 The Venezuelan economy has collapsed and hyperinflation has destroyed the

country’s currency. The economy contracted over 10 percent in 2016, and inflation
accelerated to 700 percent.
 The United Socialist Party of Venezuela, the party of Chávez and Maduro, used
redistributive policies to reduce inequality at the expense of the overall economy.
 Without fundamental reform to restore a stable currency and private incentives, the
people of Venezuela will continue to suffer.
 Venezuela is at the mercy of world oil prices, despite sitting on top of the world’s
largest proven oil reserves. Chávez implemented policies to expand access to
housing, education, medical care, and food and paid for them with revenue from oil
exports. He could easily subsidize basic goods and services when the price of oil
was rising during the 2000s.
 Oil exports from the state-owned oil company reached 95 percent of the country’s
total exports in recent years. This complete dependence on oil left Venezuela
vulnerable to changes in its price. In 2014, oil prices began a steep decline, falling
from over $100 a barrel in the summer of 2014 to a low of around $33 dollars a
barrel in early 2016.
 Hyperinflation took hold, destroying the savings of individuals and making
productive business investment nearly impossible. The government then made
things worse by implementing price controls, setting maximum prices that private
businesses could charge for a wide range of basic goods, from food to medicine.
The government controls set prices well below what otherwise prevailed on the free
market.
 Result= private business owners have cut back production or shut down as their
losses have mounted.
 The situation in Caracas, the capital, is dire. Grocery-store shelves are empty, and
there are widespread shortages of food
 The situation is the same in hospitals. They cannot provide adequate medical care
because of shortages of gauze, gloves, and drugs.
 Socialism and exclusive dependence on the oil industry have led Venezuela down
the path of economic collapse, hyperinflation, and social and political unrest. How
can the country pull out of its economic nosedive? In the short term, Venezuela is
facing a humanitarian crisis that needs to be addressed.

https://www.aier.org/research/venezuela-socialism-hyperinflation-and-economic-
collapse