Venezuela’s Problems Are Political, Not Economic

Scattered among the numerous commentaries on Venezuela’s spiral into chaos are suggestions for how to resolve the economic crisis. Little is said about the real cause of the economic problems, which is the politics of Venezuela — and it has been the problem for quite some time. Example: Jeff Spross at The Week wrote recently about the travails of Venezuela and how to “fix it,” but focused on the regime’s economic policy. Mark Weisbrot of the Center for Economic Policy Research argues similarly, writing that the regime’s currency exchange rate policy has lead to soaring inflation and a black market. That black market distorts the economy and destroys the incentive for producers to supply the basic goods for which citizens clamor.

I applaud their accurate analysis regarding the foolish and counterproductive economic policies of the regime, but these analysts and commenters fail to offer a true “fix” for Venezuela because they are not focused on what really ails the country. Venezuela is a dictatorship, and has been since Hugo Chavez took power; the policies that strangle the economy are only symptoms of the regime’s authoritarianism.

I have written about this before at The Federalist (here and here) and here at Shadow Government. 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.



Authoritarianism ruins countries because in destroying the liberties of the people, it crushes creativity and the entrepreneurial spirit, and hinders the application of everyone’s talents and labor in building prosperity. Human flourishing, which should be the goal, is not possible when the state tries to run the economy because economics is best understood as a human endeavor that encompasses the material as well as the spiritual. That is, we are more than matter, so econometrics and fiscal formulas are insufficient to promote lasting and stable economic growth. It is human liberty to flourish that matters first: all the rest is logistics.

But that is not what many economists and development workers see when they look at Venezuela and the scores of other countries ruined and impoverished over the years by statism, socialism, and big government planning. Why do smart people miss the most obvious facts? One reason is that they wish to avoid being criticized for attacking the politics of developing countries. Having worked in this field for years I know that most of these smart people know exactly what causes economic problems, but they either cannot or will not bring themselves to say so publicly. Another reason is that some are so enamored of their econometric cyphering and so focused on the material element of humankind that they won’t consider the moral and spiritual elements. They assume that poor countries can flourish with the right technical analysis and advice. They focus on the symptoms of dictatorship instead of the actual problem of dictatorship itself.

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.

Photo Credit: Anadolu Agency / Contributor