Venezuela the Victim of Decades of Losses in Economic Freedom

Lower oil prices not quite an answer.


The news from Venezuela is not encouraging. Last Friday, CNN reports, President Nicolas Maduro declared a state of emergency in order "to tend to our country and more importantly to prepare to denounce, neutralize and overcome the external and foreign aggressions against our country."

In truth, Maduro is trying to intimidate and silence the growing domestic opposition to his rule, which saw inflation balloon, shops empty and, according to The New York Times, hospitals fill with dying infants.

Like my Cato colleague David Boaz, I am a bit peeved when American leftists refer to people like Nicolas Maduro and Raul Castro of Cuba as "Presidents," while referring to people like Alfredo Stroessner of Paraguay and Augusto Pinochet of Chile as "Dictators." None of them were elected in free and fair elections, and they ought to be treated equally

More importantly, the causes of the human tragedy that is unfolding in Venezuela ought to be clearly identified and learned from. Predictably, CNN and The New York Times have laid the blame for Venezuela's economic meltdown at the door of the failing oil prices.

"Once the cornerstone of Venezuela's economy and the source of funding for many of Chavez' social programs," CNN reported, "global oil prices have plummeted, leaving Venezuela in dire financial straits—especially as much of the country's output is of lower quality."

"This nation has the largest oil reserves in the world," The New York Times wrote, "yet the government saved little money for hard times when oil prices were high. Now that prices have collapsed, the consequences are casting a destructive shadow across the country."

Ah, the vagaries of the oil market!

Yes, it is true that oil prices have come down, before rebounding somewhat, but many countries that are or have been heavily dependent on exports of natural resources have managed to avoid the kind of economic problems that Venezuela experiences.

What's missing from the picture painted by CNN and The New York Times is the gradual, but constant, erosion of economic freedom in Venezuela that has been going on at least since the 1970s. The rule of law has been undermined, private property confiscated and prices fixed by the state.

Venezuela would have run into trouble eventually anyway, since a succession of economically illiterate governments has destroyed the non-oil sectors of the economy. In 1998, one economist estimates, oil represented 77 percent of Venezuela's exports. In 2013, it amounted to 96 percent of that country's exports. 

Contrast that with the performance of Chile. As Chile grew in economic freedom, it became less dependent on mining and exports of natural resources. Other parts of the Chilean economy, including agriculture and services, have blossomed.

In 1970, which is when the Fraser Institute's Economic Freedom of the World data begins, GDP per capita adjusted for PPP in Venezuela was $19,985. It was $7,535 in Chile. In 2015, it was $17,272 in Venezuela and $23,794 in Chile. Put differently, real incomes in Venezuela shrunk by 14 percent, while increasing by 216 percent in Chile.

Hugo Chavez, Maduro's predecessor as Venezuela's head of state, called his economic model, "21st century socialism." Today it is clear that 21st century socialism is not all that different from its 20th century predecessor.

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  1. In other news, water is still wet and the pope shits in the woods.

    1. “Make America Venezuela Again!” — Bernie Sanders 2016!

  2. I am a bit peeved when American leftists refer to people like Nicolas Maduro and Raul Castro of Cuba as “Presidents,” while referring to people like Alfredo Stroessner of Paraguay and Augusto Pinochet of Chile as “Dictators.”

    We’re going to need a new leader title, as ‘President’ is rapidly going the way of ‘Despot’, ‘Dictator’ and ‘Tyrant’, all of which started out more neutral in tone.

    1. In English, “El Presidente” is generally understood as “banana republic dictator” rather than “elected administrator of the executive branch of a republic”.

      1. I wasn’t limiting the decay in the respectability of the title to the spanish-speaking world.

        1. Yes,add in Africa and Asia Minor

          1. Look, we can’t have Asian minors running around, send them to the orphan pens.

            Secondly, the following personages are also presidents:

            Francois Hollande
            Barak Obama
            Vladimir Putin

            None of them are exactly making the title a respectable one.

            1. All three qualify easily for the title “El Presidente”.

            2. “Francois Hollande”
              We french are sorry for that inconvenience.

      2. “From this day on, the official language of San Marcos will be Swedish. Silence! In addition to that, all citizens will be required to change their underwear every half-hour. Underwear will be worn on the outside so we can check. Furthermore, all children under 16 years old are now… 16 years old!”

    2. El Jefe

      1. El Jefe is Spanish for “the Jeff.”

  3. Oh yeah? But I bet there is rampant inequality in Chili! And that isn’t fair! Besides, Venezuela’s problems are because of free-market profiteers! Sean Penn said so and he’s an actor! That means he knows that he is talking about!

    1. Of course there is rampant inequality in chili – mine is really good, others, not so much.

      1. Not many Swiss in Cincinnati.

        1. Chili without cayenne isn’t chili.

          1. Cayenne? The Chilean actress? She’s hot!

  4. I would be curious if some journalist (I know, I know) would actually ask Bernie, what policy Venezuela enacted that he would have opposed. Nationalization? Price controls? Currency controls? Can he even attempt to draw a line between this obvious failure and what he advocates? Just not democratic enough? Like if the mob demanded these policies they would somehow work better?

    1. Well, duh, democratic socialism is totally different from that other, bad kind of socialism. [/dem-soc proof by assertion]

      1. I’ve heard this thrown around a lot. If I was forcedto choose between the two (I mean that there are no other options on the table, including resistance, so it’s kind of a useless exercise) I would probably go straight to the central-planning kind of socialism. Why in the world would I want mob rule socialism? It seems like that would be more likely to devolve into violent tribalism, with one violent mob fighting another violent mob trying to determine which one gets voting ownership over some decrepit factory.

        I’m not elaborating this very well, but I hope my point is coming across. Just a useless thought exercise.

        1. All mob rule means is that the mob chooses the central planners.

          1. So, America then?

        2. OK kids, line up, everyone together now, repeat after me: “But WE’RE a democracy.”

    2. I would imagine Bernie would say something like nationalizing the oil industry is fine but the nepotism that went along with it is the policy failure. You know, the same-old “it would have worked if only the right TOP. MEN. were chosen.”

    3. BINGO, mashed potatoes!

  5. Has Bernie ever been asked serious questions about how his ideas are working in Venezuela?

  6. joe you were a cheerleader for this shit. what gives?

  7. Even at The New York Times, some people are starting to see the light:

    The threats Venezuelans face today are not the result of foreign or domestic conspiracies, but Mr. Maduro’s disastrous leadership.

    * * *

    This crisis has exposed the hollow promise of the socialist policies Mr. Maduro and his predecessor, Hugo Ch?vez, have peddled since the late 1990s. While many Venezuelans got a taste of prosperity in better housing, subsidized food and higher wages when oil prices were high ? oil accounts for roughly 96 percent of Venezuela’s exports ? the government failed to build anything resembling a sustainable economy. It also failed to save when money was flowing in, which would have softened the impact of the recession that began in 2014.

    So someone on the editorial board understands that while oil prices didn’t help, central planners fucked up massively.

    1. The problem isn’t that central planning fails, but that these central planners didn’t plan correctly! Bernie is different! He’ll make the right plans! He said so!

      1. Let me elaborate. If we don’t have The People making central plans, then capitalist profiteers will make central plans. The People make plans for the greater good, while capitalist profiteers make plans to make profits. Profits are theft from workers and customers, allowing capitalist profiteers to get rich while everyone else becomes poor. As in inequality. That’s so much worse than when The People make central plans, because those plans are based on good intentions. And they don’t result in inequality. Everyone is equally poor!

        1. People talk like waiting in lines in for staples in Venezuela is a bad thing, but it’s actually a good thing. You see, with the lines in Venezuela everybody gets what they need whereas in other countries only the rich do.

          1. Plus you get to spend time with new and different people! And because everybody in line for food is hungry, they’re too weak to stab you and take your wallet full of worthless bolivars.

        2. It’s somewhat funny that so many people who abandoned religion because of the far-fetched notion of a “great authoritarian central planner in the sky” only abandoned the “in the sky” part. In other words, the father and the son are totally believable but the holy spirit is a bunch of hooey.

          Biting the invisible hand that feeds them.

  8. And yet Sanders’ supporters will remain willfully blind to the idiocy of his ideas, despite having a country run by those ideas collapsing right in front of them.

    There was an earlier article about how millenials don’t have any examples of the ills of socialism to learn from. There’s plenty (Venezuela and North Korea being two), but my generation has swaddled itself in the blanket of good intentions and refuses to peak out from under it. Whether that’s their own fault or the fault of previous generations who didn’t want to see them suffer is up for debate, though it’s probably a lot of both. If our educators were halfway decent, instead of being leftist shills, they would be beating history and economics books over their students’ heads instead of whatever social sciences bullshit they’re peddling now. America has shot itself in the foot.

    1. In history, we learned that everything good in American history had come from government and that everything bad in American history had come from capitalism. Whatever couldn’t be made to conform to that narrative had officially never happened. As for economics, what’s that? The closest we came to studying economics was learning not to spend so much on luxuries that you can’t buy food.

    2. but my generation has swaddled itself in the blanket of good intentions and refuses to peak out from under it.

      Every generation does this.

  9. Look, Chavez’s daughter is worth billions, the system worked !!!!1!1

  10. Joe from Lowell and amsoc hardest hit?

    1. Crickets from those two.

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  12. This is one of the few times a Maduro has let me down.

  13. Venezuela is starting to look and sound more like North Korea every day

    1. I think that Kim Jong Un is less insane than Maduro.

      Plus, for all their failures in other areas, the NORKs have a pretty impressive military capability. The Bolivarian socialists got nothing.

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    Bernie Sanders is a “democratic” socialist. His brand of socialism relies on democratic means to forcibly redistribute wealth and centrally manage the economy.

    Make note of this very important distinction. Unlike Venezuela, the voters will decided socialist policies. It is impossible for us to become like Venezuela.

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  18. The concept of “economic freedom” turns many left-wing people off (wrong thinking). But the article should have said “Losses of Freedom of Economic Association”.

  19. This is the fourth most liked comment on the NYT article:

    “This is the end game for inequality when the elites steal from the country and don’t invest or pay their fair share of taxes.

    This is our future under a republican agenda.”

    I am hoping it is brilliant trolling, but know it’s completely serious, without a hint of irony. That person and everyone who liked it who likely consider themselves “intellectuals” scare me much more than creationist evangelicals.

  20. RE: Venezuela the Victim of Decades of Losses in Economic Freedom

    Venezuela is he victim of decades of corruption.
    Fixed it.
    You’re welcome.

  21. According to local laws and regulations Venezuela is a paradise for conservatives. Enjoyable drugs are strictly prohibited and stiff prison sentences await doctors and women who dare to act as though they had any right to control their reproductive faculties. Clearly Venezuelans have little in the way of individual rights under Bolivarian nationalsocialism.

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