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Venezuela: The Failure of Socialism

By: Trino Márquez - Jul 18, 2013, 8:00 am

EspañolIn Venezuela we are living, once again, the shortcomings of socialism and the reasons behind this system’s failure in all the countries where it has been established.

Even the government’s own indicators, through the Central Bank of Venezuela (Banco Central de Venezuela: BCV), tell the sorry tale. June 2013 ended with inflation of 4.7 percent and an estimate of 56.4 percent for a single year. That comes after inflation of 39.9 percent over the past twelve months, including 57.4 percent for food. Further, the shortage index admitted by the BCV is 19.3 percent (although experts point out that the index is indeed above 30 percent).

But inflation at home is just the start. The difference between the official exchange rate and the unofficial exchange rate in the black market is gigantic — around 450 percent. The official rate is Bs.6.30 (Venezuelan bolivares fuertes) per US dollar, while the unofficial rate is above thirty, and the prices for most consumer goods follow this unofficial dollar exchange rate. Despite being an oil-producing country, Venezuela received the lowest influx of investment in the South American region. We have the lowest productivity rate of the continent. To rub salt into the wound, according to the Global Barometer of Corruption, published by Transparency International, we are among the countries with the least amount of transparency and clarity in the management of our public resources.

There are two typical traits of socialism currently in Venezuela: inefficiency and corruption.

Nicolás Maduro bumped into the demanding challenge of leading an interventionist state that grew over fourteen years, similar to obesity, in an unhealthy and abnormal way. It grew in size by means of expropriating efficient private companies, only to manage them into bankruptcy — such are the shameful cases of Lácteos Los Andes and Agroisleña, companies which specialized in the distribution of land fertilizers.

The government’s desire to control and monitor all economic activity led to the approval of a mass of inconvenient laws, which became enemies of investment, production, and innovation. The Ley Orgánica del Trabajo is just one example, which banned outsourcing, mandated 90 percent of a company’s employees be citizens, and impeded one’s capacity to remove unproductive individuals; it harms the national economy as well as the working classes. Since that legal instrument came into force last May, it has become increasingly difficult to create a job in the formal sector of the economy, while at the same time the productivity of workers has decreased at an alarming rate.

The price controls (or price-freezing process) and the fixed exchange rate (established in February, 2003) remain as a policy, regardless of the fact that they completely distort our country’s economy and against all evidence of their ineffectiveness and inconvenience.

Within the supporters of the government or “oficialismo,” there is a passionate discussion, which can be followed by the Aporrea website, about the line of actions that should be carried out by Maduro. The radicals support the government’s position to avoid any kind of business agreements with the private sector and criticize any kind of negotiation with the national “bourgeoisie.” They insist that the revolution should be deepened by future expropriations and nationalizations, the expansion of collectivism and the promotion of social property. Their goal is to suffocate private property until it is reduced to an insignificant level.

This extremist section insists on pious calls to strengthen the “revolutionary moral” and to fight corruption by reinforcing social audits and punishments for those responsible for supposedly fraudulent acts. This group uses extreme levels of dynamism and claims to want anarcho-communism in its purest form — regardless of how conflicting the goals of elimination of property and hierarchy may be. They attack, vilify  and have cornered the fraction of the more moderate social democrats of the “oficialismo.” This more moderate sector, therefore, chooses to keep shameful silence when faced with the irresponsible radicalism of the Maoists and Cheguevarians who are calling to the radicalization of the process.

The outcome of this confrontation within the “oficialismo” is not clear. What we know with certainty is that if the Marxists and what they advocate for win, the country will be lost in even worse chaos, similar to what occurred in Chile during the final stages of Salvador Allende’s government. The supporters of the Maoist left forced the president right into the abyss of confiscations and expropriations. There was no place for acceptance, obedience, or moderation. The economy collapsed. Chile went into bankruptcy. The end results of this suicidal jump are widely known and painful — no need to go over them.

The oil production in Venezuela grants the governments with benefits and strategies that were certainly not available to Allende. But this buffer is loosing strength. The “Venezuelan socialism” is indeed identical to the one seen in other parts of the world. The central planning strategy and the socialization and collectivization of the productive agents are part of a system that can only end in failure. Venezuela is suffering its consequences.

Trino Márquez Trino Márquez

Doctor of social science, professor at the Central University of Venezuela, and academic director of Cedice-Libertad. Follow him on Twitter @trinomarquezc.