The most unfortunate aspect is that subsidies have become a lie each person knows intimately, yet one that no one wants to end. This was proven last Christmas. After Maduro enacted price control measures on all businesses, hundreds of Venezuelans, from all political affiliations and economic statuses, lined up in long queues to take advantage of those “sales,” without caring if the businesses were losing or going bankrupt for being forced to sell at prices everybody knew where ludicrous.

The truth is that Venezuelans are used to being subsidized, and not caring about the cost.

Fuente: EDO Ilustrado
Fuente: EDO Ilustrado

Instead of thinking how to lower prices, we should ask ourselves why the money we have is not enough to purchase what we need? The answer is that the bolívar is worth nothing.

We should complain not about the government’s latest devaluation, but about our currency’s loss of actual market value. We should liberate the exchange control and be honest with our economy. Perhaps then we will see how devastated we’ve become, where we stand, and what we must do to advance.

Meanwhile, we prefer to remain deceived: doing the math with a fictitious dollar, subject to last-minute decisions. Our plans for life, buying a home, a car, a trip, and studies abroad — absolutely everything — depends on officials who have demonstrated nothing more than dishonesty and no guts to “take the bull by the horns.”

If we had a free dollar, we would not have to worry about a quota, or any conditions from the state telling us how much we can spend, at what time and in what place. It’s our money, which we have earned with our work; why should a government decide how we spend it?

However, if you were to eliminate the subsidies, the masks would fall and the reality of the country would be much worse. Then, after the storm, calm would come. If Venezuela were to become a society free of subsidies, we would have a chance at a mature and developed economy, based on relative certainties, strong and independent from any particular partisan administration.

The stumbling block is that no matter how short this crisis period would be, it would have a political cost that no government has been willing to assume. Former President Carlos Andrés Pérez tried, and he may have had the best of intentions, but his political team did not allow it.

Instead, Venezuelans continue to allow the government officials to “protect” our economy, when they are in fact drowning it amid foolish maneuvers, justified by superficial class warfare. Many people complain of the excessive controls this authoritarian government has over them, but they omit the biggest problem: they are used to a state that subsidizes them.

Everyone is afraid to find out the “real” price of living in Venezuela. While we prefer to keep the blindfold over our eyes and complain without wanting to know the economic reality, the government will continue to reward us with subsidies in exchange for what we have undervalued the most thus far: our freedom.

*Fuel in Venezuela is subsidized. The sale price of gasoline is US$0.015 per liter, on a fixed price in the local currency that has been in effect since 1997.

Translated by PanAm Post Staff.

María Gabriela Díaz María Gabriela Díaz

María Gabriela Díaz reported from Caracas, Venezuela, and led the PanAm Post internship program. She has a Bachelor of Arts in political science with a focus in international affairs.