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Wed May 3, 2017, 08:29 PM

Venezuela Is Heading for a Soviet-Style Collapse

Venezuela is not the first developed country to put itself on track to fall into a catastrophic economic crisis. But it is in the relatively unusual situation of having done so while in possession of enormous oil assets. There arenít many precedents to help understand how this could have happened and what is likely to happen next.

There is, however, at least one ó the Soviet Unionís similar devastation in the late 1980s. Its fate may be instructive for Venezuela ó which is not to suggest Venezuelans, least of all the regime of NicolŠs Maduro, will like what it portends.

Venezuela has been ailing ever since the decline in oil prices that started in June 2014, and there is no reason to think this trend will shift anytime soon. Energy prices move in long quarter-century circles of one decade of high prices and one decade of low prices, so another decade of low prices is likely. Similarly, the biggest economic blow to the Soviet Union was the fall in oil prices that started in 1981 and got worse from there.

But the deeper problem for the Soviet Union wasnít the oil price collapse; itís what came before. In his book Collapse of an Empire, Russiaís great post-Soviet reformer Yegor Gaidar pointed out that during the long preceding oil boom, Soviet policymakers thought that they could walk on water and that the usual laws of economic gravity did not apply to them. Soviet policymakers didnít bother developing a theory to make sense of their spending. They didnít even bother paying attention to their results. The math seemed to work out, so they just assumed there was a good reason.


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Reply Venezuela Is Heading for a Soviet-Style Collapse (Original post)
Zorro May 2017 OP
Zorro May 2017 #1
Bacchus4.0 May 2017 #2

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Response to Zorro (Original post)

Thu May 4, 2017, 10:07 AM

2. Good job chavistas!!! nt

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