Nathan Steelwater


Nathan Steelwater writes extensively on the industrial military complex and world events when he isn’t preparing for the next triathlon.

In a smoke-filled college dorm room somewhere in this country, several students lament the failures of capitalism and the United States while offering simple, broad brushed, idealistic solutions to the world’s nuanced issues. Between tokes they discuss income inequality, the 1%, and how things would be better if we were just, you know, socialist, man.

One thing that these Marijuana Marxists will not discuss, however, (other than the hilarity of Che Guevara’s image being used to make greedy capitalists that sweet, sweet, irony money) is Venezuela. Why? Because Venezuela serves as the perfect example of why socialism does not work.

Socialist policies have made the petrostate into an apocalyptic shadow of its former self. There are regular rolling blackouts, leading to medical emergencies in hospitals. Not to mention that Venezuela is one of the world’s most dangerous countries, with Caracas ranking as the number one city in the world for murder. Inflation hit an all-time high of 800% (that’s not a typo) in 2016, and there are critical shortages of food and basic medical supplies nationwide. There are widespread protests and clashes between government and opposition forces, and the nation’s president continuously assumes more and more power all while blaming the country’s woes on everyone and everything but its government’s policies.

If that is not utopia, I don’t know what is.

So how did we get here?

Once oil was discovered in the early 20th Century, Venezuela quickly became an economic success. While a series of military dictators were repressive, they helped to consolidate Venezuela’s resources and turn the country from a poverty-stricken Banana Republic (not the store) to a modern, industrial, state with a relatively free economy and strong property rights. In 1950, Venezuela had the fourth highest GDP per capita in the world.

The height of Venezuela’s economic success was under the politically repressive rule of Marcos Pérez Jiménez. Capitalism functioned with minimal state involvement, and market-based pricing worked regularly in most sectors, although strategic industries like steel did have state participation and the government was prone to crony capitalism and grandiose public works projects.

No matter how economically prosperous a dictator’s rule may be, it is still a dictatorship. In 1958 a coup overthrew Jiménez, and in the general election of 1959, Rómulo Betancourt became the president of Venezuela. Betancourt was an ex-communist who slowly began to move Venezuela’s promising democracy towards socialism. Betancourt and his party, Acción Democrática, sought to nationalize the oil industry and, through central planning of oil profits, provide a variety of social programs like free education.

Betancourt’s government devalued Venezuela’s currency, undermined property rights, and incorporated the active role of the state in economics.

While Betancourt was unable to nationalize the oil industry, he laid the foundation for such a move. In 1975, Carlos Andrés Pérez took advantage of the oil crisis of the 70’s and nationalized the industry. Venezuela received unprecedented oil revenues during this period.

Venezuela became a petrostate, an oil-rich country with weak institutions and power/wealth held by the few. The government held all the economic cards and placated the people with social welfare programs that skyrocketed deficit spending.

When the bottom fell out of oil prices in the 1980s, Venezuela’s economy took a major hit. The government devalued its currency to pay their debts, and the quality of life in the country plummeted. Poverty and crime rates skyrocketed. The people took notice, and after two coup attempts, President Carlos Andrés Pérez was impeached in in 1993.

Enter the Bolivarian Revolution, a leftist social movement led by Hugo Chavez, which sought to interpret the ideas of Venezuelan hero, Simon Bolivar, in a more socialist light. With further state control of the economy, Venezuela suffered from “Dutch Disease” an economic condition where one sector progresses while others decay. Petrodollars were spent on social welfare programs to pacify opponents to Chavez’s rule instead of further investment into other areas or into the oil industry itself. Corruption, once again, played a major factor in the Venezuelan government. Inflation and poverty rose well into the 2010s.

Chavez died in 2013 and his successor, President Nicolás Maduro quickly devalued the currency to try and combat increasing shortages to include food and other essential resources, leading to widespread malnutrition. In 2014, the Venezuelan economy began to tailspin and in 2016 inflation peaked at 800%.

Liberty Nation has covered the various protests to Maduro’s government, which have been ongoing since 2014. The country is on the verge of coup or collapse, but getting there did not happen overnight. There is an adage about boiling a frog. If you put a frog in boiling water, it will jump out. If you put a frog in lukewarm water and slowly increase the temperature, it will boil to death. What’s the moral of the story here?

Venezuela serves as a cautionary tale about the dangers of socialism and shows us that we must look long-term in our thinking. Venezuela’s socialist policies did not throw the country into collapse immediately; it took a long time for the blunders of socialist theory to do their damage.

We should be watchful for those who would take us down similar paths, lest we find ourselves in our own boiling water.