The question as to whether socialism has led to the economic problems of Venezuela is one that is not straight forward. This paper is based on the thesis that socialism is not the main factor for the economic problems facing Venezuela.
Although socialist policies of the country have largely been attributed to significant failures in the economy, they are not solely to blame. Some of the socialist policies that have affected the country’s economy include; price and currency controls, nationalization of farms and factories and government control of food distributions (Friedman). For instance, in reference to the exchange rates, the government created Sicad. This was a mechanism to auction dollars to the private industry (Mallet-Outtrim). The disadvantage of this policy was that the government was subsidizing its currency so as to keep the exchange rates stable against the dollar. With dwindling oil revenues, the government found itself with no dollars for importation of critical supplies. Another serious miscalculation was the controls in production. Indeed, Mallet-Outtrim concede that the Venezuela’s economy was never diversified enough away from oil. This forced the country to be a net importer of food and medical supplies. When the global oil prices went down from around 2013, the country simply had no currency reserves to meet its import obligations, hence a spiral in problems.
The main significant factor contributing to the failures have to be government corruption and cronyism. Beitler argues that socialism only created a fertile ground for official corruption to take root in the country. Hence, it is unfair to blame socialism per se. For instance, $70 billion or close to 16 percent of the country’s GDP was siphoned off from public institutions. With this huge hemorrhage, it was a matter of time before the economy started to tumble down. Corruption has led to a situation whereby the government simply has no money to offer basic services to its citizens, in spite of years of huge revenues from oil exports.
- Beitler, Ryan. What’s the Matter with Venezuela?: It’s Not Socialism, It’s Corruption. 2017. web. 12 October 2017.
- Friedman, Uri. How Populism Helped Wreck Venezuela. 2017. web. 12 October 2017.
- Mallet-Outtrim, Ryan. Does Venezuela’s Crisis Prove Socialism Doesn’t Work? 2016. web. 12 October 2017.
