Venezuela’s “New” Government: Don’t Get Too Excited

In their most recent elections, the people of Venezuela voted to oust many of their elected officials. Just hours after the polls closed, the National Electoral Council reported that the opposition party had won 99 seats in the Venezuelan government.

These results generated much excitement, not just in Venezuela, but internationally. Many pointed to the election results as a blow to the socialist government of Venezuela and the policies of President Nicolas Maduro. People have hailed the results as a breakthrough for the country, claiming the elections are the beginning of a new era in the South American country. There is hope, they say, that the country has finally turned an important corner in losing its socialist past.

This history of socialism in Venezuela is a complex one, but the origins of the current Venezuelan state go back to right before the new millennium. In 1999, the “chavista revolution” put Hugo Chavez in power. In the words of a Venezuelan family member, “Chavez could sell ice to an Eskimo.” He was undoubtedly charismatic and incredibly popular. Under his promises of wealth, improved living conditions, and assistance for many of the country’s poorest residents, many were seduced by his political rhetoric.

So it seemed that Chavez kept his promises–at least for a little while.

Indeed, during Chavez’ time in power, poverty fell, at least between 2003 and 2007. The poor were able to afford more goods at cheaper prices and it appeared these policies were working.

But how? If central planning is doomed to fail, how did such policies work in Venezuela? Did central planning really lead to a decrease in poverty and sustained growth? No such luck. In essence, the people of Venezuela weren’t experiencing true improvements in their living standards, but being propped up with short-term spending. With high oil prices in the early 2000s, the Venezuelan government heavily subsidized many goods and implemented a variety of price controls. Using the surplus cash from oil sales, the government kept shelves stocked, temporarily preventing the shortages that economics tells us inevitably come from such price restrictions.

However, just as the Soviet Union illustrated the inevitable failure of central planning, Venezuela likewise came to suffer the consequences of its terrible policies. Government coffers ran dry and imports could no longer be acquired at the same rate. As I’ve discussed on this blog before, the people of Venezuela now wait in long lines for all kinds of necessities from tampons, to toilet paper, to potatoes. Their currency is experiencing triple-digit deflation. One in every three people in Venezuela is poor. The country has the second highest murder rate in the world. In 2014, 82 per 1000,000 deaths were homicides, totaling to some 24,980 murders that year.

It’s with these problems in mind that the new Venezuelan officials were elected. Certainly, they will be better that their predecessors?

I wouldn’t be so sure.

On this blog I have had occasion to discuss two Nobel laureates, F.A. Hayek and James M. Buchanan. In his iconic work, The Road to Serfdom, Hayek discusses why the leaders of a totalitarian system are likely to consist of the worst, not best, individuals. Buchanan, the father of public choice economics, points out that political actors aren’t benevolent people, purely interested in the best interests of the public, but self-interested bureaucrats. They respond to incentives just like the rest of us. As a result, policies will align with the interests of the public only to the extent they align with the private incentives of policymakers.

Taken together, it seems far too early to call any political change in Venezuela a “victory.” While there may be different people in office, it doesn’t seem to me that things have really changed. The players might be different, but the game they play is the same. Venezuela is still broken, corrupt, and political officials use their connections to enhance their own well-being and those of their friends and family. As Hayek and Buchanan tell us, you can’t put people, even “good ones” into a broken system and magically expect it to work.

There is some reason to believe that the changes in Venezuela’s government are positive. Perhaps there is some recognition among the larger population that the Chavez-style policies, no matter how appealing they may sound, ultimately result in utter disaster. We should be careful, however, when making claims of revolutionary change.