While Venezuela’s agony is all the evidence we should ever need of socialism’s disastrous outcomes, an even more crushing indictment lies in the stark contrast between Venezuela and Chile, which has embraced broadly market-friendly policies over the last few decades. In their essay in CapX Marian Tupy and Alexander Hammond highlight the vast disparity in outcomes, which extends beyond simple economic prosperity to greater personal liberty, an independent civil society, and respect for the rule of law in Chile.
Nightmare stat: the average Venezuelan has lost 11 kilograms (24 pounds) due to food shortages resulting from the policies of Nicolas Maduro and his Bolivarian regime (let’s remember involuntary weight loss is almost always a very, very bad thing).
Venezuela was the richest country in South America until 1982 thanks to its vast oil reserves, and a democracy from 1958-1999. Hugo Chavez came to power in 1999 and initiated the populist socialist “Bolivarian Revolution.” Since then collectivist policies have cratered the economy, as reflected in an inflation rate of 80,000% this year.
By contrast Chile had the world’s 15th freest economy in 2016, and historical analysis shows that economic freedom progressed hand in hand with per capita income.
Chile’s economy grew 293% from 1975-2019, while Venezuela’s shrank by 54%.
Ordinary Chileans also enjoy a much longer life expectancy than their Venezuelan counterparts.
Chile’s privatized social security system produces an admirable return of 10% per year, compared to 2% for the U.S. public system.
Update: Daniel DiMartino outlines the manifest failures of Venezuelan socialism in an equally devastating piece in Economics21, ticking off the Bolivarian regime’s systematic destruction of the country’s economy, sector by sector. A Venezuelan expatriate living in the U.S., DiMartino notes that agriculture was one of the first sectors to be broadly nationalized – with predictable consequences.
From 1999-2016, Hugo Chavez and Nicolas Maduro oversaw the expropriation through nationalization of around six million hectares of land – that’s over 23,000 square miles, an area almost the size of West Virginia.
Food production fell 75% over this two-decade period, even as the country’s population increased 33%, DiMartino notes.
Subsequent waves of nationalization swept all other major economic sectors, including electricity production and distribution, banks, supermarkets, and construction.
Foreign currency controls have also proved deliberately disastrous, allowing corruption to flourish as top regime officials used their connections to buy dollars cheap at the official exchange rate and sell them for thousands times that (i.e., their real value) on the black market.
Previously, Federico Fernandez of the Austrian Economics Center catalogued the socialist origins of the Venezuelan disaster in an address to hundreds of college students in Iasi, Romania, as part of the Free Market Road Show.
Erik Sass is the editor-in-chief of The Economic Standard.