How to increase poverty by decreasing it.

Venezuela has just increased the price of premium grade petrol for the first time in 20 years, from $0.01 (Rs 0.68) to $0.60 (Rs 41), a jump of 6000%. Why? Because with falling oil prices the government has no money for imports. According to the central bank inflation rate last year was 180.9% and the economy contracted by 5.7%. Some say that inflation rate could reach as high as 720% this year. There is a shortage of everything. People are forced to queue overnight to buy food. People roam around with bags of cash in the hope of something to buy. Policemen with loaded pistols restrict the number of people who can enter shops. The government blames hoarding by members of the opposition for the shortages. The official conversion rate is 6.35 Venezuelan Bolivar for 1 US dollar, but in the black market the rate is over 1000 Bolivars to one dollar. The number of people living in poverty has soared to over 70% and the number in extreme poverty to over 45%. The official murder rate has risen to 62 per 100,000 population but many probably go unreported. The government restricts the media from reporting the bad news. Yet, it was so different just 3 years back when Hugo Chavez died in March 2013 after 14 years in power. GDP per capita had increased from $4,105 to $10,810. Consequently, extreme poverty had decreased from 23.4% to 8.5%. Oil revenue had increased from $14.4 to $60 billion but inflation rate was high at 31.6% and murder rate was at 45.1 per 100,000. Unemployment had dropped from 14.9% to 7.6% and infant mortality from 20 to 13 per 1,000 live births. How did Chavez accomplish such a miracle? By vigorous pursuit of socialist policies including food, education, housing and healthcare subsidies for the poor, paid for by sale of oil. Some policies, such as communal banks and workers' cooperatives, were frankly communist. Oil and food industries were nationalised and foreigners blamed for every ill. With key industries and social schemes in the hands of cronies corruption boomed. Oil, a national asset, was sold cheaply to neighboring countries in an effort to build a socialist rampart against the capitalist US. Chavez timed his death to perfection. During his life oil stayed at over $100 a barrel but since September 2014 it has dropped sharply until it is around $32 per barrel today. Along with the collapse in the price oil output has dropped from 3.3 million barrels per day to 2.7 million barrels, leading to a fiscal deficit of 24% this year. The tragedy is that Venezuela has the largest oil reserves in the world with a population of just 29 million, barely more than that of Mumbai. Why is all this important? Because India has innumerable social schemes for the poor with falling industrial output and rising retail inflation. Those who are howling for a rise in spending and fiscal deficit would do well to talk to a few Venezuelans.