Nicolas Maduro is hanging on to control of Venezuela by a bare thread. Its economy has collapsed, there is so little food in the country that the vast majority of citizens report that they’re not eating properly, and the hospitals are so low on basic medical supplies that the nation is begging pharmaceutical companies to accept gold, diamonds, and coltan in exchange for medical supplies.
But don’t worry, Nicolas Maduro has come up with the answer to his citizens’ problems. He has mandated a 40% minimum wage increase, the seventh and final such mandated wage hike in 2017.
Nicolas Maduro sold the hike to his citizens in an address televised on state-run media, in which he said “we have good news regarding the protection and stability of all the workers,” continuing on to say that he is “announcing the rise of the national minimum wage by 40 percent for all our doctors and public sector workers.”
That sounds like great news for Venezuelan workers, who are now mandated to receive a salary of 248,510 bolivares a month. They will also receive an increased ‘food ticket’ voucher, which will now be worth 549,000 bolivares every month.
The numbers sound impressive when measured in Venezuelan bolivares, and still looks impressive when you compare it to the Venezuelan government’s state-controlled exchange rate of roughly ten bolivares to the American dollar. However, it looks much less impressive when you compare it to the real exchange rate, where those 797,510 Venezuelan bolivares are worth approximately $6.48.
Yes, that means that the actual exchange rate for bolivares is closer to 1 dollar for 123,000 bolivares, despite what the Venezuelan government demands on government exchanges.
Over the course of the last year, Nicolas Maduro has increased the minimum wage seven separate times, hoping that his centrally-planned government can out-print the rate of inflation. Each time, it has failed to do anything to improve the quality of life for citizens of the socialist nation.
In fact, quite the opposite has occurred. Thanks to Maduro’s policies, Venezuela’s money has hit rates of inflation up to 3,000 percent over the last year. Leading economists, including those located in Caracas, suggest that in 2018, the rate of inflation may rise as high as 30,000 percent before the end of the year.
The root of Venezuela’s monetary and economic woes is Hugo Chavez’s socialist ideals (as well as socialism in general). Chavez took control of the nation in 1999, then instigated a socialist ‘revolution’ and basically became dictator for life until 2013 when he died in office and power transferred to Nicolas Maduro.
Chavez took over a nation that, after his ‘Bolivarian revolution,’ was doing fairly well financially, and at one point had the highest minimum wage in South America at the equivalent of $372 a month. However, this fiscal state was not due to his socialism, but rather to his seizure of every industry, including the extremely profitable Venezuelan oil industry.
But years of neglect, poor government control, and socialist policies, coupled with a dip in oil prices, have left Venezuela without any real source of income. Before the collapse, oil exports made up as much as 96 percent of Venezuela’s exports.
At this point, the worth of the Venezuelan bolivar is similar to that of the German papiermark shortly after World War I. Because of this, not only are most citizens unable to exchange them for goods, but the nation is unable to exchange its money for goods from outside the nation.
Because of this, though even the poorest citizens make nearly 800,000 bolivares in a month, most of Venezuela is unable to find food. Government-controlled supermarkets sell goods at fixed prices, but these goods tend to wind up being resold on the black market, where prices are more realistic but are unaffordable for many citizens.
Venezuela is falling apart, and the only question now is how its collapse will end. Will it end with angry Venezuelans raiding the palatial government buildings, or with international intervention as Maduro continues to use military and police might to suppress his starving populace?
Whatever the case may be, Venezuela’s new year will likely be filled with more minimum wage hikes which do nothing to make life more affordable for its citizens. Perhaps left-leaning cities that have mandated the minimum wage be set at $15 an hour should take notice