The level of poverty and extreme poverty are at record highs in Venezuela. Chart by economist.com

By Christopher Ochoa

Today the news is filled with the horrors of the Venezuelan economy, the suffering of the people there and the collapse of that society. However, this did not just happen. It occurs over a period of time. So how did Venezuela go from one of the wealthiest countries in the western hemisphere to the poorest?

Heritage.org ranks all the world’s economies and with a 2019 economic freedom score of 25.9, it is ranked 179 in the world, right after 178, Cuba and 180 North Korea. That is not good company to be in. Things are pretty bad there now.

If the situation there was summed up in a phrase it would be state interventionism. In the last couple years, the centralized government there decided to try and stop the horrible contraction of that economy by removing five zeros from the currency and giving a large increase in the minimum wage.

This is supposed to be a way to improve the lives of the people there, but it is just contributing to hyper-inflation. Inflation has been as much as 700 percent which is double of the second highest inflation on the planet, South Sudan. The problem is that the government has spent way too much for way too long. They monetized large government debt, which means that everyone’s money was not worth anything. With more money comes less value.

So how does a country with the world’s largest proven oil reserves become one of the world’s poorest economies? It just does not seem right. Like many South American countries, Venezuela was under military rule. This lasted until 1959 when a modern democratic era began. Then, forty years later, Hugo Chavez was elected in 1999. The election of Chavez began a period of the destruction of democratic institutions.

Lieutenant Colonel Hugo Chavez lead a military coupe against the government in 1992, but it failed. He was imprisoned, but released later. He was elected in 1998 and the end of the Venezuelan democracy was assured. He instituted many changes to the government and their constitution. Eventually, when business leaders objected to some of his plans, Chavez declared them “enemies of the people’s revolution.”

By the late 2000’s, Chavez ran the oil industry, but the government could not run that industry and production went down, accidents went up and costs went up. When oil prices fell, Venezuela was finished.

Things were already bad when Chavez died in 2013 and his hand-picked successor was Maduro. He was “elected” again in May 2018, and Venezuela has continued to fall into a bad state. Poverty, starvation and crime is rampant. The problem is the dictatorship government there, and the people have no way to stop it.

So, to sum things up, the problem of Venezuela is that their economy was based on the rise and fall of oil prices, which is bad enough. Their economy has handled that. But, the people followed a leftist-populist leader in Chavez, who took away their economic freedom first, and then the rest of the freedom eventually went with it.

It is sad that a people with a beautiful country and a great deal of natural resources have been reduced to starvation. Hopefully, freedom can be restored and then the economy.