Venezuela is hurting, and hurting bad. The problem right now is that it is numb because of its addiction to oil.
Last month Venezuelan president Hugo Chavez abolished term limits, which dated back to the first year of his term, in order to maintain a personal and indefinite stranglehold on the government. Also included in this barrage of new legislation, Chavez called to end central bank autonomy in order to strengthen the state’s expropriation powers and give himself complete control over Venezuela’s monetary reserves. Essentially, this will solidify his regime at the helm of one of the world’s biggest exporters of oil until his own bereavement or another, probably more radical, coup decides to take a crack at him. Chavez has a Fidel Castro-like influence on his country owing to the many socialist plans he has implemented to aid the poor and working classes; thus, the chances for an overthrow by the masses is slim to none.
By enticing the middle and lower classes in reinforcing innately positive socialist policies such as universal education (one from which our country already benefits) and universal health care (one from which our country, I hope, will soon benefit), Chavez is creating an innately negative policy with respect to today’s ‘green revolution’: relying solely on the prognosticated wealth of unexploited oil reserves.
Chavez, like President Mahmoud Ahmadinejad of Iran, the members of the Saudi aristocracy and the late Soviet Union, is a ‘petropolitician.’ And like the late Soviet Union, Chavez is using this prognosticated capital to fund a breadth of domestic policies that include the above-mentioned along with several anti-poverty, food and housing initiatives that to the low income voter, who is probably having to make ends meet for survival, seem overwhelmingly appealing. Where the problem lies is not in the present. In fact, if Venezuela assumes oil projects such as the Orinoco Belt, it will soon follow suit with its expectations and pass Saudi Arabia as the greatest producer of oil. No questions asked. Where the problem lies is in the, perhaps not immediate, future when the United States and many other countries lose their appetite for oil.
Like the Soviet Union before it, Chavez, along with the Venezuelan government, will collapse. And with them they will bring down all of the Venezuelan people. Though the dilemma posed by the former is grave, the dilemma posed by the latter is of many times greater importance.
As the tensions between the United States and the Soviet Union escalated during the Cold War, so did the Soviet Union’s export of oil. In the chaos of the 1973 oil crisis, which found petroleum exports from members of the Organization of Arab Petroleum Exporting Countries being negated to the United States, Japan and several European nations, the Soviet Union found that it had an opportunity to easily export its own untapped profusion of oil. By 1980, the Soviet Union would almost effortlessly leapfrog Iran and Saudi Arabia as the largest producer.
With the overwhelming assets they reaped, the Soviets put these to work on imprudent policies. Urban workers’ wages were doubled and rural wages increased by more than three-fourths. Low-income housing began to proliferate with completely subsidized units. Appliances and the production of other housing goods steadily rose. And these were only a select few of the thousands of fully subsidized policies by the government, enacted due to the expected rising price of oil. This expectation, however, was based more on faith than it was on economics. Though these policies were well-intentioned, they prefigured the tumble into poverty of many Soviet people, the end of the Cold War and the collapse of the Soviet government and economy.
Less than a handful of years later, the price of oil dropped owing to the major surplus the Soviets had created in the world’s oil production. All of the sudden, oil, which used to reap $80 per barrel, was sold at $10 per barrel, severely devastating the Soviet economy. The Soviets began running on empty with a lot of chicks to feed. Almost instantly, their modus operandi was completely unsustainable and collapse was inevitable. Half a decade later the Soviet Union ultimately fell through at the grips of sustainability and diplomacy.
If Venezuela is to continue relying on its oil revenue to solely fuel its economy, it will shortly follow suit. This will happen not because oil will dramatically drop in price, but because oil will soon become obsolete.
As of now, however, President Chavez has the economy of the country in his back pocket. In the not too distant future, Chavez will be the sole autocrat of the country. What he will do with his power is a mystery. Though many believe him to be a savior of the working class and the poor, he might end up being the man who single-handedly impoverishes an entire nation.
