Economy, Regs, & Taxes

Venezuela: When Free Stuff Runs Out, State Power Remains

The socialist state uses its power to keep power.

Lewis Morris · May 25, 2016

Government forces and protestors have clashed repeatedly across Venezuela in the last several days as the socialist government of President Nicolas Maduro tries to shut down attempts for a recall election. The situation has reached such a level of chaos that both domestic and international observers view the country as a time bomb.

The country that based its economy on oil when the price per barrel was high now struggles to find basic goods. Amidst rising discontent from the people, the socialist state uses its power to keep power — just like Machiavelli advised and Fredrick Hayek warned socialist governments would do.

Last week, Maduro arbitrarily imposed a 60-day state of emergency, an order he is not legally allowed to give without the approval of the national assembly, which is controlled by an opposition majority that would never grant such a decree. The state of emergency allows him extraordinary power to deploy the military and seize control of whatever public and private institutions he so desires. Thanks to protestors who have had quite enough of Maduro’s autocratic rule, order will be increasingly hard to find.

Venezuela has become an economic basket case of epic proportions. The trouble started during the rule of Maduro’s predecessor, Hugo Chavez. Chavez was a skilled dictator with a penchant for theatrics and a strong connection with Venezuela’s military, which has always been a major factor in holding power in the country.

Chavez’s iron grip on the country was already starting to slip before he died in 2012. Maduro — who worked his way up the socialist party ranks from bus driver to union leader to foreign minister — was Chavez’s handpicked successor. Since then things have only gotten worse.

Venezuela is suffering the world’s deepest recession and the world’s worst inflation rate, which hovers somewhere between 500% and 700%. (After inflation reaches triple digits, does a couple hundred points one way or the other really matter?) It also has the second highest murder rate in the world and is considered the world’s least free economy.

The political opposition recently called for a recall election of Maduro, and rallies began springing up nationwide demanding a referendum. Thousands of protestors have filled the streets of Caracas, but National Guard soldiers have barred them from accessing Venezuela’s National Electoral Council. This scene has been repeated in other Venezuelan cities and towns.

As would be expected in a socialist government, corruption infects the Venezuelan government like a cancer. The supposedly independent electoral council is no exception, because it’s run by Maduro allies. It’s determined to block efforts to process a recall through proper channels.

According to Venezuelan law, 1% of the electorate in each of the country’s 23 states have to sign a petition to begin a recall election. The opposition says it already has 1.8 million of the four million signatures needed, but those signatures have to be verified by the board. Good luck on that one. On top of that, the government says that it will fire any public employee who signs a recall petition.

Undeterred, the opposition is continuing with marches and demonstrations. Maduro has responded with stronger tactics, and there have already been a large number of injuries and arrests reported.

Many Venezuelans are so poor they don’t dare risk missing work to join in the demonstrations. Others remember the crackdown of 2014 in which over 40 people were killed during anti-government protests.

This time around, the opposition has momentum. Even among some traditionally loyal Maduro strongholds, people have had enough. Years without basic services like electricity and running water have melted the loyalty once felt for the government.

“They have been telling us for years it’s about to get better,” one protestor told reporters. Another said, “You want to know what happened to the money that they should have set aside for electricity and water? They stole it.”

Maduro blames the United States as being behind the protests. He’s even called for the largest military exercise in the nation’s history to prove his point. But that story won’t stick. Even his former leftist allies in Latin America are beginning to distance themselves from him.

Former president of Uruguay, Jose Mujica, said that Maduro was “mad as a goat.” The secretary general of the Organization of American States said Maduro will go down as another one of Latin America’s “petty dictators” if he blocks the recall referendum.

If the opposition can keep its momentum, then Maduro may be in big trouble. The country’s largest beer company had to cease production due to a shortage of barley. Coca-Cola ceased production of soft drinks due to a shortage of sugar. People are tired of being told everything’s great while living in a country where everything is running out.

The best thing that could happen to Venezuela would be for it to radically change course and adopt some serious economic reforms. Chile made such a radical change in the 1970s and is all the better for it.

The Chilean economy grew 287% between 1975 and 2015 thanks to a focus on creating a free economy. Venezuela’s shrunk by 12%. Chilean income per capita went from being 31% of that in Venezuela to 138% during that time period. Infant mortality in Chile was 33% higher than Venezuela in 1975. In 2015, Venezuela’s infant mortality rate was nearly twice as high as that in Chile. And in Chile, as a higher quality of life and a rising life expectancy took hold, a peaceful transfer of power to a democratically elected government soon followed.

Venezuela cannot expect the positive transformation to a more prosperous, free society like in Chile so long as Nicolas Maduro insists on holding onto his office through force. The failure of his policies is proof that he should step aside. Unfortunately, he thinks he just needs to squeeze harder to achieve the desired result of prosperity. As history repeatedly tells us, the only way to cure the problems of the Left is to turn toward the Right.

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