Tag: Venezuela

Illusions and Picaresque

Richard Barnes

Carlos André Pérez is usually known as the Venezuelan president who, in the early ’90s, sought to apply some sound economic policies on the country and steer it away from her headlong rush into Socialism. However, his attempts were clumsy, sudden, and, at the time, gave the concept of free markets a bad name in Venezuela. His approach caused large riots and even Hugo Chavez’s attempted coup in 1992. 

What is less remembered is his first term in the late 1970’s whereby he expropriated the iron and petroleum industries and plunged Venezuela further into the Socialism that alarmed him a mere decade later.

Shortly after his first inauguration in 1974, I walked into an elevator in Ciudad Guayana and saw someone standing at the buttons asking “qué piso?” I thought he was joking. But no, he was one of thousands who now were “employed” thanks to a presidential decree which compelled building managers/owners to install a flesh and blood “operator” in each elevator which, up to then, was perfectly controlled by a mere push of a button with the floor’s number inscribed. 

With one “presidential decree” we were all thrust to the 1935 Waldorf Astoria, sans the luxury, with uniformed elevator operators handling the controls, only these controls were push button automatic, not manual.

It “looked good” in the sense of, “Wow! Look at all these new jobs!” But an elementary school kid could also see what was not seen: the other jobs or capital improvements that were set aside in order to budget for unneeded elevator push buttoneers.

This is illustrative of how the “seen” does not necessarily reflect reality, but rather an illusion.

A few years ago, McKinsey & Company, the well-known and highly regarded global consulting firm, published a paper, Where Will Latin America’s Growth Come From?, which delved into the reasons why seeming economic growth in that massive and resource-rich continent was actually an illusion, or at most, was less than met the eye.

One of several disquieting indices is that Latin America (Mexico, Central and South America, and the Caribbean) whose sovereignty exceeds 13% of the earth’s area, constitutes a mere 7% of the world’s Gross Domestic Product (GDP). The comparable figures for The United States are 6% and 15%, respectively, an almost perfectly inverse relationship: half the sovereignty and double the GDP.

In addition, there is little if any measurable economic growth in Latin America. While global annual growth averaged 3.5% in the last three years, Latin America’s averaged 1%.

For the most part, McKinsey’s conclusions and recommendations are rather predictable, not to say pedestrian.

For example, the report criticizes the weak enforcement of “stringent regulations”. Which is it: weak enforcement, or stringent regulations? Why not take the more politically incorrect position of recommending the lifting of Latin America’s sclerotic regulatory empires?

McKinsey rightly, but inconsistently, criticizes the monstrous labor laws that make it very difficult for employers, and employees, to act freely, whether this means firings or re-assignments. 

And here is an eye-opener: 

“Service sectors, too, suffer from poorly enforced regulations that encourage informality and therefore constrain productivity growth. Informality arises as many firms have strong incentives to avoid becoming formal because of high taxes, poor auditing capabilities, and low levels of sanctions. Inefficient informal players stay in business and prevent more productive, formal companies from gaining market share, constraining overall productivity. ….the substantial cost advantage that informal companies gain by avoiding taxes and regulations more than offset their low productivity and small scale, and distorts competition. Regulations are therefore needed that reduce the cost of formal employment … and raise the risks of noncompliance (for example, better monitoring and prosecution of informal operations)….” (emphasis mine)

Bravely spoken.

In sum, what McKinsey skates around is that there is an “informal” (underground) economy in Latin America that is not measured and that avoids the implacable obstacles and barriers to business set up by the bureaucratic Latin American regimes. This underground economy is so efficient and pervasive that it depresses the “regulated” economic performance. 

Would it not make more sense then, to imitate and replicate that “informal” economy? To find why it succeeds? To reduce the regulations that ensure it continues unabated? But no, McKinsey recommends tossing a massive wet blanket on that economy and bringing it to heel along with the rest of the slow-moving, molasses of business that operates under “stringent” regulations. 

In other words, “inefficient” informal players hinder more efficient formal ones, according to the report. Could it be that the “informal” players are very efficient? They’ve figured out how to make a living by setting themselves free from the heavy regulatory load imposed by clueless bureaucrats and politicians who believe that forcing the hiring of employees to push elevator buttons will increase employment overall. 

Could it be that such “inefficient” informal players cannot be measured since they are underground, after all?  I wonder what Latin America’s true GDP is. Could McKinsey apply its considerable talent and figure out a way to measure Latin America’s informal (underground) economy and incorporate it to the conventional measurements? 

When it comes to Latin America, I believe the standard measurements are an illusion.

I have utmost respect for McKinsey and such consulting firms in general. Having cut my teeth at Arthur Andersen I do appreciate the hard work and effort required to prepare a report addressing a business entity, let alone a massive region of the world. However, the professions do tend to have conventional views, despite their reputation as beings who know how to “think outside the box.”

But modern consulting firms take far too little account of the folks who, because of circumstances (regulations and obstacles) imposed on them, must either die or learn pretty quickly to live by their wits.

This brings us to the picaresque, whose etymology hearkens to Spain.

We will look at this term and its implications to Latin America next time.

(The McKinsey report has other observations worthy of further discussion. We’ll return to it in future posts.)

Manual controls: when elevator operators were needed.
In 1974, pursuant to a presidential decree, elevators in Venezuela henceforth had to be operated by an elevator operator employed to push buttons like the above.
It is not unusual for street vendors such as the above (Quito, Ecuador) to put their children through college selling mangoes. Instead of more regulations to discourage these hard working folks, how about less regulations to encourage them to become “legit”? 

Security

Richard Barnes

“Security can get on the nerves just as much as danger.” (Brown in Graham Greene’s The Comedians – 1965)

I am in a minority in refusing to see politicians and bureaucrats as beings before whom we, as bleating sheep, must bow the knee as if they were our wise and compassionate shepherds.

In general, I do not think they are wise, and I do not think they are compassionate.

I am in an even smaller minority in my viewing church leaders with deep disappointment in how we are responding to the current state of affairs. (But those country churches, mostly non-denominational, whose leaders still have the backbone of our forebears, have earned my respect in recent weeks.)

It has become very clear that, in general, if our founding era’s church leaders had been like those of today’s, we’d still be speaking the king’s English.

Spare me the theological expositions and explanations. Looking at the fruit tells me what I need to know. And that fruit lacks courage.

This is the context in which my respect for my father, which was already of the utmost, has in recent weeks done what I would have considered to have been impossible a mere month ago.

It has grown.

He was not a great reader or student of philosophy or theology, although he, and my mother, played a key role in preparing me to appreciate such, and more.

But he was courageous.

And he was loyal.

He loved God and he loved country and he loved home. Besides him, I can think of very few men — very few — whom I would want with me in a foxhole, or in any trial or crisis of life.  One I can think of died many years ago. I still see him as he walks from his little shack up to the labor camp alongside his burro. Another, died relatively recently. I see him as he drives his truck up my driveway on a Sunday afternoon as I’m listening to the BBC on short wave radio.

I used to think I am easily impressed. I guess I’m not.

The scene: San Félix, a town on the shores of the Orinoco River. It’s about 10 P.M. on a night in the 1940’s. Communist militants and sympathizers have been active. My father and the company controller, Mr. T, have been at the town’s movie theater and are now heading to the company pickup to drive back to Palúa, the riverfront camp.

A group of about 10 men accosted them and one ran up to Mr. T and struck him in the face, knocking him down. His glasses hit the ground and cracked.

Striking a man with glasses was considered cowardly. Striking an older man, such as Mr. T, was unforgivable. 

My father instinctively swung and landed his fist with a violent blow against the jaw of the perpetrator, who fell back awkwardly and heavily with a muffled thud on the dusty street. Then he realized: the man was drunk.

He looked up and saw that the other men stood, staring at him. Some were drunk, while others seemed sober, but sullen.

“Men, your friend is drunk. Otherwise, I am sure he would never have struck an older man wearing glasses. I assume you do not want to see your friend get hurt. Help him get up and return to his home! There is no need for us to fight. If you have any grievances, you must know by now that we will happily [con gusto] receive you and talk with you about it. Will you help your friend?”

As he spoke to the men, in perfect Spanish, Mr. T, following my father’s whispered commands, slowly made his way, undisturbed to the pickup, glancing back at my father, knowing that if the situation got out of hand, there would have been little for him to do to help out.

No one moved, except for the man on the ground, who rolled over on his stomach and vomited.

He clearly was not going to get up unassisted.

A man stepped forward and knelt by the fallen man, taking his left arm and wrapping it over his shoulder, “B, listen to me, I am going to stand up slowly, but I need you to hold on to me. Escúchame!” Then, looking over his shoulder, “Men, I need your help! Vengan!”

At this, the men stepped forward, almost in unison, and, having come to the area where B had fallen, strove to help the kneeling man rise along with the other, who was rapidly gaining full consciousness.

Eventually, about 5 or 6 of them accompanied the man helping B towards the south end of the town. The group, composed of individuals insistent on helping out one-by-one or two-by-two, continued southward, looking like a receding Rorschach test image. Others remained nearby, looking at Mr. T in the pickup as my father, leaning on the passenger side’s door, talked with him while also looking back, off and on, at them.

I did not learn about this incident from my father. In fact, I never heard him talk about it.

One summer, in the 1970’s, I interned at the mining office and, during my breaks, I’d visit the archives and read the dusty, decades-old memoranda submitted over the years by the general managers and controllers to the Pennsylvania home office. I came across a memorandum with a vivid description of my father’s actions many years before. The controller freely admitted, in his own writing, that my father likely saved him from great bodily harm that night in San Félix.

I know of several other such incidents involving my father, at least one of which occurred in my presence.

The circumstances for each were different. But they all pointed to one common constant: courage. A man’s refusal to be governed only by security. In doing so, he, ironically, created security for himself and for others.

We need to learn from such men again.

Palúa was about a mile west of San Félix (now part of Ciudad Guayana), and 180 miles from the Orinoco River delta.
San Félix, circa late 40s, early 50s. The theater (not pictured) was about a block to the right.
San Félix at the Caroní River ferry crossing, circa mid-50s
My father and Mr. T, circa 1948. San Félix, Venezuela.
My father and Mr. T, circa 1960. El Pao, Venezuela.
My father and me, circa 1963, on the Orinoco River, headed towards the great Orinoco delta on the Atlantic Ocean

El Loco

Richard Barnes

El Loco’s haunts were unknown. For the most part.

Mining camp residents spotted him occasionally, and only when they journeyed to or from San Felix, the port town on the banks of the Orinoco River, about 40 kilometers north. If they were lucky, their trip would coincide with an El Loco sighting. He’d be seen walking jauntily, swinging his arms in an exaggerated, yet nonmilitary-type, arc; unmindful of the storms of dust raised by cars or trucks as they passed him, always slowly, because everybody wanted to see El Loco and laugh with him, and the sightings seemed too few and too far between.

He’d always laugh and lift his arms in childlike, yet firm salute; one hand always gripping a staff, as if some sort of rudderless Moses wandering the El Pao – San Felix road for generations. 

Probably no American had seen him up close. But, judging from 30 or 40 feet away, a consensus of sorts had developed among them affirming El Loco was probably in his early thirties

He seemed to be much taller than average in that era and in those regions, maybe five feet nine or ten inches; wiry, strong, virile, and with huge hands. These judgments-from-afar were about as much as could assuredly be said about him, as the distance did not permit inspection of his physiognomic features. More on that further below.

Of course, everybody understood that someone had to be “taking care of” El Loco, else he could not survive. Here, perhaps, the legendary Venezuelan hospitality played a critical but hidden role.

An American cattleman with business interests in Venezuela once wrote his personal impression of Venezuelan society saying that it was the most open and cordial in all of South America. He further noted that, unlike the Argentines and Brazilians, who used hotels or restaurants or clubs to entertain visitors, the Venezuelans entertained in their own homes; in that respect, he concluded, they were very much like the Americans.

That observation was true, though too limited. Venezuelans didn’t invite only known, or business, guests to their homes; they compelled strangers, especially the poor, and the “locos”, apparently mindful that, at times, some, unawares, had entertained angels.

Then weeks would go by with no one having seen him. Where was he? At such times I would hear speculation when accompanying my mother at the commissary in the Otro Campo (known to the Americans as the labor camp), or with my father in the American Camp bar. Some voices affirmed, as if they were eye-witnesses, that El Loco was still on the road, but, in fact, no drivers or passengers had seen him. Others rumored El Loco was on jungle paths, headed temporarily for other destinations, as if looking for side adventures to spice up his El Pao – San Felix routine. Still others did not really care or think about it, and just assumed El Loco would reappear on his favorite road soon enough. And he eventually did, as if he had been nowhere else. As if he would live forever.

Regardless of opinions as to his whereabouts, the Venezuelans along the El Duo road just shrugged, confident in the truth of the old Spanish aphorism, “God takes care of the widows, the orphans, and the crazies.” It did not occur to them that God used them to do the caring.

El Loco walked with a swinging gait, a long, thick staff in one hand. His dusty jet-black hair shagged over his collar and a bit over his ears. He always walked with, never against, the traffic. Whenever I heard or read about a man in rags, I’d picture El Loco. His rags were always in khaki, just like the men in El Pao, only very worn and torn. And, instead of a dull yellow, El Loco’s khakis seemed rusty red.

Once, on a drive to San Felix, we saw him up close.

As we approached him in our car, to my utter, indescribable delight, El Loco swung round and stopped, looking toward the Oldsmobile as it slowly approached. El Loco began jumping in place, raising his arms and waving them. He was strong; he could wave the arm carrying that staff as easily as the other. Then he yelled a loud, croaking-like cheer as he laughed. His entire face laughed. And his teeth shone a bright white.

To me, laughing with my parents as we all saluted El Loco, it seemed even the Oldsmobile laughed. We drove slowly by El Loco, as we waved at him while he waved back, croaking, yelling, laughing, screaming, jumping. His cheeks’ bony arches seemed like sharp hills guarding his oviform eyes, whose color matched his hair, only brighter. And they seemed, to the boy, to be looking right into his own eyes.

Unlike most adults, El Loco was able, with absolutely no awkward self-consciousness, to look at someone in the eye, no matter what the age, and sustain that look until naturally broken. I just knew El Loco looked only at me, as if he knew me. As if we’d met before. Somewhere. There was no fear in me. On the contrary, like all children, I considered El Loco as very approachable, a dear friend and protector.

I stuck my head out the back window resting it on my arms on the frame as I looked back at El Loco, who was still jumping and yelling and laughing, forming a striking, puppet-like silhouette against the green, as the dust rose behind the car.

What most knew about El Loco was limited to the fact that he spent his days and years striding between El Pao and San Felix. Clearly folks cared for him; after all, it was assumed, he ate and slept. The I recall once, and only once, during an unusual mid-day drive to San Felix, seeing El Loco sitting peaceably in a chair in the front, porch-like structure of one of the cabins off the road. The farmer sat across from him, as the wife served him lunch and the children stood by. Sometimes El Loco would not be seen for what seemed to be weeks, before he’d reappear again on the road bringing joy to folks, especially children, who drove by.

I don’t remember the last time I saw him. He just melted away, like a mirage, into the jungle and before I knew it, I realized I had not seen him in years, maybe decades.

But I think about him. I can see him walking firmly, soldier-like, on the right side of the road, gripping his staff with his right hand, wildly swinging the left. El Loco whirls round and there is that wide grin once again, mouth way open, white teeth flashing. He lets off that loud cheer as he raises his hand and staff, pointing to the heavens.

1959 Oldsmobile Delta 88. Ours was white, not two-toned. As my father used to say, “Se come la carretera.”[Roughly translated, “She swallows the road.”]
Picture a cross between Henry Silva and Anthony Perkins in old, raggedy khakis, with hair more like Perkins’, but a bit longer, and you’d have an approximation of El Loco as I remember him from early childhood.
Clearing and building the El Pao-San Felix road. The period I remember most about El Loco was when the road was unpaved. 

Extra Judicial Deaths

Richard Barnes

In the early 1960’s, two American Peace Corps volunteers driving in the city of Caracas inadvertently ran a Venezuelan National Guard checkpoint. They were immediately pursued by siren-blaring vehicles and motorcycles. Once they realized they were being chased, they pulled over and stepped out of their car with their hands in the air, only to be shot down in a hail of bullets. One died instantly, the other was in critical condition but was rushed to the hospital and eventually recovered.

Such was the nervousness in those days. Pérez Jiménez had been exiled and Rómulo Betancourt, a former Communist, had been elected president and immediately invited Fidel Castro for talks in Caracas. The talks did not go as anticipated, Castro being impatient for immediate Latin American revolutions, Betancourt having moderated somewhat and being more patient to wait for a revolution over time, wherein the state eventually took over most major private enterprises, including the oil and steel industries.

But Castro’s impatience blew up like an exploding cigar. Arms, ammunition, and explosives caches were found along the Venezuelan coast and easily traced back to Cuba and in November, 1961, Betancourt, very publicly, broke diplomatic relations with Cuba. Immediately, Communist guerrilla activity flared and intensified. Checkpoints were set up across the country, so much so that decades later, when stopped at checkpoints while visiting Latin American countries on business, I experienced no nervousness whatsoever, as I had become inured to such since childhood.

That was the atmosphere and the context in the early ’60s when the two hapless volunteers were shot down.

But the early 1960s were a piker compared to extra judicial deaths in Venezuela between January 2018 and May 2019: 6,856 according to the U.N. High Commissioner for Human Rights. That’s more than the killings attributed to Augusto Pinochet’s 17-years in office. And many believe that the commission likely undercounted.

Of the top 20 “murder capitals” in the world, Venezuela has 4 (second only to Mexico) and Caracas is in third place, after Tijuana and Acapulco. If you have been following this blog, you have an idea how shocking this is when you recall that as late as the mid-20th century Venezuelans left their doors not only unlocked, but sometimes open to allow air to flow through on warm, humid nights.

Our earlier posts told of Richard Nixon’s visit in 1958 (Nixon) and the leftist fervent in Caracas university student bodies and their involvement in that close run thing (Universities). The United States National Security Council’s minutes after the Vice President’s return records some interesting insights by John Foster Dulles, the United States Secretary of State as to what might have ailed Venezuela in that era. The following is excerpted from the minutes in 1958, declassified decades later:

“Secretary Dulles went on to say that there was one more very important factor in the Latin American problem which the United States faced. This was the collapse of religion generally in Latin America. We all believe in this country that religion, with its emphasis on the rights and freedoms of the individual under God, is the very core of our democratic system and that it is also the greatest bulwark against atheistic communism. Unhappily … organized religion had practically no influence on the mass of the people as opposed to the aristocracy. Admittedly, said Secretary Dulles, he did not know what we could do about correcting this very grave situation, but it was certainly at the heart of our problem in Latin America.”

Secretary Dulles was on to something. Search for any listing of the top 50 murder capitals in the world, and you’ll find that all but 9 or 10 are in Latin America. However, you’ll also see a smattering of US cities in the lists. As the true religion wanes in the hearts of a people, their capacity for self-government and self-restraint, as well as their courage in restraining others by simply calling a spade a spade, so to say, also wanes. As to the very little crime in Venezuela up to the middle of the last century, it must be said that much of that was likely due to the mano dura of “benign dictatorships who promptly and at times ruthlessly dealt with crime. As Dulles might have put it: you either govern yourself, or you will be governed.

Even today, in Latin America, the mano dura approach is applauded by people of all philosophical stripes. For example, Coronavirus lockdown decrees (which are not different from those of a number of US state governors) would easily have been characterized as totalitarian not too many decades ago. But, whereas in the US there is genuine questioning and push back, including hard-hitting editorials and opinion columns, in Latin America it is amazing to see very little intellectual resistance, but rather applause because “sometimes such measures are necessary.”

Latin America flirted for a long time with, to use Dulles’ words, “atheistic communism”. There are hopeful signs of an awakening, which cannot come too soon. However, looking at our own dalliance with the living-without-God option, might we facing our own dark night?

In this Easter Season, let us all look to Him Who was lifted up and Who draws all peoples unto Him. Personal knowledge of Him gives us an understanding and an inclination to deny oneself thereby to control oneself. This, in turn, foments a growing appreciation for liberty under God and the eternal vigilance necessary to preserve it.

May you have a wonderful Easter.

Christ on the cross — Rembrandt

How Socialism Ruined Venezuela

Richard Barnes

Researching for the series on ranchitos, I came across a well-written piece published in 2017 by the Mises Institute, and set it aside for future publication in this blog.

While not “all in” on Austrian economics, I certainly will refer to any publication whose narrative accurately reflects the course of the Venezuela miracle and catastrophe of the 20th and early 21st centuries. 

I vividly recall sometime-heated conversations in the early 1960’s regarding the course that Rómulo Betancourt was taking, although I did not understand the substance of the matters being discussed. I smile when remembering an aged aunt’s utter hatred of Pérez Jimenez and adoration of Betancourt and his party. She was an energetic firecracker and I miss her. My godmother ( Madrina ) was equally fervent for the other major party and just as energetic. 

However, looking back and considering those and subsequent years, one must become aware of the ever-increasing size and power of the state over the lives of Venezuelans, far beyond anything its dictators were ever able to accomplish.

The article below was written by Venezuelans with an expertise in economics. The writing is lively and informative and, aside from a few very small quibbles, trustworthy. The link to the article is below.

Enjoy.

How Socialism Ruined Venezuela, by Rafael Acevedo and Luis B. Cirocco

In order to understand the disaster that is unfolding in Venezuela, we need to journey through the most recent century of our history and look at how our institutions have changed over time. What we will find is that Venezuela once enjoyed relatively high levels of economic freedom, although this occurred under dictatorial regimes.

But, when Venezuela finally embraced democracy, we began to kill economic freedom. This was not all at once, of course. It was a gradual process. But it happened at the expense of the welfare of millions of people.

And, ultimately, the lesson we learned is that socialism never, ever works, no matter what Paul Krugman, or Joseph Stiglitz, or guys in Spain like Pablo Iglesias say.

It was very common during the years we suffered under Hugo Chávez to hear these pundits and economists on TV saying that this time, socialism is being done right. This time, the Venezuelans figured it out.

They were, and are wrong.

On the other hand, there was a time when this country was quite prosperous and wealthy, and for a time Venezuela was even referred to as an “economic miracle” in many books and articles.

However, during those years, out of the five presidents we had, four were dictators and generals of the army. Our civil and political rights were restricted. We didn’t have freedom of the press, for example; we didn’t have universal suffrage. But, while we lived under a dictatorship, we could at least enjoy high levels of economic freedom.

A Brief Economic History of Venezuela

The economic miracle began a century ago, when from 1914 to 1922, Venezuela entered the international oil race. In 1914, Venezuela opened its first oil well. Fortunately, the government did not make the mistake of attempting to manage the oil business, or own the wells. The oil wells were privately owned, and in many cases were owned by private international companies that operated in Venezuela. It wasn’t totally laissez-faire, of course. There were tax incentives and other so-called concessions employed to promote exploration and exploitation of oil. But most industries — including the oil industry — remained privatized.

Moreover, during this period, tax rates in the country were relatively low.

In 1957, the marginal tax rate for individuals was 12 percent. There was certainly a state presence, and the public sector absorbed 20 percent of GDP. But, government spending was used mainly to build the country’s basic infrastructure.

The area of international trade was relatively free as well — and very free compared to today. There were tariffs that were relatively high, but there were no other major barriers to trade such as quotas, anti-dumping laws, or safeguards.

Other economic controls were few as well. There were just a few state-owned companies and virtually no price controls, no rent controls, no interest-rate controls, and no exchange-rate controls.

Of course, we weren’t free from the problems of a central bank, either. In 1939, Venezuela created its own central bank. But, the bank was largely inactive and functioned primarily defending a fixed exchange rate with the US dollar.

Moving Toward More Interventionism

Despite the high levels of economic freedom that existed during those years, government legislation started to chip away at that freedom. Changes included the nationalization of the telephone company, the creation of numerous state-owned companies, and state-owned banks. That happened in 1950 [telephone company was nationalized in 1953]. The Venezuelan government thus began sowing the seeds of destruction, and you can see the continued deterioration in the level of economic freedom in the decade of the 1950s.

In 1958, Venezuela became a democracy when the dictatorship was overthrown. With that came all the usual benefits of democracy such as freedom of the press, universal suffrage, and other civil rights. Unfortunately, these reforms came along with continued destruction of our economic freedom.

The first democratically elected president was Rómulo Betancourt. He was a communist-turned-social democrat. In fact, while he was in exile, he founded the Communist Party in Costa Rica and helped found the Communist Party in Colombia as well. Not surprisingly, as president, he started destroying the economic institutions we had by implementing price controls, rent controls, and other regulations we hadn’t had before. On top of that, he and his allies created a new constitution that was hostile to private property.

In spite of this — or perhaps because of it — Betancourt is almost universally revered in Venezuela as “the father of our democracy.” This remains true even today as Venezuela collapses.

Of course, compared to today, we had far greater economic freedom under Betancourt than we do in today’s Venezuela. But, all of the presidents — with one exception — who came after Betancourt took similar positions and continued to chip away at economic freedom. The only exception was Carlos Andrés Pérez who in his second term attempted some free market reforms. But, he executed these later reforms so badly and haphazardly that markets ended up being blamed for the resulting crises. [Pérez nationalized the oil and iron industries early in his first term (1974-1979). That eventually drove my family from El Pao. Pérez redivivus (1989-1993) attempted to rein in the whirlwind he had unleashed, but to no avail.]

The Rise of Hugo Chávez

Over time, the destruction of economic freedom led to more and more impoverishment and crisis. This in turn set the stage for the rise of a political outsider with a populist message. This, of course, was Hugo Chávez. He was elected in 1998 and promised to replace our light socialism with more radical socialism. This only accelerated the problems we had been facing for decades. Nevertheless, he was able to pass through an even more anti-private-property constitution. Since Chávez’s death in 2013, the attacks on private property have continued, and Chávez’s successor, Nicolás Maduro, promises only more  of the same. Except now, the government is turning toward outright authoritarian socialism, and Maduro is seeking a new constitution in which private property is almost totally abolished, and Maduro will be allowed to remain in power for life.

A Legacy of Poverty

So, what are the results of socialism in Venezuela? Well, we have experienced hyperinflation. We have people eating garbage, schools that do not teach, hospitals that do not heal, long and humiliating lines to buy flour, bread, and basic medicines. We endure the militarization of practically every aspect of life.

The cost of living has skyrocketed in recent years.

Let’s look at the cost of goods in services in terms of a salary earned by a full college professor. In the 1980s, our “full professor” needed to pay almost 15 minutes of his salary to buy one kilogram of beef. Today, in July 2017, our full professor needs to pay the equivalent of 18 hours to buy the same amount of beef. During the 1980s, our full professor needed to pay almost one year’s salary for a new sedan. Today, he must pay the equivalent of 25 years of his salary. In the 1980s, a full professor with his monthly salary could buy 17 basic baskets of essential goods. Today, he can buy just one-quarter of a basic basket.

And what about the value of our money? Well, in March 2007, the largest denomination of paper money in Venezuela was the 100 bolivar bill. With it, you could buy 28 US dollars, 288 eggs, or 56 kilograms of rice. Today, you can buy .01 dollars, 0.2 eggs, and 0.08 kilograms of rice. In July 2017, you need five 100-bolivar bills to buy just one egg.

So, socialism is the cause of the Venezuelan misery. Venezuelans are starving, eating garbage, losing weight. Children are malnourished. Anyone in Venezuela would be happy to eat out of America’s trashcans. It would be considered gourmet.

So, what’s the response of our society? Well, it’s the young people who are leading the fight for freedom in Venezuela in spite of what the current political leaders tell them to do. They don’t want to be called “the opposition.” They are the resistance, in Spanish, “la resistencia.” They are the real heroes of freedom in our country, but the world needs to know that they have often been killed by a tyrannical government, and all members of the resistance are persecuted daily.

This is not surprising. As Venezuelans, our poor understanding of the importance of freedom and free markets has created our current disaster. We Venezuelans never really understood freedom in its broader dimension because when we enjoyed high levels of economic freedom, we allowed the destruction of political and civil rights, and when we finally established a democracy, we allowed the destruction of economic freedom.

But there is reason for hope. Along with the Mises Institute we do believe that a revolution in ideas can really bring a new era to Venezuela. On behalf of the resistance and millions of people in our country, we thank the Mises Institute for this opportunity to briefly tell the full history of Venezuela. 

Thank you very much.

https://mises.org/library/how-socialism-ruined-venezuela