Forget everything about Venezuela’s economic crisis. Yes, radical leftist politicians have governed Venezuela for almost two decades and have run the economy into the ground. Yes, Venezuelans must now stand in line for hours to buy food and consumer goods such as toilet paper, and most have no access to basic medication. Yes, the currency is worthless and inflation is the highest in the world. And yes, violence and looting have become facts of daily life.
But Venezuela has been here before—again and again. Nations, like individuals, can be addicted to overspending, especially when spending is made easy. And with the richest oil reserves in the world, Venezuela’s ability to spend is limited only by how fast it can pump and by the price at which each barrel is sold. As their country faces a new economic disaster, Venezuelans should admit to themselves the sad truth: their country has a dangerous addiction to misspending its oil wealth.
Venezuelan history has a familiar pattern: populist leaders promise citizens economic miracles to get elected, and once in office they recklessly spend oil money to stay there. Yet after each failed economic experiment, politicians have promised another. Chavismo, the leftist movement created by former President Hugo Chávez, may be responsible for the current mess. But Chavismo is just one episode in a long history of irresponsible governments that have overspent when oil prices are high and saved nothing for lean times.
One source of the problem is that the avalanche of money inevitably leads to corruption, inefficiency, and waste. During the 1950s, the Venezuelan dictator Marcos Pérez Jiménez promised to modernize the country overnight. But his government became so corrupt and wasteful that Popular Mechanics famously labeled one of his pet infrastructure projects—a road linking the capital city of Caracas to the coast—as the “costliest freeway in the world,” with a price tag of $5.6 million per mile (or $50.6 million per mile in 2016 dollars).
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