Venezuela’s Hyperinflation: Where Did It Go Wrong?

With each passing day, there seems to be yet another sensational headline about Venezuela’s runaway inflation; indeed, a US dollar today will get you approximately 300,000 Venezuelan bolivar – stunningly, purchasing a single McDonald’s hamburger would cost a Venezuelan upwards of 1,000,000 bolivares. The results have been dire, with food and medicine becoming hard to obtain for the average Venezuelan, what with the ever-rising prices. Critics of socialism hold Venezuela as the archetype of socialism, the exemplification of all its faults; would-be-supporters of the ideology say that Venezuela cannot be seen as a black mark on the record of socialism when its governance is more militaristic in nature. It is the opinion of this editorial the current economic and inflationary crisis comes as a result of the culture of corruption perpetrated by former President Hugo Chavez and sitting President Nicolas Maduro, as well as the latter’s’ aggravation of the United States, preventing Venezuela from effectively making use of the lifeblood of its economy: its oil reserves.

Elected to the office of President of Venezuela in 1999, Hugo Chavez is extraordinarily impactful, with his most enduring legacy undeniably being his installation of a socialist regime in Venezuela. He ascended to the office by way of his Bolivarian Revolution, a progressive movement that saw the appointment of numerous government officials with a less than pristine approach to government coffers assume power. The Bolivarian Revolution largely gained traction because of public discontent over the corruption of Chavez’s predecessor, President Jamie Lusinchi. President Lusinchi is charged by Venezuelan sociologist, Ruth Capriles, as having stolen a sum in and around “36,000,000,00” US dollars from the Venezuelan government and its people through his overtly corrupt economic programs, namely his infamous currency exchange control programs.

Despite his promises to rid the Venezuelan government of corruption, Hugo Chavez went in the opposite direction, enabling and allegedly partaking in the widespread corruption of government officials that has and continues to plague Venezuela. He unveiled a series of acts that eased the way for the pilfering of money by those in his government, such as the nationalization of the oil industry and the subsequent lack of public records that any government with a sense of accountability would keep in the aftermath of such a move. This allowed (oftentimes underqualified) officials appointed by him and his party to loot Venezuela’s most important industry with but an iota of oversight. He also radically reformed the court system, removing long-standing judges and replacing their seats with party loyalists, ridding the government of the last bastion of oversight over government and party corruption. 

Though undoubtedly egregious, the price of oil remained surprisingly stable throughout his tenure, helping to keep inflation at substantially lower levels than Venezuela is experiencing today, though it still far outpaced that of the global economy. However, the appointment of his protege, Nicolás Maduro, coincided and quite possibly triggered what has become a tidal wave of hyperinflation for the Venezuelan people and their currency.

Nicolas Maduro is not solely responsible for the corruption of the Venezuelan government; as we saw earlier, many of the moves made by his predecessor laid the groundwork for the corruption-infested government he inherited. Unlike his predecessor, however, the corruption of his administration has affected the vitally important price of oil that serves as the lifeblood of the Venezuelan government. The corruption of Maduro’s administration has drawn United States sanctions that have and continue to prevent the country from making full use of its vast oil reserves, crippling its economy. 

Nicolas Maduro is not to blame for the global decline in oil prices. He is, however, to blame for the countless sanctions by the United States over his administration’s corruption, which has prevented Venezuela from selling their oil in a ready and profitable manner. Over the course of his reign, the United States has unleashed a torrent of economic sanctions against the Venezuelan government and its officials for their deplorable human rights violations and unchecked corruption. Chavez was largely able to avoid such sanctions, only facing them in 2011, at the tail-end of his long tenure in office. Maduro has faced them practically from the minute he took office, although the most damaging ones have mostly came after 2017.

The effects of these sanctions cannot be understated. A study by the Washington Office on Latin America found that US sanctions since 2017, like the blocking of certain Venezuelan imports needed to harness their oil reserves, have cost the Venezuelan state, “between $17 billion to $31 billion in revenue”. The study goes on to say that these sanctions have caused a, “ deep decline, and… further deterioration of the quality of life of Venezuelans” and are one of the key drivers of hyper-inflation. All this because a few(or rather, many) government officials couldn’t keep their hands out of the cookie jar of government coffers, or not indulge in a narcotics side-business.

This editorial has already shown that blame for the hyperinflation crisis does not solely rest at Mr.Maduro’s feet, as many would have it, but rather comes as a result of a deeply-seated culture of disregard by the government and its officials for appropriate use of government funds and the United States’ response to such abuse of powers. However, Mr. Maduro is only making things worse for himself by playing hardball with the United States(such as when he switched currency standard for Venezuelan oil reserves from the dollar to yuan) instead of owning up to the corruption of his administration. Maybe if he did, the Venezuelan economy wouldn’t have contracted by 65% and the noble Venezuelan people would have access to basic human foodstuffs. Maybe, just maybe, the price of a McDonald’s hamburger wouldn’t cost in excess of 1,000,000 bolivares.