How to ruin a country's economy in five easy steps: Analyzing the case of Venezuela's Economic War

There have been several news articles in the web about the current events in Venezuela's economy. President Nicolas Maduro has started an economic war against the burgeoisie and dollars and price speculators. He has recently adquired special powers in order to attack and destroy corruption and clean the path for Socialism.
However, from the eyes of the experts, the only thing that will be possibly achieved is the ruin of the country's economy. Here are the 5 steps that the Government has taken and that probably shouldn't have.

1.- Attack the Big Business

Recent news have shown what are the tactics of the government to tackle the "unfair" capitalists and burgeois. The last known event was the government takeover of the electronic retailer Daka. The military took the owner and arrested him, while cutting prices of all goods inside the store. The main claim was the unjustified price level that was "absurdly high".

2.- Foster Hyperinflation

If there is something very clear in Macro Economics is the fact that the more money is in circulation, the higher the inflation rate will get. Inflation means the rate the goods increase their monetary value in time. It means that, the higher the inflation rate is, the higher the costs of basic goods will be.

An unjustified increase in the salaries will create a higher cost of producing goods. The higher the cost of producing, the higher the final price of the finished good. Simple math.

Venezuela has an alarming inflation rate of 54% this year. That means, that basic goods now cost 54% more than the beginning of the year.

3.- Induce a Currency Crisis

Since Inflation reduces the value of the currency, a simple and logic solution would be to push the value of the currency higher. One way to accomplish that is to print less money. The less money there is in circulation, the more value it will have. The problem is, Venezuela is actually running out of cash. It can't pay for basic goods that are needed to be imported, like for example, toilet paper.

4.- Subsidize

The Socialist government use to subsidize may of the basic services to the people: education, health care, housing, food, even gasoline is almost free. But not just that, another reason Venezuela is running out of money is because it is subsidizing one of its super socialist partners, Cuba. It has been doing it for years. Venezuela sends around 100,000 daily barrels of oil to the island.
On the other side of the world, with China has a compromise for 400,000 daily barrels for the following 20 years.

5.- Become a Dictatorship

Not a surprise in Latin America the fact that President Maduro gained the power to pass laws without consulting the congress. Paradoxically, the man who claims himself in favor of democracy, decides to take measures in an authoritarian way. He argues that the reason for this is to attack corruption in the public sector. Nowadays, Venezuela is the 9th most corrupt country in the world, and the most corrupt country in the continent. And surprisingly, everything worsened when Maduro's predecessor, Hugo Chávez, started the socialist movement last decade.

Economic experts agree on the fact that Venezuela is on a fast track to ruin (Zakaria; Pardo; Guerra, 2013). According to analysi Fareed Zakaria, while Venezuela has the potential to become as wealthy as Saudi Arabia or Qatar (because of its oil reserves), it is becoming more similar to North Korea.

CNN's article:

http://globalpublicsquare.blogs.cnn.com/2013/11/16/five-ways-to-ruin-an-economy/

Transparency International:

http://www.transparency.org/annualreport/2012

Maduro impondrá límites a las ganancias de empresas: (in Spanish)
http://cnnespanol.cnn.com/2013/11/11/maduro-anuncia-que-pondra-limites-al-porcentaje-de-ganancia-a-las-empresas-en-venezuela/?iref=allsearch

Troops take control of business:
http://worldnews.nbcnews.com/_news/2013/11/11/21399541-venezuela-sends-in-troops-to-force-electronics-chain-to-charge-fair-prices

Cheers!
Jonathan