The image of Germans carrying cartloads of currency to buy a loaf of bread, post World War I still haunts us, a century later. The Latin American country of Venezuela now seems to be on Germany’s path in terms of hyperinflation. The civil war gripped country, sitting on the largest oil reserve in the world, in a striking contrast to other oil-rich countries is now undergoing a situation wherein over 80% of its population being below the poverty line. Since the past 1 year, over 3 million people have migrated out of the country as adequate medicine and three meals are being viewed as luxuries in Venezuela. The economy is in ruins, crime rate is at an all-time high and the executive situation is so distraught that the people don’t even know who their president is. This situation today has arisen because of the deeds of their erstwhile president, Hugo Chavez, who wanted to remove the inequality prevalent in Venezuela.
Venezuela was originally a rich country, having its underground treasure in the form of oil wells. The oil industry was nationalized in 1976, named as Petroleos de Venezuela, S.A or PDVSA, which was renowned throughout the globe in the early 90s. In 1999, when President Hugo Chavez was elected, he sought to remove the inequalities between the people and implemented a socialist regime. To further this agenda, he adopted many policies aimed at controlling the oil fields and minimizing foreign investment.
Perhaps the biggest causation of today’s situation is Chavez’s various policies to eradicate poverty. The 90s witnessed a surge in the oil prices and the Venezuelans believed this demand isn’t going to diminish anytime soon. Due to the thriving exports, wanting to implement subsidies for their citizens, Chavez looked to lower prices of the basics by setting them himself; a phenomenon termed “artificial pricing”. This meant that all products would be available at cheap prices and would be safeguarded from fluctuating inflation. Hence, food became extremely cheap and affordable, Chavez gained the support of millions for this move, but destroyed the livelihoods of many too.
Although the prices for products remained the same, production costs rose through the years and eliminated the prospect of making profits. At some point, the cost of manufacturing or producing some goods and products was higher than their selling price in the domestic market. Since the farmers were barely making profits and the government was keen to provide them with subsidies, they stopped producing. Slowly, each indigenous industry crippled, while domestic food production became almost non-existent.
Venezuela, however, didn’t seem to mind as their oil exports enabled them to afford mass importation, of even the basic necessities. Soon, Venezuela was importing all of its food including staples like rice and corn from foreign nations, with government expenditure reaching billions. Now, the state has reached a situation wherein they don’t have enough cash to import enough food for its thirty million citizens, the reason why Venezuelans are going hungry. Every day, organized raids are conducted on supermarkets and restaurants by the population to feed themselves, even though those places themselves are struggling to bring more food in.
If this wasn’t enough to bring the economy down to its knees, Chavez has thought of another ingenious way. He had replaced PDVSA’s employees with workers who lacked skills to cope with the work environment and were inept but were loyal to him and his regime. Thus, the organization lacked maintenance, safety equipment, and produced a lower amount of oil; harming the PDVSA’s ability to extract oil in the long run.
Apart from the economy, the country is facing an internal civil war. The current president Nicolás Maduro, Chavez’s successor, is facing heat from the opposition. Juan Guaidó, the head of the National Assembly is against the communist regime of Maduro. He has cited that the recent elections have been rigged by Nicolás Maduro and hence has declared himself as the interim president. Major countries all over the world, including the USA, Canada and the neighboring Latin American countries have supported Guaidó’s claim.
Moreover, the internal crisis has been coupled with external conditions. The oil market all over has crashed, and since oil exports comprise 95% of Venezuelan exports, the country is badly affected. Out of those oil exports, exports to the USA amount to 41% of the total, who have now put sanctions on the exports unless Juan Guaidó is accepted as the President. In addition to this, the crude oil mined in the country needs to be refined, the infrastructure for which is lacking. Traditionally, the oil used to be refined in foreign countries but with the current economic crisis, Venezuela is unable to do so.
Venezuela is an apt example of what poor economic management can do to a country. Currently, the prices of the commodities double every 19 days; with the value of Venezuelan currency so low that 1 USD is currently equal to 5,191.94 VES. The country should be viewed as a deterrent by other countries, a caution to what a free socialist regime can do to an economy. The farmers and workers were given food and other staples practically free of cost. In a situation, wherein the profits earned through farming are not adequate to support an individual, coupled with the lavish government subsidies, an individual will logically stop working. It is only the Venezuelan government which is responsible for the present economic crisis, for not maintaining a balance.
Congress and the left-liberal intelligentsia, instead of learning from the Venezuelan crisis, are doing everything in their power to follow their path. Starting with Siddharth Varadarajan, founder of media publication The Wire, to now the Congress party itself; they seem to appreciate the Hugo Chavez model. Siddharth Varadarajan, sitting in a capitalist economy such as the USA has lauded and appreciated Chavez and the socialist economic model the country adopted under him.
Now, much recently, the Congress party introduced NYAY scheme for the poor in the country. In his latest poll gimmick, Congress president Rahul Gandhi promised NYAY, which is a quasi-Universal Basic Income to 20 percent of Indian families from the poorest strata of society. If elected to power, which is to be decided this month; the Congress has promised to give 5 crore families, comprising of the poorest in India, an amount of Rs 72,000 per year through NYAY. This amount, according to Congress’ own words, is enough for a family to comfortably live in India. It is pertinent to note that most of these families are engaged in the occupation of agriculture, which is the primary sector of India’s economy. The NYAY amount will enable them to go lax in their jobs and altogether stop working. Not only will the distribution of this amount lead to an economic crisis in India, the ramifications of NYAY might lead to an abandonment of agriculture since it is a natural human tendency to stop working if the government provides the livelihood free of cost. Moreover, India is not even an oil-rich country to begin with, so implementing NYAY would make the situation worse than Venezuela.
Leaders within the Congress party prefer to call themselves well educated and have often used their foreign education as an indication of their “worldly knowledge” and “awareness’. However, with the introduction of the NYAY scheme, no doubt making them popular among the citizens, especially the poor ones; they have essentially thrown India’s economic future down the drain.