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Why is Venezuela starving?

The idea that a developed nation like Venezuela can be undergoing a famine is bizarre. There has been no natural disaster which has interrupted Venezuela’s food supply. There has not been a sudden and unexpected failure of crops and yet people starve.

If the food supply was not damaged is it the case that Venezuela has no money? Venezuela is a petro-nation with close to 300 billion barrels of crude oil reserves and oil sands as large as those present in Canada. Those Venezuelan oil sands are of a higher quality than those in Canada allowing for easier extraction and greater oil yield for the effort expended. Money can be felt between your toes if you walk bare foot on the coast but the Venezuelans are still starving.

While Venezuela has money locked away under its feet and across its shorelines the economic circumstances of its people changed suddenly. Venezuela had wealth but was never a wealthy country as it lacked indigenous industry. Hugo Chavez spent oil revenue heavily at a time oil prices were high and when the price of oil fell that spending became quickly became unsustainable.

The connection between wages and what a wage could buy became uncoupled when inflation rose to 800% due to the inept economic decisions made by its leaders. Venezula Prices spiked rapidly while wages did not, people looked at where they should spend their money and decided they could do without things, pushing the people selling or making those things into poverty as their customers dried up.

When you beggar the nation to the extent it cannot afford to eat there are two knee jerk reactions both of which are disastrous. On one hand you can assume the market will sort itself out if given enough time. In a functioning system when you go to the shops there is bread on the shelves and how it got there is an example of the beauty of decentralised decision making. No bread authority sets the pricing from wheat to store shelf nor decides how many and what type of loafs are delivered.

While bread still gets made and delivered to places people can buy it it should be remembered that the market operates on the principal that you sell to those who can afford it. If a nation is crushed by inflation resulting from bad government policy you can expect the market to look to sell its product elsewhere. The market is not benevolent.

State intervention is the other option and the one the Venezuelan government chose as it fit with the political ideology of the leadership. With prices of products soaring famers and food producers were instructed to sell their produce to the state at a set price. This financially wiped out many farmers and detrimentally affected their motivation to go back to the hard work of farming when the state could decide their effort was worth a flat fee regardless of the quality of their produce.

In Poverty and Famines Amartya Sen casts modern famine as an economic disaster rather than a food availability disaster, Venezuela is an economic disaster which has priced food beyond the reach of its citizens and created ongoing shortages by demotivating farmers. The solution to future Venezuelan starvation is not in taking from farmers, or nationalising whatever the state takes an interest, but in creating an open democracy with a free press. It is the ideologues of the Venezuelan government that created the conditions for rampant inflation thereby spiking prices as it pushed people in discretionary spending jobs into poverty.

A starving Venezuela is a product of ideology over concern for citizens and where a free press would have highlighted signs of impending disaster over the past two decades press freedoms in Venezuela have eroded as self-censorship has increased. Venezuela is not a democracy its elections have been declared shams by observers and pro-government thugs routinely attack those they see as in the way of fulfilling the dreams of the now dead Hugo Chavez. So long as Venezula is an anti-democratic state which promotes the ideology of its rulers over the needs of its people starvation will continue and food shortages will re-occur.           

Food shortages can happen but they are not as frequent as in previous centuries as the application of mechanisation by even the smallest farmers across Asia and Africa has increased the global food supply overall. With the developed nations in the west having less children in the next 30 years we will have a global population decline while automation makes food production even more efficient. The world already has food in abundance, Venezualan’s cannot afford to access it due to the ineptitude of their rulers.

Moving away from Venezuela the horrifying situation in Puerto Rico shows you what happens when a natural disaster does occur. One thing I took note of was the collapse of the communications infrastructure. It does not matter if you have Bitcoin, Apple Pay or an ATM card unless you have folding cash in your pocket you currently have nothing to buy anything with.

A cashless society depends on the ability to communicate and authorise your transactions, you might want keep some bills under the mattress just in case a disaster takes out your channels of communication.