How Venezuela’s experiment with ’21st century socialism’ failed

When a Venezuelan entrepreneur we know launched a manufacturing company in western Venezuela two decades ago, he never imagined he’d one day find himself facing jail time over the toilet paper in the factory’s restrooms.

But Venezuela has a way of turning yesterday’s unimaginable into today’s normal.

The entrepreneur’s ordeal started about a year ago, when the factory union began to insist on enforcing an obscure clause in its collective-bargaining agreement requiring the factory’s restrooms to be stocked with toilet paper at all times.

The problem was that, amid deepening shortages of virtually all basic products (from rice and milk to deodorant and condoms) finding even one roll of toilet paper was nearly impossible in Venezuela—let alone finding enough for hundreds of workers. When the entrepreneur did manage to find some TP, his workers, understandably, took it home: It was just as hard for them to find it as it was for him.

Toilet-paper theft may sound like a farce, but it’s a serious matter for the entrepreneur: Failing to stock the restrooms puts him in violation of his agreement with the union, and that puts his factory at risk of a prolonged strike, which in turn could lead to its being seized by the socialist government under the increasingly unpopular President Nicolas Maduro.

So the entrepreneur turned to the black market, where he found an apparent solution: a supplier able to deliver, all at once, enough TP to last a few months. (We’re not naming the entrepreneur lest the government retaliate against him.) The price was steep but he had no other option—his company was at risk.

But the problem wasn’t solved.

No sooner had the TP delivery reached the factory than the secret police swept in. Seizing the toilet paper, they claimed they had busted a major hoarding operation, part of a U.S.-backed “economic war” the Maduro government holds responsible for creating Venezuela’s shortages in the first place. The entrepreneur and three of his top managers faced criminal prosecution and possible jail time.

All of this over toilet paper.

The entrepreneur is one of the real people behind those zany “there’s no toilet paper in Venezuela” stories that play up the crisis for laughs, and clicks. But to Venezuelans like the present writers, and the entrepreneur, there’s nothing funny about the dark turn our country has taken.

The experiment with “21st-century socialism” as introduced by the late President Hugo Chavez, a self-described champion of the poor who vowed to distribute the country’s wealth among the masses, and instead steered the nation toward the catastrophe the world is witnessing under his handpicked successor Maduro, has been a cruel failure.

Former Venezuelan president Hugo Chavez (Reuters)
Former Venezuelan president Hugo Chavez (Reuters)

Anatomy of a collapse

Developing countries, like teenagers, are prone to accidents. One pretty much expects them to suffer an economic crash, a political crisis, or both, with some regularity. The news coming from Venezuela—including shortages as well as, most recently, riots over blackouts; the imposition of a two-day workweek for government employees, supposedly aimed at saving electricity; and an accelerating drive to recall the president—is dire, but also easy to dismiss as representing just one more of these recurrent episodes.

That would be a mistake. What our country is going through is monstrously unique: It’s nothing less than the collapse of a large, wealthy, seemingly modern, seemingly democratic nation just a few hours’ flight from the United States.

In the last two years Venezuela has experienced the kind of implosion that hardly ever occurs in a middle-income country like it outside of war. Mortality rates are skyrocketing; one public service after another is collapsing; triple-digit inflation has left more than 70 percent of the population in poverty; an unmanageable crime wave keeps people locked indoors at night; shoppers have to stand in line for hours to buy food; babies die in large numbers for lack of simple, inexpensive medicines and equipment in hospitals, as do the elderly and those suffering from chronic illnesses.

But why? It’s not that the country lacked money. Sitting atop the world’s largest reserves of oil at the tail end of a frenzied oil boom, the government led first by Chavez and, since 2013, by Maduro, received over a trillion dollars in oil revenues over the last 17 years. It faced virtually no institutional constraints on how to spend that unprecedented bonanza.

It’s true that oil prices have since fallen—a risk many people foresaw, and one that the government made no provision for—but that can hardly explain what’s happened: Venezuela’s garish implosion began well before the price of oil plummeted. Back in 2014, when oil was still trading north of $100 per barrel, Venezuelans were already facing acute shortages of basic things like bread or toiletries.

The real culprit is chavismo, the ruling philosophy named for Chavez and carried forward by Maduro, and its truly breathtaking propensity for mismanagement (the government plowed state money arbitrarily into foolish investments); institutional destruction (as Chavez and then Maduro became more authoritarian and crippled the country’s democratic institutions); nonsense policy-making (like price and currency controls); and plain thievery (as corruption has proliferated among unaccountable officials and their friends and families).

A case in point is the price controls, which have expanded to apply to more and more goods: food and vital medicines, yes, but also car batteries, essential medical services, deodorant, diapers, and, of course, toilet paper.

Juan Requesens, right, deputy of the Venezuelan coalition of opposition parties (MUD), argues with Venezuela's National Guards at the National Electoral Council (CNE) headquarters in Caracas, Venezuela, April 21, 2016.REUTERS/Marco Bello
Juan Requesens, right, deputy of the Venezuelan coalition of opposition parties (MUD), argues with Venezuela’s National Guards at the National Electoral Council (CNE) headquarters in Caracas, Venezuela, April 21, 2016.REUTERS/Marco Bello

The ostensible goal was to check inflation and keep goods affordable for the poor, but anyone with a basic grasp of economics could have foreseen the consequences: When prices are set below production costs, sellers can’t afford to keep the shelves stocked. Official prices are low, but it’s a mirage: The products have disappeared.

When a state is in the process of collapse, dimensions of decay feed back on each other in an intractable cycle. Populist giveaways, for example, have fed the country’s ruinous flirtation with hyperinflation; the International Monetary Fund now projects that prices will rise by 720 percent this year and 2,200 percent in 2017.

The government virtually gives away gasoline for free, even after having raised the price earlier this year. As a result of this and similar policies, the state is chronically short of funds, forced to print ever more money to finance its spending. Consumers, flush with cash and chasing a dwindling supply of goods, are caught in an inflationary spiral.

There are many theories about the deeper forces that have destroyed Venezuela’s economy, torn apart its society and devastated its institutions, but their result is ultimately a human tragedy representing one of the most severe humanitarian crises facing the Western hemisphere. Here we offer, through a few vignettes, a glimpse of what it’s like for some of the individuals who are living the collapse and seeing no one held accountable.

Who killed Maikel Mancilla Peña?

Finding the basic requirements of daily life has become the main preoccupation of Venezuelan families—and it can be a matter of life and death. At 14 years old, Maikel Mancilla Peña had been battling epilepsy for six years.

His condition was under control, just about, thanks to a common anti-convulsive prescription drug called Lamotrigine. It had long been a struggle for his family to get it, but as the gap between the real cost of the drugs and the maximum pharmacies were allowed to charge for them grew, it became impossible to find them.

On February 11th this year, Maikel’s mom Yamaris gave him the last Lamotrigine tablet in their stash. None of Yamaris’s usual pharmacies had any anti-convulsants in stock.

She worked social media— which in Venezuela these days is filled with desperate people trying to source scarce medicines—but no luck. She drove hours to track down a lead, but came up empty-handed.

In the following days, Maikel experienced a series of increasingly violent epileptic seizures, as his family watched helplessly. On February 20th, he suffered respiratory failure and died.

People walk past shelves mostly filled with the same product at a state-run supermarket in Caracas, Venezuela, January 9, 2015.REUTERS/Carlos Garcia Rawlins
People walk past shelves mostly filled with the same product at a state-run supermarket in Caracas, Venezuela, January 9, 2015. REUTERS/Carlos Garcia Rawlins

Maikel’s case is not unique. The collapse of the health-care system and the scarcity of medicine is costing lives every day. Psychiatric patients struggling with schizophrenia have to go without anti-psychotic meds.

Tens of thousands of HIV-positive people struggle to find the anti-retrovirals they need, forcing them into the kind of stop-and-go treatment patterns that doctors warn risk bringing on AIDS. Cancer patients can’t find chemotherapy drugs. Even malaria—which had essentially disappeared from Venezuela a generation ago and is easily treatable with inexpensive medicines—is making a deadly comeback.

The racer

While Venezuelans were dying for lack of simple, inexpensive pills, their radical socialist government was spending tens of millions a year to keep a native son, Pastor Maldonado, competing in the Formula 1 global auto-racing circuit.

You could be forgiven for not having heard of Maldonado—a mediocre driver who managed to win a single race in five years in the sport. Still, Venezuela’s state-owned oil company, PDVSA, spent some $45 million each year to keep Maldonado racing under its logo. Why an oil company without a retail arm and with monopoly rights to Venezuelan oil needs to advertise in the first place was never clear.

Yet Maldonado, whose habit of crashing in race after race earned him the nickname “Crashtor,” was only forced out of the F1 circuit this year, when PDVSA, hit by the oil crash, failed to come up with the sponsorship money.

Venezuelan oil largesse has been scattered around the globe, from the $18 million handed to the American actor Danny Glover in 2007 to produce an ideologically appropriate film (still to be delivered), to the millions of Venezuelan dollars spent financing leftist parties and movements from El Salvador toArgentina to Spain and beyond.

Stealing lunch

Meanwhile, the Venezuelan government can no longer afford to provide even rudimentary law and order, making Caracas, the capital, by some calculations one of the most murderous cities in the world. Drug traffickers run large sections of the countryside.

Prison gang leaders keep military-style weapons on hand, and while grenade attacks still make the news, they are nothing new. Recently, the police captured an AT4 antitank rocket launcher—basically, a bazooka—from a suspect.

The breakdown of law and order is so severe that even children are being robbed. At Nuestra Señora del Carmen school in El Cortijo, a struggling neighborhood of Caracas, supplies for the school-lunch program have been stolen twice this year already: Thugs have broken into the school’s pantry late at night after fresh food is delivered. The second burglary meant the school couldn’t feed the kids for at least a week.

Venezuela's President Nicolas Maduro speaks during his weekly broadcast "en contacto con Maduro" (In contact with Maduro), in Margarita IslandThomson Reuters
Venezuela’s President Nicolas Maduro speaks during his weekly broadcast “en contacto con Maduro” (In contact with Maduro), in Margarita IslandThomson Reuters

Elsewhere, school food programs have simply stopped working, because the government apparently can’t keep them supplied. In poorer communities, parents often respond to this by taking their kids out of school: They’re more useful standing in line outside a grocery store than sitting in a classroom.

The regime has long put education at the center of its propaganda, yet the reality today is that a generation of underprivileged kids is being denied an education through straightforward hunger.

Still, some politicians seem to have found the bright side of their citizens’ hunger: The opposition-controlled National Assembly alleges that government officials or their cronies stole some $200 billion in food-import scams alone since 2003.

The crime outbreak feeds the zika outbreak

In the midst of all this, Venezuela is facing one of the worst Zika outbreaks in South America, and it’s an epidemic the country can hardly measure, much less respond to. The Universidad Central de Venezuela’s Institute for Tropical Medicine is where the crime and public-health crises collide.

The institute—ground zero in the country’s response to tropical epidemics—was burglarized a shocking 11 times in the first two months of 2016. The last two break-ins took place within 48 hours of one another, leaving the lab without a single microscope. Burglars rampaged through the lab, scattering samples of highly dangerous viruses and toxic fungal spores into the air.

Conditions like those make it virtually impossible for institute researchers to do their work, crippling the country’s response to the Zika outbreak. And attempts to repair the damage are undercut by the same dysfunctions that afflict the rest of the economy: There’s just no money to replace the expensive imported equipment criminals have stolen.

Other aspects of state collapse feed back on the Zika crisis as well. Venezuelan cities’ water infrastructure is crumbling after nearly two decades of neglect. That would be hard at the best of times, but this year’s El Niño has brought an acute drought to most of the country. Water utilities have responded to falling reservoir levels with harsh rationing measures.

Neighborhoods and shantytowns can go for days and even weeks with no piped water. Most people adapt by filling several buckets when service is provided, in preparation for the dry periods. Of course, storing water in buckets is precisely what you shouldn’t do when facing a mosquito-borne epidemic: The containers double as breeding grounds for the bugs that transmit the Zika virus, as well as others like Chikungunya, dengue, even malaria.

Children fill plastic containers with water from a well on a street, close to a neighbourhood called "The Tank" in the slum of Petare in Caracas, Venezuela, March 17, 2016.Reuters
Children fill plastic containers with water from a well on a street, close to a neighbourhood called “The Tank” in the slum of Petare in Caracas, Venezuela, March 17, 2016.Reuters

No Power, no justice

The same drought that’s forcing water rationing has seen water levels at the country’s electricity-generating dams fall alarmingly. Blackouts used to at least spare the capital, but these days they’re nationwide, as the public utilities struggle to keep enough water in the reservoirs to prevent a complete collapse in the power grid.

It didn’t have to be this way. Since 2009, hundreds of millions of dollars have been devoted to building new diesel and natural gas-burning power plants. The new plants were meant specifically to relieve pressure from the aging hydroelectric network.

Much of the capacity never came online, though, and the money was never accounted for. Two people have been indicted over this in the U.S., but nobody in Venezuela appears to be investigating.

This is emblematic of the kind of impunity that reigns now at every level of the state, from the gravest crimes to the highest government offices. On March 4th 28 miners disappeared in the jungle near Brazil, and eyewitnesses alleged a massacre. At this writing, only four people have been arrested in connection to the event. They weren’t the culprits, though: They were family members of victims who dared to call for justice.

Late last year, two of the powerful first lady’s nephews—including one who grew up in the presidential household—were arrested by DEA agents in a sting operation, in which they were allegedly recorded offering to provide a large amount of cocaine to agents posing as traffickers. The first lady’s reaction was to accuse the DEA of kidnapping her nephews.

Following Venezuela closely means hearing any number of stories like these. The happy, hopeful stage of Venezuela’s experiment with Chavez’s 21st-century socialism is a fading memory. What’s been left is a visibly failing state that still leans hard on left-wing rhetoric in a doomed bid to maintain some shred of legitimacy. A country that used to attract fellow travelers and admirers in serious numbers now holds fascination for rubberneckers: stunned outsiders enthralled by the spectacle of collapse.

To the Venezuelans who live its consequences day after day, the spectacle is considerably less amusing. Our toilet-paper-seeking industrialist found very little mirth in it. After being arrested on absurd charges of hoarding, he realized that it was just a shakedown: The cops were far less interested in his toilet paper than his money.

“Their opening bid was in the high hundreds of thousands of dollars,” he said. “I thought that was a bit much; we bargained.”

In the end, he said, the cops agreed to drop the criminal charges for a few tens of thousands of dollars.

That time, the regime’s appetite for theft trumped its instinct for repression. Next time, who can tell?

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