Case study: An investigation into the effect of socialism on the people of Venezuela

Venezuela holds the world's largest supply of crude oil. The government is running out of money, and prices are soaring. Venezuela was a powerhouse of South America in the 1990s. The country turned toward socialism in 1999 and elected Hugo Chavez president. He championed populism, cut ties with the United States and cozied up to China and Russia, both of which loaned Venezuela billions. Chavez ruled until his death in 2013, and is still seen today as a hero for the poor.

An estimated 1.5 million of Venezuela’s 32 million people have left since Chavez came to power in ‘99. Former Venezuelan government officials have suggested that as much as $300 billion may have been diverted over the last decade from national coffers to private accounts through
the currency control system alone.

In economic terms, destructive government policies, including expropriations, price controls,
and currency controls, in combination with rampant corruption and mismanagement in government enterprises, have progressively eliminated the capacity of the Venezuelan economy to produce even the most basic goods required by the people of the country to survive.

The Maduro government has attempted to address the political implications of such shortages by appointing the military to distribute scarce food. As a result, the system mainly channels the little available food to those who support the regime while also ensuring the military both has reliable access to food for itself as well as opportunities for earning money by selling food on the black market.

Hyperinflation has been driven up by the government's willingness to print extra money and its readiness to regularly increase the minimum wage in an effort to regain some of its popularity with Venezuela's poor.

The government's hostile attitude towards private businesses have also alienated potential foreign investors.

As of 2016, Bolivarian Venezuela suffered from hyperinflation and a dramatic loss of jobs and income (consumer prices rose 800% and the economy contracted by 19% during 2016), widespread hunger (the "Venezuela's Living Conditions Survey" (ENCOVI) found nearly 75% of the population had lost an average of at least 8.7 kg in weight due to a lack of proper nutrition) and a soaring murder rate (90 people per 100,000 had been murdered in Venezuela in 2015 compared to 5 per 100,000 in the United States according to the Observatory of Venezuelan Violence).

According to Human Rights Watch, “To silence critics, the government has conducted widespread arrests and other repression. Since 2014, we have been documenting the violent response of security forces to protests, with beatings and arrests of peaceful demonstrators and even bystanders and torture in detention.”

As a result of the Bolivarian government's policies, Venezuelans suffered from shortages, inflation, crime and other socioeconomic issues, with many Venezuelans resorting to leave their native country to seek a better life elsewhere.

Shortages occur in regulated products, such as milk, various types of meat, chicken, coffee, rice, oil, precooked flour, butter prices; and also basic necessities like toilet paper, personal hygiene products and medicine. As a result of the shortages, Venezuelans must search for food, occasionally resorting to eating wild fruit or garbage, wait in lines for hours and sometimes settle without having certain products.

The Bolivarian Revolution

According to Chávez and other supporters, the Bolivarian Revolution sought to build an inter-American coalition to implement Bolivarianism, nationalism and a state-led economy.

Chávez announced that he had changed the slogan of the Bolivarian Revolution from "Motherland, socialism, or death" to "Socialist motherland and victory. We will live, and we will come out victorious".

Chavismo (socialism through Chavez’s lense) policies include nationalization, social welfare programs (Bolivarian missions) and opposition to neoliberalism (particularly the policies of the IMF and the World Bank). According to Chávez, Venezuelan socialism accepts private property, but this socialism seeks to promote social property too. Chavismo also support participatory democracy and workplace democracy. In January 2007, Chávez proposed to build the communal state, whose main idea is to build self-government institutions like communal councils, communes and communal cities.

Chávez refocused Venezuelan foreign policy on Latin American economic and social integration by enacting bilateral trade and reciprocal aid agreements, including his so-called "oil diplomacy", making Venezuela more dependent on using oil (its main commodity) and increasing its longterm vulnerability.

Notable actions by the government
Chávez used Venezuela's rapidly growing oil wealth to set up social programmes, known as the Misiones, with the aim of eradicating poverty and reducing inequality. It was, many claimed, a much-needed intervention in the entrenched disparity between Venezuela's rich and poor.

Plan Bolívar 2000
- Plan Bolívar 2000 was the first of the Bolivarian Missions enacted under the administration of Hugo Chávez.
- The plan involved around 40,000 Venezuelan soldiers engaged in door-to-door anti-poverty activities, including mass vaccinations, food distribution in slum areas and education. Several scandals affected the program as allegations of corruption were formulated against Generals involved in the plan, arguing that significant amounts of money had been diverted.

Mission Barrio Adentro
- The mission was to provide comprehensive publicly funded health care, dental care and sports training to poor and marginalized communities in Venezuela. Barrio Adentro featured the construction of thousands of iconic two-story medical clinics—consultorios or doctor’s offices—as well as staffing with resident certified medical professionals. Barrio Adentro constitutes an attempt to deliver a de facto form of universal health care, seeking to guarantee access to quality and cradle-to-grave medical attention for all Venezuelan citizens.

- Though positive outcomes have come from the mission, there have been some struggles as well. In July 2007, Douglas León Natera, chairman of the Venezuelan Medical Federation, reported that up to 70% of the modules of Barrio Adentro were either abandoned or were left unfinished. In 2014, residents in Caracas also complained of the service despite large funding from the Venezuelan government.

Mission Habitat
- Mission Habitat's goal is the construction of thousands of new housing units for the poor. The program also seeks to develop agreeable and integrated housing zones that make available a full range of social services—from education to healthcare—which likens its vision to that of New Urbanism. According to Venezuela's El Universal, one of the Chávez administration's outstanding weaknesses is the failure to meet its goals of construction of housing. Chávez promised to build 150,000 houses in 2006, but in the first half of the year completed only 24 percent of that target, with 35,000 houses.

By 2011, Venezuela suffered from a housing shortage of 2 million homes, with nearly twenty prime developments being occupied by squatters following Chávez's call for the poor to occupy "unused land". Up to 2011, only 500,000 homes were constructed under Chávez, with over two-thirds of the new housing developments being built by private companies while the Government provided about the same amount of housing as previous administrations. Housing shortages were further exacerbated when private construction halted due to the fear of property expropriations and because of the Government's inability to construct and provide housing.

President Maduro Maduro announced in 2014 that due to the shortage of steel, abandoned cars and other vehicles would be acquired by the government and melted to provide rebar for housing. In April 2014, Maduro ruled by decree that Venezuelans who owned three or more rental properties would be forced by the government to sell their rental units at a set price or they would face fines or have their property possessed by the government.

Mission Mercal
- The Mission involves a state-run company called Mercados de Alimentos, C.A. (MERCAL), which provides subsidised food and basic goods through a nationwide chain of stores. In 2010 Mercal was reported as having 16,600 outlets, "ranging from street-corner shops to huge warehouse stores", in addition to 6,000 soup kitchens.

- In recent times, customers who had to wait in long lines for discounted products say that there were a lack of products in Mercal stores and that items available at the stores change constantly. Some customers complained about rationing being enforced at Mercal stores due to the lack of products.

Mission Robinson
- The program uses volunteers to teach reading, writing and arithmetic to the more than 1.5 million Venezuelan adults who were illiterate prior to Chávez's election to the presidency in 1999. The program is military-civilian in nature and sends soldiers to—among other places—remote and dangerous locales in order to reach the most undereducated, neglected and marginalized adult citizens to give them regular schooling and lessons.

- According to Francisco Rodríguez and Daniel Ortega of IESA, there has been "little evidence" of "statistically distinguishable effect on Venezuelan illiteracy". The Venezuelan government claimed that it had taught 1.5 million Venezuelans to read, but the study found that "only 1.1m were illiterate to begin with" and that the illiteracy reduction of less than 100,000 can be attributed to adults that were elderly and died.

Impact of Revolution and Missions
- As Chávez strived to transform the nation with what he called 21st century socialism, his populist policies began to take a more radical turn. He nationalised industries and bloated state bureaucracy at great national expense, all funded by high oil prices and unchecked borrowing. Venezuela became saddled with record-high levels of debt.

- In order to make basic goods more affordable to the poor, the Chávez administration introduced price controls - capping the money people pay for such staples as flour, cooking oil and toiletries.
This meant that many companies no longer found it profitable to produce these items, driving them out of business.

- The Chávez administration had decided in 2003 to take control of the foreign currency exchange.
Since then, Venezuelans wanting to exchange the local currency, the bolívar, for dollars have had to apply to a government-run currency agency. Only those deemed to have valid reasons to buy dollars, for example to import goods, have been allowed to change their bolivares at a fixed rate set by the government.
With many Venezuelans unable to freely buy dollars, the black market flourished and inflation rose.

- The salary increase at the end of 2016 (this being one of the supposed solutions of the government), brought with it the dismissal of half of the employees of large companies (Corpoelec, Imaseo, etc.).

- Following the Bolivarian Revolution, the new government initiated the installation of free healthcare, and assistance from Cuban medical professionals providing aid. The government's subsequent failure to concentrate on healthcare for Venezuelans, the reduction of spending on healthcare, as well as unchecked government corruption eventually resulted in avoidable deaths due to severe shortages of medical supplies and equipment, and the emigration of medical professionals to other countries.

Defenders of Venezuela
- Economic hardship is the result of international forces, led by the USA, arranged against Venezuela. These forces try to undermine the government from within and from the outside.

- Dutch disease
The Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agriculture). The putative mechanism is that as revenues increase in the growing sector (or inflows of foreign aid), the given nation's currency becomes stronger (appreciates) compared to currencies of other nations (manifest in an exchange rate). This results in the nation's other exports becoming more expensive for other countries to buy, and imports becoming cheaper, making those sectors less competitive. While it most often refers to natural resource discovery, it can also refer to "any development that results in a large inflow of foreign currency, including a sharp surge in natural resource prices, foreign assistance, and foreign direct investment".







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