The March of Folly
Hugo Chavez, an army officer, was elected and has served as president of Venenzuela from 1998 until his death in 2013. He served a total of four terms exceeding the presidential term limit set in constitution, which was altered to remove limit by holding a much criticised Constitutional Referendum in 2009. Not only has he restricted the pre-existing direct access to military by civilians but has also removed a chamber of Congress, and has extended his power to the Supreme Court by replacing and extending justices panel with member of his choice. Thus, he has became a semi-authoritarian and a hyper-populist.
In the beginning, his policy includes redistribution of wealth, land reform, and democratization of economic activity which were initially conceived, perhaps, for a good cause of improving economic and social conditions. However, after little more than a decade of populist programs, overspending, artificial price control and rigging of Venezuela’s economy, cracks in the system started to appear leading to inflation, shortage and poverty.
After Chavez’s death, Nicolas Maduro, a former bus driver who rose through the ranks and later served as a minister and vice president to Chavez, became the president winning by a very narrow margin of 1.5% vote. True to form, Maduro continued most of the previous administration’s populist pledges and concentrated only on public opinion. He neglected practical issues which economist have repeatedly warned about in the past, and has failed to improve economic and financial predicament.
The country has entered an economic recession by 2014, and has seen the highest inflation rate of 800% in 2016, 250,000% by early 2018, and now the government has officially stopped publishing the inflation rate. The International Monetary Fund has predicted the hyperinflation to reach 1,000,000% by the end of this year.
(Photo source: https://news.sky.com/story/venezuela-crisis-11476739)
The socio-economic crisis has driven more than 2 million citizens to migrate to other countries in desperate search of better life, crossing unfriendly and foreign terrain with no food. Those who remained back home are reduced to eating wild fruits, roots, animals (such as horses, dogs, cats etc.) and even scavanging trash for waste food. Essential needs such as rice, oil, meat, soap, toilet paper etc. are long out of stock, and the few places where they are still selling are looted.
(The photos show how much you have to pay for basic goods. Source: https://nypost.com/2018/08/20/venezuelan-bolivar-is-worth-more-as-toilet-paper/slide-2/)
Lack of medical equipment and medicines has brought most of the hospitals to grinding halt, and few doctors that are left – most of the doctors has already fled to other countries since few years back- are forced to work without electricity and refrigeration causing rampant spread of disease. The result is surge in avoidable deaths especially new born, women and children.
The state is on the verge of anarchy with many-fold increase in robbery, larceny and murder. It is, perhaps, the most unsafe place on the planet today.
So what went wrong?
The government is heavily dependent on oil export; more than 90% of export revenue comes from oil and its derivates. While it can be a lucrative trade during booming of oil price, it nevertheless exposes the national economy and is vulnerable to unpredictable economic shock which depends on many factors such as oil price, demand, political atmosphere in trading countries, technological advancement, geopolitics and foreign relations. These factors can never be fully understood or reliably predicted.
Revenue generated from oil exports was extensively spent on short-term populist programs. Such ‘reforms’ were aimed to garner support from lower-class voters for president himself, his allies and his cronies. The unrestrained expenditure might have improved the living condition of lower income group for awhile, but such reform in isolation has proved unsustainable.
The initial cash-inflow in not-seen-before amount has encouraged import-driven economy, thereby reducing the production capacity of the country. With little or no intervention from government, the gravity of the situation is not realized or felt for as long as you can import goods with sale of oil. However, when the demand, and thus the price for petroleum fuel drops, the country is suddenly sucked into vicious circle of perpetuating poverty.
A short supply of foreign currency has caused devaluation of bolivar which individuals could not exchange with reliable currency like US dollars as the government has imposed limitation on purchase of foreign currency. A currency black market developed as a result where US dollar is sold at steep exchange rate. However, the president’s close allies are given full control of key activities such as price control, import goods transportation and ports. This new ‘currency-control license’ has given the few privileged of his inner circle an access to obtain dollar at much lower rate than an average person.
The crisis is a booming business for these handful fortunate loyalist; importing at cheaper rate and selling at very high price to desperate Venezuelans. And it is reasonable to assume they do not wish this national crisis to end anytime soon.
Inspire of it all, Maduro remains in power through loyal political bodies such as the Supreme Court, National Electoral Council and the military.
What can we learn from Venezuela?
A fool does not learn from his mistakes while a wise man do. But we shall be wiser still to learn from mistake of oil-rich money-poor Venezuela’s crisis.
Short-term populist programs, usually ‘free’ or ‘subsidized’ programs, yields tangible result which could be exploited for political milage. While not all short-term programs are undesirable, we must seek to appreciate the balance of short-term deliverance and long-term sustainability.
For we intend to be the master of our own house, we should build our economy on multi-sectorial pillars of production. It would be unwise to abandon hydro-power projects but it would equally be foolish to depend extensively on it. Rather, it should be supplemented and reinforced by strong in-country production capacity in agriculture, forestry, industry, trade, tourism, art and craft. This then will absorb any shock should we experience any unpredictable change in market or geopolitics.
Whatever our hopes maybe, the dimensions of threat to a man and his freedom ever loom large on the horizon in a country riddled with corruption and media censorship where the ultimate authority lies in oligarchy and not in democratically elected government.
If we are to meet this national peril, more than ever before, we the people shall be weary of what is ‘promised and offered’ by politicians. We shall resist every temptation of trading sovereignty and liberty of our motherland with temporary comfort; our independence of thought and choice with mindless conformity, and our vision of progress with complacent beneficiary outlook.
With this I pray that the most able in body and soul, the greatest gifted with experience and wisdom, the strongest of will and moral-compass may win the National Assembly election of 2018, and guide us in our pursuit of life, liberty and pursuit of happiness.