Venezuela Is Spiraling out of Control

As the economic situation rapidly worsens in Venezuela, the government is growing increasingly authoritarian and is now actively undermining the foundations of the country’s already deteriorated social fabric.

On Friday night, President Nicolás Maduro ordered the military to seize the stores of a consumer electronics retail chain and confiscate all the goods in order to sell them at “a fair price.” Soon afterwards large crowds gathered outside appliance stores all over the country, leading in some instances to mass looting. The announcement came one day after the Central Bank reported that the inflation rate in October was 5 percent, leading to an annual rate of 54 percent. However, as our colleague Steve Hanke documents on his Troubled Currencies Project, Venezuela’s implied annual inflation rate is actually 320 percent.

The government claims that runaway inflation and pervasive shortages of basic goods are part of an “economic war” being waged by the United States and the local “parasitic bourgeois class.” Thus, Maduro is now mobilizing his troops against the perceived enemy. The owners of two of the retail chains have been detained under charges of “gouging” and “usury.”

Showing his economic illiteracy, Maduro said that the Central Bank should take note of operations, wondering out loud: “If we are lowering products’ prices by one hundred percent, this should impact the inflation rate, right?” Well, no. As long as the Central Bank continues to print money to finance the government, inflation will continue to rise. However, by actively encouraging outright plunder, the government is deliberately destabilizing Venezuela’s society probably as a means for taking further radical measures.

Last April when Nicolás Maduro officially assumed the presidency after a very questionable victory in the polls, many people speculated that he would be more conciliatory than his predecessor Hugo Chávez. That proved to be wishful thinking. It is clear now that under Maduro the worst has yet to come in Venezuela.