Underground Capitalism Rises in Venezuela

Necessity is the mother of invention, so the saying goes. Venezuelans are proving the adage true. As Maduro’s socialist regime continues to drain the country and her people of their livelihood, a new underground capitalism is developing, filling the holes created in the market by toxic government authoritarianism and overreach.


According to a Monday report from Bloomberg, the people who have chosen to stay in Venezuela have begun to prove why capitalism beats with the heart of human nature while socialism beats against it: because the free exchange or goods and services, barter and trade are methods of survival when things are at their worst.

Hyperinflation and scarcity have the Bolivarian revolution’s socialist heart pulsing with entrepreneurship. Desperate citizens are eking out a living with ventures such as digging home water wells, bartering bananas for haircuts and transporting commuters in animal-cargo trucks. The economy’s erosion has created markets and market players where none existed.

“I had to improvise in this crisis,” said Ramirez, 31, who always had a knack for fixing things, tinkering with television remotes and microwaves. “Many people today have to pick food over buying things like lightbulbs. I do things well, and I help them afford a good product that will last.”

The call to capitalism is primal. As soon as humankind graduated from hunting and gathering, markets emerged. The first formal institutions seem to have begun in the Fertile Crescent. On the Micronesian island of Yap, seafaring explorers brought massive limestone discs from afar to serve as stationary, monumental currency. Today, markets are ubiquitous for everything from sports tickets to Wall Street deals conducted in milliseconds. But in Venezuela, commerce is returning to an earlier era of experimentation and invention.

“When you think of cases such as the Soviet Union or China, both economies were characterized by scarcities and, despite significant state ownership, a very large amount of the economy was supported by entrepreneurial activity,” said Geoffrey Jones, professor of business history at Harvard Business School. “In some cases, it’s actually what has kept the places going. You see regimes tending to tolerate them, because they know the consequences for them if they don’t.”


The rise of capitalism in Venezuela while socialism attempts to destroy her is a lesson for Americans, too. Especially Democrats, of whom, a recent poll found, 57% prefer socialism to capitalism. While the left in this country promote and sing the praises of avowed socialists such as Alexandria Ocasio-Cortez and Bernie Sanders, they could very easily look to the extreme South and see the practical application of the policies they espouse if they only wanted to. There’s plenty of evidence of the chaos that results from a full embrace of the socialist ideology, from a mass migration, to hyperinflation, to starvation and unemployment the likes of which most people here have no real understanding of.  And we may be thankful for that, but, in the absence of real-world experience as teacher, Paul Rubin, writing at E21, suggests we’ve failed our children by not teaching them basic economics, which leads them to believe a Sanders or Ocasio-Cortez.

Economists disagree on the optimal role of government in society. But virtually all mainstream economists agree that a socialist system, where government controls the means of production in most important segments of the economy, is vastly less efficient than a capitalist economy.

If theory were not enough to teach this lesson, we continually have real world examples, with Venezuela being the most recent. Although Venezuela has large petroleum supplies and was once the richest country in Latin America, socialist policies have reduced it to abject poverty. Food is in such short supply that people are eating zoo animals. Professional women are turning to prostitution to earn money. Seven percent of the population—2.3 million people—have left the country, and more are leaving every day. Similar economic dislocations caused the fall of the Soviet Union, which continually suffered from food shortages.


In Venezuela, children are learning how economics works the hard way. One wonders if Sanders or Ocasio-Cortez would have the same luck convincing them of the wonders of socialism.


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