What’s going on in Venezuela?

Because of high inflation and unemployment, Venezuela has the most miserable economy in the world. The country currently has an inflation rate of 180 percent, but that’s expected to increase 1,642 percent by next year. The current unemployment rate is 17 percent, and the IMF projects it will reach nearly 21 percent next year.

The country is also crippled by shortages of goods and services. A few weeks ago Venezuela’s President Nicolás Maduro instituted a two-day workweek for state employees because of power shortages. (Because most of the country’s energy is produced by a hydroelectric plant, critically low water levels are blamed for the energy crisis.)

President Maduro has declared a state of emergency, threatening to seize factories and jail business owners who have stopped production.

Shortages of basic goods like food, toilet paper, and medicine has devastateda nation where more than 70 percent of the people already live in poverty.

What caused the crisis?

The answer depends on who you ask.

Maduro and the hisallies blameplots by business leaders in Venezuela and the United States, claiming they are trying to subvert the president and his government.

Many outsider observers lay the blame on low oil prices and mismanagement of oil revenues by the government.

But the real problem appears to be the left-wing political ideology chavismo (more on that below) which has crippled the economy and destroyed the rule of law.

Isn’t the Venezuela’s economic crisis mostly caused by a decrease in oil prices?

The drop in oil prices has certainly exasperated the problems in Venezuela — but it’s not the primary cause.

The country has the world’s largest oil reserves (totaling 297 billion barrels), surpassing even Saudi Arabia. Over the past few decades it has e increasingly dependent on oil for it’s economic prospects, which has made the country susceptible to “Dutch disease.” Currently, oil accounts for 95 percent of Venezuela’s exportsand 50 percent of its GDP.

Venezuela had budgeted for oil at $40 per barrel (the price is currently close to $50), but is still not able to cover revenue. The country also failed to save the surplus when oil was at $100 a barrel. Now, the price of oil would have to rise to $120 for the country to balance it’s budget.

So it if it’s not about oil, what caused the crisis?

The primary problem is the authoritarian socialism derived from chavism. Named after Hugo Chávez, Maduro’s predecessor, chavism (or Bolivarianism) is a left-wing political ideology that incorporates nationalism with democratic socialism and anti-imperialism.

The result is a system of government that is politically and financially corrupt, and that fails to protect its citizens. As Gustavo Coronel wrote in 2008,

Three major areas of corruption have emerged during the Chavez presidency: grand corruption, derived from major policy decisions made by Pres. Chavez; bureaucratic corruption, at the level of the government bureaucracy; and systemic corruption, taking place at the interface between the government and the private sector.

According to Transparency International, Venezuela is the most corrupt country in the Americas, and the 9th most corrupt in the world.

The country also has the world’s second highest murder rate (behind only Honduras), and the capital Caracas has been ranked as the most murderous city on Earth.

What is being done to fix the problem?

In parliamentary elections in December, opposition parties won a majority of seats by promising to remove Maduro from office before his term ends in 2019. The legislators have presented a petition that has been signed by 1.85 million citizens (3 percent of the country’s total population).

Venezuela’s Vice-President Aristobulo Isturiz, however, has ruled out the possibility of a recall referendum against Maduro.

Even if Maduro is removed from office, though, the country’s economic and social conditions are unlikely to recover until Venezuela discards the destructive ideology of chavism.