Venezuela and social programs in the United States

Venezuela was once one of the rather strong economies in South America. However, the country, its society, and its economy are facing the worst circumstances in the history of the nation.

International Monetary Fund (IMF) has projected over 1,000,000% inflation (yes, you read that right, one million percent) for 2018. There are widespread shortages of food, medicine, and other basic necessities which have led to riots, violence, a rapid increase in crime rate, political instability, and understandably, a huge number of people immigrating to other nations.

Those who have stayed in the country face an involuntary weight loss due to the shortages of food and the inability to buy what they need since their money has been rendered worthless.

Meanwhile, Venezuela has the largest oil reserves in the world, even larger than Saudi Arabia. The management and export of this large national reserve are the duty of PDVSA, the Venezuelan state-owned oil, and natural gas company and thanks to its large oil reserves, Venezuela was the richest country in South America back in the 1990s. However, things started to change in 1998. These changes are crucial to understanding the current conditions of Venezuela

In 1998, Hugo Chavez became the president of Venezuela, after a failed attempt of a coup and years in prison, and started a socialistic style of government. His socialistic views were accepted by the people of Venezuela since the country was exclusively ruled by two political parties and while the country was rich in theory, the wealth was not proportional between different social classes and a large number of people we left in the poverty. Soon after becoming president, he started many social programs changing many laws.

The government started many social programs and welfares which in short-term, helped many people to experience a better life. However, the Chavez’s government started subsidizing and nationalizing every company, business, resources he could get his hands on, leaving Venezuela with little to no private businesses. Most of these nationalized businesses were abandoned shortly after the expropriation which led to increasing the rate of unemployment.

Things were going fine for some time. Chavez actually managed to reduce the poverty rate of the country significantly in a short term. However, in 2002, the economy started getting worse and worse and Chavez was nearly removed from power by a coup. The 2002 coup resulted in many measures by Chavez to prevent such events from happening in the future which in turn led to more corruption.

After 2002, the price of oil increased rapidly from $30 in 2002 to more than $130 in 2008. Since the government had already subsidized and nationalized most of the businesses and resources, the entire economy was dependant on the oil revenue and that increase in the price really helped the government to keep up its welfares and programs and reducing the poverty rate even more. Things were good since the government made enough money from oil to pay its bills.

Shortly after the coup, the employees of PDVSA, the state-owned oil and natural gas company, went on a strike. PDVSA is the company in charge of the extraction and sale of Venezuela’s oil. This strike could destroy the economy since the entire economy was dependent on the revenue of oil and if no oil is produced, the economy will collapse. In the aftermath of the strike, PDVSA fired 18,000 workers, many of whom were skilled employees, replacing them with over 100,000 new workers. This way not only PDVSA would continue its operation, but the unemployment rate would also decline. However, the decision to hire the extra staff did not affect the production rate. PDVSA was still producing the same number of barrels but with a much higher number of employees and much higher costs. But none of these mattered as long as Venezuela could sell their oil at a high price.

In the financial crisis of 2008, the price of the oil suddenly dropped to $35 in a matter of days, reducing the revenue of the government significantly. The government had no significant tax income since it had subsidized most of the businesses. So now, the country is left with no major private businesses, a government with not enough income to pay its bills, and a high corruption rate. The situation became so bad that even the gradual increase in the price of the oil could not help the economy. 

In 2013, Venezuela was in a bad shape. The government high a lot of cost with not enough oil revenue with little to no private sector. Right at this time, Hugo Chavez passed away and Nicolás Maduro had assumed the office.

Maduro inherited a country in crisis but his actions and decisions made things even worse. To pay the bills, Maduro decided to print more money which, unsurprisingly, increased the inflation rate. Things got even worse in mid-2014 when the price of crude oil plummeted from $110 to $45 in 6 months, reducing the government revenue even further, causing Maduro to print more money, and pushing the inflation rate even higher.

Then, to make things worse, the government started to set a maximum sale price for commodities with unreasonable prices, increasing the operation of black markets. Many businesses had to close down, turn to the black market to survive, or take advantage of the government official exchange rate and reimbursements.

In 2015, the opposition leaders won the majority of seats in the National Assembly and Maduro tried everything to prevent them to risk his presidency which resulted in even more protests. Maduro held (and won) an election in 2018 to make changes to the Venezuelan constitution, to dissolve the National Assembly which resulted in nationwide protests.

Nobody knows the end to the economic crisis of Venezuela and its people are one suffering from the consequences. At the time of writing, Venezuela has one of the weakest currencies in the world, the highest inflation rate, a worse economy than that of countries in the middle of a civil war.

Many, especially in the United States, blame socialism for the crisis of Venezuela and oppose any sort of socialist programs, giving Venezuela as an example and state that social programs and welfare can lead to the same situation.

However, Socialism is only partly to blame. There are many other factors playing a role in the crisis of Venezuela including but not limited to corruption, mismanagement, and falling oil prices. The government of Venezuela has always tried to fix everything by the shortest and quickest possible way while having control over everything. For example, instead of creating new opportunities for its people to create more jobs, the government instead hired more people in PDVSA, raising its payroll cost to the roof.

Now, the critics of socialism in the United States bring Venezuela as the example the system and oppose any sort of social programs such as free health care. Some even bring up more modern and successful countries such as Sweden, Canada, or even Denmark with rather false claims.

Although the United States is manly capitalistic, in reality, it is a mixture of capitalism and socialism, just like any other country in the world. There are free markets and private ownership in the United States but there are also many social programs by the government such as Medicare. In fact, the US has consistently spent more money on healthcare per capita than any other country in the world.

And it only makes sense. In every society, there are people who cannot work as efficiently or are deprived of opportunities to make enough money to meet their needs such as the elderly, mentally handicapped, physically handicapped etc. These people are still a part of the society and still need to be taken care of. So, every country, use some degree of socialism to support and take care of those who are unable to do it themselves and the United States is no different.

The United States is more than capable of running social programs such as free healthcare or veteran care with the same or a bit more amount of money that it already spends but with higher efficiency. In fact, many voters are already in favor of such social programs which was demonstrated in the primary elections and might be even more prominent in the mid-term elections.

Of course, no one, including me, suggest that any country should be purely socialistic but at the same time, no country can be purely capitalistic. It should always be a mixture of the two just as it is now but with a better approach.


Founder of Vieolo

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