Venezuelan inflation and scarcity of basic goods. Why?

[R_P_A_S]

This is not the first time that I hear about this. What's up? How come Venezuelan inflation keeps on rising and why are there shortages in basic goods? This is ridiculous.. anyone?

http://www.bbc.co.uk/news/world-latin-america-17527939

[MarxSchmarx]

This is not the first time that I hear about this. What's up? How come Venezuelan inflation keeps on rising and why are there shortages in basic goods? This is ridiculous.. anyone?

http://www.bbc.co.uk/news/world-latin-america-17527939

I can't speak to the "shortage of basic goods" because I don't know a lot about it, but as to inflation Venezuela has historically been extremely prone to it, and if anything it has gotten a little better under Chavez:


Legislator and economist Jesus Faria of the ruling Socialist Party (PSUV) noted that inflation during the Chavez era has been considerably lower than during the previous decade, when it reached a peak above 100 percent.
http://www.reuters.com/article/2012/02/14/us-venezuela-economy-election-idUSTRE81D0RA20120214

Chavez has struggled to bring it in line with other countries in the region, but the evidence is unequivocal that Venezuelan inflation has been much milder under his regime than under both military dictatorship and elected right-wing governments.

I suspect the reason he has failed to completely curtail inflation is in part due to the increase in purchasing power afforded to humongous segments of Venezuelan people who were previously deprived of pretty much any ability to buy things, the willingness of Venezuelans to put their money into consumibles due to historically higher inflation rates (e.g., laundry machines are called "investments", kind of like a bank account), and the immense oil income that provides the funds necessary to purse both "investments" in consumibles and massive welfare.

[Amal]

I can't speak to the "shortage of basic goods" because I don't know a lot about it, but as to inflation Venezuela has historically been extremely prone to it, and if anything it has gotten a little better under Chavez:


http://www.reuters.com/article/2012/02/14/us-venezuela-economy-election-idUSTRE81D0RA20120214

Chavez has struggled to bring it in line with other countries in the region, but the evidence is unequivocal that Venezuelan inflation has been much milder under his regime than under both military dictatorship and elected right-wing governments.

I suspect the reason he has failed to completely curtail inflation is in part due to the increase in purchasing power afforded to humongous segments of Venezuelan people who were previously deprived of pretty much any ability to buy things, the willingness of Venezuelans to put their money into consumibles due to historically higher inflation rates (e.g., laundry machines are called "investments", kind of like a bank account), and the immense oil income that provides the funds necessary to purse both "investments" in consumibles and massive welfare.
It seems that Venezuela at present need some productivity revolution in order to get rid of the inflation.

[Die Neue Zeit]

Hmmm. Besides the political bias, did the right-wing media harp on Venezuela's inflation before Chavez?

[Ocean Seal]

The answer is that Venezuela has a lot of really bad policies in combination with a very strong anti-Chavez presence in Columbia and other nations. What Chavez does is oftentimes he will immediately stop trade with Columbia over a petty dispute. While this does often make his point, it makes it such that his people don't have access to things like milk among other things. Also Chavez has a lot of initiatives which have made people leave their jobs on the farms and thus agricultural goods are often in shortage.
Mainly Chavez just does a lot of things wrong.

[Revolutionair]

President Chavez says businesses should profit in a "rational manner"

hmmmmmmmmmmm

[seventeethdecember2016]

This is not the first time that I hear about this. What's up? How come Venezuelan inflation keeps on rising and why are there shortages in basic goods? This is ridiculous.. anyone?

http://www.bbc.co.uk/news/world-latin-america-17527939
It was worse before Chavez came to power.

[el_chavista]

Here is an excert of an article (2010) by Manuel Sutherland from Opción Obrera, the Venezuelan section of the CRCI (Coordinadora por la Refundación de la IV Internacional)


Although bourgeois economic theory states that generally growth brings about inflation and recession drags drop in prices, Venezuela's economic downturn since the end of the 2004-2008 oil boom has been accompanied by a fast-paced inflation.

The exchange control creates pressure on prices, that is, in a climate of bourgeois industrial disinvestment and low production of goods, control of exchange obliges to buy what is produced here, but as here there is not enough supply, national production can not meet increased demand and prices continue to rise.

The obstacles to get dollars, price controls and so on, imply scarcity of goods and services which tends to further raise the price level and is the cause of higher inflation. Public spending as a driver of investment is inflationary being an external demand, from oil revenues.

The exchange control allows certain exclusive import for whom has enough capital to cope with the paperwork, delays and kickbacks arising from the exchange control. So in 2010, they have the luxury of selling a $ 162 blue jeans, which costs 36$ in the U.S., 120$ in Argentina and 95$ in Colombia. The bourgeoisie they advocate as a possible export with aid and soft loans, exported (2008) 4085 million USD and imported U.S. $ 38.682 million.

With respect to the devaluation of the bolivars, Economy Minister Jorge Giordani "explained" that if you have euros or dollars, "now you're given more bolivars" which, "will tend to increase domestic production and exports, therefore, there will be an increase in supply and this is an inflation-fighting element". The inflationary reality clearly refutes an absurd liberal and bourgeois theory.

I reason from the need to restructure social relations of production, so that the workers' state (which we must build) has the monopoly of international trade, and thus do not have to suffer from "small" 300% profit margin enjoyed by our local bourgeoisie .

As long as the bureaucratic elite use bourgeois thinking dogmas, they will repeat its disastrous results.

[OnlyCommunistYouKnow]

Wasn't the milk shortage due to the company hoarding all their milk, saying there was none, to raise prices?

[el_chavista]

The authorities often seize hoarded milk. Hoarding is a common practice despite the fact that in Venezuela there are laws that criminalize it.
The application of the neoliberal package in 1989 caused a widespread hoarding and the popular uprising called "The Caracazo".

[Sinister Cultural Marxist]

RPAS-the reasons have to do with what people already mentioned, specifically that the huge influx of foreign money from oil leads to an import-based economy, and as Chavista mentioned, the continued existence of Capitalist enterprises in Venezuela mean that the economic agents have a financial incentive to either horde goods or disinvest altogether.


Wasn't the milk shortage due to the company hoarding all their milk, saying there was none, to raise prices?

It's a little too convenient to blame just the bourgeoisie. The problem is that Chavez is allowing the milk companies to remain private while controlling their prices. If you do that, it gives the business an incentive to hoard, because they believe that they can sell it later at a higher price. Basically, Hugo Chavez is trying to walk some fine line between Capitalist and anti-Capitalist thinking, while maintaining a Capitalist economy. It is keeping his party in power, but it's unclear how it will lead to an actual socialist revolution in the long term.

In particular, this:


"We are not asking [companies] to lose money, only that they profit in a rational manner, and that they not steal from the people," Mr Chavez said in a televised speech in February.Well, businesses are acting in a rational manner if they horde goods. After all, businesses exist to realize the surplus labor of their enterprise via exchange. Thus, according to the rationale of Capitalism, they should horde if they think they can get a higher price for the goods later on. That is what Hugo Chavez doesn't quite get, he seems to think that nationalizing half of the industry and saying his country is going through a "socialist revolution" will cause the massive chunk of the economy which remains in private hands to cease using Capitalist logic. Well, it doesn't work that way unfortunately.


One good thing the Chavez government has done to counteract this is in investing in productive enterprises itself, which might be a long-term solution once they re productive enough. It's yet to be seen whether that actually works or not, or if they have invested enough in it or in the right areas.

[RedSonRising]

The answer is that Venezuela has a lot of really bad policies in combination with a very strong anti-Chavez presence in Columbia and other nations. What Chavez does is oftentimes he will immediately stop trade with Columbia over a petty dispute. While this does often make his point, it makes it such that his people don't have access to things like milk among other things. Also Chavez has a lot of initiatives which have made people leave their jobs on the farms and thus agricultural goods are often in shortage.
Mainly Chavez just does a lot of things wrong.

It's Colombia, but yes, he does seem to isolate himself from historically beneficial trading partners, but it isn't necessarily his fault that being a quasi-socialist pisses off neighboring ruling class leaders. A lot of foodstuffs come from Colombia that flow into Venezuela, and much of that has been cut off. Also, throughout the 20th century, productive agriculture in Venezuela was dismantled as a dependency for food from imports increased, and they are just now trying to revitalize their domestic food production.

In general, Venezuela is still a capitalist country with a seemingly anti-capitalist president threatening to destabilize the whole thing with small acts of expropriation (or re-appropriation) appearing here and there. The working class hasn't gotten nearly enough power to organize things in a way that holistically benefits them as a class, yet the holders of capital that make the economy "work" are extremely discouraged. Less investment, less circulation of money, less jobs available, etc., all because the "risk" is too high. We have yet to see whether or not Chavez's party can eventually shift the economic model towards a sustainable and truly democratic one so that the economy's well-being doesn't depend on the complacency of the ruling class with the nation's politics.