A Brief Overview
In a country where hyperinflation is so extreme that prices double every 17.5 days and the annual inflation rate is 16,428%, should we be surprised that businesses can’t make a profit? First, it’s important to understand that Venezuela has the largest oil reserves in the world, and in a free market they would be a very rich country rather than one that has been in turmoil for decades. I will provide some statistics so readers can understand the absurdity of all this:
- Venezeula has a total land area of 353,841 mi2; this is a little larger than the state of Texas (Venezuela alone has over 7 ½ as many oil reserves as the U.S., at a measly 39,230.)
- Saudi Arabia, who ranks 2nd in the total amount of proven oil reserves, is over 2 ¼ times bigger than Venezuela with a total land area of 830,000 mi2. Still, Venezuela has 300,878 proven oil reserves, while Saudi Arabia has 266,455.
- Between 2004 and 2015, Venezuela made $750 billion on oil which accounted for 96% of its foreign profits; Huge Chavez forced bonds to be issued while also borrowing heavily, leaving them with a huge budget deficit (which rose to 15.6 percent of GDP in 2012); they spent $718 billion on social welfare programs between 1999 and 2014; oil production dropped from 3.2 million barrels a day to 1.5 million; imports are down from $66 billion in 2012 to $9.2 billion in 2018.
Kellogg’s Is Now In The Hands of the Venezuelan Workers!
In a new report from BBC News, “Workers said they were prevented from entering the plant in the central city of Maracay on Tuesday,” which President Maduro declared “”absolutely unconstitutional and illegal.” An official statement from Kellogg’s to CNBC stated:
The current economic and social deterioration in the country has now prompted the company to discontinue operations.
Maduro apparently was not happy with this decision, saying “We’ve begun judicial proceedings against the business leaders of Kellogg’s because their exit is unconstitutional.” You can watch clips from the live rally for yourself from yesterday. He notably said this:
This town has a president and a government that will continue to produce now in the hands of the working class!
Now that the Kellogg’s factories in Venezuela have been “handed over to the workers,” what does this all even mean? The workers, most of whom are probably grateful to make it to the next day, and who nevertheless have to spend hours gathering a few of their basic essentials because of shortages, are now supposed to be in charge of an entire operation? What is to stop inevitable hierarchies from forming in which a dispersion in skills leads to some individuals feeling they have the answers, while others feeling they do. Does “workers ownership of the means of production” in this situation translate to “State ownership of the means of production,” or is this going to be a truly Socialist experiment that will succeed this time?
In 2016, something similar happened to Kimberly-Clark, who “makes Huggies diapers and Kleenex tissues” when “Venezuelan authorities took over a plant belonging to the American personal care products manufacturer and renamed it the Cacique Maracay Productive Plant after a local Indian leader who fought against Spanish colonial rule in the 16th century.” The results were telling:
Production was rapidly reinitiated at the plant following the expropriation with the national government stepping in to provide financing worth US$22 million. When operating at full capacity, the plant can reportedly meet 20% of national demand for diapers, sanitary pads, toilet paper, and other scarce personal care products. The aftermath of all this will be another nail in the coffin for the idea of socialism with its inability to centrally plan and its inability to calculate, as the Austrian economists correctly have shown throughout history; this time will be no different.