The Venezuelan bolivar has depreciated to such a dramatic point in the last year that citizens wait anxiously in long lines outside of ATMs to withdraw hefty quantities of currency in order to make purchases. The marketplace has been rationed to the point that toilet paper is a black market good, and several other commodities have either been restricted or have become so expensive because of low supply, high demand, and hyper inflation. Let us consider the history behind the Venezuelan government and its’ economic policies.
Beginning with the election of leader Hugo Chavez in 1998. President Chavez developed the country’s domestic oil industry to the point of complete dependency. The nation had few supplemental exports, and had made itself entirely dependent on a good that’s value is highly volatile. In many respects Chavez was a wonderful leader and cared very much for his people. To recognize a few of his socialist policies, Chavez enacted what he called communal councils where he would allocate funds to a communal economic effort and those individuals from that region would use the funds as they saw fit (these ranged from communal banks to agricultural interests as well). Chavez implemented a large quantity of social programs, thereby over spending proceeds which the government reaped from nationalizing the oil industry. By 2003 the government had promised and delivered a large amount of social welfare programs ranging from healthcare to education, and was displaying poor financial behavior as they were spending more than they were taking in. His social programs were incredibly effective in fighting poverty, and the nation experienced more than a 50% poverty decrease in one decade.
By 2005, it had become cheaper for the government to import goods (as a result of extensive bureaucratic expansion, such as price controls led to minimal autonomy on the part of the firm) rather then to produce goods domestically. As a result, the nation quite literally did not export anything other than oil. By 2009 the country had begun to experience the highest global inflation as a result of price controls and poor economic policy. Once oil prices began to drop in 2014 the economy completely crumbled. There had been very little financial prudence (overspending on social welfare programs) on the part of Chavez who had left office by this point. The Venezuelan people had grown used to either free or artificially repressed service prices in healthcare, education, agriculture, etc.. that once the government went bankrupt in part because of its’ effort to deliver on these services the people exhibited great unrest. There is a much larger story behind this economic collapse, however, at this point individuals are starving, poor, and their currency has literally no value. I look forward to reading about the lessons learned by the Venezuelan government, and hope to see their domestic economy expand in the future.
