Inflation, Starvation, and Migration: the Humanitarian Consequences of Bad Money

As humanitarians, we’ve dedicated ourselves to the eradication of human suffering — poverty, famine, epidemics. We advocate against the underlying causes — civil war, natural disasters, climate change. Seldom though, do we talk about the consequences of poorly managed financial systems - systems that have been remanding populations into poverty for generations. It’s time our humanitarian dialogue reflected the humanitarian impact of bad money.

History has given us many examples of the impact of irresponsible currency control on populations. One needs only to look at the collapse of Zimbabwe when the country’s inflation rate hit more than 86 billion percent in 2008. As salaries became meaningless, schools and hospitals shut down, while people carried their cash to market in wheelbarrows. Citizens with 175 quadrillion Zimbabwean dollars were eventually able to exchange them for $5 US.

A similar story is playing out right before our eyes in Venezuela, where Maduro’s socialist state is falling to pieces. Named “the worst economy of 2016” by the International Monetary Fund, Venezuela’s annual inflation rate recently hit 1,300,000% and is expected to grow to 10,000,000% next year.

It’s easy to get lost in the zeros. Simply put, if you bought $1million USD worth of Bolivars in 2013, you would have less than $0.37 today. In an ironic metaphor for the meaninglessness of the currency, gold from the online game World of Warcraft is worth more than 62 times the value of the Bolivar.

A Venezuelan making the median salary will only take home enough money at the end of the day to buy 900 calories of the cheapest food available. To put that in context, without spending a dime on rent, clothing, or medication, at the end of their day, a worker could only afford two eggs. This, combined with food shortages, has lead 15% of Venezuelans to eat garbage as a regular part of their diet. In July of 2018, six children were dying each week of starvation.

The Venezuelan military is now controlling distribution of scarce stocks of food as desperation increases — and those who support Maduro get better access to goods. The government is using hunger as a mechanism of political control.

Citizens are reverting to gold as store of value. Many have even gone back to the mines to work, which brings its own challenges. Sleeping in the mines has caused many to get infected with malaria. This year, rates have already jumped over 60% over 2017 — which grew 69% more than the year before. Medicine is free, but shortages mean it is virtually impossible to get treatment — even after waiting for hours or days at clinics.

Shortages have also impacted the spread of vaccine-preventable diseases like diphtheria, which was once virtually eradicated. Of particular concern, measles, a disease that infected only one single individual across 2008–2015, has now spread to over 5,300 people. Hospitals simply have nothing to work with — no medicine, no supplies, and a decreasing number of staff. Often they can’t perform surgeries because they don’t have electricity. Even if they can, there are no antibiotics and no cleaning supplies to prevent and treat infections. 79% of hospitals don’t even have regular access to water.

People are dying at such alarming rates that coffins are hard to find and impossible to afford.

Despite the government’s best efforts, people are leaving — little could be worse than the situation at home. Over 7% of the country has left since 2014 — some estimates say more than 4 million people. The UN migration agency predicts it will be worse than the migration crisis in the mediterranean — one the humanitarian sector has been consistently focusing advocacy efforts for the better part of a decade.

Access is a major theme in the humanitarian narrative. Where is the outrage over a lack of access to a functional financial system? It’s coming from a community who have equally dedicated their lives to stopping human suffering, but are looking to decentralization as the solution. The blockchain community.

Using blockchain as the foundational technology, applications can be built in a decentralized fashion — without the need for a government to provide trust. The most relevant use case in Venezuela is the most simple — currency. Bitcoin is a cryptocurrency, money that relies on algorithms instead of centralized and corruptible governments. Bitcoin sales have exploded in Venezuela — the cryptocurrency is particularly popular with younger generations who are mining it using cheap energy or buying it on open marketplaces. Bitcoin is what is keeping their families from starving. Groups like the Open Money Initiative are supporting efforts to bring bitcoin — fundamentally, the freedom to choose a financial system — to Venezuelans.

As humanitarians, we too should be playing a role in addressing not only the symptoms, but also the root causes of medical emergencies. In Venezuela,this could mean paying our staff in the currency of their choice or giving patients a transfer of bitcoin when they leave the clinic. It’s time we start looking at how the decisions we make as a part of our processes can impact our staff and patients as much as our medical programming does.

Anne Connelly is passionate about harnessing blockchain and decentralized technology to transform the lives of people in developing countries. Anne is Faculty at Singularity University and has been an active part of the global blockchain community since 2012. She previously worked with Doctors Without Borders Canada in Central Africa and currently serves on their board of directors. Anne was honoured as one of CBC’s 12 Young Leaders Changing Canada and one of the Fifty Most Inspirational Women in Technology in Canada.

Want to learn more about blockchain and cryptocurrencies? Check out these resources:

TEDx Talk — Blockchain and Human Rights

New Kids on the Block: Resources to get up to speed on blockchain technology

Coinbase — a user-friendly way to buy bitcoin

Blockchain and social impact