
Venezuela is on the brink of a complete economic collapse - csomar
https://www.washingtonpost.com/news/wonk/wp/2016/01/29/venezuela-is-on-the-brink-of-a-complete-collapse/?tid=pm_business_pop_b
======
aristus
It's fun to use these situations as proof of one political belief or another,
but I suggest looking deeper than "socialism" or "leftism". Chavez tapped a
popular anger that was the direct result of mismanagement by the previous 30
years of government that was decidedly not leftist. The mood was so bad that
Chavez was forgiven for a coup attempt and allowed to run for president. Think
about that for a second. The AD-COPEI regime in power from the 60s to the 90s
was so discredited that a _literal traitor_ was elected to replace them.

Venezuela's problem is not political flavor, it's the oil curse itself. I have
family there, and it is quite bad. The economy is stuck in several sorts of
cleft stick: Saudi Arabia's game of chicken with the rest of OPEC, the
mismanagement called out in the article, the hangover of Chavez policies
(which were necessary for popular support), and of course the military-narco
complex always in the wings.

~~~
awl130
the oil curse? come on. natural resources are neither a blessing or curse.
norway is a small country with lots of oil and isn't a disaster. i don't know
what the problem is but don't blame it on oil.

~~~
guyzero
A curse is literally what economists call these situations.
[https://en.wikipedia.org/wiki/Resource_curse](https://en.wikipedia.org/wiki/Resource_curse)

~~~
legulere
Another name would be Dutch disease:
[https://en.wikipedia.org/wiki/Dutch_disease](https://en.wikipedia.org/wiki/Dutch_disease)

------
sremani
The Cubans did not run to Americans out of love, they saw the writing on the
wall that their patron/sponsor in Venezuela was a sinking ship. This was long
time coming but things will not really settle down or improve in VZ until
2019, when PDSV will be vacated out of power, but one can hope that can happen
early.

The Oil bust and Venezuela creating a welfare state around $100/barrel (along
with the corruption) led to this crisis. This is the cost of Leftist Populism.
Some ones got to pay, and usually it is the populace. Caracas is probably most
violent City in Americas, today.

People in US clamoring for leftist populism should take deep look at
Venezuela.

~~~
TheBiv
Oil represents 95%[1] of Venezuela's export earnings. When 95% comes from a
single source and that source loses 1/3rd of it's value in a short amount of
time then its straightforward to understand why Venezuela is in this
situation.

>>People in US clamoring for leftist populism should take deep look at
Venezuela.

I don't see a reason to bring your political leanings into a discussion of
straightforward economic cause and effects.

[1]
[http://www.opec.org/opec_web/en/about_us/171.htm](http://www.opec.org/opec_web/en/about_us/171.htm)

~~~
fiatjaf
"I don't see a reason to bring your political leanings into a discussion of
straightforward economic cause and effects."

Really? Can't you really step out a little and try to think why oil represents
95% of Venezuela's export earnings? Are you really sure that pointing the
cause of Venezuela's collapse on leftist policies is just a fruit of "policial
leanings"? Is there anything you would you consider as reasonable argument
against "leftist populism"?

~~~
crdoconnor
Saudi Arabia, despite being not in any way leftist, is in pretty much the same
boat. They've just got more money in the bank at the moment.

Similarly, Ecuador is pretty leftist. It just has a substantially better run
economy.

~~~
varjag
Saudis are the ones waging the price war. Without their effort, oil prices
would've been quite a bit higher now.

~~~
Riod
Waging a war by not supporting artificially low quotas enacted by a cartel?
That makes no sense

~~~
varjag
OPEC without SA is irrelevant, it's like NAFTA without the USA. Saudi wage the
price war on emergent players (frackling and shale extractors), disregarding
the wishes of lesser market players like Venezuela.

~~~
Riod
It's not a price war if you're reverting to a competitive market after many
years of running a cartel. Unless you dislike a competitive market?

The Saudis realise that setting a high price allows for artifically high shale
investment which would eventually disenfranchise the Saudis. They rather take
some pain now than sponsor their own demise.

~~~
varjag
My point was Saudi are not some victims of cartel policies. They run it (or
ruin it) at their own discretion as the largest member by far. Cartel quotes
were never binding them in any practical way.

------
ChuckMcM
Venezula is a really interesting example in my mind. Here is a country which
has all of the fundamental things it needs to be a vibrant, robust, and
generally great country and yet it isn't one.

It has natural resources which are in demand, and for which the tools and
techniques to convert them into exchangable goods is well understood. It has
few serious military threats from its neighbors and so militarily its
primarily responsible for civil and criminal activities, and it has nominally
"easy" access to nearby markets for trade goods (importing things it doesn't
have domestically).

But it also has people in "charge" to have no idea how running a country even
works much less the forces that act on it. And as many anti-libertarians will
point out, the lack of a competent government does not result in a paradise
emerging from the work of motivated individual actors within.

And understanding that, go back to the founding of the US and its fits and
starts trying to go from being a colony to being a country, and most
importantly the constraints on their own actions that everyone had to agree to
in order to get the Constitution done. Try to understand why that worked is an
interesting (and perhaps vital) exercise. Was it the people? Their values?
Their education? Their understanding? Was it coincidence or luck?

I find myself desperate to know why one institution works and another fails.
Both large like nation-states, and small like companies. How is it "no big
deal" for some companies to get a new CEO and catastrophic for others?

~~~
qrendel
> _And as many anti-libertarians will point out, the lack of a competent
> government does not result in a paradise emerging from the work of motivated
> individual actors within._

There's a big difference between an incompetent government and a libertarian
free-market paradise. The two aren't even comparable. A corrupt government
bureaucracy with central economic planning based on nepotism and cronyism
(presumably, Venezuela) is pretty much the polar opposite of what any sane
libertarian or anarcho-capitalist would be advocating for.

~~~
ChuckMcM
I agree they would not advocate it but I'm wondering how they would _prevent_
it. It is easy for people who don't understand the consequences of their
actions to over power those who do, because they are willing to take action
that favors short term gain over long term survival. So your 'sane
libertarian' or 'anarcho-capitalist' who was not also willing to destroy the
economy to further consolidate their influence, would be swept aside by thugs
who were willing to do that.

------
rickitan
I'm a Software Engineer born and raised in Venezuela. I moved to Canada one
year ago. Ask me anything!

~~~
chromaton
Would you suggest Venezuela for a vacation right now? It looks like a dollar
would go a long way.

~~~
rickitan
Answering this question has been harder than I thought. I hate to say "Don't
go to my country right now". But I've to be honest, I don't think it's worth
the risk visiting right now due to crime, robbery, murders, kidnaps and more..
Even though a dollar will go a long way, your life is worth a lot more..
Hopefully things will get better soon you will be able to see the Angel Falls
and Los Roques with your own eyes!

------
epx
A .vn minister said recently that toothpaste was difficult to find in stores
because people were brushing their teeth 3x a day, which is "obviously too
much, 1x at night is enough". It is incredible how stupid things a person
allows him/herself to say when paid to do it.

~~~
ipince
Well, the media mischaracterized what she said in order for it to sound more
shocking. What she actually said was that people use more medication than they
need, in general. Still preposterous, but I'm saddened that the media makes
these outlandish claims that only hurt its credibility in the long run.

------
_Marak_
No surprises here.

You can look at base points for Venezuela credit default swaps in 2014.

[http://money.cnn.com/2014/12/12/investing/venezuela-
russia-d...](http://money.cnn.com/2014/12/12/investing/venezuela-russia-
default-wall-street/)

[http://i2.cdn.turner.com/money/dam/assets/141212155648-venez...](http://i2.cdn.turner.com/money/dam/assets/141212155648-venezuela-
credit-default-1024x576.jpg)

Wall Street has been betting against Venezuela for two years.

------
api
"Why not? The answer is that Chávez turned the state-owned oil company from
being professionally run to being barely run. People who knew what they were
doing were replaced with people who were loyal to the regime, and profits came
out but new investment didn't go in."

This is a classic "that never works" maneuver. The USA did the same thing to
some extent when it "de-Baath-ified" Iraq, which shows that this is a thing
that doesn't work regardless of whether you are "left wing" or "right wing"
and it doesn't even work when the USA does it. It also sometimes fails in the
corporate world, such as when an "activist investor" replaces everyone who
knows what they're doing in a company or a lot of people are fired in an
acquisition.

~~~
krisdol
>This is a classic "that never works" maneuver

Funny how this argument starts to fall apart when you look at all the failing
oil & fracking companies in the US, which were run by people who knew what
they were doing and had no socialist petro regime to be loyal to and no
activist investors.

~~~
cbr
Aren't they failing because of low prices, not because of technical
incompetence?

~~~
protomyth
The frackers have stopped drilling new wells, but the way fracking works
actually lends itself to this. They are not long term wells like you typically
see, but more of a burst and drill again. When the prices go up, they will put
the equipment back in the field.

Now would be a good time to schedule some of those infrastructure projects
that need truckers, welders, and such.

------
johnrob
>> The first step was when Hugo Chávez's socialist government started spending
more money on the poor, with everything from two-cent gasoline to free
housing.

That sounds exactly like the kind of thing we (HN crowd) have been dreaming
about. Hopefully we don't end up reading a similar comment down the road about
the US!

~~~
chadnickbok
I think there's a marked difference between conversations about basic income
and "two-cent gasoline".

In this case, direct market manipulation of specific goods paid for by a
budget entirely reliant on the price of oil being at historical highs doesn't
seem like good policy, even to those who'd vote for Bernie Sanders!

------
bobby_9x
"Now, there's nothing wrong with that — in fact, it's a good idea in general"

When you are spending more money than the money coming into the system, which
happens with almost all socialist systems (because commerce is severely
restricted), it collapses.

~~~
jsprogrammer
Is there an economy in existence that doesn't run a deficit?

I don't think it is possible under current monetary regimes.

~~~
psuter
If you believe this list [1], South Korea, Germany, Switzerland, among others
(I've informally excluded tiny and oil-rich ones).

[1] [https://www.cia.gov/library/publications/the-world-
factbook/...](https://www.cia.gov/library/publications/the-world-
factbook/rankorder/2222rank.html)

~~~
jsprogrammer
Heh, downmods for a question. Classic HN.

Anyway, I checked out the first country (South Korea) in your source.
2014-12-31 estimate of outstanding debt is $424.5 Billion with a credit stock
of ~$2.4 trillion.

If you want to only analyze receipts over a short period of time, then I'd
guess you can find a positive period for most countries.

------
masterleep
Who could ever have predicted that socialism would destroy the economy?

~~~
kentrado
Every time some flavour of socialism fails, out of the woodwork they come:
See? Socialism doesn't work, Capitalism is perfect.

Every time some flavour of socialism succeds: Hmm... Yea those Scandinavians
are a ticking bomb, any day now they are going to fail. (40 years later)...
Any day now...

~~~
pmelendez
> Hmm... Yea those Scandinavians are a ticking bomb,

Most Scandinavians countries are kingdoms ( I think only Finland is actually a
republic) and when people talk about socialism they usually have Marxism-
Leninism in mind. The Nordic model [1] relies on the free market to have a
welfare state, which contrast with Marx's ideas of state and social classes.

[1]
[https://en.wikipedia.org/wiki/Nordic_model](https://en.wikipedia.org/wiki/Nordic_model)

~~~
dragonwriter
> when people talk about socialism they usually have Marxism-Leninism in mind.

Er, what? Socialism is _much_ more than just Marxism even in the broad sense,
and Leninist vanguardism ("Marxism-Leninism") is not particularly significant
in modern socialism. About the only thing from even Marxism in the broad sense
that is fairly broadly common throughout all of what people talk about under
the umbrella "socialism" is the broad outline of the critique of
concerns/problems with capitalism, but the actual alternatives vary
considerably.

------
fiatjaf
I really wish to hear from people who support leftist causes what they think
of this and if there's anything, any hypothetical event, that they would
accept, if happened, as a proof that leftist policies are bad.

~~~
mvaliente2001
I'm not sure if I qualify as leftist, but I can answer your questions. Is
there anything that makes me accept that leftists plicies are bad? Yes.
Evidence, like Venezuela's example, prove that _some_ leftists policies are
bad. The current government and the policies it have taken are the only
responsible for the current inflation and product scarcety. But that doesn't
mean that _every_ leftist policy is bad.

For example, the Venezuela government started programs to eliminate
analphabetism, increased the number of doctors and free hospitals (in a
program with the help of Cuba), reduced the infant death rate, increased the
education budget, the access to potable water and other things like that.
Granted, none of these measures are leftist per se, but also, these are not
the things a right wing government cares about (at least not our right wing
governments).

I think the reason so many people in Latin America is leftist is not ideology.
It's simply that the other option is not liberalism, free markets and laisse
faire. The alternative is chronism, medieval institutions (feudalism is alive
in a lot of places), privatization of earnings and nationalization of loses.

~~~
fiatjaf
Thank you for being the only one to answer my question.

But let me make another one. We will not agree on an answer, you don't even
have to reply if you don't want, but I want to ask anyway: you don't see any
relationship between the reasoning behind free hospitals and the Venezuela
economic collapse?

~~~
mvaliente2001
Relationship between some improvement in health services and economic
collapse? No. I think the economic trouble is due to a bigger, wider
mismanagement. Health and education are just a drop of water that could (and
should) remain untouched even after the prices of oil went down.

When I talked about an increase in health and education expenditures, I was
talking about increase in the percentage of the budget, so they were done at
expense of other things, and it began before the increase in oil prices. The
years previous to Chavez, the health budget was 3.5-4.5% and it went up to
6.0%, and remained above 5.0 up to 2010. As you can see, these are not
exorbitant expenses, and they are below other countries' expenditures like
Uruguay, Tanzania or Uganda [1].

The economical crisis is not because the government increasing expenditures in
some basic human needs, but because there hasn't been a cut down anything at
all. There are a lot of valid criticisms that can be done to Venezuela's
government, but expending a little bit more in its people is not one, in my
opinion.

[1]
[http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS](http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS)

------
cgrubb
The Venezuela wikipedia page makes it sounds as if the Bolivarian Revolution
is a repeat of history:

    
    
        The election of Carlos Andrés Pérez in 1973 coincided
        with the 1973 oil crisis, in which Venezuela's income
        exploded as oil prices soared; oil industries were 
        nationalized in 1976. This led to massive increases in 
        public spending, but also increases in external debts, 
        which continued into the 1980s when the collapse of oil 
        prices during the 1980s crippled the Venezuelan economy.
        As the government started to devalue the currency in 
        February 1983 to face its financial obligations,
        Venezuelans' real standards of living fell dramatically.
        A number of failed economic policies and increasing 
        corruption in government led to rising poverty and crime,
        worsening social indicators, and increased political 
        instability.

------
scardine
Populism is the best regime until the money runs out and no one is left to
shake down.

A lot of damage was done in Argentina, Brazil, Bolivia and Venezuela.

------
dpeterson
"Sure socialism didn't work for them; but with a little finesse, we'll do it
better" (says every socialist ever).

------
dang
[https://news.ycombinator.com/item?id=11001169](https://news.ycombinator.com/item?id=11001169)

------
researcher7
Another socialist utopia collapsing? Shocked, shocked I tell you.

------
m0skit0
I will do some Nostradamus here: when Venezuela stops being leftist, oil
prices will suddenly and surprisingly rise.

~~~
AndrewBissell
So, your claim is that the global price of oil is being manipulated lower
solely to punish Venezuela for having a Chavista-style government?

Allow me to indulge in some counter-prognostication. Shale technology will cap
the oil price at $50-$60 per barrel in perpetuity. Since the Chavistas rely on
a price far higher than this to fund their theft and largesse, their system
will be revealed to be no more economically sustainable than the dozens of
other socialist revolutions that have been tried.

~~~
m0skit0
I'm not defending reliance on high oil price as a good long-term strategy. In
any case the money was used to improve the living standard of a lot of people,
and that's something I cannot disagree with. Still I would have used that
money to diversify the economy reliance on oil and make sure we had funds for
the future, but that doesn't make the same political impact.

And the dozens of other socialist revolutions that have been tried all failed
because they have been all boycotted by capitalist nations, with war, arms
race, space races, illegal embargoes, and whatnot, not because the socialist
system is not sustainable. Socialism cannot compete with capitalism in term of
generating huge amount of capital and growth because it is not the goal of the
socialist system.

Still, examples like Cuba with a 50-year embargo from the world superpower
manages to have the best health of all latinamerica, and even a lower children
mortality than the USA. I totally disagree that this is a failure. The USSR
also went from a absolute monarchy slavery behind-time empire to a world
economic and military superpower with one of the best health and education
systems in ~30 years, which is an unparalleled impressive feat.

