The murder and massacre of Syria has for the moment been pushed off the front pages and is replaced by the chaos in Ukraine. Though gallons of ink have been expended on both we are after it all better read but not better informed.
One story of a government’s terror against its own people is winding up to what will be a horrible finale yet remains stubbornly out of the papers and off our televisions. The terror in Venezuela maybe mostly economic but it is a relentless and mindless campaign against the poor and human rights.
Fifteen years ago Hugo Chavez was elected on a programme of redistribution and old fashioned anti-Yankee socialism. And that is what his people got.
At the beginning there was a palpable sense of excitement in the left across the globe as day by day he rolled out juggernaut state and attacked the exploiting blood sucking multinationals that stole the People’s wealth and left millions mired in poverty. This time would be different. This time socialism would work.
Of course the Jeremiahs on the right shook their heads and predicted that it would all end in tears.
By 2009 Venezuela, the third largest oil exporter in the world was in deep trouble. At time of record prices for crude debt as climbing, inflation rising, productivity falling and shortages beginning to appear. In response President Chavez seized assets from 60 oilfield services companies .
“Today, the private services companies disappear, we don’t need them, the people and workers can do the labor and be more efficient,” Chavez said. “We’re going to bury capitalism in Venezuela.”
Today Venezuela far from being an exporting powerhouse cannot meet its own energy needs. Oil production is falling. Drilling distribution and refining infrastructure is rotting and rusting. No investment in new production or existing plant has happened. Rolling blackouts are regular occurrences plunging the cities into darkness and shutting down industrial production.
As it happens there is little industrial production left to close down. The Government has introduced severe currency restrictions making it impossible for many to purchase the dollars necessary to pay for the raw materials they need. Even if they get access to foreign currency it is at a rate of exchange set by the state which is a fantasy.
According to the government 6.3 Bolivars will buy a Dollar. However according to the black market you will need more than ten times that. To put in real life terms, if you arrive in Caracas with a few greenbacks and fancy a Big Mac combo it will cost you $25 if you use an official exchange. However If you get a chap on the black to sell you Bolivars the meal will cost you $2.
In 2007 Chavez imposed tariffs and restrictions on imported cars in order to stimulate local production. In January 2014 Ford production hit zero. While sales of new Fords stood at two. Today companies like Toyota, GM and Ford are either mothballing production or simply getting out. The foreign exchange has made it nearly impossible for local factories to get dollars to pay for car parts. As a result, assembly lines are stopping without any clear sign they will reopen in the near future.
Hand in hand with fanciful exchange rates are price controls. Of course the Government knows and it tells the people that high prices are not caused by them running the printing presses but by shopkeepers and businessmen who are gouging them.
Recently elected President Maduro has declared war on the parasitic bourgeois and has ordered shops to charge ‘fair’ prices. To encourage the others he decreed the state takeover of an electrical goods chain and told those looking for a bargain in plasma televisions and laptops ‘Leave nothing on the shelves, nothing in the warehouses Let nothing remain in stock!” He went on to warn that this nationalisation was only the tip of the ice berg.
The problem is that since retailers have to pay international suppliers at the real rate of exchange selling goods at the officially set fair price means they lose money on every single sale. Consequently the only choice they have is to close up shop.
In a cruel comic twist the chaos in the economy may mean that soon that even those who want to get out will find themselves trapped as international air lines have started to cut back on flights in and out of Venezuela. They have found it impossible to repatriate almost four billion dollars in revenues and talks on payment in government bonds or oil have foundered. As the president of the IATA Tony Tyler said “The simple fact is that many airlines have stopped substantial sales in Venezuela because they haven’t been paid for the last year or so,”
The official annualised rate of inflation stands at a fairly horrible fifty six per cent. However many economist believe that the real figure may be six times higher. The Cato Institute’s Troubled Currencies unit estimate real inflation to be running at three hundred and thirty per cent. At this level and no sign of the presses stopping how far can hyper inflation be?
Though the presses printing Bolivars may run unimpeded that is not true for the newspapers of Venezuela. Paper shortages have led to the close of twelve titles and another fifteen are reported on the brink. At a time when new regulations are being introduced to curb what the Government calls sensationalist reporting on the nations crime epidemic and TV stations hostile to the leadership are threatened with loss of license, editors who want newspaper print feel themselves in the crosshairs of the information ministry.
Crime is a sore subject. Venezuela does not have guerrillas in the mountains or drug cartel in the forests but it has a higher murder rate than either Colombia or Mexico and it climbs year by year. After fifteen years of radical socialist rule the homicide rate is 73 per 100,000 inhabitants, the highest in South America. Last year 21,692 Venezuelans died at the hands of another. This was a 12% increase on the previous year. More murders than in the USA and all twenty seven member of the EU combined.
The future looks bleak. The Government will not change its policies. It is deep in a paranoid mindset which sees enemies, spies, saboteurs and counter revolutionary bourgeois behind every piece of bad news. Toilet paper is rationed. One government spokesperson ascribed this to the price gouging activities of the manufactures as one would expect. But then in a moment of genius went on also to accuse bourgeois saboteurs of deliberately using far more paper than they needed in a wicked plan to discredit the leadership.
Last week Delcy Rodriguez , the Minister for Information, called for an investigation of newspaper crossword puzzles. It seems she fears they are being used to send conspiratorial messages and organise protests. Bloomberg asked the ministry for a comment on the progress of the investigation but a ministry spokesman declined to comment. As per Ministry of Information rules the spokesman could not be named.
Hugo Chavez sadly died last year. Sadly because when the total collapse of this economy occurs he will escape blame. When the old women are once again rooting through garbage for food most likely they will curse the misfortune which took Hugo from them. Hugo would have known what to do, he would have saved them. Venezuela will most likely learn little from the experience. What about us? Will all those politicians across Europe who queued up to praise the courage and vision of Hugo not finally reflect that making the rich poor does not make the poor rich. Will they admit that his corruption of the courts and judiciary was not after all a price worth paying? Will they see that the concentration of power, political and economic, in one place is an inevitable recipe for disaster? Will they at this late date finally understand that the price of a thing cannot be legislated?
My guess is no.