Hugo Chavez is dead, but his legacy lives on.
And that means that Venezuela is in a heap of trouble:
The suddenness of Venezuela’s collapse should have come as no surprise because downfalls are inherently abrupt…Imagine there’s no money to keep up the sovereign bond payments, the only source of money to keep power plants going.
Welcome to Hugo Chavez’s Venezuela, a country with the fifth largest oil reserves in the world and absolutely broke. It’s a remarkable achievement for Chavismo. A just-wow moment. Socialism is useless at everything except for smashing things in record time.
As Margaret Thatcher famously said: The problem with socialism is that you eventually run out of other people’s money. “Eventually” seems far away—until it arrives.
So, what happened? This:
High oil prices funded Mr. Chavez’s “Bolivarian revolution” over the past 14 years. He made massive investments in health and education; because the government releases almost no reliable data, it is debatable how much impact these had on human development, but they did inspire a belief in redistribution and justice, and ensured his huge popularity.
But since Mr. Chavez’s death nearly a year ago, it has become apparent that his hand-picked successor, Nicolas Maduro, lacks his charisma. Meanwhile, the safety net is starting to tatter. Production by the national oil company, Petroleos de Venezuela, S.A, or PDVSA, is declining, although the government won’t say by how much. The company is crippled by debt, has no cash to invest in operations, must operate on the posted exchange rate, and has been turned into a bizarre do-everything organization that makes jam and processed chicken, builds houses and runs neighbourhood health clinics.
As uncertainty grows, Venezuelans must adapt to an ever-shifting reality. In the middle and upper class, this means cultivating friendships with grocery store clerks who text you when a shipment of butter comes in; shopping on credit cards, because the bolivare, the national currency, will be worth even less when the bill comes due; and sinking cash into hard assets such as a used car, if you can find one (the official waiting list at dealerships is years long.)
Even before President Obama was elected in 2008 I wrote that he was showing Chavez-like tendencies. I have never seen any reason to revise that notion; it has only strengthened. Reading the Globe and Mail article I quoted above, I am struck in particular by this seemingly unimportant quote, “the government releases almost no reliable data.” That’s been especially true of Obamacare and the present administration, as I pointed out last Thursday. Far more than ever before in my memory, domestic statistics released by the government have become almost pure propaganda, and few on right or left trust them.
But bluffing can only get you so far. Sooner or later economic reality comes to call.
Can Venezuela right itself? Richard Fernandez thinks it may have reached a point of no return:
The problem with Venezuela is that Chavismo has left people with nowhere else to go. It’s burned the bridges. There’s no reopening the car plants or restarting the factories, or even repairing the power plants. The engineers have all emigrated to Alberta, Canada.
Fernandez then notes that something similar has happened in Syria, for different reasons. And in Detroit:
Detroit had posted the lowest math scores in the history of the National Assessment of Educational Progress.
“These numbers are only slightly better than what one would expect by chance as if the kids had never gone to school and simply guessed at the answers,” said Michael Casserly, executive director of the Washington-based Council of the Great City Schools, which represents large urban school districts. “These numbers … are shocking and appalling and should not be allowed to stand.”
“Should not.” But what’s to be done? Has Detroit passed some point of no return?
It is easier to destroy than to build. Much easier. That’s true whether destruction is your goal or not. And if you’re blinded by the need to stick to your ideology and declare it a success no matter what the truth is, you may not even know what’s going on until Humpty Dumpty finally takes that tumble.
[ADDENDUM: See also this.]