Venezuela's Crisis: What's Oil Got To Do With It?

What originally caused the Venezuelan crisis was not oil, nor can oil now be inherently its cure. The cause of Venezuela’s collapse is the stunting of domestic capital accumulation that began with monetary and social policies of the preceding century and whose effects are now fully felt. And it is the same brand of poor economic policies and government spending (albeit not in the same degree) that is sought after and implemented in the U.S. or Europe, where it is touted either as innovative, stimulating, or anti-cyclical.

In 1952, in The Plight of Underdeveloped Nations, Mises was discussing Iran’s plans to nationalize their oil industry and was pointing out the precise—and since unchanged— the hypocrisy of the West in criticizing socialist policies they were themselves implementing at home:

If it is right for the British to nationalize the British coal mines, it cannot be wrong for the Iranians to nationalize the Iranian oil industry. If Mr. Attlee [Labour Party leader and prime minister of England from 1945–1951] were consistent, he would have congratulated the Iranians on their great socialist achievement. But no socialist can be or ever was consistent.

Mises’s further analysis in that essay—quoted below at length—can be used not only to cut through to the heart of the current Venezuelan problems but to lay out the only solution for overcoming the crisis and allow for true prosperity. And as you might have guessed, it does not involve mentioning the large oil reserves at all:

What the underdeveloped nations must do if they sincerely want to eradicate penury and to improve the economic conditions of their destitute masses is to adopt those policies of “rugged individualism” which have created the welfare of Western Europe and the United States. They must resort to laissez faire; they must remove all obstacles fettering the spirit of enterprise and stunting domestic capital accumulation and the inflow of capital from abroad.

But what the governments of these countries are really doing today is just the contrary. Instead of emulating the polices that created the comparative wealth and welfare of the capitalistic nations, they are choosing those contemporary policies of the West which slow down the further accumulation of capital and lay stress on what they consider to be a fairer distribution of wealth and income. Leaving aside the problem whether or not these policies are beneficial to the economically advanced nations, it must be emphasized that they are patently nonsensical when resorted to in the economically backward countries. Where there is very little to be distributed, a policy of an allegedly “fairer” redistribution is of no use at all. […]

The problem of rendering the underdeveloped nations more prosperous cannot be solved by material aid. It is a spiritual and intellectual problem. Prosperity is not simply a matter of capital investment. It is an ideological issue. What the underdeveloped countries need first is the ideology of economic freedom and private enterprise and initiative that makes for the accumulation and maintenance of capital as well as for the employment of the available capital for the best possible and cheapest satisfaction of the most urgent wants of the consumers.

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