I live in a Latin American neo-populist petrocracy.

For the last decade, my government’s economic officials have pledged themselves to the “comprehensive, humanist, endogenous and socialist development of the nation”, whatever that means.

Perhaps that gobbledygook just means that in Venezuela it is much easier to fetch a bottle of premium Scotch whisky at any low-income neighborhood’s supermarket than a bottle of milk, a pound of sugar or a dozen of eggs. Paradoxically, the local branch of Audi set an all-time Latin American sales record during 2007 by catching a 22% share of the region’s luxury cars market.

To the average Venezuelan citizen, “petropolitics” is not just another catchy word. Despite the hard fact that our main customer is the U.S., my oil-rich country’s notoriously outspoken leader is the perfect embodiment of anti-Americanism in our continent. To say that American motorists end up paying for Venezuela’s Russian Sukhoi US 28 Soviet-era jet fighters and hundreds of thousands of Kalashnikovs assault rifles is not an overstatement.

The hard fact is that, no matter how “humanist” and “endogenous” a petrostate’s welfare and social policies are conceived, oil just does not create jobs. On the contrary, it destroys most other sectors of the economy. Its most distorting effect is pushing up the real exchange rate, lessening incentives for almost any other industrial activity. Why produce your own food, for example, if you can import it? How can any other kind of export industry be developed if the inflow of petrodollars hampers manufacturing?

With all that oil wealth concentrated in the state, you can only witness how “clientele politics”, voracious bureaucracy and crony capitalism pervade every corner of our society.

As Tina Rosenberg wrote in “The Perils of Petrocracy” (The New York Times, 11-04-2007), “those in power distribute oil money to stay in power. Thus oil states tend to be highly corrupt”. “Comprehensive, humanist and socialist” stance notwithstanding, I would add.

Populism and petropolitics have lately drawn the interest of many scholars and commentators who have indisputably attained a keener understanding of both subjects than mine, hence I will not delve into all the consequences of those terms when they concur in a Latin American country with 27.7 million inhabitants, a GDP of $140 mm and, according to government sources, a 13.2% level of unemployment.

I will rather follow Yogi Berra’s word of advice, “you can observe a lot by watching” how daily life goes by in a populist petrocracy such as the one I live in. In consequence , allow me to contribute to a better knowledge of Venezuela’s current economic plight by pointing at an “Orwellian” innovation that I have designated “populist newspeak.”

When Mr. George Orwell coined the word “newspeak” he was obviously thinking of full-blown totalitarian regimes, not erratic Latin American populism. To everyone’s surprise, Mr. Chávez has plundered “newspeak” usages and twisted them into illiberal democracy’s conventional rhetoric. A remarkable achievement, let us be fair. That said, I think it’s high time for a digression directed at taking a better hold of my contention.

Consider breakfast. My breakfast, to be exact. It’s been months since I have had an oatmeal breakfast or a nice cup of espresso with a drop of milk because coffee and milk has literally vanished from supermarkets’ shelves since last November. And that includes “Mercal”, the government’s supermarket network where the poor are supposed to buy food at subsidized low prices

The reason? Stiff price controls, of course, and fixed currency rates that have been going on for 5 years, too.

Read more about the effects of Price Controls in an article by Hugh Rockoff in the Concise Encyclopedia of Economics. See also the discussion of how fixed exchange rates work in the CEE article on the Gold Standard by Michael Bordo.

I must confess that the very mention of price controls makes me drool at the thought of black beans and precooked corn flour, two staples absolutely essential in our spicy and usually inexpensive cocina criolla (Creole cuisine) that, according to señora Luz, the Dominican immigrant lady married to my office building’s Colombian janitor, I am not the only one to miss.

Early on February, an outburst of looting broke in Sabaneta, Mr. Chávez’s small hometown in southwestern Venezuela. Two hundred regular army troops had to be sent in to avoid further looting of the local “Mercal’s” facilities. The enraged looters accused corrupt supermarket officials of hoarding subsidized basic foods and then trying to sell them above controlled prices. As isolated as it was, the whole episode was reminiscent of the bloody riots that erupted in Caracas in 1989 with a death toll of some 700 people.

But, please, don’t take it from me, take it from the host of foreign left-leaning correspondents who now appear to be utterly surprised by the onslaught of criticism that Mr. Chávez is facing, even from his own supporters, about a list of “petty” domestic worries such as violent crime and shortages of basic foods.

An economic crisis is rapidly playing out when it should be the best of times for Venezuela, a country endowed with the largest conventional oil reserves outside the Middle East and with oil prices verging on global record highs.

Going back to price controls and “newspeak”, here is what Mr. Chávez said in his Sunday TV show back on January 20th:

In the same breath, Mr. Chávez both accepted that price controls lead to shortages and blamed shortages on producers’ treachery. Wry blogger “Quico” Toro, who holds a Political Sciences Master degree, reaching out to a large following among Venezuela’s youth, writes that,

In 1984, George Orwell wrote:

That passage could have come straight out the “Understanding Comprehensive, Humanist, Endogenous and Socialist Development Handbook”.

Orwell’s prescience is still scary, isn’t it?