Politics Magazine

The Real Reason for Venezuela’s Economic Problems

Posted on the 28 February 2015 by Calvinthedog

This video shows the truth about Venezuela’s economic problems. In short, the economic problems are being caused 100% by the Venezuelan capitalists and the Venezuelan rich, and 0% by the Chavistas.

First of all, the lie that the shortages are typical of socialist and Communist systems. Many socialist economies on Earth have no shortage problems whatsoever. It is true that Communist countries have tended to be plagued by chronic shortages for a variety of reasons. Unfortunately this appears to be more of a feature of the system instead of a patchable bug.

The error here is that Venezuela is a Communist country. Since Communist countries have chronic shortages and Venezuela is a Communist country, the shortages are being caused by the fact that Venezuela is a Communist country. This argument is utter nonsense and it shows you just how retarded most of the rightwing Chavez-haters and the Lying Western Media are. Actually I think LWM know better and and are lying on purpose like they always do, but I am not sure about your average stupid dittohead.

First of all, Venezuela is not a Communist country. Some might even argue that it is not a socialist country, but that is more up for grabs. The fairest analysis of Venezuela from those on the Left is that it is some sort of a social democratic country similar to what exists in Europe and most of the world. Yes that is correct. Venezuela has a social democracy, which is the typical economy of the average state on Earth. Social democracies do not typically have shortages of products. In fact, product shortage is not a known feature or bug of a social democracy. Not to say that there are not problems with this model, but shortages is not  one of them.

What is incredible is that this country is so demonized by the US because of the fact that it has an economy like that of all of our European allies and that of most of the world. However, since the Monroe Doctrine, the US has been committed to never allowing any progressive governments in Latin America and the Caribbean. Hence most governments that were even social democratic ion nature were destroyed by the US, which called all of these moderate governments “Communists.”

So you can see that the US will only allow rightwing and centrist governments in the Hemisphere. Lately they have moderated this a bit and are apparently ok with the PT government in Brazil and Bachelet in Chile. And for some bizarre reason, the US long supported social democracy in Costa Rica and even before that in Mexico. The reason for these exceptions is not known, however in the 1980’s, Reagan put extreme pressure on Costa Rica to dismantle their social democracy.

The truth is that the entire economy of Venezuela is controlled by the private sector. So if there are shortages, that means that the Venezuelan capitalists are creating them on purpose for some reason.

First of all, let us look at the main Lying Western Media bashing point: inflation. Inflation has nothing to do with Chavez. High inflation has been ongoing since 1980. The reason is the “Dutch Disease” problem – the Venezuelan economy is completely dependent on oil, and that is the cause of almost all of the inflation right there.

There may be some other reasons. The Venezuelan economy boomed through most of the Chavez years when it had a high rate of economic growth. High economic growth can cause inflation. In addition, there are now many more consumers in Venezuela.

Chavez so dramatically improved the standard of living of the 90% of the country living in poverty that now they can afford to buy many more things that they could not afford before. For instance, before Chavez, only well to do people could afford to buy milk. Most Venezuelans could never afford it. Hence the shortages of it are not particularly missed by most of the population, whose attitude is, “Yes there are milk shortages now, but at least we can buy it sometimes. Before we could never buy it ever.”

Price controls were put in to control inflation. These price controls have been put in for a long time now and the shortages are fairly recent. The Lying Western Media want to have it both ways. They bash the Chavistas for inflation and then they blast them for the anti-inflation measures that they put in. That’s neither logical nor fair but it is typical of the rightwing mind.

At any rate, the price controls are apparently not causing the latest round of shortages because the price controls have been in effect for years and there were few shortages then.

Instead the shortages are being caused by the currency market.

Hear me out. Since the start of the Chavez regime, the Venezuelan rich and  capitalists have engaged in massive capital flight. This happens most times whenever a leftwing government is elected anywhere. The rich and the investors simply start sending all of their money out of the country, in the case of Venezuela, they mostly sent it to Miami.

Capital flight cannot be allowed to go on. If it continues, eventually it will devalue the currency so much that you will get a currency crash, which is an economic catastrophe. So the capital flight had to be stopped. The Venezuelan government put in capital controls and currency controls to regulate the amount of dollars coming into and going out of the country.

In other words, all of the dollars in the country were being routed through the government which fixed their value at a certain rate. If the private sector wanted dollars to import goods or for whatever reason, they would have to buy them from the state. The state was quite willing to sell dollars to anyone who could show a need for some. Later controls were put in and you could only access dollars for certain reasons such as overseas travel. However these rules were soon abused.

Be as it may, over time, problems developed in the value of the dollars that the state held. I am not sure what it was all about, but I think the state dollars were starting to be worth less than the dollars on currency markets. I am not sure why the state did not adjust the value of the dollars but possibly that move may have been fraught with all sorts of bad possible consequences. As time went on, a black market in dollars developed. When it started, the black market dollar was worth twice the state dollar. Now the black market dollar is worth 20-25 state dollars. Do you see where this is going now?

If you follow, obviously almost all dollars in the country are going to end up routed through this black market at some time or another due to profit potential.

Capitalists would come to the state asking for dollars to import products. The state would dole out the dollars and the capitalists would use the dollars to import goods. However, these goods bought with cheap state dollars could now be sold on the black market or in Colombia for the black market dollar price for tremendous profits. Hence, we arrive at a situation where 30-40% of the goods imported to Venezuela by the capitalists are routed out of the country, typically to Colombia, for the higher profits involved. So there is the reason for your shortages right there. The shortages are being caused by the profit-seeking of the capitalists.

I suppose the state could set the state dollar value much higher, even matching the black market value. However, I understand that this is a bad idea for a number of reasons. The state began to be reserved in how many dollars it was handing out. The capitalists would say they wanted the dollars to import goods but then they would turn around and use those dollars to import the goods and then send them out of the country or they would simply invest the dollars in some speculative activity.

The state began to get wary about handing out dollars and started demanding proof that the capitalist were going to use them for the reason that they said they were. At one time, this started adding to the shortages because now the capitalists were importing fewer goods as they had fewer dollars to import with, but they were sending a huge amount of imports out of the country anyway so I am not sure how big of a factor this was in the end.

The state has few recourses to this problem as long as the dollar black market exists. I suppose they could try to shut down the black market but efforts to shut down black markets usually do not work very well. There are other possibilities. One is to let the Venezuelan currency float, but this is also fraught with risks, for instance the bolivar could rise or fall quite a bit in value, both of which might be problematic. A huge fall would definitely be a problem. But they may have to take that risk.

Recently the state devalued the bolivar. A lot of people screamed about this as this supposedly means the economy is in trouble but that is not necessarily always true. The Lying Western Media screamed and yelled about this, insisting that it meant that the Venezuelan economy was collapsing. Keep in mind that according to the disgusting Venezuelan opposition and the Lying Western Media, the Venezuelan economy has been in a state of collapse, near collapse or soon to collapse every single year that Chavez was in office. If you look at economic figures, you can see how absurd this is. You guessed right. The Venezuelan opposition lies almost continuously about just about everything you could imagine.

The truth was that the bolivar was overvalued. I am not sure if that is good or bad, but it doesn’t sound real bad to me. It sounds better than a collapsing currency. When your money is overvalued, it is usually a good idea to devalue your currency. It is a sound economic decision.

The Venezuelan economy is indeed in bad shape now, but that is mostly due to the collapse of oil prices. All major oil producing nations are experiencing the same phenomenon. The collapse in oil prices is not the fault of Venezuela and indeed is a plot by the US and the Saudis to ruin Russia over Russia’s involvement in Syria and the Ukraine. That the Lying Western Media is screaming about Venezuelan economic problems caused by an oil price collapse that was not their fault shows you how repulsive the Lying Western Media is.

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