The dream of a socialist Venezuela has turned into a nightmare.
It’s depressing to see the disintegration of President Hugo Chávez’s attempt at political reform. Chávez, elected in 1999, was part of the “pink tide” that swept Latin America in the 2000s. He was one of the three musketeers of leftist governments in South America which included Lula da Silva of Brazil and Evo Morales of Bolivia.
The three denounced the Washington consensus of the 1990s which saw neo-liberal policies implemented: privatization of public companies, cuts to public spending on education and health care, foreign investment, and free market strategies.
The Neo-liberal experiment in the Latin Americas collapsed by the end of the 1990’s, leaving unemployment, corruption, inflation and increased inequality. Strained relations with the U.S. left an opportunity for China to partner with leftist governments.
The seeds of Venezuela’s collapse were sown from the start of Chávez’s presidency. Part of it had to do with the ego of the populist president. He believed that he was the people’s true champion and to ensure that he remained in power, he abolished the legislature’s upper house. Despite his public rhetoric of democracy, Chávez was consolidating power in himself.
Chávez’s policies were popular as many were lifted out of poverty with food subsidies, education, and welfare; all funded by the state-run oil company. But things went downhill after the workers of the oil company went on strike in 2002. Chávez fired 18,000 of them and replaced them with 100,000 of his supporters. Since the new workers had few of the technical and managerial skills necessary to run the plant, production fell even as global oil prices boomed.
To make up for falling oil revenues, Chávez borrowed money to fund popular programs leaving Venezuela the most indebted country in the world.
Chávez’s successor, President Nicolas Maduro, worsened the crisis. Unable to pay for subsidies and welfare programs, he printed money. This drove up inflation making basic goods unaffordable. He instituted price controls and fixed the currency exchange rate, so that imports became prohibitively expensive. Businesses shut down. Maduro printed more money, and inflation grew again. Food became scarce. Unrest deepened, and Maduro’s survival grew more contingent on handouts he could not afford.
In a country with the world’s largest proven oil reserves, food has grown so scarce that three of four citizens reported a weight loss averaging 19 pounds in a year.
The collapse of Venezuela’s economy surpasses the Great Depression of the dirty thirties says Ricardo Hausmann, former minister of planning of Venezuela:
“Put another way, Venezuela’s economic catastrophe dwarfs any in the history of the U.S., Western Europe or the rest of Latin America.”
Where words fail to describe the calamity, numbers help. Instead of thinking of lost of wages in currency, think of them as measured in the cheapest source of calories. Minimum wage, so measured, declined to just 7,005 calories per day. This is insufficient to feed a family of five, assuming that all the income is spent to buy the cheapest calories. One-half of Venezuela works at minimum wages.
City streets are marked by black markets and violence. The last reported murder rate, in 2014, was equivalent to the civilian casualty rate in 2004 Iraq.
Venezuela’s heartbreaking fall leaves dreamers of a better world in mourning.