Mises Wire

Venezuela: Radical Pro-Market Reform Is the Only Way

Venezuela’s future is still unclear, but the challenge for the Venezuelan people lies is demanding not only a political but also an economic change. This country, once the richest of South America, is paying for the socialist policies and populism that politicians have implemented to enslave society in recent decades. In my home country, politicians and their pundits have applied those fancy promises that Americans are hearing now: “free education,” “free healthcare,” and more. In brief, Venezuela has tried democratic-socialism and other even-more-drastic types of socialism such as “Socialism of XXI Century.” Needless to say, the experiment has failed.

The answer lies in adopting true freedom for Venezuelans, but few alternatives exist for ordinary voters and citizens.

For example, the most “popular” political alternative to the Chavista regime has the same ideological root. Interim President Juan Guaidó, his comrades, and “economic counselors” want to return to the old democratic-socialism that opened the door to Hugo Chávez. Those politicians allegedly on the Right wing promote few real and radical free-market reforms. They just self-proclaim as “pro-free-market” because the majority of Venezuelans want to hear that. But their actual proposals say otherwise.

Guaidó and his team promote a plan called (in English) the “Morning After.” In Spanish it is marketed as “Plan País.” In a nutshell, it is a bunch of old-fashioned socialist economic policies and “strategies” to solve the crisis. The core of their plan is to promote a “public debt expansion” and an “exponential increment of governmental expenditures.” This plan maintains the state’s fiscal dependence on oil revenues, although this dependence remains among one of the gravest dangers to a real and sustainable democracy. Dependence on oil means the state must maintain state ownership and control of the commanding heights of the economy — such as the energy sector. Current plans also mean the state will continue granting a monetary monopoly to politicians and their counselors, thus enabling them to endlessly print out new and fresh money. In brief, those pundits and politicians will maintain the oversized state and do not apply the reforms that Venezuela really needs .

But even if planned and implemented by a new and different group of politicians, socialism still won’t work.

After all, when Chávez himself introduced his own reforms, he was supposedly a new visionary politician with a new way of doing things. But in practice, when Chávez won the first election in 1998, his policies and exponential increment of state interventionism just worsened the situation. Now, twenty years later, Venezuelans continue to suffer from a socialist cocktail of corruption, insecurity, shortages of basic goods and medicines, hyperinflation, exchange controls, and barriers to international trade. Corrupt government institutions — including the military and agencies designed to combat terrorism and drug trafficking — have condemned the country to growing humanitarian crises.

Nevertheless, Venezuela had high rates of corruption and insecurity before Chávez. In the decades leading up to the current crisis, the government applied price controls to some goods, and exchange controls had been a common policy from 1959. Protectionist policies were commonplace, and applied to protect the regimes’ cronies. 

Recently, Guaidó’s comrades have been involved in corruption with managing the humanitarian aid in Cúcuta. His political allies have squandered the collected funds on parties, sex-workers, and in lining their own pockets. Others have become caught up with with corruption in cases as the Odebrecht bribery scheme, the Derwick Associates scandal, and the Gorrín money-laundering case. Worst of all, many of the new reformers claim to be for a new and improved “democratic-chavismo” or “good-socialism.”

Radical free market reform is the only way.

If true reform succeeds, it would not be the first time that a country suffering from the late stages of socialism overcomes the crisis through true free market reforms. Georgia, Singapore, and New Zealand are all cases of regimes that adopted major pro-market reforms in the face of serious economic crisis. The Singapore case is an excellent example that Venezuelans should analyze because our country is almost at the same level of corruption and social-political destruction experienced by that country in the 60’s. Indisputably, Venezuela needs to get rid of Maduro and his narco-regime, but it must also solve the humanitarian, economic, social and political crisis by stabilizing the economy, eradicating corruption, building new and strong institutions, and eliminating trade barriers. Opening the road to a long-run prosperity will not be possible with a plan like the one Guaidó promotes. Venezuelans are naïve if they believe again in promises and plans to “apply correctly” the failed oil-funded welfare state, or “good-socialism.” They must understand that there is no other path to achieve long-run prosperity and liberty than through true market freedom. Otherwise, in the near future, Venezuelans will face just another form of “neo-chavismo.”

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