Venezuela - Which Came First: Socialism or Ruin?

Causality matters.

Here, in brief, is an economic history of Venezuela.  

1950: An upper-middle-income-country, 4th richest per capita:

GDP per Person
Top Seven Countries

(1) United States     $9,573

(2) Switzerland        $8,939

(3) New Zealand      $8,495

(4) Venezuela          $7,424

(5) Australia            $7,218

(6) Canada              $7,047

(7) Sweden             $6,738

Yep, you read that right - Venezuela was #4 in the world economically, ahead of both Canada and Australia.

So what is Venezuela like today?

Today, Venezuela is in ruins. It is one of the few Latin American countries to have had, not one, but two "lost decades:" the 1980s and the 1990s. Never really able to recover from currency and debt crises in the 1980s, Venezuela plunged further into economic chaos in the 1990s. 

Inflation remained indomitable and among the highest in the region, economic growth continued to be volatile and oil-dependent, growth per capita stagnated, unemployment rates surged, and public sector deficits endured despite continuous spending cutbacks. 

Real wages today are almost 70 percent below what they were 20 years ago. In eight of the last 12 years, Venezuela suffered some sort of economic emergency-a critical fiscal deficit, a banking crisis, a currency crisis, an economic recession or a combination of these. 

More than two-thirds of the population now live below poverty levels. A recent report estimates that, for an average Venezuelan with 12 years of schooling, the probability of ending up poor is 18.5 percent, up from 2.4 percent only a decade ago. Education-a common antidote against poverty-has simply ceased to work. (emphasis added).

I agree.  It's terrible, isn't it?

Only one problem.  Those words were written by Javier Corrales in 1999, not 2019.  (OK, I lied.) 

Hugo Chavez came to power in 1999 after the December, 1998 elections.

Corrales, writing in Harvard's Review of Latin America:

Essentially, Venezuela has been stuck in an ax-relax-collapse cycle of reform. Each cycle begins with the eruption of an economic crisis, to which the government responds by implementing harsh cutbacks and adjustments-the "ax." After some initially positive results, the reforms soon lose momentum, becoming either haphazardly implemented or prematurely abandoned-the "relax" stage. This culminates in yet another economic crisis-the "collapse." With the launch of "Agenda Venezuela" in 1996, Venezuela embarked on its fourth such reform cycle since 1979, succumbing shortly after to the same pattern of relaxation and collapse. 

The main difference was that, this time, the economic collapse (in 1998) was the worst ever.

The economic collapse of 1998 was the final straw that propelled Chavez to power.  

It wasn't clever words, or insidious propaganda, a leftist university system, or even a popular politician that bought socialism to Venezuela.  A substantial  group of Chavez's 1998 voters valued democracy.  And for several years, Chavez's approval ratings were even worse than Donald Trump's!

Chavez came to power because Venezuela had already collapsed.  His country was already in ruins, and voters were desperate for better answers. (Answers he clearly did NOT provide. As I think is the case with socialists in our country.)  

Ruin came before socialism.  And yes, it has gotten desperately worst since Chavez and Maduro:

“We are barely surviving,” Perez said of himself and his wife. “If prices keep rising, I don’t know what we’re going to eat.”

As Venezuela’s economy crumbles, daily life has become a constant struggle, consisting of waiting in line for food and stretching a minuscule wage that each day buys fewer goods.

The country's monthly minimum wage of 1,307,000 bolívars — around $6.03 on the black market — is enough for two cartons of eggs, a kilo (about 2.2 pounds) of cornmeal and a box of pasta, or two liters of milk, four cans of tuna and a loaf of bread.

With extreme food shortages, hunger and malnutrition are on the rise. But even when food is available in stores, the average salary is not enough to feed a family.

So why was Venezuela already in ruin in 1999, before socialism? 

Twenty-two Ph.D's did a tedious study on this question. The result is a 450-page scholarly study:  Venezuela Before Chavez   After careful research on a dozen possibilities, the final regression shows the causes of Venezuela's collapse were as follows:

Reason	% of Cause
#1: Democratic institutions decline / collapse	25.4%**
#2: Export / trade flexibility & openness	23.6%*
#3: Financial sector failure / contraction	14.4%
#4: Human capital (education)	12.7%***
#5: Government overspending / public debt	10.4%***

(* p<.10, **p<.05, ***p<.01)
pp. 428-429 - like items consolidated

(Reminder to the non-statistical people of the world:  The point of doing a regression is to establish causality.)

So which came first in Venezuela, socialism or ruin?  

The facts of history are very clear - it was ruin.  

Which begs the question:  How do we best stop socialism?  In my brain, I am going to work for, and vote for, solutions that mitigate the problems above.

Through all my work with Christian schools, I am going to work to raise up great citizens of our great democracy.  I am going to judge politicians by whether their actions support democracy, and vote accordingly.  I do NOT espouse the theory that both political parties are morally equivalent at any given point in our history. 

I will support economic policies that prosper our nation.  I will support politicians who support policies that prosper our nation. I will not support those who do not.

I will support those who advocate reasonable government oversight of the financial sector.  I believe that history and economics will both conclude that Paul Volcker had it right, and Alan Greenspan had it wrong.

I will spend the rest of my life working with the education of young people, giving them a purpose that will propel them towards the highest levels of accomplishment, and helping those who help them.  That is the essence of the Daniel Generation.

And finally, I do not support the current overspending of our government, and the huge debt we incurred during times of prosperity, or for ill-advised wars.  Our children will pay a grave cost for our foolishness.

Because corruption impacted almost all of these institutions in Venezuela, as they do in the United States, I will work for, and vote for, politicians who avoid, and fight against, corruption in our country.

Because in the balance of government regulating capitalism, socialism goes too far.  

But, because causality matters, I am going to spend the rest of my life working to avoid the conditions that lead to socialism in the first place.     

Can I be blunt?  Simply attacking socialism or voting on that basis will NOT be good enough to prevent it. Why are millennials supporting socialism more than previous generations?  

A key reason is old fashioned good jobs - or more specifically, the lack thereof.  (In fact, a worldwide survey by the Gallup organization found that the #1 predictor of happiness in life is having a good job.) Read and study:  Understand the economic realities of young people.  

There is one absolute certainty here:  Young people will live longer than older people.  We need to help them all we can (Matthew 25:35).  Criticizing or ridiculing their views might feel good, but it accomplishes nothing (James 2:14-18).  

By supporting policies and strategies that help young people, we truly help America be great (Matthew 20:20-28.)