Before I even talk about this Atlantic article on Venezuela, let me say that I don’t know enough about Venezuela to have much of an opinion on it or its politics. And the language in the article is not unbiased, but has an ideological bent. But here’s what it says:
What our country is going through is monstrously unique: It’s nothing less than the collapse of a large, wealthy, seemingly modern, seemingly democratic nation just a few hours’ flight from the United States.
In the last two years Venezuela has experienced the kind of implosion that hardly ever occurs in a middle-income country like it outside of war. Mortality rates are skyrocketing; one public service after another is collapsing; triple-digit inflation has left more than 70 percent of the population in poverty; an unmanageable crime wave keeps people locked indoors at night; shoppers have to stand in line for hours to buy food; babies die in large numbers for lack of simple, inexpensive medicines and equipment in hospitals, as do the elderly and those suffering from chronic illnesses.
Like I said this article is ideological, blaming the problems on “Chavez’s 21st-century socialism”:
A case in point is the price controls, which have expanded to apply to more and more goods: food and vital medicines, yes, but also car batteries, essential medical services, deodorant, diapers, and, of course, toilet paper. The ostensible goal was to check inflation and keep goods affordable for the poor, but anyone with a basic grasp of economics could have foreseen the consequences: When prices are set below production costs, sellers can’t afford to keep the shelves stocked. Official prices are low, but it’s a mirage: The products have disappeared.
When a state is in the process of collapse, dimensions of decay feed back on each other in an intractable cycle. Populist giveaways, for example, have fed the country’s ruinous flirtation with hyperinflation; the International Monetary Fund now projects that prices will rise by 720 percent this year and 2,200 percent in 2017. The government virtually gives away gasoline for free, even after having raised the price earlier this year. As a result of this and similar policies, the state is chronically short of funds, forced to print ever more money to finance its spending. Consumers, flush with cash and chasing a dwindling supply of goods, are caught in an inflationary spiral.
The Soviet Union taught us that there is such a thing as going too far with price controls, and such a thing as being overly reliant on oil revenues. Maybe leaders of this country missed some of those lessons of history and repeated some of those mistakes. But I also see another lesson here. The article talks about both the collapse in oil prices, which hit government revenues hard, and the severe drought caused by El Nino, which is causing both water shortages and electricity shortages because the country is dependent on hydropower. So whatever the decisions of political leaders, which I take no position on here, the country was clearly not ready for an external shock caused by environmental factors and changes in supply and demand of natural resources. It may be a microcosm for things to come on a larger scale elsewhere in the world.