November 16th, 2013
02:28 PM ET

Five ways to ruin an economy

For more What in the World watch Sundays at 10 a.m. & 1 p.m. ET on CNN

By Global Public Square staff

Some startling images caught our eye this week. A shopping free-for-all at a major electronics chain, the equivalent of America's Best Buy. People making off with flat-screen TVs…refrigerators…and more…all at bargain basement prices. No, it’s not the holidays yet. This is what happened when the government of Venezuela decided to play Robin Hood: the army took over the privately owned chain and slashed prices.

The incident got us thinking. We often talk about best practices for economies. Perhaps there should also be a list of things to avoid – a checklist titled ‘How to ruin your economy.’ Well, it so happens this isn't just a theoretical list, because Venezuela is actually ticking each of those boxes in practice.

So let's go to rule #1. Attack big business. That's exactly what we saw Venezuela do this week with "Daka" – the electronics chain. President Nicolas Maduro says that his opposition is in cahoots with Washington to bring down his economy. Apparently that's why TVs were so expensive. As we saw this week, there's an easy fix: Have the army take over. Sounds like a lasting solution.

That brings me to 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. The ripple effect is clear. Prices go up, so salaries have to go up, and so anything you produce costs more. Mission accomplished, your economy is now less competitive.

More from CNN: Chavez gone, not forgotten

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. For a country which imports 70 percent of its basic goods, this is a big problem. You may remember recently that Venezuela ran out of toilet paper. Why? Well, it's running out of a different kind of paper – the money to pay for it.

Which brings me to rule #4. Subsidize, subsidize, subsidize. If Caracas is running out of money, thegovernment 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. Gas is essentially free in Venezuela. In fact it's also nearly free in neighboring Cuba, which Venezuela has been subsidizing for years.

I could go on and on, but I'll point out just one more rule. Number #5, which is…Become a dictatorship. President Nicholas Maduro won a vote this week 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. It is ranked 9th for corruption. It took years for Hugo Chavez to take Venezuela to this point…and now Maduro wants to double down on the very same policies.

So, on points 1 through 5, Venezuela is on a fast-track to total ruin. The world saw this coming under Chavez. We hoped for change, but in his dying days Chavez handpicked a “mini-me” to stay the course. The sad truth is that Venezuela is wasting the world's largest oil reserves. It could have been as wealthy as Saudi Arabia or Qatar. It could have outstripped Mexico or Brazil. Instead, it is beginning to resemble North Korea, simply by following the most ruinous set of policies in the world.

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Topics: Economy • Venezuela • What in the World?

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soundoff (131 Responses)
  1. TheTruth

    Sounds like what we're doing here.

    November 18, 2013 at 7:28 pm |
  2. Mike

    The number 1 way – elect an incompetent clown as president.

    November 19, 2013 at 1:55 am |
    • Sado Myr

      This comment before the age of the Trump Clown himself

      March 21, 2019 at 12:18 pm |
  3. Cynthia Avishegnath

    Our current prevalent society has a great propensity to pigeon-holing.

    Broad and straight is the road that leads to destruction.
    Narrow and winding is the way that leads to salvation.

    By choosing broad strokes to paint an economy or society with a one-ideology-fits-everytime is choosing the broad and straight simplistic solutions.

    It is time we allow adaptive and agile principles into the economy. But no way, we have too many people convinced that they need to be fixated on one path to salvation.

    November 19, 2013 at 7:43 am |
    • aCriticalEye

      So very true, albeit sad.

      November 19, 2013 at 11:37 am |
    • Richard

      I am not so sure I understand your psycho-babble. It is largely the hope of mankind we learn from our past mistakes (both obvious and not so obvious) and move on with increased vigor and wisdom. You may not consider the laws of macro-economics as sacred physics but they are. I believe this is what the author in suggesting.

      November 19, 2013 at 6:19 pm |
      • markodavid

        Talk about Sico Babbbble.Macro economics has never been a science.It IS one fad after the other that keeps the 1% in charge

        November 19, 2013 at 8:44 pm |
      • Cynthia Avishegnath

        1st, you have never read about agile and adaptive in dynamic systems and engineering management.
        2nd, you have no idea about having used dynamics being used in modeling economics.
        3rd, you are not familiar with the Bible, from whence I derived the sarcasm.

        November 19, 2013 at 9:57 pm |
  4. Sternberg

    Well, we are working diligently on #1. And Mr. Obama has figured out a way to subsidize about 2/3 of us to varying degrees with his ACA. Then there was his "cash for clunkers" that no one wants to bring up in polite company anymore. Looks like we are well on our way.

    November 19, 2013 at 8:31 am |
    • aCriticalEye

      The article was written by big business for big business. Your man Robme lost....get over it!
      No more bailing out the corporate raiders !

      November 19, 2013 at 11:39 am |
    • william proctor

      Give me a break PLEASE I'm so sick and tired of hearing everything in it present happen under President Obama watch, have we forgotten George Bush and the hole he put this Country into before left office. Dear sir please come back to the real world not the screw up world of the fairs and balances Fox News Network.

      November 19, 2013 at 5:36 pm |
      • jesuspportillo

        GIVE VENEZUELANS A BREAK. Stop comparing Venezuela to the U.S. It is very, irreconcilably different. Our country is totally screwed, yours isn't.

        November 19, 2013 at 11:02 pm |
    • Jackie

      Jesusportillo – people need to start looking and understanding what is going around them. If they don't take note on what is happening in Venezuela since 1999, not only in US but in any other country that can happen.

      Americans need to understand that Obama is now, the present, therefore going back and blaming Bush and previous presidents won't do anything. Obama hasn't show the minimum to his country to show he cares and that he really wanted to "fix" economy here. No actions, no actions, no actions...blah blah blah "I'm the victim" "Poor me"
      Just wait for our next surprise (what ALL socialists, dictators do-) New upcoming law -> You can run for president indefinitely, and have control of all those ignorants who support you.

      November 20, 2013 at 12:03 am |
      • Francisco

        Sadly Venezuela was in pretty bad shape way before 1999 and Chavez. Mostly because the government was controlled from Washington, Chavez tried the oppositte and that did not work out either. Very sad situation.

        January 31, 2014 at 11:34 am |

    2 more sure fire ways to ruin an economy:
    1. Elect a person to the highest office in the land, despite the fact he has no real world experience, or knowledge.
    2. Repeat rune #1.

    November 19, 2013 at 8:41 am |
    • Sombra

      Agree, that George W. time was a complete disaster very difficutl to fix.

      November 19, 2013 at 11:03 am |
    • aCriticalEye

      Since they couldn't completely destroy the ecnomy with Gee dubya, they thought they could finish us off with Robme. Since that fell apart, they fell to plan "C", obstruct everything and caus as much trouble for the president as possible.

      November 19, 2013 at 11:42 am |
  6. Duplex T

    Just look over Africa (French speaking + Cameroon) and you will see just that. And I wonder how long will the current growth will last. So we shouldn't forget that the so said growth is being fueled by the reinvestment of debt relieve proceeds. What about the political elites of Africa working hard to destroy their own economies?

    November 19, 2013 at 10:39 am |
  7. aCriticalEye

    Who actually wrote this article? Reading it, the first thing that came to mind was "Goldman sachs". It speaks entirely of big money.

    November 19, 2013 at 11:35 am |
  8. Simon

    Ironically, most dictatorships tend to thrive in poverty. With the economy in tatters President Nicolas Maduro might remain in power longer.

    November 19, 2013 at 3:21 pm |
  9. Michael

    One way how not to ruin an economy: 'Don't hire Mrs. Hillary – kick her out of politics'.

    November 20, 2013 at 4:40 am |
  10. seth

    This is propaganda, not news reporting. Go to hell, CNN. Why don't you just call yourself Fox News? Capitalism is destroying the world, and you choose to write this propagandiat crap.

    November 20, 2013 at 11:52 am |
    • K_W

      Seth before you start doing stupid comments, i recommend you look out the window... For us that are living here in venezuela, seeing the wreck that our country is, and where is going, is not stupid propaganda.

      Daka is out of stock, not because of the militarism getting in the way, because when the president said open those doors, the people when there and kick the door open, and sacked 50% or more of the store, and the president applaud that, since they are hitting the capitalism where it hurts. The next days every major and minor store in the country got flooded with people due to the goverment demanding a 50% or more offer on every single article in the store, because it's the capitalism monster that is ruining venezuela

      This week they past from electronic stores that are basicly in bankrupcy to clothing and hardware stores, one of the biggest hardware store in the country is being forced to do an 80% offer on every articles, and people are flooding to buy everything from the store. The only thing that is doing is people buying tons of things for half the price or more so they can reselled them at the price they were originaly are in the blackmarket, and most if not all the minor companies going broke and closing, and most of the major countries going broke or firing tons of people

      Venezuela is going through a really dark time, due to this "socialism" the ignorant president and his combo are pulling on us, when half the population are ignorant sheep that will follow him for anything he throws at him, while the rest of us have to consider migrate to other countries and leave our home behind or stay in a dieing country, that could have been one of the richest, which is now in debt with several countries.

      So go cry me a river, and this satiric news, is actually really accurate on the sad state of vzla

      November 20, 2013 at 3:19 pm |
  11. seth

    This is propaganda, not news reporting. Go to hell, CNN. Why don't you just call yourself Fox News? Capitalism is destroying the world, and you choose to write this propagandist crap.

    November 20, 2013 at 12:00 pm |
  12. Reinaldo Torres

    Venezuela is like that because of the venezuelans. Chavez was consequence and people voted for him. Venezuela is a society that failed. I mean, it has been 15 years, the only thing you can read from it is... the government fits the culture. Because if it was a mistake it would have been only for 4 years, but no... the opposition is very mediocre as well, that is why is a cultural problem and that is what the Venezuelans do not want to realized "I AM THE MISTAKE" FOR BEING LAZY, FOR BLAMING OTHERS, FROM EXPECTING FROM OTHER TO DO THE THINGS FOR ME. The Venezuelan situation will last for many years, you will see.

    November 21, 2013 at 1:13 pm |
    • luis

      What a joke this article is... as with those who speak as if Venezuela had been a powerful economy BEFORE Chavez arrived !! Oh please... it must have been the most corrupt stereotyipical banana republic in South America... and some of these people would like to blame Chavez for the crap that has ALWAYS gone on in a country run by a little oligarchy who sucked on every oil pipe there ever was in the vicinity. With the crap going on in the US... it is somewhat comical to be hearing "lessons" from some people. Oh well... the world is full of morons, who watch moronic news channels.

      January 15, 2014 at 12:14 am |
      • Francisco

        Exactly dude! Listen I don't know what you though about Chavez. We didn't like it so we left. But when I heard this piece by Zakaria I almost passed out in laughter. He is either an idiot or (more likely) gets paid very well to say crap like this.

        January 31, 2014 at 11:57 am |
  13. SLeaSawyer

    Seems like barrack obama is checking off all these items off his list too! America will soon find itself much like socialist Venezuela! Sad!

    November 21, 2013 at 10:37 pm |
  14. diego


    November 28, 2013 at 10:08 am |
  15. Sudargento

    What about China? What about the current crisis in USA?

    This post is ridiculous and outdated neo-classical nonsense. Things changed. Capital is mobile and labor is not. The paradigm changed and your reductionist books stay the same.

    January 12, 2014 at 10:22 am |
  16. Francisco

    Venezuela is indeed in serious trouble, but this are the wrong reasons. 1)Since when big bussines= all business, if your government can't stand up against private interests you might as well have no government. 2) subsidize? Are you kidding me? Farms, oil, areonautics, weapons, teachnology, banks! Everything that is important in America is or was heavily subsidize. 3) dictatorship?!! Half of America don't vote, our two parties do the same thing in economics, and lobyists! All around congress and the senate make sure your vote doesn't count anyways. Listen Venezuelas sucks I agree, But maybe is time for us to buy a big fat mirror...

    January 31, 2014 at 11:48 am |
  17. An Anonymous Indian

    Looks like the process has begun in India circa Nov 2016! Rule #3 – "Induce a currency crisis" is exactly what is happening in this country.

    November 14, 2016 at 5:30 am |
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    I must say, as a lot as I enjoyed reading what you had to say, I couldnt help but lose interest after a while. Its as if you had a excellent grasp to the topic matter, but you forgot to include your readers. Perhaps you should think about this from more than 1 angle. Or maybe you shouldnt generalise so significantly. Its better if you think about what others may have to say instead of just going for a gut reaction to the subject. Think about adjusting your own believed process and giving others who may read this the benefit of the doubt

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