It was about time to do another update on Venezuela’s failing socialist economy when I dropped by Hot Air and saw that Ed Morrissey had already done all the heavy lifting for me:
“The currency in what should be the richest country in South America has collapsed, as well as its economy, under the dual weight of falling crude prices and the Chavista socialism that has been choking the country for more than a decade.”
Venezuela’s Chavista policies have always ignored economic reality. Socialism is a fantasy economic system, especially as implemented by Hugo Chavez and Nicolas Maduro.
The difference between Venezuela and the nanny-state petro-economy in Norway is that the latter preserves itself by respecting private property and foreign investment. From the beginning, Hugo Chavez attacked both, nationalizing oil production and criminalizing private investors as part of his “Bolivarian” revolution. When it did that, it chased off the talent needed to run oil production and the investment needed for all other kinds of goods and services. For a short period of time, their oil revenue allowed it to succeed in ignorance. When that failed, Chavez and now Maduro reacted to those predictable consequences by predictably imposing all sorts of rationing mechanisms which only decreased incentives for production and investment, especially in the legitimate economy. Now that the price of oil has collapsed, so has the official Venezuelan economy — and a populace used to a high standard of living now endures massive shortages and ever-increasing oppression to cover it up.
Morrissey, in turn, quotes a big chunk of this Matt O’Brien piece in the Washington Post:
Venezuela’s government is running a 14 percent of gross domestic product deficit right now, a fiscal hole so big that there’s only one way to fill it: the printing press. But that just traded one economic problem—too little money—for the opposite one. After all, paying people with newly-printed money only makes that money lose value, and prices go parabolic. It’s no wonder then that Venezuela’s inflation rate is officially 64 percent, is really something like 179 percent, and could get up to 1,000 percent, according to Bank of America, if Venezuela doesn’t change its byzantine currency controls.
What he said. Er, both of them.