Venezuela and Chavez's Deadly Endgame

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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Venezuela's cities are convulsed with riots. A local beauty queen was shot in the head during protests over . . . well, everything: chronic shortages of basic goods, increasing repression of free speech by a government that clearly feels it cannot tolerate any dissent. She is not the only person to have been killed in recent days. The government is cracking down -- hard -- on any and all opposition.

It seems to me that this was always the inevitable end game to the disastrous policies of the late President Hugo Chavez. Diverting funds from capital investment into the nation's oil fields was politically popular. But it was also disastrous: Venezuela's oil is sludgy stuff, hard to get at and hard to refine, and it requires a high level of capital expenditure just to keep production level. Predictably, production is now well below pre-Chavez levels. That wasn't so much of a problem as long as oil prices kept rising, because they offset lost production. But the price of Venezuela's crude is no longer rising:

As the economy has deteriorated, the government has resorted to dubious stopgaps such as price controls. The price controls have produced more shortages, leading to more stopgaps . . . and more political repression to control complaints about the shortages and stopgaps. People made much of the fact that Chavez won elections -- but less of the fact that he won them in the context of government policies that required television stations to broadcast hours of his speeches every week. And that he silenced stations that opposed him.

This has only continued to get worse under President Nicolas Maduro. Having shrunk the space for legitimate opposition so far, its only outlet seems to be the streets.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

(Megan McArdle writes about economics, business and public policy for Bloomberg View. Follow her on Twitter at @asymmetricinfo.)

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net