Venezuela is spiraling out of control. Inflation is above 700 percent, and only rising. There are drastic shortages of basic consumer goods. Venezuelans wait in lines several blocks long just to enter grocery stores, only to find empty shelves. Even when certain products are available, the sky-high inflation rate is eating away at Venezuelans’ ability to purchase food, clothing and other necessities. Hospitals are running out of antibiotics and other basic medical supplies; doctors, then, are unable to provide even the most essential care. Much of this can be blamed on price ceilings, which in practice were intended to keep goods affordable for Venezuela’s most vulnerable citizens, but in reality have made basic products unavailable for everyone.
Prospects for a national comeback are bleak: Black market trade and illegal imports from neighboring states like Colombia have surged as Venezuelans look elsewhere for what their government has failed to provide. And make no mistake: Venezuela’s current economic crisis is the direct result of inept political decision-making and misguided economic policies.
To begin with, Venezuela has one of the world’s largest oil reserves, and its economy is heavily dependent on crude exports. So when oil prices tumbled worldwide in early 2015, Venezuela’s GDP went along for the ride. Since Venezuela is a single-commodity economy, it paid the price for its lack of economic diversification. Venezuela had no other source of income to turn to in its time of crisis.
But Venezuela’s economic woes are not simply the result of the precipitous drop in oil prices. Although crude is a notoriously volatile commodity, other oil-dependent states have weathered the earlier price slump much better than Venezuela has. Russia, another oil-dependent nation, is not exactly the paradigm of a healthy and robust economy, but it is certainly doing better today than Venezuela. Saudi Arabia, one of the world’s largest oil producers, withstood the decline in prices better than rapidly-crumbling Venezuela, largely because it saved for the proverbial rainy day.
Venezuela, too, could have avoided its current economic and political crisis were it not for egregious economic mismanagement. Its government’s policies are derived from chavismo, the unique left-wing, populist-nationalist ideology of the nation’s deceased former president, Hugo Chávez. Current president Nicolás Maduro, Chávez’s chosen successor, has stayed loyal to the tenets of chavismo, but in doing so, has sacrificed the economic well-being of his country.
These policies purport to benefit Venezuela’s workers and poor, who form the backbone of Maduro’s political support. However, they often do more harm than good for their intended beneficiaries. Some of these damaging policies—including price ceilings, an over-reliance on inefficient public-sector jobs, and an artificially propped-up exchange rate—amount to the purchase of political loyalty at the expense of the economic well-being of the nation. These policies have a wide range of harmful effects: They result in widespread shortages of food and medical supplies, wasteful government spending that does not contribute to economic productivity, and a contraction of international trade—all factors exacerbating Venezuela’s economic meltdown.
It’s not that Venezuela lacks qualified economists or politicians who advocate for responsible economic stewardship; it already has them. Rather, Maduro chose to ignore the experts and idolize Chávez by continuing his disastrous policies. After months of national turmoil, Venezuela’s citizens wanted change. Now, the opposition has a supermajority in the legislature, which clearly demonstrates voters’ dissatisfaction with Maduro and his policies. Street protests and petitions demanding Maduro’s resignation further prove that everyday Venezuelans reject his policies. But Maduro has ignored this dissent and continues to advocate incremental changes to the current system instead of embracing the wholesale reforms that would put Venezuela back on the path to sustainable economic growth.
Maduro’s choice of ideological purity over the well-being of Venezuela’s citizens is a willful disregard of the value of human life. Although he claims to be a socialist who represents the interests of the people, the disaster unfolding in Venezuela is evidence that Maduro’s government’s policies have the opposite effect: They hurt the very people they claim to be helping.
Unfortunately, Venezuela does not have a clear path forward. Its economy is in the dumps, and is only worsening. And the political standoff between President Maduro’s government and the opposition must be resolved before Venezuela’s economy can be put on the path back to growth. The only sure thing is that until a change is made, everyday Venezuelans will continue to suffer as a result of Maduro’s policies.
There are many lessons that can be drawn from Venezuela’s economic collapse. The country’s overdependence on crude reinforces the importance of economic diversification. Further, it illustrates the benefits of saving during good times in order to get by when revenues dry up. And Maduro’s disregard for the demands of the people demonstrates the importance of feedback and representative government, because had the government listened to its constituents, Venezuela would certainly be better off now. Perhaps the most important lesson, though, stems from the danger of overzealous idealism. There are dire consequences to ignoring reality in order to maintain ideological purity and ill-conceived economic policies, as Nicolás Maduro’s glaring mismanagement of the Venezuelan economy clearly demonstrates.