Price controls, a government bureaucracy to set profits, and prison for “capitalist parasites.” In the past five months Venezuela has become a socialist autocracy which only insures things will continue to get worse.
In 2013 Venezuela had a 56 percent inflation rate. In order to combat the problem, President Maduro asked for and was given special powers to rule by decree for up to one year. Known as the Enabling Act, this law gave Maduro complete authority over the Venezuelan economy with no need to consult the National Assembly.
In November, Maduro first act was an “economic offensive” in which he sent “soldiers and inspectors” to 1,400 shops accused of being “capitalist parasites.” Some store owners remained closed in order to avoid the surprise inspections. Reuters quotes one unidentified owner of an electronics shop complaining “We’ve reduced everything by 10 to 15 percent, but it’s not fair. I can’t make a profit now.”
But that shop owner was lucky. Electronics retailer Daka, a big box chain similar to Best Buy in the U.S., was specifically targeted by Maduro. He announced on state run television that everything in the stores must go at newly announced “fair” prices. At Maduro’s urging, police arrested managers at Daka and competing electronics stores for the crime of unjustified price increases.
In reality, the problem is not greedy capitalists it’s Venezuela’s sagging currency. Importers who want to buy goods abroad, like flat screen TVs, often pay black market rates for dollars which are now almost ten times the official exchange rate posted by the government. Those real world prices then get passed on to consumers.
After starting his crackdown with electronics, Maduro spread price controls to everything from pet food to toys to used cars. In each case, inspectors were sent out and riot police were stationed near stores to insure long lines of bargain hunters did not get out of hand.
Maduro’s economic moves were blatantly political. A round of mayoral elections taking place in early December was considered a referendum of sorts on Maduro himself. The major complaint, apart from crime, was the cost of public goods. By unilaterally cutting prices and jailing capitalists, Maduro won some short term relief among his base of chavistas.
In January, Maduro issued a new edict creating the National Superintendence for Defense of Socioeconomic Rights which would set “reasonable” profit margins. Of course the government can only enforce profit margins by first gathering information from everyone about costs. But as Foreign Policy pointed out, the law never defines how costs are to be calculated. It’s also not clear how many employees will be needed for the new bureaucracy to make these determinations for a nation of nearly 30 million people.
Whatever standards the government uses to judge whether businesses are behaving fairly, the law makes clear the penalties for failing to do so are more severe than ever. Chavez-era laws against profiteering carried a maximum jail sentence of six years. Maduro’s new law raises the maximum sentence to 14 years.
Maduro’s government has all the hallmarks of an end stage socialist state. His moves over the last five months, done entirely on his own thanks to the Enabling Act, insure future shortages and will do nothing to stem inflation. This, in addition to the sky high crime rate, is what is driving so many young people to demand a new approach.