Economic Crisis, Public Misjudgment, and Institutional Destruction

Historically, when a national economy faces a serious crisis, the citizens often choose populist slogans for the reason of overcoming the crisis, making a critical mistake to voluntarily destroy the foundations of liberal democracy and the market economy. The choice of Hugo Chávez by the Venezuelan public in 1998, after experiencing economic depression and distrust of traditional parties through the 1980s and 1990s, was a representative example of this tragedy.

Boasting the world’s largest proven oil reserves and enjoying the highest economic prosperity in Latin America during the mid-20th century, how did Venezuela fall into one of the worst human rights violations and economic destructions in modern history?

The answer does not lie in outside forces. As scholars Jraissati and Jakee demonstrate in their study on Venezuela’s institutional design and collapse, the breakdown was caused by deliberate internal policy choices and the systematic destruction of civil liberties. From a legal perspective, constitutional order and the separation of powers function as the last shield protecting citizens’ basic rights from the violence of state power. However, Chávez concentrated absolute power in the executive branch by creating a new constitution in 1999 – extending presidential terms, eliminating the Senate, seizing control of military appointments, and neutralizing the Supreme Court. This led directly to the collapse of the liberal democratic order. Yes, he dismantled the very last shield of free citizens. Furthermore, Steven Levitsky and Daniel Ziblatt warn in their landmark book, How Democracies Die, that democracy erodes when elected leaders reject democratic rules and deny the legitimacy of their opponents. Venezuela followed this exact strategy.

The Politicization of the Oil Industry and Central Planned Economy

Some supporters of state-led or social-led economic systems try to blame Venezuela’s collapse on the mid-2010s decline in international oil prices or U.S. economic sanctions, but this distorts the essence of the matter. In reality, Venezuela’s crisis was the result of self-destructive institutional shifts predicted long before sanctions or the oil crash.

Immediately after taking office, the Chávez regime reformed the Hydrocarbons Law in 2001 and fired 18,000 skilled employees collectively during the 2002-2003 nationwide strike to politically control the state-owned oil company, PDVSA. Instead of being operated efficiently according to market mechanisms, this core national resource became a political fund for the regime. Massive oil revenues were not reinvested into critical infrastructure. Instead, they were indiscriminately moved into populist programs like ‘Misiones’ to buy the votes of the poor. Thus, such populist vote-buying ruined state finances and destroyed productivity.

The Destruction of Property Rights and Market Mechanisms

The core principles of a state governed by the rule of law and a free market economy exist in the protection of private property rights and freedom of contract. However, the Venezuelan government messed up the market mechanisms through decades of price and exchange controls, massive nationalizations, and excessive regulations.

As reported in The New York Times, Harvard University Professor Kenneth Rogoff described the situation in Venezuela as “a human tragedy of this scale outside civil war.” Indeed, between 2002 and 2013, over 1,000 private companies and lands were robbed, making Venezuela the country with the weakest protection of property rights in the world. Price caps and production quotas caused severe shortages of basic goods and hyperinflation, paralyzing the market’s price mechanism.

Such centrally planned economic controls directly led to terrible local living conditions. Maracaibo, once Venezuela’s oil hub, suffers from constant blackouts and shortages of water and gasoline, and people can hardly afford to buy unrefrigerated organ meat, animal fat, and cow feet at the flea market. As the value of currency dropped rapidly (with the IMF expecting inflation to reach 10 million percent) people carry bundles of worthless bills to the bank, and the majority of citizens face extreme poverty, surviving by searching through garbage or gathering wild fruits.

Stealth Authoritarianism Under Pandemic Pretexts

When economic collapse threatened social instability, the regime turned to harsh political repression disguised under legal cover. Legal scholar Ozan Varol describes this movement as “stealth authoritarianism” – a practice where autocrats use laws, public safety decrees, and institutional rules to suppress opponents while pretending to maintain a democratic appearance.

Under Nicolás Maduro, the COVID-19 pandemic offered the perfect pretext to expand totalitarian controls. The government declared states of emergency and used military units to restrict citizens’ freedom of movement and track political competitors. The regime expanded a digital tracking network through the mandatory “Fatherland ID” (Carnet de la Patria), making access to basic social welfare and food aid dependent on political loyalty.

During this process, freedom of speech and expression was also ruthlessly ignored. Medical staff and independent journalists who pointed out flaws in COVID-19 infection statistics or criticized them were arrested and charged with the unreasonable crime of ‘hate speech’. This was an act of totalitarian control that denied constitutional basic rights guaranteed by the constitution and international human rights law, such as freedom of movement, privacy, and freedom of expression.

The Downfall into a “Not Free” Country with Erosion of Democratic Institutions

According to a Freedom House report, Venezuela’s freedom score is only 14 out of 100 (1 out of 40 for political rights, and 13 out of 60 for civil liberties), classifying it as a “Not Free” country. Democratic institutions have been damaged for a long time, while harsh suppression of the opposition and manipulated elections have accelerated this entire process.

Electoral fraud: The Maduro regime tried to forcibly form a ruling-party-dominated legislature through events like the 2020 National Assembly elections held during an opposition boycott, and most democratic nations declared this a clear corrupt election.

Decline of the Judiciary and Separation of Powers: The Supreme Court acted as the regime’s dog, eliminating the legitimate authority of the opposition and selecting the electoral commission according to the regime’s tastes, thereby completely destroying the separation of powers in the constitutional order.

Restoration of Liberal Democracy and the Rule of Law is the Only Solution

Venezuela’s disastrous downfall serves as a historical warning of what tragedies occur when a state violates property rights, rejects market mechanisms, and monopolizes power based on populism. The core values pursued by international law and the liberal democratic constitutional order are human dignity, a free market economy, and the democracy based on a legal structure with the separation of powers. For Venezuela to escape this catastrophe and achieve true recovery, structural reforms must be carried out to absolutely clear away the remains of institutional controls, guarantee property rights, establish an independent judiciary, and restore free market economic mechanisms.