Venezuela isn’t exactly news. Ever since 2012, hyperinflation has made the country a go-to for economic criticism. However, with riots escalating over the past few days it is clear that the country is not heading towards rehabilitation. Almost in parallel, the same threat seems looming on the horizon in the UK. Jeremy Corbyn seems as determined as ever to sacrifice the democratic will of the people to push his socialist agenda, and his praise of Venezuela allows for an almost perfect lesson in hindsight.
The UK 2017 snap-election was close, scarily close, to disaster. Through the very nature of socialism, it is clear to see why. As an ideology, socialism plays off of our desires. It makes impossible promises that seem too good to turn down. Compared to the hard truth from the right wing parties, the left can appear comforting.
Venezuela should not be needed as an example of the failures of the left. All we need to do is look back to the last time a socialist government held office in the UK. The late 1970’s. At that time, the UK was infamously nicknamed the ‘Sick Man of Europe’ during the Winter of Discontent. Union power seriously hindered industry and strikes meant that litter filled the streets and bodies went unburied. Inflation reached a peak of well over 25% RPI in 1975. Thankfully, the 1980’s saw the use of contractionary monetary policy in curbing this inflation. However, the controversial views surrounding Thatcher mean any attempt to use this period as a comparison to Corbyn would be run short. Venezuela provides a much clearer, contemporary lens to analyse the comically named ‘Corbynomics’.
Corbyn and Venezuela
Corbyn has made many comments in favour of Venezuela’s regime. Despite the economic downturns and disasters the country faces, Corbyn has stood by his support in an almost dogmatic fashion.
Corbyn expressed his close support for Hugo Chavez, previous President of Venezuela, after his death in 2013. Shortly after, at a London vigil for the deceased leader, Corbyn stated:
“Chavez showed us that there is a different and a better way of doing things. It’s called socialism, it’s called social justice and it’s something that Venezuela has made a big step towards.”
From 2014 onwards, Corbyn has also found himself repeatedly praising the current president, Maduro. This has gone as far as participating in rallies that support the regime.
However, Corbyn’s links don’t end there. There are remarkable similarities between Venezuela and the most recent Labour Party manifesto. High taxes, increased regulations and further public spending make the same framework in both cases.
Seeing as Jeremy Corbyn sees the Venezuelan regime in such a positive light, and is even willing to allow them to influence his manifesto, the numbers have become vitally important.
The Venezuelan economy by numbers
- Canadian think tank, Fraser Institute, placed Venezuela in last place in their annual survey on economic freedom.
- The country has been given a summary index rating of 3.23, making it formally the most regulated economy on the planet.
- Venezuela has a government budget surplus/deficit of -58.2%, making it formally the 7th highest deficit (as a percentage) in the world (according to the CIA World Factbook).
- 81.77% of people were estimated to be below the poverty line in 2016.
- The inflation rates in Venezuela were at 720.5% CPI at the start of July (IMF).
- The IMF speculates that inflation in the country will surpass 1600% by the end of the year.
It is clear that things are bad in Venezuela. There is a severe drought, meaning water is only arriving in the capital, and even there it is unclean. There is a huge shortage in power supplies, causing the government to turn-off electricity for hours each day. Mass regulations on businesses and limitations to the free market have caused the economy to collapse. Hyperinflation, as well as shortages of food and medical supplies, have occured as a result of socialist policies.
Rioting is almost constant. Torture, firearms and chemical weapons have been used against protestors.
Worst of all, people are dying.
The clearest example of the failure of the government can be seen in the efforts to counter inflation. It was announced that, in order to do this, the minimum wage would be raised to 50%. Yes, you read that correctly. The regime isn’t going to create a new currency, they aren’t going to implement contractionary monetary policy… they’re going to give people more money.
It is, quite frankly, embarrasing. It would be laughable if millions of people weren’t going to suffer as a result of this incompetence.
The automatic assumption is that this couldn’t occur in the UK. Some may believe that the economy is too strong for socialist policies to force a country like the UK into desperation. However, let’s not forget that Venezuela used to be incredibly wealthy.
Venezuela has roughly $14.3 trillion in natural resources, the 10th highest amount in the world. It has a huge abundance of oil and used to prosper because of it, until oil prices fell between 2012 and 2014. The UK has no such reserve. The entire economy is propped up on free trade, currency value, add-on services and historical reputation. All of these would be wiped-clean under the regime Venezuela is currently victim to.
And it isn’t because Venezuela is a South American country. The climate, local attitudes, continental history and distance from world markets don’t have an impact. Comparing Venezuela to Chile, another country in South America but with a very different economic model, tells us this much.
Chile has a much smaller population than Venezuela (17.91 million to Venezuela’s 31.57 million) and pales in comparison to Venezuela’s natural resources. However, economically, Chile is doing a much better job. With a GDP per capita of $24,797 PPP (the highest in South America)/$13,663 nominal, Chile boasts one of the most comfortable standards of living in the world. Venezuela, meanwhile, is far behind with a GDP per capita of $15,891 PPP/$4,262 nominal. It is no coincidence that Chile also happens to be ranked 10th in the world (1st in South America) on the Fraser Institute survey for economic freedom.
We see a stark contrast. Venezuela severely regulates its economy and happens to be in turmoil. Chile encourages a free and competitive market and happens to be in prosperity.
Even under the centre-left government they’ve held since 2013, Chile seems to be leading the way forward in terms of economic freedom on the continent.
It is Venezuela, however, that provides the clearest lesson.
How did things get so bad?
The droughts (and consequent electricity shortages) of course haven’t helped things. However, these are issues that have been made severely worse by the government.
Under prosperity, as a result of selling a vast supply of oil, the Venezuelan government severely overspent. Following socialist doctrine, the country invested thousands into the public – all the while severely regulating and limiting private enterprise – using black gold.
The boom period covered up the economic mismanagement of the country.
The facade was quickly unveiled when oil prices fell. Without private corporations to keep price levels appropriate enough to import supplies, with over-regulation preventing FDI, and with huge debts piling up due to the nationalised economy and lack of funds to support, the country collapsed. Maduro has attempted to solve the situation following the same technique as was used prior to the economic nightmare; he has thrown money at the problem. Giving more money to the people, primarily through direct welfare policies, has caused the value of the Bolivar to plummet. Perhaps he was trying to use consumption to unfreeze the market? Either way, it has had an adverse impact.
We are being taught some very important lessons. By plugging an economy, the government eventually runs out of other people’s money.
After the recession of 2008 British politics has found itself dominated by economics. The left have blamed the free market for the crisis, the right have blamed the Keynesians for propping up the banks. However, since 2015 the reactionary and traditional conservative movements have used immigration and Brexit to divert our attention to social policy. Our economy is being neglected and this sudden shift in focus has tricked people into thinking we are free from the impacts of the recession. This has allowed the radical left to use austerity as a scapegoat to encourage mass spending, public services and regulation.
Let’s not make the same mistake as Venezuela. Let’s not allow an economic distraction to trick us into incorporating socialism and the failures that follow.