Venezuela: A Lesson for the United States

Shortage in Venezuela due to economical crisis
CARACAS, VENEZUELA (Photo by Carlos Becerra/Anadolu Agency/Getty Images)

If you talk to a conservative about Socialism, they’re favorite strawman is to bring up the economic crisis in Venezuela and suggest that any amount of Socialism will plummet our economy into the same over-inflated mess.  But there is actually a way that the United States could face the same consequences being felt in Venezuela, and one of those ways is to stay on the same course we are currently on.

The reason Venezuela is having an economic crisis has nothing to do with the “ist” or “ism” attached to their economic model; it has to do with the fact that 96% of Venezuela’s exports and 40% of their GDP is petrol.  For a decades, Venezuela was one of the wealthiest countries in the region due to their massive reserves of petrol.  When the price of petrol drops, Venezuela’s economy will undoubtedly suffer.  Conservatives claim that if we adopt policies in America meant to serve the people, we will end up like Venezuela, but to compare their economy to the United State’s economy is where they will make their first mistake, because America’s economy is not reliant upon the price of petrol.

Their second mistake is to suggest that Venezuela is Socialist or Communist; 500 different U.S. corporations operate within Venezuela, so by definition, they are Capitalist.  Differentiating their petrol companies from American oil companies because they are “state-owned” is metaphorically slicing hairs.  In 2015 alone, the United States subsidized fossil fuels for a total of $600 billion.  Re-read that fact again a couple times and then tell me American fossil fuel companies are not “state-owned.”  America’s government is no less invested in its fossil fuel companies than Venezuela’s government is invested in theirs.

The reason that Venezuela has strong social protections is because they have five branches of government, as opposed to our three, one of which is the Citizen’s Branch; meaning that the people have more of a voice in which legislation is passed.  The consequence being that the state subsidizes products for their poorest citizens and takes a net loss, because they feel it’s worth it to take care of their most vulnerable citizens.  Of course, with that ideology (which comes from an inherently good place), comes more subsequent problems, such a black market for government-sold items, which become increasingly rare for those who need them.  But it should be emphasized, that this net loss suffered by the state has nothing to do with the current economic turmoil, which, again, has everything to do with the price of petrol dropping.

If conservatives were at all interested in understanding why the price of petrol is dropping, they might actually come closer to understanding the real reason why Venezuela’s economy is in crisis.  To do that, is to look at our own foreign and economic policies, in tandem to Saudi Arabia’s.  The main goal for Saudi Arabia is to create a global monopoly on oil by first destroying the markets of their main competitor’s, Russia and Iran.  Their strategy for doing so is to over-produce oil, so that the market is saturated and the price drops; their goal being that this price drop will hurt Russia and Iran.  At this point, the only countries that have actually been hurt by this change are those which rely on petrol for economic growth, such as Libya, Angola, Nigeria, and Venezuela.

So what is the real lesson the United States can learn from Venezuela, since we know the lesson is not that policies designed to help the poor will destroy our country.  To do that, we need to understand the other reason why the price of fossil fuels is dropping: The price of oil, as with any other commodity, is regulated through supply and demand. When there is an oil surplus, or a reduction in demand, the price will fall.  Saudi Arabia’s actions demonstrate what happens in an oil surplus, but what happens when there is a reduction of demand are very similar and the brunt impact of that could be faced by the United States.  This is what is called the “Carbon Bubble.”  (Hint: the word “Bubble” should be an indicator that it has potential to pop and cause havoc.)  Currently, China is leading the world in investments into renewable energy.  This trend will only increase around the world, as manufacturing renewable technology becomes cheaper than digging dinosaurs out of the ground.  Maybe now is a good time to revisit that number of $600 billion the United States taxpayers paid in 2015 to subsidize the fossil fuel industry.

We are investing billions of dollars of taxpayer money to subsidize pipelines sprawling across our country; trillions to secure global oil reserves for American corporations – what happens if we never see a return on that investment, because in 20 years the price of oil has halved because of China’s booming renewable industry.  The United States could be on the forefront of that new manufacturing industry, instead we are stuck in the past, digging in the dirt; trying to force everyone to watch VHS instead of leading the switch to DVD, or digital.  Right now there is a profit in ignoring the growing renewable market, but once that profit disappears, so will the investors, and so will a large portion of our economy.  Venezuela’s mistake was assuming petrol prices would remain high and our current mistake is the assumption that the price of fossil fuels will remain high.  With our current course of action, it is inevitable that the global demand of fossil fuels will continue to reduce until the Carbon Bubble pops, at which point, it will be far more accurate to compare the United States to Venezuela.

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