Introduction
This is not the first time when I find myself writing an article shining a little light about the beginning of the current economic and political crisis that’s happening in Venezuela, which as I am sure a lot of you already know, is the worst crisis in the history of the country.
However, recently I found a new document from a well respected Venezuelan economist, where he shared his own explanation about certain events that I wasn’t aware before, events that in his opinion, had some influence in the deterioration of the country that started a few decades ago.
Since this was new information for me, I decided it was a good idea to prepare an article and share this new finding with the community.
To start it off, it is very important to understand that Venezuela wasn’t always a country in crisis, until a few decades ago, it was a very prosperous place, where people from other South American countries came here to have a better life, and even people from European countries like Spain, Italy, Portugal, Germany, among others, also came here in great numbers. This is why today there are so many Venezuelans with European passports returning to Europe to escape from the current situation.
To put things into perspective, between 1925 and 1974 the Venezuelan economy was the one growing at a faster rate on a global scale, and between 1950 and 1974 Venezuela also had the lowest inflation rate in the whole planet Source in Spanish
Measured as real gross domestic product (GDP) per capita in international dollars, Venezuela attained levels of more than 80 percent of that of the United States by the end of 1960. Source
It is clear that in those decades the future of Venezuela looked bright, the economy was going great, and people from all over the world wanted to come and live in the country. So how come now Venezuela finds itself in a circumstance that is the complete opposite?
Well, apart from the totally different economic & political model that is currently in place in Venezuela, one where there isn’t a free market and the government acts in a totalitarian way due to their ideology, there was an important event that happened in the United States, which according to the author of the document I recently read (which is linked at the end of this post), ended up having a great impact in the way politicians in Venezuela developed their strategies to govern the country.
Specifically, this event is called the “Nixon shock”, when the American president informed the world that the dollar-gold conversion was no longer accepted. Apparently, this important change in the economic policies of the most important country in the world, caused a lot of modifications regarding how Venezuelan politicians handled the national oil, mainly due to the sudden appearance of the oil rent, which is the difference between the production costs of the oil, and the price people pay for it, this is the part that I wasn’t aware of, but the “Nixon shock” might have been one of the factors that triggered the appearance of the oil rent, at least, that’s what this economist is saying.
Given the huge potential earnings coming from the oil industry thanks to its rent, and doing a little bit of intellectual speculation, there is the possibility that Venezuelan politicians from that time saw this new-found money as a way to offer “free stuff” to the people (which is, by the way, a strategy that also happens in other countries, but in the end, nothing the government gives away is “free”) with the goal of earning their popular support, and achieve political power through this classical populist strategy.
Since the “Nixon shock” happened in 1971, it is then no surprise to see that by the end of the 70s, Venezuela started to begin its deterioration, once populism took control of Venezuela’s political landscape, the country started to get worse and worse with each passing year, even to the point of having a social explosion at the end of the 80s.
The politicians in Venezuela shifted their focus from having a country with proper law and order, to only caring about having access to the oil revenue and offering stuffs to the people, earn more votes and win elections, which was clearly an extremely unhealthy dynamic, as we can now see by its results.
After more than 2 decades of deterioration, the people desperately wanted to find a solution to what was happening with their quality of life, I think they didn’t understand the causes of the problem, and by the end of the 90s, the voters decided that Chavez was the solution.
It has to be said that Chavez before becoming President was completely different than Chavez after becoming President, but still, even after showing his true intentions once he enforced the currency exchange control, the people kept believing in this model, instead of stopping populism and the use of oil money to buy votes, the people went “all-in” towards the ultimate expression of a populist government, that ultimately ended up being a totalitarian government, the worse one in the history of the country.
The result of this stubbornness can be seen today in all those news, articles and reports that are constantly informing the world about the horrible situation in Venezuela. The problem for Venezuela has always been having a populist form of government, except that right now, the ruling political party more than being populist, it has morphed into an extensive criminal organization, with ties to all sort of criminal groups from all over the world like Hezbollah itself.
Conclusion
If Venezuela is ever going to overcome this difficult situation, it will only happen with the help of other countries that are committed to defend freedom and stop terrorist governments, and in order to stop suffering from these crises, the people need to finally understand that populism or any other similar system always ends in the government having more power than what it should have. People must choose freedom, and do it in perpetuity.
I am looking forward to reading your comments about the current situation in Venezuela!
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