Venezuela’s rich, diverse landscape should make it a bountiful garden that provides for all the basic needs of the Venezuelan People, yet the People are starving. Venezuela is a victim of an economic system that relies on exports to fuel massive social welfare programs and imports to provide for the raw materials used by its stunted industries. Facing shortages of food, water, electricity, basic building supplies, and raw materials, Venezuela is on the verge of collapse as it struggles to overcome political discontent aimed at the successor of the beloved President Hugo Chavez, Nicolás Maduro.
With the capitalist-versus-socialist struggle very much alive in South America, it is easy to misdiagnosis Venezuela’s problems as simply the result of flawed socialist ideologies and/or imperialist conspiracy theories that project blame for serious governance issues onto the United States. Where high commodity prices helped inflate the cost of imported goods, even higher oil revenue allowed the Venezuelan government to hide the true cost of imported goods with subsidies. Once oil prices collapsed, however, the government could no longer afford to subsidize imports, even though suppressed commodity prices helped push import prices down.
By relying on foreign oil revenue and the purchase of foreign goods to provide for the basic needs of the country, Venezuela’s economy learned to rely on foreign wealth and imports at unsustainable prices. Just as capitalist countries have been victims of price instability surrounding import and exports, particularly during the Great Recession, socialist Venezuela made itself over reliant on the global economy to point it cannot function without foreign capital and imports. Unable to afford imports, Venezuela suffers, because it does not have a sustainable domestic economy that can provide for the needs of Venezuelans.
A large among of the blame rests in free trade-accelerated globalization, which has undercut domestic production across the globe in favor of cheaper outsourcing. National economies must be built on industries that serve the local needs of a people with locally plentiful resources that are as local as possible with excess production being used to participate in the global economy. After all, a stable global economy depends on healthy national economies. Globalization during the Clinton-era, however, meant economies should be built to service global demand with each country offering a selection of specialized goods.
Because this model creates a fragile global market built on global pricing of overly relied upon goods it creates a lowest-bidder competition that artificially suppresses prices to unsustainable levels. If a country has an established, efficient industry, which does not cater to vital national interests, that can deliver an equivalent and/or superior product and there is a weak or nonexistent domestic industry, free trade can be beneficial as it can be used to remove trade barriers to established industries in exchange for the same benefit. Absent this scenario, free trade is an industry killer, because it disadvantages the already mature, often more expensive.
That said, Venezuela is the victim of a socialist economy that relies on a capitalist economy undermined by the ills of free trade. Because Venezuela discourages business development, controls access to foreign currency, i.e. the ability to purchase raw materials directly, and caps the price of goods, Venezuela’s over-protective socialist government has made it near impossible for businesses to function, thereby making Venezuela far more reliant on the fragile global economy. In other words, Venezuela’s government helped create an overreliance on foreign imports and wealth by driving its domestic economy out of business.
Venezuela has long had a troubled political relationship with the US to the point the US has become a means for political leaders to shirk responsibility for Venezuela’s economic problems. It is true that the US, which is the largest importer of Venezuelan exports, has an interest in securing Venezuela as a cooperative trade partner; however, the US is just as much a victim of overreliance on imports as Venezuela. The problem is neither can provide for their domestic needs. The different is that the US does not mainly rely on crude exports and Venezuela restricts the profitability of its domestic market to the point almost no businesses can survive.
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