After years of deprivations, an informal trade in American dollars is allowing Venezuelans to buy groceries and medication.
The Venezuela of Hugo Chávez’s professed socialism — with food subsidies that initially helped the poor but soon resulted in chronic shortages — is slowly giving way to Mr. Maduro’s tropical brand of haphazard capitalism, where two currencies exist at odds with each other. There’s economic liberalization, but also repression, price distortions and inequality. And paradoxically, by providing the economy a lifeline to endure crippling U.S. sanctions and persistent inflation, the dollar economy helps Mr. Maduro remain in power.
Every economy is a market economy, whether leadership admits it or not. If supply and demand are not balanced, you will either see price collapses or inflation. Impose price controls and you will only encourage a black market. Put those price controls too low to sustain production, and supply will dry up at the very moment demand surges. Hello, chronic shortages. Ultimately, allowing some price fluctuation and profit motive, paired with need-tested subsidies (something a petrostate like Venezuela could have easily afforded if not for Chávez’s and Maduro’s crony kleptocracies) is a far more elegant solution compared to the disaster “Bolivarian democracy” visited upon itself. As much faith as I lost in Juan Guaidó on account of Operation Gideon, I can still only hope that free and fair elections can bring to power a presidential administration able to implement a stable, mixed economy with an effective regulatory regime and public safety net.
