How Poor Can Venezuela Get?

We haven’t checked in on Venezuela for a while. Formerly one of the world’s richest countries, Venezuela has become destitute since it was taken over by socialists Hugo Chavez and Nicolas Maduro. The country has gone downhill in an ever-worsening spiral of poverty and dysfunction. Things have gotten so bad that American liberals no longer hold up Venezuela as an example of “real socialism.”

The London Times reports:

[T]his is a country still suffering the trauma of the most spectacular currency collapse of our times. The Venezuelan bolivar, which in the 1960s was considered as solid a store of value as the Swiss franc, is now worth less than the paper it is printed on. If you converted a million dollars into bolivars in 2013 — when Nicolás Maduro first came to power — and left it in an interest-accruing Venezuelan bank for the past decade, your current balance would be about 3 cents.

Let’s hear it for socialism! And also for money-printing. Venezuela kept printing currency until it could no longer afford the paper and ink, but how different is that from the path our own government is currently on?

All this became glaringly apparent during an especially precipitous period of the downward spiral, during 2018 and 2019. With annual inflation touching two million per cent, a brick of notes was needed to buy a sandwich. The government ran out of the ink and paper physically needed to print more money.

Debit cards, along with bartering, became essential; with everyone from coconut sellers in the Caribbean to barbers in Caracas using cheap card readers to make transactions. But banks were slow to keep up with the devaluation, failing to raise their limits per transaction. Buying just a few items in a supermarket could therefore require three or four bank cards.

Life under socialism isn’t just poor and violent, it is crazy, too.

In mid-2019, the Maduro government quietly threw in the towel and allowed people to officially use US dollars. It turned out to be a transformational moment, taming price rises and bringing in some stability.

At least 60 per cent of retail transactions in Venezuela are believed to be in dollars, either in cash or with cards.

So the viciously anti-American kleptocrats are rescued, sort of, by the American dollar. But the damage is done, as Venezuela’s economy has shrunk by 75%. The last word:

[One Venezuelan] lamented, “Nobody’s got any money. There’s nothing much left to steal.”

I suppose the kleptocrats long for the good old days, when there was still something in Venezuela worth stealing. Chavez’s daughter Maria Gabriela, a perfect exemplar of leftism who represented Venezuela in the United Nations, made off with a cool $4.2 billion. But she was a piker compared to her father’s Treasury Minister, Alejandro Andrade, who slipped away from Venezuela with $11.2 billion in Swiss banks. As I wrote back in 2015:

If you want a world in which a few obscenely rich jet-setters lord it over a sea of poor people, socialism is the ideology for you.

But even those halcyon days have come to an end, as “[t]here’s nothing much left to steal.” It is as Margaret Thatcher memorably said: the problem with socialism is that eventually, you run out of other people’s money.

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