Venezuela's 'socialist paradise' turns into a nightmare: Medical shortages claim lives as oil price

[happyslug]

141. The problem is, this problem of non-development of the rest of the economy is decades old

The "Dutch Problem" facing Venezuela is as long as their export oil, it will always be cheaper to import the to develop the internal capacity to produce those items. When the price of oil DROPS (like it has) the profit to BUY disappears, AND there is no excess cash to develop the ability to produce the items locally. West Virginia has this problem, in good times when the mines were going full speed, everyone worked at the mines for it produced the most profit, but when the mines had to close do to drop in prices, all the money had been spent, none of it saved OR invested in developing what in the good times were inferior profitable fields. This lead to the old joke about West Virginia, during good times it was the poorest part of the American Midwest, during bad times, it was the poorest part of the American South.

The government of Venezuela MUST adopt a policy of buying local only, even if it costs twice as much. If it can NOT be produced locally, do without til it can be purchased locally (a high Tariff on imports, including food imports, would accomplish that). The problem is the people of Venezuela wants their share of the oil wealth, and thus want low price goods, including low price food. In simple terms, Venezuela has to drop out of the world economy except for exportation of oil (and even limit the exportation so NOT to push the value of Venezuela currency to high).

The problem is to many people want the problems of Venezuela to be solved TODAY, not 20 years from now. This was a problem even for Chavez and he failed to solve it (For example he failed to bring the local price of gasoline to world wide levels, more to keep the opposition and the upper middle class from objecting even more to the changes he was trying to implement).

Please note I am also avoiding the issue of to many people wanting their share of the oil profits, this includes the opposition as while as the supporters of the President. To many people see the oil as a good thing for the economy and themselves as oppose to the problem it is and will remain till people accept the fact that the oil IS THE PROBLEM and the solution is to shift the economy away from oil.

A good comparison is with Russia. Russia is another country dependent in oil for revenue, but has other industries and produces a lot of items its uses domestically. Russian imports today are way above what they were in Soviet days, but Russia has also used the present crisis to get their people to buy locally and STOP using items that are imported.

If I was the President of Venezuela I would do the following:

1. Increase the price of Gasoline to the world market price, People will complain, but point out oil is sold on the international market and thus its price domestically should be at least at that price.

2. Impose a Tariff on imports so that domestic producers know that as long as their can keep their costs below the Tariff, they can make money. Foreign Companies will see the Tariff and will build factories inside Venezuela to get around that Tariff. Either system builds up the non-oil economy of Venezuela. Yes people will use the example of the poor having to pay high prices for food, but point out the problem is that poor people can not find employment for the food is being imported. This will also cause many farmers to return to farming for the price of the food their raise should be cheaper then any food being imported. Another way to improve the non-oil economy.

3. Other domestic programs to get people working, i.e. constructions of new housing and roads to improve internal trade and thus help the non-oil economy.

The thrust must be to help the non-oil economy, for oil will constantly hurt that part of the economy and it is that part that needs to be built up to get Venezuela out of the "Dutch Trap" it is in and has been since at least the 1920s.