OPINION: Venezuela Needs A Free Market To Succeed — Not Another Socialist Boss

Benjamin Powell and Rafael Acevedo | Contributors

It’s been 60 years since the Cuban revolution swept Fidel Castro into power, much to the delight of American elites. Will history now repeat itself in Venezuela?

It’s a grim possibility. The political stalemate between Venezuelan President Nicolas Maduro and his would-be successor, Juan Guaido, conceals an unfortunate truth: that Guaido — who has been recognized as interim president by the United States and some 50 other countries — is no free-market reformer.

Make no mistake: Venezuela desperately needs to rid itself of Maduro and his oppressive policies. But Guaido and allied opposition leaders don’t support the type of market reforms Venezuela needs.

High oil prices masked the economic ruin that Hugo Chavez’s brand of “Bolivarian Socialism” was inflicting on the country for years. But since the collapse of oil prices, shortly after Chavez’s death in 2013, the economy has been crumbling as Maduro, his hand-picked successor, continued his ruinous policies.

Almost 90 percent of Venezuelans now live in extreme poverty. There are shortages of food, medicine and other basics; people are going hungry. Maternal mortality has risen 65 percent and infant mortality 30 percent. Hyperinflation is skyrocketing out of control. Four million people, including one of the authors of this column, have fled the misery to look for a better life abroad.

Unfortunately, Guaido and the allied political parties belonging to the Democratic Unity Roundtable — known as Mesa de la Unidad Democratica (MUD), or “Frente Amplio” (Broad Front) — were more united in their opposition to Maduro’s leadership than to the failed socialist policies. In fact, Guaido’s political party is a member of the Socialist International and he and his allies would like to return to the type of “light socialism” Venezuela practiced before Chavez came to power in 1998.

They favor state-ownership of “strategic enterprises,” keeping the bloated bureaucracy as it is, protecting national industries from foreign competition with subsidies, and command and control state intervention in the economy. In short, they want a return to democracy, but with the same big government economic meddling that pre-dates Chavez.

Although Venezuela was doing better in 1998 than it is now, its economy had been in a long period of decline prior to Chavez coming to power. In 1957, Venezuela’s real GDP per capita was half of that in the United States. After its “social-democrat era” began in 1958 its economy stagnated, and by 1998, when Chavez began pursuing more hard-core socialist policies, incomes averaged only 15 percent of U.S. levels.

Instead of the failed interventionist policies favored by Guaido and his supporters, Venezuela needs true market reforms: privatizing state-owned companies and assets, including the state-owned oil company (PDVSA); eliminating such corrupted institutions as the Bolivarian National Guard; reducing government personnel; giving administrative and budgetary autonomy to counties; replacing steeply progressive taxation with simple flat tax; eliminating international trade barriers, and opening the road to monetary freedom by dollarizing.

Venezuela would not be the first socialist country to make these type of radical market reforms. The Republic of Georgia embraced most of these same policies following the 2004 Rose Revolution. Georgia went from having a socialist economic system to now being ranked the seventh most economically free country in the world. The results were dramatic. The pro-market reforms increased Georgia’s income per capita about 40 percent, lowered infant mortality by 30 percent, and increased employment by about 10 percent, all while not increasing inequality. 

Getting rid of Maduro is a necessary but insufficient step towards getting Venezuela back on its feet. If Venezuela is going to get off “the road to serfdom” and back on a path towards prosperity, Guaido will need to give voice to Venezuela’s market-oriented opposition groups — such as Rumbo Libertad and Movimiento Libertad Venezuela — and embrace real reform.

Otherwise, the long-suffering country may simply be trading its old socialist boss for a new one.

Benjamin Powell is a senior fellow at the nonprofit Independent Institute in Oakland, Calif. He is also the director of the Free Market Institute at Texas Tech University, where he teaches economics, and co-author of the forthcoming book Socialism Sucks: Two Economists Drink Their Way Through the Unfree World.

Rafael Acevedo (@Raacevedor) is research associate at the Free Market Institute, founder-director of Econintech, a free-market Venezuelan think tank, and a former associate professor at Universidad Centroccidental Lisandro Alvarado in Venezuela.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.

Tags : benjamin powell juan guaido opinion rafael acevedo venezuela
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