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News tells us what causes the Venezuela crisis

published May 23, 2017 12:32   by admin ( last modified May 23, 2017 12:32 )

News tells us what causes the Venezuela crisis, well at least some news does. You have to dig a bit.

People are prevented to cooperate and create value, to the point of starvation and under abundant abuse by criminals and people turned criminals.

Many news articles seem to miss that point. Here is a recent BBC article that barely mentions the economic situation as behind the turmoil, truly remarkable: Venezuela crisis: What is behind the turmoil? - BBC News

Let's dig a bit deeper and start with CNN Money:

4 reasons why Venezuela became the world's worst economy - Oct. 25, 2016

Two reasons could be valid as causing the others and the crisis:

  • Government spending
  • Price controls

Time Magazine is starting to give some answers Venezuela Government to Blame as Economic Situation Worsens:

Venezuela depends on oil for about 96% of export earnings and nearly half its federal budget. When prices were high, policymakers could have created a rainy-day fund. Some of that money went toward lifting poor people from poverty, but much was stolen: Venezuela is the most corrupt country in the Americas and the ninth most corrupt in the world, according to Transparency International.

Ok, so they used oil money to run the state and when that got less, there was less money for handouts and subsidies.

The Guardian gives more hints Venezuela's worsening economic crisis – the Guardian briefing:

Chávez build his popularity on oil money and foreign debt, using both to fund consumption, while nationalising more than 1,200 private companies deemed not to be functioning in the public interest.

So 1200 companies were nationalised.

The overall themes seem to be two:

  • Reckless spending that has put people in a position of dependency, and when that spending dries up, people have no means, networks, trust in each other or experience to cooperate around creating value
  • An obsession with control, that puts people in charge who are incompetent and corrupt, and price controls that make it impossible to sell imported stuff at market value

To summarize these two themes, it's about preventing people to cooperate and create value, to the point of starvation and abundant abuse of people by criminals. I talked to some Venezuelans about two years ago here in Sweden and they told me how bad the situation was then for their loved ones. I cannot imagine how bad it is now.