To the brief and harsh list of life’s certainties, let’s add that socialism invariably leads nations to economic ruin. The latest case: the “Bolivarian” Republic of Venezuela under Hugo Chávez.
At the beginning of this month, the Venezuelan strongman shifted the official exchange rate of the US dollar to 4.3 bolivars from 2.15. With a single stroke, he wiped out the savings and purchasing power of the working-class individuals he pretends to represent, most of whom are barely surviving. The news of the devaluation instantly plunged the country, where consumer prices had already risen by 25% in 2009 according to official figures, into panic, with shoppers lining up to stock up on goods before prices soared.
Mr. Chávez then decreed that he would fine and even arrest any merchant caught adjusting prices, ignoring the fact that Venezuela imports nearly everything and exports only oil. Now, Venezuelans face a Hobson’s choice of complying with the mandate, leading to shortages, or disobeying it, resulting in inflation.
However, just as one disaster of “21st-century socialism” inflicted pain on Venezuelans, Chávez unveiled another. On January 12, the government instituted a series of rolling blackouts due to a power shortage that had been building for months. Apparently, the shortage was caused by a drought that left water levels at the country’s massive Guri dam, which provides over 70% of its electricity, critically low. But this is a result of the government’s failure to maintain the dam and build additional capacity.
The immediate result of the blackouts was chaos, particularly in Caracas, where people became “trapped in elevators or in dangerous parts of the city without streetlights,” according to Reuters. The capital already has one of the highest per capita murder rates in the world, and Chávez was forced to suspend the blackouts two days later. The rest of the country, however, remains subject to sporadic power cuts.
Behind the failure of Chávez’s utopia is the fact that he is running out of money because Venezuela’s oil production is plummeting. In 1998, the year Chávez was first elected, the country was pumping 3.3 million barrels a day. Today, the figure is 2.4 million barrels, and that’s an optimistic estimate.
Venezuela isn’t running out of crude. The problem is that Mr. Chávez has expelled or seized the assets of foreign companies capable of properly maintaining the country’s fields, including ExxonMobil and ConocoPhillips. It didn’t help that in 2002 Chávez fired thousands of skilled workers from the state oil company PDVSA because he disliked their politics, replacing them with his political allies.
On Monday, Chávez reluctantly made a concession to reality by agreeing to a joint venture with the large Italian oil company ENI, which had also pulled out of Venezuela in 2006. We’ll let the Italians take their own bets on the limits of Mr. Chávez’s whims. They’ve already received a fair warning that the Bolivarians, like other predators, rarely change their spots.