Mandated Wage Increases Doom 40 Percent of Venezuelan Businesses

Another day, another terrible economic woe befalls the people of Venezuela at the hands of the Maduro regime. The latest in failed attempts to reduce starvation and utter poverty were to increase the minimum salary by nearly 3,500 percent in one fell swoop, according to the National Council of Commerce and Services of Venezuela.

The strong-arm tactics of President Nicolas Maduro have forced an estimated 40 percent of retail stores to close, many of which will not open again. The Venezuelan bolivar has inflated some 100 percent in the last several weeks. For those still struggling to get used to the new pricing system, 50 of today’s bolivars equals 5 million of the old ones.

While the call for a $15 minimum wage in the U.S. pares in comparison, the bolivar increase to the Venezuelan minimum salary shows what happens in a draconian way. The one-two punch of staggering inflation and stratospheric salaries have led to the shutdown of almost half of retail business. It translates in the marketplace to this. Venezuelan companies are being forced to sell at prices far below cost just as employee salaries are increasing 60 times. According to Maria Carolina Uzcategui, president of the National Council of Commerce and Services of Venezuela, “These decisions are leading many business people to say, ‘No, I can’t do it anymore.”

On Aug. 15, 1971, in a nationally televised address, President Richard Nixon announced, “I am today ordering a freeze on all prices and wages throughout the United States.” In the very short term, there was success, as the markets rallied and economic optimism resumed. However, As Nobel Prize-winning economist Milton Friedman correctly predicted, Nixon’s gambit ended “in utter failure and the emergence into the open of the suppressed inflation. The people would pay the price.” This was done by executive order by the way. Sounds a little scary, and similar to the Maduro regime, with a few exceptions. Nixon, as far as we know, never planned to criminalize those that violated his mandate. The Maduro regime has also banned stores from increasing their prices to cover the salary increases, arguing that it is not necessary. If they do increase prices, store owners or managers can end up in prison. A stellar example of how executive power can get quickly out of control. Uzcategui  says, “Anyone who protests against these measures runs the risk of going to jail, without the right to appeal, without the right to anything, simply because the official whose turn it was to inspect the store just felt like arresting you. He did it, and that’s all.” George W. Bush stated in 2008 that sometimes you have to “Abandon free-market principles to save the free-market system.”

Economist Orlando Ochoa outlines the current Venezuelan situation with utter clarity and astonishment. “The government sector has the monopoly on imports, the currency market is dysfunctional and there’s hyperinflation,” Ochoa said. “So, if salaries are increased by decree, and the commercial and industrial sectors cannot sell their products because of these problems, and on top of that because of electricity blackouts, infrastructure problems and the loss of qualified personnel, which is leaving the country, then it’s easy to understand that many may prefer to close.” Wow. What a mess.

About John Thomas

John Patrick Thomas is a four-time cancer survivor who lives with his family in South Florida. John attended Gettysburg College and The American University before embarking on an entrepreneurial career on Wall Street. He turned to the teaching profession after his life-threatening bout with bone cancer. John has recently written a #1 Amazon Cancer Bestselling book entitled, “A Call to Faith, the Journey of a Cancer Survivor.” He has appeared in publications such as The New York Times, The Wall St. Journal, The Washington Post, Memorial Sloan-Kettering Cancer Center publications, and was featured in new DayStar network series, “Impact with Pastor Dave.” He has traveled as a missionary and may be one of the few people that tell you cancer was the best thing to ever happen to him. You’ll have to ask him why.

3 comments

  1. And yet, about 40% of democrats support socialism. Today’s Venezuela is what you get when you apply socialist policies. And just “a little socialism” is still harmful.

  2. How duplicitous. The author conveienently omits the elephant in the room which are the starvation sanctions which is causing the parabolic inflation. No matter how much ineptitude the Venezuelan government has and whatever culpable actions they may have taken no one can withstand a siege of Leningrad which economically is being done to VE in order to force regime change. Without incorporating that factor the article has no merit.

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