Recently Fareed Zakaria on his CNN program Global Public Square, or GPS, illustrated five rules to ruin a national economy. He suggested a prime example of these rules could be found in Venezuela. Below is a recap of the situation according to Zakaria.
Rule #1. Attack big business. That’s exactly what we saw Venezuela do recently with “Daka” – the electronics chain. President Nicolas Maduro says that his opposition is in cahoots with Washington to bring down his economy.
Rule #2. Create hyperinflation. It turns out those TV salesmen in Venezuela aren’t the only robbers. The truth is the overall price of goods has risen 54 percent in Venezuela this year. So, if your household groceries cost $100 a week in January, they’ll now cost you $154.
Rule #3. Induce a currency crisis. The easiest way to curb inflation is to increase the value of your currency. Basically, print less money. But it turns out Caracas actually has a cash crunch, so it actually needs to do the opposite. Meanwhile, the black market for American dollars is thriving. The official exchange rate is 6.3 Bolivars for every greenback. In reality, the black market rate is 7 to 10 times that amount.
Rule #4. Subsidize, subsidize, subsidize. If Caracas is running out of money, the government doesn’t seem to know. Just last month, President Maduro raised public sector salaries by 10 percent across the board. This comes after two recent elections, where the government lavished subsidies to win votes.
Rule #5. Become a dictatorship. Recently President Nicholas Maduro won a vote to get what is known as “decree powers” – the ability to pass laws without consulting Congress. He says he needs these powers to fix the economy and tackle corruption. After all, Venezuela is ranked 181st of 189 countries for doing business.