11 ms·

I wonder how you get here while exporting $20B of oil annually. Where did all the money go?

by thriftwy 9y ago

Carlton87 9y ago
Socialism
- sctb 9y ago
  Would you please say something substantive instead, like the guidelines ask? https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
wavesounds 9y ago
Planet Money has good episode on this exact topic called "How Venezuela Imploded": https://www.npr.org/sections/money/2016/10/21/498867764/episode-731-how-venezuela-imploded https://www.npr.org/sections/money/2016/10/21/498867764/epis... tldr: They didn't invest the oil revenues wisely and became reliant on high oil prices
microcolonel 9y ago
> Where did all the money go? TL;DR: Socialism. NTL;WR: Capital flight caused by the arbitrary seizure of private property. Longer still: They allowed the state to control the oil revenues entirely, and because they wanted to enrich themselves, they promised unsustainable entitlements to the public which eventually fell through when the oil price dropped slightly. Because they didn't give a damn, the private sector was not involved to invest any portion of the revenues, and the government couldn't possibly care less to invest them. Now lacking the revenue they took for granted, the entitlements they promised the public have bankrupted the state, and all good-natured attempts to liberalize the economy (which could save it literally at any point, but with increasing transitional pain) have seemingly been met with threats against life. Added: Hey cowards, if you dislike this post so much, why don't you make a reply and tell us all why it's wrong? There is probably a civil war on the horizon and you can't help but QB the ideology of the establishment which has turned Venezuela from a forward and developed country with a bright future into a prison hellscape of rape, murder, and mugging.
- lawlessone 9y ago
  They do it so wrong and it seems like countries like Norway ,Sweden etc seem to get the balance right.
  - microcolonel 9y ago
    That's because Norway and Sweden respect private property to some extent, even with Norway's wealth tax (and additional taxes on oil extraction). The oil companies are ultimately private in Norway. There's no doing it right if your end game is basically communism; but if you have a clear purpose for some prejudicial taxes, and ultimately respect some form of property rights, then it can sometimes work out for many decades, as it has in Norway (though I would argue that Norway's system, as it is today, is unsustainable as well, but not in a Venezuela kind of way).
    - kunimu 9y ago
      Venezuela also respects private property, just to a somewhat lesser extent than other countries. It's important to note that the state's protection of such property is to be expected in this case, in which it is the government which acts as a capitalist itself on the global scale and on the internal scale (such as by employing wage labour). There are numerous examples of people and businesses which own private property and employ people in exchange for wages in Venezuela. The fact that such activity is highly taxed or limited is irrelevant to the point about private property being defended and respected. For it is private property which can ensure the cycle of M-C-M' which we see respected and the functioning of money as the general equivalent form of Value.
      - microcolonel 9y ago
        > The fact that such activity is highly taxed or limited is irrelevant to the point about private property being defended and respected. I'd agree with that, but with the exception of wealth (and possibly property) taxes. I might accept that real property must be rented from the state to accomplish certain goals, but I'm not so sure other property can be. In reality, if the rates are low enough, even a wealth tax is not a mortal threat to property, but it is still questionable (which is why it seems some Norwegian parties are looking to ditch it). Last time I said this, I was dragged into a bickering match, but: wealth taxes have many of the properties of rents, which sets them far apart from income, consumption, and excise taxes. Transactional taxes (income, consumption, excise, even inheritance [though I oppose this one for double taxation reasons]) pose no threat to property rights, they just ultimately change the true price of goods and services. Property and wealth taxes pose a threat to property rights, since they threaten the property directly. But that's not what people are talking about here anyway, they're talking about literal seizures of private property.
donquichotte 9y ago
Corruption [1], I guess. It appears to me that if a country has access to oil or minerals and still has bad infrastructure or a suffering population, it sits high on the corruption index. [1] https://en.wikipedia.org/wiki/Corruption_in_Venezuela https://en.wikipedia.org/wiki/Corruption_in_Venezuela
- thriftwy 9y ago
  You can't embezzle $20B without massive international cover up operation. These kind of money stick up. So we should be actually be asking, who's got it? Should not we make them reimburse money towards Venezuela's lenders?
  - seanmcdirmid 9y ago
    María Gabriela Chávez is worth around $4 billion. Not sure how you’ll ask her to give it back though.
    - thriftwy 9y ago
      Don't see why you won't put those money towards repaying Venezuela's debts. You don't go asking of course. International corruption is well past politely asking stage.
    - donquichotte 9y ago
      And Isabel dos Santos, daughter of former Angolan dictator J. E. dos Santos, has a net worth of 3bn US dollar.
adventured 9y ago
Squandered of course, in an extreme vote/allegiance buying escapade that was never sustainable by a middle-tier economy. They would have had a lot more time had oil remained at $100 of course. Chavez didn't plan for that oil price plunge just as the Soviets didn't in the 1980s. Part of Venezuela's problem is erosion of infrastructure. They continually robbed from the necessary reinvestment into their energy production, while managing the state firms in a wildly incompetent manner typical of similar regimes. We've seen plenty of other authoritarian countries manage their production drastically better, such as Saudi Arabia and Russia, so it's not all down to just that factor, it was a special combination of authoritarianism + Chavez incompetence. You end up with exports that look like this: https://oilprice.com/images/tinymce/James%207/AE3023.png https://oilprice.com/images/tinymce/James%207/AE3023.png While over time your own domestic needs climb some, against falling production that looks like this: http://peakoilbarrel.com/wp-content/uploads/2013/08/Venezuela.jpg http://peakoilbarrel.com/wp-content/uploads/2013/08/Venezuel... Once you erode the whole system down far enough, you slip below a level of recovery, where you can no longer afford to actually fix anything even if you theoretically could or wanted to. You start becoming dependent on outside funding, in this case from China and Russia; but even in the case of China, they start to lose their patience if they think they're going to see a hundred billion dollars vaporize entirely with little to no benefit.
yardie 9y ago
Miami. More specifically, Doral. A little, sleepy bedroom suburb where real estate prices simply defy logic.
aclsid 9y ago
As a Venezuelan, living in Venezuela but having lived in the US and China, I can tell you that people here enjoy some very ridiculous subsidies and have to suffer some very draconian laws, which aside from corruption, mismanagement, etc. represent the main factor of how we got here. College is free, hospitals and medicine at those hospitals is free (quality in those places has gone down the drain over the decades, so if they can afford it, people prefer the private ones), a 37,000 liter gas truck is actually cheaper than buying a box of eggs. Govt tried to replace the gasoline subsidy with a switch to natural gas in vehicles, and the NGV was being provided for free. On the economic laws front, since 2013, they have imposed strict currency controls, meaning that you can only buy dollars legally through a government sanctioned auction that is next to impossible to make it work, unless you are a relative of somebody there. That in turn has created a massive chaos on the supply chain, from car parts to medicine and basic goods in general. And as always with these restrictions, flourishing black market with skyrocketing prices that led to the current hyperinflation. Oh and the vast majority of the population pay very little, if any, in taxes. They just have to "declare". Most tax revenue comes from private companies profits and the state oil company of course. So people want to have the same socialist services as people enjoy in France without the tax rate, while at the same time you have a govt making it hard for business to operate and massive oil income to support the whole craziness. Recipe for success in the wrong way.
- curiousgeorgio 9y ago
  So, in a word: socialism. Apparently it doesn't work (like all the other times it's been tried and failed). Edit: thanks for all the downvotes and flags - I guess the truth hurts :)
- ajuc 9y ago
  > College is free As in most EU countries, even poor ones. > hospitals and medicine at those hospitals is free See above. The other subsidies do seem ridiculous, but unlikely to be the main problem.
  - aclsid 9y ago
    But in the EU you pay for those with your taxes, so it is self-sustaining.
ZeroGravitas 9y ago
The "resource curse" theory would suggest that because it was so easy to get that $20 Billion dollars of oil, there was no need for investment in other parts of the economy. This therefore leads to a crappy country to live in for most of its inhabitants.
dekhn 9y ago
You should read "The Prize" and "The Game" by Daniel Yergin. It explains quite clearly (and I agree with the analysis) that Venezeula's big mistake was nationalizing its oil industry while subsidizing its local market.

I wonder how you get here while exporting $20B of oil annually. Where did all the money go?

Carlton87 9y ago

Socialism

sctb 9y ago
Would you please say something substantive instead, like the guidelines ask? https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

wavesounds 9y ago

Planet Money has good episode on this exact topic called "How Venezuela Imploded": https://www.npr.org/sections/money/2016/10/21/498867764/episode-731-how-venezuela-imploded https://www.npr.org/sections/money/2016/10/21/498867764/epis... tldr: They didn't invest the oil revenues wisely and became reliant on high oil prices

microcolonel 9y ago

> Where did all the money go? TL;DR: Socialism. NTL;WR: Capital flight caused by the arbitrary seizure of private property. Longer still: They allowed the state to control the oil revenues entirely, and because they wanted to enrich themselves, they promised unsustainable entitlements to the public which eventually fell through when the oil price dropped slightly. Because they didn't give a damn, the private sector was not involved to invest any portion of the revenues, and the government couldn't possibly care less to invest them. Now lacking the revenue they took for granted, the entitlements they promised the public have bankrupted the state, and all good-natured attempts to liberalize the economy (which could save it literally at any point, but with increasing transitional pain) have seemingly been met with threats against life. Added: Hey cowards, if you dislike this post so much, why don't you make a reply and tell us all why it's wrong? There is probably a civil war on the horizon and you can't help but QB the ideology of the establishment which has turned Venezuela from a forward and developed country with a bright future into a prison hellscape of rape, murder, and mugging.

lawlessone 9y ago
They do it so wrong and it seems like countries like Norway ,Sweden etc seem to get the balance right.
- microcolonel 9y ago
  That's because Norway and Sweden respect private property to some extent, even with Norway's wealth tax (and additional taxes on oil extraction). The oil companies are ultimately private in Norway. There's no doing it right if your end game is basically communism; but if you have a clear purpose for some prejudicial taxes, and ultimately respect some form of property rights, then it can sometimes work out for many decades, as it has in Norway (though I would argue that Norway's system, as it is today, is unsustainable as well, but not in a Venezuela kind of way).
  - kunimu 9y ago
    Venezuela also respects private property, just to a somewhat lesser extent than other countries. It's important to note that the state's protection of such property is to be expected in this case, in which it is the government which acts as a capitalist itself on the global scale and on the internal scale (such as by employing wage labour). There are numerous examples of people and businesses which own private property and employ people in exchange for wages in Venezuela. The fact that such activity is highly taxed or limited is irrelevant to the point about private property being defended and respected. For it is private property which can ensure the cycle of M-C-M' which we see respected and the functioning of money as the general equivalent form of Value.
    - microcolonel 9y ago
      > The fact that such activity is highly taxed or limited is irrelevant to the point about private property being defended and respected. I'd agree with that, but with the exception of wealth (and possibly property) taxes. I might accept that real property must be rented from the state to accomplish certain goals, but I'm not so sure other property can be. In reality, if the rates are low enough, even a wealth tax is not a mortal threat to property, but it is still questionable (which is why it seems some Norwegian parties are looking to ditch it). Last time I said this, I was dragged into a bickering match, but: wealth taxes have many of the properties of rents, which sets them far apart from income, consumption, and excise taxes. Transactional taxes (income, consumption, excise, even inheritance [though I oppose this one for double taxation reasons]) pose no threat to property rights, they just ultimately change the true price of goods and services. Property and wealth taxes pose a threat to property rights, since they threaten the property directly. But that's not what people are talking about here anyway, they're talking about literal seizures of private property.

donquichotte 9y ago

Corruption [1], I guess. It appears to me that if a country has access to oil or minerals and still has bad infrastructure or a suffering population, it sits high on the corruption index. [1] https://en.wikipedia.org/wiki/Corruption_in_Venezuela https://en.wikipedia.org/wiki/Corruption_in_Venezuela

thriftwy 9y ago
You can't embezzle $20B without massive international cover up operation. These kind of money stick up. So we should be actually be asking, who's got it? Should not we make them reimburse money towards Venezuela's lenders?
- seanmcdirmid 9y ago
  María Gabriela Chávez is worth around $4 billion. Not sure how you’ll ask her to give it back though.
  - thriftwy 9y ago
    Don't see why you won't put those money towards repaying Venezuela's debts. You don't go asking of course. International corruption is well past politely asking stage.
  - donquichotte 9y ago
    And Isabel dos Santos, daughter of former Angolan dictator J. E. dos Santos, has a net worth of 3bn US dollar.

adventured 9y ago

Squandered of course, in an extreme vote/allegiance buying escapade that was never sustainable by a middle-tier economy. They would have had a lot more time had oil remained at $100 of course. Chavez didn't plan for that oil price plunge just as the Soviets didn't in the 1980s. Part of Venezuela's problem is erosion of infrastructure. They continually robbed from the necessary reinvestment into their energy production, while managing the state firms in a wildly incompetent manner typical of similar regimes. We've seen plenty of other authoritarian countries manage their production drastically better, such as Saudi Arabia and Russia, so it's not all down to just that factor, it was a special combination of authoritarianism + Chavez incompetence. You end up with exports that look like this: https://oilprice.com/images/tinymce/James%207/AE3023.png https://oilprice.com/images/tinymce/James%207/AE3023.png While over time your own domestic needs climb some, against falling production that looks like this: http://peakoilbarrel.com/wp-content/uploads/2013/08/Venezuela.jpg http://peakoilbarrel.com/wp-content/uploads/2013/08/Venezuel... Once you erode the whole system down far enough, you slip below a level of recovery, where you can no longer afford to actually fix anything even if you theoretically could or wanted to. You start becoming dependent on outside funding, in this case from China and Russia; but even in the case of China, they start to lose their patience if they think they're going to see a hundred billion dollars vaporize entirely with little to no benefit.

yardie 9y ago

Miami. More specifically, Doral. A little, sleepy bedroom suburb where real estate prices simply defy logic.

aclsid 9y ago

As a Venezuelan, living in Venezuela but having lived in the US and China, I can tell you that people here enjoy some very ridiculous subsidies and have to suffer some very draconian laws, which aside from corruption, mismanagement, etc. represent the main factor of how we got here. College is free, hospitals and medicine at those hospitals is free (quality in those places has gone down the drain over the decades, so if they can afford it, people prefer the private ones), a 37,000 liter gas truck is actually cheaper than buying a box of eggs. Govt tried to replace the gasoline subsidy with a switch to natural gas in vehicles, and the NGV was being provided for free. On the economic laws front, since 2013, they have imposed strict currency controls, meaning that you can only buy dollars legally through a government sanctioned auction that is next to impossible to make it work, unless you are a relative of somebody there. That in turn has created a massive chaos on the supply chain, from car parts to medicine and basic goods in general. And as always with these restrictions, flourishing black market with skyrocketing prices that led to the current hyperinflation. Oh and the vast majority of the population pay very little, if any, in taxes. They just have to "declare". Most tax revenue comes from private companies profits and the state oil company of course. So people want to have the same socialist services as people enjoy in France without the tax rate, while at the same time you have a govt making it hard for business to operate and massive oil income to support the whole craziness. Recipe for success in the wrong way.

curiousgeorgio 9y ago
So, in a word: socialism. Apparently it doesn't work (like all the other times it's been tried and failed). Edit: thanks for all the downvotes and flags - I guess the truth hurts :)
ajuc 9y ago
> College is free As in most EU countries, even poor ones. > hospitals and medicine at those hospitals is free See above. The other subsidies do seem ridiculous, but unlikely to be the main problem.
- aclsid 9y ago
  But in the EU you pay for those with your taxes, so it is self-sustaining.

ZeroGravitas 9y ago

The "resource curse" theory would suggest that because it was so easy to get that $20 Billion dollars of oil, there was no need for investment in other parts of the economy. This therefore leads to a crappy country to live in for most of its inhabitants.

dekhn 9y ago

You should read "The Prize" and "The Game" by Daniel Yergin. It explains quite clearly (and I agree with the analysis) that Venezeula's big mistake was nationalizing its oil industry while subsidizing its local market.