From: jameskerlindsay
Over the past 25 years, Venezuela’s gone through severe economic and political turbulence that has seen it become a pariah on the international stage [00:00:00]. Despite possessing the world’s largest oil deposits [01:21:00], even more than Saudi Arabia [01:24:00], the country has economically collapsed and descended into what many call a dictatorship [01:27:00].
The Resource Curse
One interesting aspect of modern international politics is how countries with considerable natural wealth, such as oil, often experience worse developmental outcomes, including low economic progress and greater political instability, than countries without as much [00:52:00]. This phenomenon is known as the resource curse [01:12:00], and Venezuela serves as a particularly good example [01:17:00].
Early Oil Boom and Economic Development
At the start of the 20th century, everything changed for Venezuela when oil was discovered in the west of the country [04:28:00]. Over the subsequent decades, Venezuela profited massively from the worldwide surge in demand for fossil fuels [04:35:00]. By the 1950s, Venezuela had emerged as the world’s largest petroleum exporter, becoming a key supplier to the United States [04:42:00]. This oil wealth drove economic development in various other areas [04:52:00].
Economic Problems and Political Instability (Late 1980s)
Serious economic problems began to emerge in the late 1980s [05:06:00]. As international oil prices fell dramatically between 1981 and 1986, Venezuela suddenly faced a debt crisis [05:11:00]. Inflation surged, unemployment grew, and the country descended into political instability [05:20:00]. Major riots broke out in Caracas in 1989, leading to hundreds, if not thousands, of deaths [05:26:00].
The Chavez Era: Renewed Spending and Declining Production
When Hugo Chavez became president in 1998 [05:51:00], he launched a radical agenda of economic, social, and political change [06:03:00]. Buoyed by renewed oil price rises, he significantly increased public spending on healthcare, education, and public infrastructure projects [06:09:00]. Crucially, he nationalized parts of the economy and inserted inexperienced political allies into key sectors, including the country’s oil industry [06:18:00]. Despite high international oil prices, the increasingly poorly run oil industry suffered from low investment and poor maintenance, leading to declining production and slowed revenues [07:24:00].
The Maduro Era: Catastrophic Collapse
After Hugo Chavez’s death in 2013, Nicolas Maduro succeeded him [07:38:00]. Venezuela’s growing economic difficulties became a full-blown crisis when global oil prices dropped sharply again [07:59:00]. Prices fell from almost 29 a barrel by January 2016 [08:04:00]. The effects on Venezuela were catastrophic [08:14:00], as the economy collapsed, and standards of living dropped sharply [08:17:00]. This forced hundreds of thousands of people to leave the country in search of work, and popular protests erupted [08:22:00].
Modern Re-acceptance: Driven by Global Energy Needs
Despite the dire political and economic situation [01:38:00], Venezuela appears to be regaining International acceptance [00:32:00]. This shift is not due to Venezuela overcoming its resource curse by re-establishing democracy [13:10:00]. Instead, it is driven by wider geopolitical factors [13:37:00], particularly Russia’s war against Ukraine, which has closed off energy supplies and forced a worldwide hunt for other oil producers [12:42:00]. With the world’s largest reserves, Venezuela simply could not be ignored [12:50:00]. Essentially, Venezuela’s rehabilitation stems from the fact that the rest of the world still suffers from the resource curse of being overly reliant on fossil fuels [13:14:00].