Not too long ago, Venezuela was one of the wealthiest countries in the world, and its people enjoyed a high standard of living. From the 1950s to the 1990s, Venezuela’s economy grew at a steady rate, mostly due to the nation’s abundant oil reserves, strong manufacturing base, and robust agricultural sector.
Then, in 1999, Hugo Chavez took power and put Venezuela on the dead-end road to socialism. The results have been dreadful. Over the past two decades, Venezuela has been in a never-ending and ever-worsening downward spiral because the nation has become increasingly more socialistic.
Although many Venezuelan sympathizers blame the nation’s economic plight on the decrease in oil prices related to foreign production, this is only half-true. The lack of oil production and revenue in Venezuela is closely tied with falling prices and everything to do with the government’s nationalization and plundering of the once-vibrant oil sector. Shortly after coming to power, Chavez fired 18,000 employees at Venezuela’s national oil company (PDVSA) and replaced these engineers and managers with unqualified apparatchiks. This move alone, coupled with many other boneheaded decisions by the socialist government under Chavez and his successor, Nicholas Maduro, also responsible for Venezuela’s dismal decrease in oil production and revenue.
It’s also worth noting that Norway, Saudi Arabia, Qatar, the United States, and many other oil-producing nations have not experienced anything close to the economic collapse that has destroyed Venezuela’s once-thriving economy, showing that Venezuela’s plunge in oil production is a symptom, not the cause, of its larger economic breakdown over the past few decades.
It’s true that Venezuela has been incredibly dependent on oil for decades, and thus greatly affected when oil prices decline, but the centrally planned economic decision to be so dependent on oil was also a deliberate decision made by the country’s socialist regime. Had Venezuela’s economy been more diversified, which would have occurred naturally in a market-based economy, Venezuela would not have been nearly as affected by falling oil prices. Additionally, had Venezuela properly cut government spending when oil revenues declined, it wouldn’t have needed to print so much money to pay the bills, driving inflation and causing even more economic turmoil.
Of course, this short article is not intended to be an all-encompassing history of Venezuela’s slide from a relatively capitalistic powerhouse to a socialist catastrophe. My intention is simply to highlight how suddenly socialism has slayed the once-vibrant economy and culture of Venezuela. Consider the following absolutely astounding facts:
In 1950, Venezuela’s GDP per capita was ranked fourth in the world. At the time, Venezuela’s GDP per capita of $7,424 trailed only the United States, Switzerland, and New Zealand.
Today, Venezuela’s GDP per capita stands at $2,548. It has fallen to 133rd in the world. In 2018, Venezuela’s GDP shrank by 19.6 percent. It is estimated to have shrunk by 35 percent in 2019.
As I noted previously, inflation in Venezuela is totally out of control. As of April 2020, it is estimated that the country’s rate of inflation hit 4,210 percent–putting it firmly in the camp of “hyperinflation.” Inflation has caused a number of important economic crises, including massive shortages of everyday items, such as basic foods, toiletries, clothing, etc.
In 2015, roughly 19.7 percent of Venezuelans lived below the poverty line, and no one really knows what the actual number is today. Almost all data that comes from the Venezuelan government (which is not corroborated by international organizations) is misleading, at best. Much of it is totally false. As of 2017, the unemployment rate hovered near 27 percent. In Venezuela, making ends meet and putting food on one’s table is a daily struggle.
In terms of wealth distribution, one would expect that Venezuela, a socialist country for more than two decades, would be an egalitarian utopia. But the available evidence suggests that’s not the case. In 2006, the most recent available statistic I could find, Venezuela’s household income or consumption by percentage share breaks down like this: The lowest 10 percent holds/consumes 1.7 percent while the highest 10 percent (mostly government and military elites) holds/consumes 32.7 percent. And its likely that these figures have only become much worse in recent years for most of those without government jobs.
Of course, no one has benefited more from socialism in Venezuela than the Chavez and Maduro families, along with their most important cronies in government, most of whom have become wealthy beyond their wildest dreams over the past two decades.
This should all come as no surprise to those who have studied the history of socialism. Over the past century, socialism has plagued humanity, causing an immeasurable amount of poverty, death, and horror.
The millions of people in the United States now calling for a soiree with socialism should think twice before pushing the country off the socialist cliff. A good place to start is by examining what socialism has done to our neighbors to the south in Venezuela.