Let’s add to the collection today by perusing an interesting – but frustrating – article in the New York Times about Venezuela’s near-decimated oil industry.
Authored by Sheyla Urdaneta, Anatoly Kurmanaev and Isayen Herrera, it provides a thorough description of how the energy sector in oil-rich Venezuela has collapsed.
For the first time in a century, there are no rigs searching for oil in Venezuela. Wells that once tapped the world’s largest crude reserves are abandoned… Refineries that once processed oil for export are rusting hulks… Fuel shortages have brought the country to a standstill. At gas stations, lines go on for miles. …The country that a decade ago was the largest producer in Latin America, earning about $90 billion a year from oil exports, is expected to net about $2.3 billion by this year’s end… More than five million Venezuelans, or one in six residents, have fled the country since 2015, creating one of the world’s greatest refugee crises, according to the United Nations. The country now has the highest poverty rate in Latin America, overtaking Haiti.
But here’s what shocked me. The article never once mentions socialism. Or statism. Or leftist economic policy.
Instead, there is one allusion to “mismanagement” and one sentence that refers to government policy.
…years of gross mismanagement… Hugo Chávez, appeared on the national stage in the 1990s promising a revolution that would put Venezuela’s oil to work for its poor majority, he captivated the nation. …Mr. Chávez commandeered the country’s respected state oil company for his radical development program. He fired nearly 20,000 oil professionals, nationalized foreign-owned oil assets and allowed allies to plunder the oil revenues.
Almost 1800 words in the article, yet virtually no discussion of how maybe, just maybe, Venezuela’s hard shift to the left (as illustrated by the chart, economic freedom has steadily declined this century) may have contributed to the collapse of the country’s major industry.
This is journalistic malpractice. Sort of like writing about 2020 and not mentioning coronavirus or writing about 1944 and not mentioning World War II.
For those of you who do care about facts, it’s worth knowing that Venezuela has the world’s lowest level of economic liberty according to Economic Freedom of the World and second-to-lowest level of economic liberty according to the Index of Economic Freedom.
In a column for USA Today, Daniel di Martino writes about the awful consequences of his nation’s drift to socialism.
All my life, I lived under socialism in Venezuela until I left and came to the United States as a student in 2016. Because the regime in charge imposed price controls and nationalized the most important private industries, production plummeted. No wonder I had to wait hours in lines to buy simple products such as toothpaste or flour. …My family and I suffered from blackouts and lack of water. The regime nationalized electricity in 2007 in an effort to make electricity “free.” Unsurprisingly, this resulted in underinvestment in the electrical grid. By 2016, my home lost power roughly once a week. …The real reason my family went without water and electricity was the socialist economy instituted by dictators Hugo Chavez and Nicolas Maduro. The welfare programs, many minimum-wage hikes and nationalizations implemented by their regimes resulted in a colossal government deficit that the central bank covered by simply printing more money — leading to rampant inflation. …I watched what was once one of the richest countries in Latin America gradually fall apart under the weight of big government.
And he issues a warning about what could happen to the United States.
…neither Medicare for All nor a wealth tax alone would turn the United States into Venezuela overnight. No single radical proposal would do that. However, if all or most of these measures are implemented, they could have the same catastrophic consequences for the American people that they had for Venezuela.
The good news, so to speak, is that it would take many decades of bad policy to turn the U.S. into an economic basket case. There’s even a somewhat famous quote from Adam Smith (“there is a great deal of ruin in a nation“) about the ability of a country to survive and withstand lots of bad public policy.
But that doesn’t mean it would be a good idea to see how quickly the U.S. could become Venezuela. As I pointed out when writing about Argentina, it’s possible for a rich country to tax, spend, and regulate itself into economic crisis.