Venezuela Didn't Need High Oil Prices To Prosper Before Chavismo

The images of Venezuela’s economic collapse — long lines, shortages, and street protests — have quickly become a cliché of our increasingly connected internet experience. Even more, played out are the simplistic arguments of why Venezuela is in ruins. In his late night TV show, leftist comedian John Oliver famously alluded to declining oil prices and other vague factors such as “mismanagement” as the main factors behind Venezuela’s collapse.

Many leftist commentators have repeated these same talking points ad infinitum as a way to downplay the Venezuelan state’s blatant disregard of basic economics. But the declining oil price rationalization takes the cake as the biggest myth in explaining Venezuela’s economic crisis. For that reason, a study of Venezuelan economic history is necessary to refute these myths.

Oil Was Not the Only Reason Venezuela Became Rich

While it’s true that oil played a substantial role in the development of the modern-day Venezuelan state, it’s misleading to attribute the country’s past prosperity solely based on its large endowment of oil reserves.

Economist Hugo Faria provides an excellent appraisal of Venezuela’s economic institutions in Hugo Chavez Against the Backdrop of Venezuelan Economic and Political History. Faria explained how Venezuela had a smaller state presence in the economy during Venezuela’s boom period from the 1920s to the 1970s. Property rights were stable, the regulatory state was light, and sound money was a fixture of the political economy (Venezuela was late to the central-banking party when it established its central bank in 1939).

Venezuela would be placed in an enviable position post-World War II. Not only was Venezuela an attractive spot for foreign investment, it also became a magnet for skilled immigrant labor from countries such as ItalyPortugal, and Spain. These factors helped bring Venezuela to the promised land of economic prosperity. According to some estimates, Venezuela found itself in the top 10 richest countries in the world — a far cry from its current economic state.

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Jose Nino is a Venezuelan-American political activist based in Fort Collins, Colorado. Contact: twitter or email him  more

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