The new failure of radical socialism in Venezuela is exposed when one looks at the number of people who seek to leave the country.
Many people have run desperately away from the regime imposed by Chávez and continued by Nicolás Maduro.
One example of those who are fleeing their Venezuelan homes is a student I met in Spain named Willians. I first met Willians toward the end of 2011. He arrived late to the Austrian Economics Course we were attending at the Universidad Rey Juan Carlos, in Madrid. Having graduated from the Universidad de Carabobo in Venezuela, he was delayed in his arrival due to the amount of paperwork he had to do in order to get the necessary euros at the official exchange rate. Despite his efforts, the government — which heavily regulates currency exchanges — did not approve his request, and he had to cover all of his expenses at the black market foreign exchange rate.
He paid for that with his own savings and with the help of his sister.
In 2011, the official rate for the dollar was 4.3 bolívares, while it could be bought on the black market for around 9, more than twice the official price.
Inflation was already a problem, although it was “controlled” at a little bit below 30 percent a year. Scarcity, due to price controls, was also starting to be a matter of unease.
When he got back to his country, Willians witnessed the radicalization of the socialist regime. After the death of Hugo Chávez, Maduro won an election plagued with suspicions of fraud, and socialism began to show its worst side.
As F.A. Hayek could have predicted decades ago, continued state control of economic activities in Venezuela had led to increasing control of the private life of everyone. And so it happened in Venezuela. Authoritarianism, already running at high levels, grew even bigger, and today not only are there political prisoners such as Leopoldo López, but also businessmen who are imprisoned and persecuted for being suspected of causing an “economic war” that seeks to undermine the government.
The truth is that a boundless government has spent well beyond its means, issuing currency without control to cover budget deficits. After that, when inflation came, the Venezuelan state decided not only to control currency prices but every price in the economy, creating shortages in basic services and giving rise to what is now a humanitarian crisis. The fall in oil prices was only the death knell for a system that had already spun out of control.
Seeking an Escape from Venezuela
The last time I spoke with Willians was in May as he was traveling to Madrid so that he could find a better future.
He is not alone in his decision. Chavismo is the cause of what has become known as the “Venezuelan diaspora;” already hundreds of thousands of Venezuelans have decided to pack their bags and leave the country.
One of the destinations chosen by Venezuelans is the United States. According to a survey by the Pew Research Center, in 2013 about 170,000 Venezuelans were living in the United States. Back in 1990, that number was only 35,000. Another way to see the phenomenon is the number of Venezuelans who obtained lawful permanent resident status since the beginning of the socialist regime.
Chart 1. The Venezuelan Diaspora — Immigration to the US
Source: Department of Homeland Security
In 1999, when Chávez was elected, the US government granted 2,508 permits. In 2013 that number jumped to 9,572. The total number of permits is 117,000 for the whole period.
Spain is also a destination of choice for the Venezuelan diaspora. In 2001 the National Institute of Statistics recorded only 18,370 Venezuelans living in Spain. According to the 2011 census, the number had tripled.
Argentina, a country that flirted with Bolivarianism but did not reach its level of institutional collapse, has also witnessed this trend. As the chart below shows, Venezuelan immigration has exploded in recent years.
Chart 2. The Venezuelan Diaspora — Immigration to Argentina
Source: Migraciones.gov (2015 estimated with data from the first semester)
After one recent conversation with Willians, he told me about the 8 hours per day that his house lacks electricity; and the three-hour wait in line required to buy basic supplies. Prices are prohibitive, even in the regulated markets.
Faced with the reality of rampant inflation, Venezuelans are fleeing toward foreign currencies, but the Venezuelan state continues to impede Venezuelans’ efforts. Today, on the black market, a dollar costs 111 times what it costs on the official exchanges. Expected inflation for this year is above 700 percent.
This is another failure of socialism and economic interventionism. A system which begins by regulating the economy and ends up destroying it.
The only consolation is that in a short period of time, my friend Willians will no longer have to tolerate it. I deeply hope that soon the ordeal is over for the millions who are not lucky enough to escape it.