Venezuelans Revert to Pre-Money Era with Barter
by: Paz Gomez
published: Tuesday, November 21, 2017
Venezuelans are not only struggling with scarcity and repression, inflation could surpass 2,000 percent next year — on the back of hyperinflation in 2016. This has led locals to adopt the old custom of barter for goods and services, to recover purchasing power and overcome their distrust of the official monetary system.
The most prosperous Latin American country in the mid 20th century, Venezuela has turned into a dystopian novel. The problems grew when Hugo Chávez introduced an expansive and unsustainable welfare system, coupled with hostile conditions that killed off the private sector.
Prior administrations were far from market oriented, but they were able to at least maintain Venezuela’s position as an economic leader in the region due to her abundant oil production. By contrast, Chávez began to stumble in 2008, when the oil income decreased by 40 percent with less production: 3.3 million barrels per day in 2006 versus 2.7 million in 2011. To pay for his socialist government, Chávez issued more of the local bolívar currency and took on foreign debt, which reached 71 percent of GDP in December 2012, three months before he died.
Even though Chávez clipped three zeros from the currency, given persistent inflation, price rises have worsened under dictator Nicolás Maduro, on account of deficits financed with new currency and exacerbated by the price-control system. The Cato Institute, a libertarian think tank in Washington, DC, released a report in February 2017, and of all the troubled currencies in the world, Venezuela’s had the highest inflation rate, estimated at 741 percent.
Venezuelans distrust their currency and government more each day, but they are taking whatever actions they can and creating networks to protect themselves. One such mechanism to tackle scarcity and rapidly inflating prices is barter. They have created private groups on Facebook, and they are using the hashtags #Trueque (barter/exchange) and #Vzla in tweets, to obtain the goods and services they need.
They prefer to rely on each other via social networks rather than on the formal or approved economy.
As Nobel Laureate Friedrich Hayek explained, “Inflation is probably the most important single factor in that vicious circle wherein one kind of government action makes more and more government control necessary.” However, resilience propels people to look for alternative ways to satisfy their needs — often outside the law — when the governing system represents a threat to their well-being and jeopardizes their freedom.
As highlighted by Martha Zavala’s tweet, barter has become commonplace in Venezuela, since it cuts out an unreliable currency and helps people to improve their living conditions and enjoy more variety.