Venezuela, though filled with exotic beaches and many natural resources, has the most miserable economy in the world thanks to high inflation and unemployment. For a detailed background on the current situation in Venezuela, see Joe Carter’s recent explainer. Since Venezuela’s crisis took over the news, there has been plenty of commentary about the chaos and what could have caused it. Acton’s Director of Programs, Paul Bonicelli argues that politics is to blame. “Venezuela is a dictatorship,” he writes in Foreign Policy. “[T]he policies that strangle the economy are only symptoms of the regime’s authoritarianism.”
Venezuela used to be one of the success stories of Latin America even though it was never fully democratic and always a country of rich elites dominating the poorer masses without a fully developed middle class. But all that changed for the worse when Hugo Chavez, a former coup-leader, embarked on the path of a statist-socialist populism in the late 1990s. He called his project Bolivarian Socialism, thereby sullying the Great Liberator’s name; the better name is Chavismo, for it is Chavez and his cronies that deserve all the opprobrium for the failures of their project.
Once in power, Chavez implemented a dictatorship and took over and destroyed the once thriving oil industry. He intimidated every independent sector of the economy and social life into subservience. He died before he had to face the full fruition of his policies. As Venezuela crashed and his popularity plummeted, the opposition used the regime’s failures to finally take back the legislature, but now political stalemate rules between the presidency held by Chavez’s inept successor, Nicolas Maduro, and the opposition-held assembly. Things have gotten much worse in the last six months. The regime jails its political opponents (including business leaders it falsely accuses of hoarding); Venezuelans go without basic goods like toilet paper and nourishing food; and the government appears helpless to deal with murder, robbery, assault, and corruption. Vigilantism is replacing formal policing. People die in pools of their own blood in filthy hospitals for lack of prescriptions and care. To save energy and ease the strain on the budget, government employees are required to show up for work only two days a week.
Chavismo — which is nothing more nor less than authoritarianism — has ruined Venezuela, as authoritarianism usually does. With unchecked political power, dictators are free to engage in any dumb idea they choose without a reckoning. For those who think Deng’s China or Pinochet’s Chile are examples to the contrary, note well that neither saw any economic thriving until they embraced a market economy, and only an economic illiterate or a moral idiot would encourage other countries to try their path with all the human rights abuses and instability that come with dictatorship. Chile mercifully passed into democracy with a push from the Reagan administration and its economy does well, while the Chinese Communist Party’s dictatorship breeds corruption and mismanagement; its economic model is obviously shaky, if not terminal. The comparison between Chile and Venezuela is also quite telling.
Now what? How does Venezuela turn itself around?
Venezuela doesn’t just need some economic tinkering; it doesn’t simply need reforms to its currency exchange rules. It needs a constitutional and republican political order; it needs democratic capitalism (see Michael Novak’s timeless work, The Spirit of Democratic Capitalism, for the diagnosis and the cure). The donor nations of the world, the international aid agencies, and the opinion leaders, should have been decrying the lack of a free political order in Venezuela for all the years that Chavez and his cronies were ruining the country. With soaring poverty and crime, with thousands of protestors in the streets, with the country on the verge of a civil war, it is time for some clarity about the root problems in Venezuela. In 2016, the answer to the kinds of problems Venezuela is enduring is human freedom, not technocratic tinkering.
Read “Venezuela’s problems are political, not economic” at Foreign Policy.