You probably won’t be surprised that in William Finnegan’s lengthy history of Venezuela under Chávez and since in his New Yorker piece only two explanations for Venezuela’s economy having been left in tatters are presented. The Venezuelan government’s position:
I asked about the current food shortages and failing hospitals. “It is an economic war totally orchestrated by fascistic factions on the right,” Ruiz explained. “In every country, you have an oligarchy, a bourgeoisie, working to prevent other groups from gaining power. Our economic situation is imposed by outside powers, by transnational companies like Polar.”
The government constantly cites this “economic war,” secretly directed from Washington, to explain the gutted economy. Polar is Empresas Polar, Venezuela’s leading manufacturer of food and beer. Polar has been threatened with expropriation, and is harassed and vilified by the government as a treacherous bastion of capital, but it has become indispensable to feeding the country. Ruiz explained that Polar is responsible for shortages because it has reduced production. Polar’s management contends that it cannot import essential ingredients, because the government, which controls all foreign exchange, declines to provide the dollars necessary. These claims are false, according to Ruiz. “They have enough.”
or that it’s just too complicated for us mere mortals to understand:
Understanding Venezuela’s failing state as just another failure of socialism, and of statism generally, is ahistorical. Venezuela before Chávez was often extravagantly statist. Corruption has been a major problem in every era. Even dire food shortages are not new. These things happened under capitalism, too, as did intense political repression. Today’s crisis is for most people the worst in memory, but it is not all about socialism. The predatory state, the extreme insecurity, the sheer weakness of the rule of law—these are problems more profound, at this stage, than a traditional left-right analysis can clarify, let alone begin to solve.
Actually, it’s quite simple. Making economic decisions politically always introduces inefficiencies into an economy. That’s as true in Venezuela as it was in the Soviet Union or Mao’s China or as it is in today’s United States or North Korea. Those inefficiencies are what I’ve been referring to here at The Glittering Eye as “deadweight loss”. China’s economy was supine until it incorporated some market economics into its system.
When enough decisions are made politically, incentives are completely bolloxed up. People do things they shouldn’t and don’t do things they should. They hoard. They become profligate.
When you add rampant corruption to the mix, something inevitable when economic decisions are made politically, it makes matters that much worse.
Stir in monetary mismangement and you’ve got Venezuela.