America is ungovernable. Those who have served the revolution have plowed the sea.
– Simon Bollvar
The Liberator’s dying words are a fitting epigraph for Venezuela today. While much of Latin America is approaching an economic renaissance thanks to the adoption of free‐market reforms, Venezuela is still following the discredited statist policies of the past, which could lead to nationwide catastrophe within a decade or less. Despite Venezuela’s enormous natural resources, its economic, political, and social systems are disintegrating.
Since 1959 Venezuela, once viewed as a showcase of democracy, has been run by political and business elites that are unwilling to make needed changes that go against their own immediate self‐interest. Furthermore, in the current political culture, market reforms are viewed with enormous suspicion, and the public yearns for the free‐spending days of the 1970s.
Like many other Latin American countries faced with economic crises in recent years, Venezuela can resolve its problems only by introducing market reforms. A crucial component of those reforms is the privatization of the oil monopoly, which has been the lifeblood of the nation’s mercantilist state. Other necessary changes include the constitutional recognition of widespread property rights and the elimination of corruption through judicial reform. Making those changes requires a wholesale change in the country’s political culture, which may not come about until the crisis becomes more severe.