By Mary Anastasia O’Grady | The Wall
Street Journal
A mother and her two children looking for
food in garbage containers in the municipality of San Francisco, Venezuela,
June 7. Photo: Humberto Matheus/Zuma Press
Few countries have
provided such a perfect example of socialist policies in practice.
Word from Caracas is that locals
have taken to scouring city streets for plastic garbage bags full of rubbish
and, when they find them, emptying the contents so that they can resell the
bags.
This sounds absurd, but it is
believable in a country where extreme poverty has spread like the plague. Human
capital is fleeing. Oil production is plummeting, and the state-owned oil
company is in default. The garbage bag, imported with dollars, is a thing of
value.
If anything was more predictable
than the mess created by Hugo Chávez’s Marxist Bolivarian Revolution, it is the
pathetic effort by socialists to deny responsibility.
The Socialist Party of
Great Britain tweeted recently that
Venezuela’s problem is that socialism has yet to be tried. It blamed the crisis
on “a profit-driven capitalist economy under leftist state-control.”
Even more
preposterous is the claim by some academics that economic liberalism in the
1980s spawned the socialism that has destroyed the country.
Learning from history is impossible
if the narrative is wrong. So let’s clear
the record: By the time Chávez was elected, Venezuela already had 40 years
of socialism under its belt and precious little, if any, experience with free
markets.
Military dictator Marcos Pérez
Jiménez was toppled in January 1958. Romulo Betancourt, an avowed socialist,
was elected president later that year.
When Venezuela promulgated its 1961
constitution, Betancourt immediately suspended Article 96, which read: “All can
freely engage in the profitable activity of their choice, without any
limitations other than those provided for in this Constitution and those
established by law for security, health or other reasons of social interest.”
This crucial protection remained on
the shelf for 30 years, as a string of socialist governments employed price and
exchange controls in counterproductive attempts to raise living standards.
Rent control in Venezuela dates to
1939 but was not enforced by Pérez Jiménez. In August 1960 Betancourt revived
it, passing a new rent-control law and prohibitions on eviction.
Since then,
“not one apartment rental building has been built,” writes Vladimir
Chelminski in his 2017 book, “Venezuelan Society Checkmated.”
The legendary
slums that climb Caracas’s hillsides are a testament to this socialist
stupidity.
Carlos Andrés Pérez took the
presidency for the first time in 1974.
World oil prices had shot up as
President Nixon’s domestic price controls crippled U.S. production. As a
result, Venezuela felt rich.
The national assembly granted CAP, as the
president was popularly known, an “enabling law” so that he could rule by
decree.
He mandated salary increases for the entire nation and implemented, for
the first time, a minimum wage.
He froze prices and issued crazy edicts. All
commercial buildings had to employ elevator operators, and all public restrooms
had to have attendants.
CAP put limits on foreign investment
in everything from telecom and banking to food and electricity distribution,
forcing foreigners to sell what they owned in Venezuela.
He nationalized oil in
1976. The state expanded its role in iron, steel and aluminum and took control
of coffee, cocoa and the previously independent central bank.
CAP and his successors ran up
unsustainable debt. The bolivar had been fixed at between 4.3 and 4.5 to the
dollar since the early 1960s. But by the late 1970s, with the central bank
printing money, it was no longer worth that.
Buying dollars with bolivars became
a lucrative national pastime until 1983, when President Luis Herrera Campins
announced exchange controls. He also reinforced price controls, which by then
applied to virtually everything, from cement, hotels and banking to parking lots,
meat, milk and sugar.
When CAP returned to power in 1989,
he inherited a fiscal and monetary time bomb.
Out of options, he liberated
almost all prices, along with the exchange rate, opened the country to foreign
investment, and lowered import tariffs.
He restored Article 96 of the
constitution. According to Mr. Chelminski, a former executive director of the
Caracas chamber of commerce, the positive effects included a notable recovery
in foreign investment, exports and economic growth.
But Cuba had already infiltrated the
military. Now it capitalized on the social unrest generated by the sudden
reversal of policies, which exposed pent-up inflation. CAP also had credibility
problems with investors. After two coup attempts in 1992 he was weakened and
eventually removed for corruption.
Rafael Caldera took office for a
second time in 1994 and restored price and exchange controls. By 1996, facing
another collapse, he reversed course again, liberating prices and opening
markets.
The adjustment exposed reality but was painful, especially in the face
of falling oil prices.
Thus, the ground was fertile for an antiestablishment
candidate in 1998.
Chávez was inaugurated in February
1999, in the midst of a recovery in oil prices and with the bolivar at 576 to
the dollar. He tripled down on socialism, exacerbating a long history of
destroying capital that would lead to today’s disaster.
