The Staggering Inequality of Venezuela



In developed nations people tend to discuss the political economy of their countries in the following way. When they think about capitalism, they associate it with economic freedom, and therefore, with higher opportunities to climb the socio-economic ladder. On the other hand, defenders of socialism see their system as a way to achieve greater economic equality and material stability. Hence, socialism would ideally allow people to enjoy life beyond work.

Therefore, in these discussions, there is an implicit trade-off between more opportunities and a more generous welfare system. In other words, the question of whether we should prioritize freedom over equality or vice versa. I find this vision problematic, in the sense that it cannot explain socialist countries like Venezuela. At least in my country, years of socialism did bring many things, but economic equality was not one of them. Socialism brought us chronic and widespread shortages of essential food, such as bread, corn oil, and milk. It brought us daily power blackouts, and similarly, crumpling hospitals, politicized schools, and a collapsing industrial sector. But it did not bring us equality. In fact, it widened inequality dramatically. I will use our newest crisis as an example of this. Currently, Venezuela is undergoing a chronic shortage of fuel due to years of severely mismanaging its state-owned oil industry. The Maduro regime is trying to solve this crisis by partnering with Iran, a country that sent five vessels a couple of weeks ago with fuel. This allowed Maduro to create a new supply mechanism last week. A dual system that includes subsidized and dollarized fuel stations. The former supposedly allowing each person to put up to 120 liters per month at a subsidized price, while the dollarized stations sell fuel at half a dollar per liter. To make the story short, the dollarized stations are inaccessible for the budget of virtually all Venezuelans. And the "subsidized" stations quickly became niches for corruption, condemning people to endless lines of cars waiting for fuel. Therefore, this solution ended up only giving gasoline to people with political connections and fat wallets. Whereas the vast majority of the country will not be able to use their cars for a very long time.  This is what I mean when I say that socialism did not address but rather exacerbated inequality in Venezuela. In another example, our country has had strict currency controls since 2003, allowing the government to decide who has access to foreign currency. Because of it, while virtually all Venezuelans have lost their life savings due to the rapid devaluation of the bolivar, a currency that has been experiencing hyperinflation since October 2017. Politically connected Venezuelans are financially protected, as they have been acquiring dollars at subsidized rates for years. Precisely because of this, a lady told me a few days ago: "Jorge, in Venezuela, there are first-class and second-class citizens." And she is right. I already gave two examples of it. But I could also do the same with multiple aspects of daily life in Venezuela. In our country, public goods ceased to exist, making them inaccessible for most citizens. Currently, millions of Venezuelans suffer from daily power blackouts, meanwhile the elites h