Venezuela headed for an economic collapse -- or worse

“Venezuela is a bomb,” says opposition leader Henrique Capriles, “that could explode at any moment.” One reason for that potential social explosion — an economy that has imploded, despite the country’s vast petroleum resources. As Nicolas Maduro imposes emergency decrees and attempts to shield the Chavista socialist government from its opposition, people are swarming into the street … and starving at home, and dying in Venezuela’s hospitals.

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This is what “democratic socialism” looks like when it runs out of other people’s money, folks:

PRI’s John Hockenberry details the descent of Venezuela from a comfortable liberal democracy to an impoverished third-world socialist nightmare. Hockenberry interviews Ricardo Hausmann, who calls this the result of the “craziest” economic system in history:

Ricardo Hausmann, a Venezuelan, a professor at the Harvard Kennedy School of Government, and director of the Harvard Center for International Development, says that those inside and out of Caracas claim that the nation is headed for collapse.

“Venezuela’s problems are a consequence of the craziest economic policy ever in a country or in the world,” he says. “It’s a country that has gone through its longest and highest oil boom in its history, and ended that period over-indebted, with a destroyed productive capacity, and now it cannot face the reduction in the price of oil.”

The global oil industry is struggling — prices have hit a 10-year low and hover around $45 a barrel, which has disrupted energy markets in the Middle East, the United States, Africa and Latin and South America. For unstable governments, the results have been disastrous.

“[Venezuela] has no access to international financial markets to borrow, it has no reserves left. It has a crazy system of controls that has led to rationing, and shortages and long lines,” says Hausmann.

Hausmann calls this the “consequence of Hugo Chavez” and his blend of socialism, authoritarianism, and Keynesian policies:

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“Hugo Chávez, in his last year in government, had the price of oil at $104 [per barrel], but he spent as if the price of oil was at $197, and he borrowed the difference,” Hausmann says. “When Maduro came in, the markets said, ‘Chávez has borrowed so much money that you’re no longer eligible for loans.’ So that caused him to lose international finance, so he started printing money.”

Taken together, these factors have produced the perfect storm of economic, political and social upheaval. But Hausmann believes things would change if the opposition were able to recall President Maduro.

“I think that it’s very clear the direction in which the country would have to go,” he says. “It would have to re-establish basic market mechanisms and basic balances, but it would need massive international support. The government of Maduro doesn’t want to hear anything of international support, other than from China or maybe Belarus. But we are too big, and they are too small relative to the needs of the crisis.”

How bad has it gotten? The New York Times reported this week on the frighteningly desperate conditions in Venezuela’s health-care system, which Maduro claims is only second to Cuba’s. He might be accurate in that assessment, although not in the way he intends:

Hospital wards have become crucibles where the forces tearing Venezuela apart have converged. Gloves and soap have vanished from some hospitals. Often, cancer medicines are found only on the black market. There is so little electricity that the government works only two days a week to save what energy is left.

At the University of the Andes Hospital in the mountain city of Mérida, there was not enough water to wash blood from the operating table. Doctors preparing for surgery cleaned their hands with bottles of seltzer water. …

The figures are devastating. The rate of death among babies under a month old increased more than a hundredfold in public hospitals run by the Health Ministry, to just over 2 percent in 2015 from 0.02 percent in 2012, according to a government report provided by lawmakers.

The rate of death among new mothers in those hospitals increased by almost five times in the same period, according to the report.

Here in the Caribbean port town of Barcelona, two premature infants died recently on the way to the main public clinic because the ambulance had no oxygen tanks. The hospital has no fully functioning X-ray or kidney dialysis machines because they broke long ago. And because there are no open beds, some patients lie on the floor in pools of their blood.

It is a battlefield clinic in a country where there is no war.

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Oh, there’s a war, all right — a war on natural rights to property, on investors, and on economic sanity. In less than a generation, the Marxists of Venezuela have fundamentally transformed their country into impoverishment for all but the Marxists. Anyone who doubted that there would be casualties in that war simply didn’t pay attention to the entire 20th century.

Glenn Reynolds used his column this week to remind readers of those lessons, and how they apply now in Venezuela — and the US:

The daughter of Venezuela’s socialist ruler, Hugo Chavez, is the richest individual in Venezuela, worth billions of dollars, according to the Miami-based Diario Las América. In Cuba, Fidel Castro reportedly has lived — pretty much literally — like a king, even as his subjects dwelt in poverty. In the old Union of Soviet Socialist Republics, as Hedrick Smith reported in his The Russians, the Communist Party big shots had lavish country houses and apartments in town stocked with hand-polished fresh fruit, even as the common people stood in line for hours at state-run stores in the hopes of getting staples.

There’s always a lot of talk about free health care, but it’s generally substandard for the masses and fancy for the elite. (The average Cuban or Venezuelan peasant — or Soviet-era Russian — doesn’t get the kind of health care that people at the top get.)

In the old Soviet Union, the new communist nobility, whose positions and influence seemed to run in families somehow, were called the Nomenklatura (from the Latin word for a list of names). Despite all the talk about equality, etc., they generally did a lot better than people who didn’t have the right connections. Dissident Milovan Djilas referred to these managers and apparatchiks (another Soviet-era word) as the “New Class.” Where socialist equality was supposed to eliminate the distinction between exploited workers and peasants and their capitalist exploiters, it instead produced a new distinction, between exploited workers and peasants and their “New Class” socialist oppressors. …

As the Rainmakers sang, back in the 1980s, “They’ll turn us all into beggars ’cause they’re easier to please.” That’s socialism in a nutshell. The “equality” talk? That’s just for the suckers. Don’t be a sucker.

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Capriles’ warning also mirrors that from similar points on the socialist-failure curve. Those leaders that eventually allowed for political change ended up seeing the collapse of socialism. Those who didn’t occasionally ended up against the wall come the counter-revolution, such as Nicolae Ceausescu. Venezuelans won’t put up with this for much longer either way, especially since enough of them are around to recall the pre-Chavez days … and Nicolas Maduro is no Hugo Chavez.

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