The Economic Failure of Venezuela
Oct 10, 2026 · 16 min · 11 segments
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Oct 10, 2026 · 16 min · 11 segments
Learn more about your ad choices. Visit megaphone.fm/adchoices
to what happened in Norway, a country that has been discussed and mostly praised many times over on this channel before.
But this is where it all went wrong.
While most oil rich countries recognize that oil doesn't last forever, Venezuela decided to go on a spending spree.
Taxes were lowered and government spending was massively increased.
This government spending for the most part didn't actually go towards productive infrastructure or even something like a sovereign wealth fund that could have provided the country with a long-term foundation of wealth.
No.
Instead, this was spent on government handouts that did work to improve the quality of life for the average Venezuelan, but it did so in an extremely unsustainable manner.
Similar to someone winning the lottery and then buying a truckload of caviar to feed the local homeless shelter.
I mean sure, it kind of does the trick and you would be extremely popular, but canned food would probably last longer and be an overall better investment for the greater good.
The vast oil production also led to a very serious economic phenomenon that would go on to plague the nation.
Dutch disease was a term coined in 1977 following the decline of the manufacturing center of the Netherlands after a discovery of a large natural gas field in the country.
It is a term used to describe the impacts that poorly handled oil and resource wealth can have on an economy.
When a country like Venezuela starts exporting oil, its currency shoots up in value because people need to purchase Venezuelan country to purchase Venezuelan oil.
This may seem like a good thing, but an artificially stronger currency causes issues elsewhere in the economy.
Suddenly, it becomes very cheap for Venezuelans to import foreign cars and foods and cigarettes and the like because their dollar has shot up in value.
This means that local industries start to suffer because it becomes cheaper to import something than it is to buy locally, especially given their position in Latin America surrounded by countries with very low costs of living.
This really hurts local industries that have to compete with cheaper foreign competitors.
It gets even worse though, because suddenly Venezuela can't export anything either.
Because their currency has increased in value, suddenly their goods are artificially more expensive and less competitive on a global market.
On top of this, local industries are starved of workers and investments, as labour and capital is redirected towards the far more profitable oil industry.
A successful natural resource boom can effectively smother all other industries to death with its own success, and this trap is so common that it has its own name.
Dutch disease was particularly bad in Venezuela because the government didn't really do anything to adversify the economy.
A lot of oil rich countries try to reinvent themselves.
The United Arab Emirates wants to turn itself into a center for business and tourism.
to what happened in Norway, a country that has been discussed and mostly praised many times over on this channel before.
But this is where it all went wrong.
While most oil rich countries recognize that oil doesn't last forever, Venezuela decided to go on a spending spree.
Taxes were lowered and government spending was massively increased.
This government spending for the most part didn't actually go towards productive infrastructure or even something like a sovereign wealth fund that could have provided the country with a long-term foundation of wealth.
No.
Instead, this was spent on government handouts that did work to improve the quality of life for the average Venezuelan, but it did so in an extremely unsustainable manner.
Similar to someone winning the lottery and then buying a truckload of caviar to feed the local homeless shelter.
I mean sure, it kind of does the trick and you would be extremely popular, but canned food would probably last longer and be an overall better investment for the greater good.
The vast oil production also led to a very serious economic phenomenon that would go on to plague the nation.
Dutch disease was a term coined in 1977 following the decline of the manufacturing center of the Netherlands after a discovery of a large natural gas field in the country.
It is a term used to describe the impacts that poorly handled oil and resource wealth can have on an economy.
When a country like Venezuela starts exporting oil, its currency shoots up in value because people need to purchase Venezuelan country to purchase Venezuelan oil.
This may seem like a good thing, but an artificially stronger currency causes issues elsewhere in the economy.
Suddenly, it becomes very cheap for Venezuelans to import foreign cars and foods and cigarettes and the like because their dollar has shot up in value.
This means that local industries start to suffer because it becomes cheaper to import something than it is to buy locally, especially given their position in Latin America surrounded by countries with very low costs of living.
This really hurts local industries that have to compete with cheaper foreign competitors.
It gets even worse though, because suddenly Venezuela can't export anything either.
Because their currency has increased in value, suddenly their goods are artificially more expensive and less competitive on a global market.
On top of this, local industries are starved of workers and investments, as labour and capital is redirected towards the far more profitable oil industry.
A successful natural resource boom can effectively smother all other industries to death with its own success, and this trap is so common that it has its own name.
Dutch disease was particularly bad in Venezuela because the government didn't really do anything to adversify the economy.
A lot of oil rich countries try to reinvent themselves.
The United Arab Emirates wants to turn itself into a center for business and tourism.
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