Ryan Mallett-Outtrim — Does Venezuela’s Crisis Prove Socialism Doesn’t Work?

Yet in reality, Venezuela’s current economic crisis can mostly be chalked up to one of life’s most dreary technicalities: bad currency management.…

Venezuela has a fixed rate currency, meaning the government sets exchange rates pegged to the US dollar. It’s worth noting there’s nothing socialist about a fixed exchange rate. Countries as diverse as Saudi Arabia and Aruba have fixed rate currencies. However, Venezuela’s currency, the Bolivar Fuerte (BsF) also has one other interesting feature: its distribution is controlled by the government. In Venezuela, you can’t just go to an exchange house and buy currency. You either purchase currency from the government, or you resort to the black market. A decade ago, this arrangement worked well, but today things are different.…

For years, the government has only had two options: either move towards a well regulated, well oiled, simple and loophole free controlled exchange regime, or a free float. Instead, the government has chosen a third option: make currency exchange as convoluted, inefficient and messy as possible, with loopholes and blind spots left, right and center. Nothing makes sense, and everything is open to exploitation. This may sound harsh, but the facts don’t lie.…

If you read through the entire thing, you may have noted some of the most pro market voices oversaw some of the biggest policy blunders.…

No matter how we cut it, it’s hard to avoid the conclusion that poor currency management was a pivotal factor in the current crisis.…

The right wing can blame it on the vague specter of socialism, but only if they ignore the successes of the Chavez years. They also need to ignore the fact that throughout the Maduro administration, many of the government’s top economics decision makers have been from the pro business wing of the PSUV. They also need to ignore the fact that no opposition party has offered anything resembling a viable policy solution to the economic crisis. Likewise, the left wing can continue simply blaming the imperialist conspiracy, but they have to ignore the fact the government has made some very obvious missteps. Assuming there is a conspiracy involving the US to crush the Bolivarian movement (which frankly, is already an open secret), the Maduro administration has made life pretty easy for the conspirators. It’s also important to point out there has only been so much the government could have done to prevent sabotage over the past few years, making relatively easily controllable factors like monetary policy all the more critical.

Unfortunately, through procrastination and inaction, poor monetary policy has been permitted to rot the foundations of the economy for years on end, and now a political crisis rages on with no end in sight. The only question left is, can this go on much longer?

Float that sucker!!!


Much more in-depth reporting that I have seen elsewhere. Must-read to understand what's up in Venezuela. It's longish for a post, but worth reading all of. The excerpts above are the most interesting from the MMT POV. Venezuela should have taken the signal from Russia and floated.

Counterpunch
Does Venezuela’s Crisis Prove Socialism Doesn’t Work?
Ryan Mallett-Outtrim