Will Socialism be able to save Venezuela as Bernie Sanders felt it could save America?

I answered this question on Quora. My answer was “No.” But it was a very detailed no. Here’s an excerpt:

Chavez was a true, dyed-in-the-wool socialist. He passed many reforms that would have crippled another nation. For instance, he made it illegal for private employers to fire anyone. Hiring an employee in Venezuela means paying that person a living wage until he quits or retires, regardless of whether he does any work or not. Imagine trying to run a business under that constraint! Chavez expanded state control of the economy in the name of socialism, but the country didn’t fall into chaos. As late as 2013, David Sirota was declaring it an “economic miracle.” This might seem like a win for socialist economics, but the truth is more dull than that.

The truth is that Venezuela has the most proven oil reserves of any country. Just as in the pre-Chavez period, economic weakness could be papered over with oil revenues and debt so long as oil prices didn’t fall too low for too long. Chavez’ socialist economy was basically non-functional, but as long as the oil money kept coming in, he could keep paying for his social programs to make everyone happy.

Here is a graph of crude oil prices during this period (source):

Points to note are the sharp drop in oil prices in January 1986, which created the crisis that led to El Caracazo and the rise of Chavez. Chavez took power in 1999, right around the time when oil prices turned around, and died in 2013, just before they crashed. He was able to ride the current of rising oil prices for his entire time in power, which made his policies seem much more successful than they really were.

Read the whole thing.