Figure 1.-- Venezuela is potentially a rich country sitting atop a vast oil resource. The population was once known throughout Latin america for extravngance and shopping excess. Today thanks to Chavismo, shoppers wait hours in long lines in the hop of finding basic necesities like toothpaste and toilet paper in stock. Mothers are increasingly frutrated because of the increasingly difficult task of finding nilk for their children.

"To be rich is bad, it is inhuman. This is what I say and I condemn the rich."

Fiedel Castro who took control of Cuba in 1959, like many Third World leaders, believed that socialism was a superior economic system to capitaism. It waa a reagic mistake which has condemned the Cuban people to poverty and economic want. Hugo Chavez who was elected president in 1998 on a popularist campaign has no excuses. By this time it was clear that socialism was a failed economic system. As he under cut Venezezuelan democracy he has been able to drive the Venezuelan economy steadily toward socialism. And unlike Cuba, Chavez had the country's substantial oil income tonpay the bills as well as to lelp support like-minded politicand in his Bolivarian Bloc. And prhrams to help the poor made Chavez popular enough to win elections. The ecomomic result of Chacez's socialist ecomomic policies have, however, steadily reduced production in a country that was already importing large quanties of food and other esentials. Venezuela's oil revenues vary with internationa; prices, but even at high price levels, the oil income can not funance the entire economy and consumers wracked with spiraling inflartion face increasing shortages of eldectricity and food essebtials like milk. Governmrnt agencies report the GNP fell nearly 6 percent in the first quarter of 2010 and inflation reached 30 percent. As a result of Chavez's nationalization, capital is fleeing the country. Inefficent state industries, ill-conceived land reform, and the lack of investment is the cause of the declining national production. This is at a time that economies in most other countries are recovering from the 2009 economic downturn. Chavez's response has been to go after store owners who raise prices and currency traders. The result, of course will simply put further restrictions on both production and needed imports. There are National Assesmby elections scheduled (Fall 2010). Chavez is using the tatic of the Iranian Mullahs, disqualify opposition candidates. This will probably keep him in control. It will not, however, slow the implosion of the Venezuelan economy.

Native Americans

The Venezuelan economy has undersgone several distinct periods. The modern Venezuelan economy is based primarilu on oil and oil exports, but this is a very modetn development, beginning in the 20th century. The Native Americans who inhabited pre-Conquest Venezuela were ptimitive tribes. They varied somewhat in that the eastern tropical jungle tribes wwere largely hunter gathers. The more Andean peoples in the west were more involved in agriculture. None of the ribes were a part of the great Native Ameican cultures, beyound the reacged of the Maya and other Meo-Americn peoples and the Inca further south in the Andes.

Spanish Empire (16th-18th centuries)

The next economic era came ith Colunbus' discovery of America (1492). He would be the first European to see Venezula a few yers later. Venezuelan tribes were the first Spanish contct with South americn peopes, briught sbout becus the Native American peoples on Santo Domingo, the first Spanish colony in the New Workd were fieing in such large numbers and the Spanish needed laborers to work heir plantations. Venezuela for the next several centuries was a backwater of the Spanish Empire. Unlike Mexivo and Peru, little gold was found in Venezuela. And Venezuela was not involved in the trade wherby gold and silver was shipped back to Spain. Under Spanish rule, the economically important regions were the Andean highlands where agriculture was practiced on large hacindas. Also important was the Llanos to the south where cttle were raised. The eastern tropical jungle areas were largely unsettled.

Independence (19th century)

While of limited economic importance, it was in Venezuela that the revolution and independence movement was born (1802). The Wars for Independence were fought for more than two decades. was launched during the Napoleonic Wars. Spain was occupied by the French and unable to support the Roylist forces in the America. Britain with its powerful Royal Navy favored independence because it essentially opened the whole continent to trade. Spain unlike Britain required its colonies to trade with the mother country. Thus even after the French were expelled, the Royal Navy meant that Spain could not significantly assist the Roytalists. After independence, Venezuela was part of a similar economic and political trajectory as the rest of Spanish Empire. The new Government did not make major economic changes beyond removing Spanish colonial restriuctions on trade. Gradually they did adopt high tariffs to protect infant industries. But there were few industries to protect. The country's ecomnomy was primarily agriculture. Coffee and cocoa were very important. This was the situation despite the industrial revolution in Europe and America. Why did the the indidtril revolution not take hold in Venezuela and other Latin Anmeriucan counytries> In part, it was the same reasin that it did bnot take hold in Spain and Portugal. The Iberaian social system did not promomote entrpreneurship. And little effort was made to develop the country's human capital. Whjile Europe and Anerica developed fine public education sysdtems, public education lagged. And not one world class university was created. In addition to agriculture, Latin America turned to exporting raw material. Venezuela had few important raw materials to export, until oil became a valuable commodity at the tirn of the 20th century.

Oil

This all changed with the realization that Venezuela's oil resource was not onky subsrantial, but of huge financail value. d Ir meant that effort woukd begin to develop an important oil industry. The discovery of explotable oil deposits in western Venezuela (Lake Maracaibo) during World War I would prove central to the country's future. Oil made Venezuela the richest country in Latin America. As is often the case of oil-rich Third World countries, the oil while benefiting many Vnezuelans at least temporatily, actually retarded the country's economic development or address the needs of many poor Venezuelans. The country's economy in the 20th century has thus been dominated by the oil industry. This brought great wealth which was not very well distributed.

OPEC and Oil Price Increase

And this process was only intensifid when President Carlos Andr�s P�rez, the Democratic Action leader who won the 1973 elections, nationalized the iron ore industry (1975) and the petroleum industry the following year (1976). This was done under the popular belef that state ownership with extend the profits to the whole society. This od course is posible, but it also increases the possibility of coruption as Brazilians in 2015 re finding out in contection with Petrobas. Venezuela was a founding menber of OPEC (1960). As a result of the Arab-Israeli Six Day War benefitted from a tripling of the oil price. This meant a wave of unprecdented spending. Immigrants fom the rest of Latin America flocked to Venezuela, attrcted by high wages. Venezuelans connected wih the Goverment nd oil industry benefitted from corruption and high wages. There was alo widespread waste. The oil money financed increased imports of food and luxury items. Agriculture declined as Venezuela imported more and more of its food. The oil created a privileged economic elite, but did not develop a productive economy or aid the needs of the poor not connected with the oil riches. Venezelan boys' clothes once varied substantially by class. As a result of the oil income, many middle-class families were affluent and able to afford stylish Western clothing.

Chavismo

The disparities in Venezuelan society was was a factor in the rise of Col. Hugo Chavez abd Chavismo. Like many poorly educated South Americans, he accepted as a article of faith that socialism would cure Venezuela's economonic problems and aid the poor. And many programs initited by President Chavez did aid the poor, financed by the oil wealth. The problem is that in doing so, Chavismo began to destroyed the country's productive economy, both agriculture and industry, and step by step has largely achived just that in his march toward Communism and a Soviet-style command economy. He believed that a state-directed economy could increase production. The result as anyone who has studied histoty and economics was a decline in production. More and more food and basic necesities had to be imported. The oil wealth is such that it could support a great deal, but combined with destroying the ecomomy, mismanagement, and incomportance has result it huge waist. Venezuela has huge untapped oil resources. And despite the need to increase income. PEDERVESA under Chavismo had been unable to even maintain production levels, let lone increase production. Oil production has been declining. Graft and corruption is also proving costly. And the huge drop in oil prices (2014-15) has drastically reduced oil income. Maduro's response has been to blame it all on the United States and Venezuelan businessmen and proceeding with not only more nationlizations, but the arrest of anyone who criticizes him. Mean while Venezuela suffers from a high inflation rate and shortages of food and baic necesities, a unbelievable sitiation for a country with one of the largest oil resource in the world. President Chavez is seeking to build a socialist society and is intent leveling out incomes, but as in Cuba the primary impact has been to generally reduce the overall standard of living. Socialists can argue that they are seeking to achieve social justice. What is undeniablw is that Chavevez's policies has damged the economy. Food and industrial output has declined. This has not caused President Maduro to reassess Chavez's socialist policies, but to double down on them, blame the problems on the United states, nd arrest political opponents.

Created: 1:06 AM 3/17/2015
Last updated: 10:48 PM 3/17/2015