Venezuela had a budget surplus in 1999, by 2013 it had a deficit of 14% of GDP
Nationalisation is associated with collapsing productivity in key industries in Venezuela
It is deeply troubling that Jeremy Corbyn calls Venezuela "a better way of doing things"
Over President Chavez’s term (1998 to 2013), Venezuela’s economic freedom score went from average to one of the most repressive.
President Chavez apologists – including Jeremy Corbyn – argue that the reforms were a success as poverty fell from 1998 to 2013.
But that was cosmetic. It only occurred as there was a 600% increase in oil export revenue, which arose from oil price increases, not gains in output or productivity.
Price controls were already causing food shortages in 2006, by disincentivising domestic food production. Oil revenues had to be used to pay for a fourfold increase in imports to fill the gap.
President Chavez’s unrestrained spending was astonishing. The country went from a budget surplus in 1999 to a deficit of over 14% of GDP when Chavez left office – despite booming oil export revenue.
Widespread nationalisation was associated with collapsing productivity in industries including oil, steel and sugar, as well as widespread corruption.
Regional competitor Chile, which has implemented free market reforms, is now the wealthiest country in the region, seeing absolute poverty plummet in the last decade.
Price controls, mass nationalisation, profligate fiscal policy, and ever-growing corruption have sown the seeds of the current economic and political calamity in Venezuela. It is not simply about oil prices.
It is therefore deeply troubling that the leader of the UK’s official opposition described President Chavez’s reforms as “a better way of doing things”.
Daniel joined the Centre for Policy Studies as Head of Economic Research in November 2015. He was promoted to Deputy Director in March 2017. Prior to joining the CPS, he worked in research roles for a number of parliamentarians.