As we’ve known for some time now, in addition to starvation, disease and a lack of potable water, Venezuela has been laboring under an inflation rate which is believed to be in the neighborhood of one million percent. (It’s hard to pin down an exact number when hyperinflation reaches these levels and your currency is literally worth more as kindling than cash.) The money people earn at their jobs (if they are lucky enough to still have one) isn’t worth anything and they need to carry around a wheelbarrow to have enough bolivars to cover a loaf of bread. So what’s a dictator like Nicolas Maduro to do?
No problem! Since it’s a socialist dictatorship you can just make up the rules as you go along. And to “help” his starving people, Maduro raised the minimum wage last week… by 3,000%. Of course, that means that the employers who were already struggling to stay afloat could no longer afford to pay the wages, so… you can guess what happened next. (Bloomberg)
Venezuelan workers who earned a pittance are now earning a slightly larger pittance, thanks to a big increase in the minimum wage. What they may not have are jobs.
Starting this week, 7 million employees are guaranteed 1,800 bolivars a month — worth about $20 at the black-market rate. President Nicolas Maduro intended the mandate as political boost, but it’s having the opposite effect as companies, already hit by Venezuela’s epic economic contraction, tell workers they can’t afford to keep them.
While there have been many similar moves in the past, never has one been so disruptive, arriving amid hyperinflation, depression and devaluation. Some employers are restructuring costs, rejiggering pay scales and negotiating settlements with workers. Others are simply dismissing people. Much of the action happens secretively as companies try to avoid punishment by the government, which has been jailing those it believes are flouting the rules.
Yes, many of the workers were simply fired. Some employers have gotten creative and tried to set up various types of barter systems to pay their employees. Others turned to the black market and started paying people in American dollars under the table. But if the ruling socialist party discovers that you are “breaking the rules” and abandoning the bolivar, they come along and seize your business, throwing you in jail for good measure.
None of this is particularly surprising. When socialist schemes collapse, these sorts of economic implosions are not only predictable but seemingly inevitable. And the people who don’t flee the country will always find a way to do business among themselves even if they risk accusations of being on “the black market.”
This is beyond the level of being a crying shame. What’s happening to the citizens of Venezuela is more on the level of war crimes. We learned recently that residents of that country have now been forced to abandon their beloved pets to the streets or to shelters that have no food for them. This humanitarian crisis is touching everyone, be they on two legs or four. But it also serves yet again as a reminder of something we will keep repeating no matter how long it takes to drive the message home. This is how socialism always ends eventually.