The Venezuelan people, economy, and government are all connected by a common thread: oil. Venezuelan oil is the most influential variable in Venezuela today. Having depended on oil since the early 1930s, a hit on the oil industry would result on drastic changes in society, the economy, and in the government. While the failure of the oil industry in Venezuela would have a great social and economic effect on the country, the political outcome of this failure would overwhelm every aspect of Venezuelan life.
The people of Venezuela have a very important role in the success or failure of the oil industry. The people who are the workers are the ones who help the oil business stay afloat. An industry as vast as the Venezuelan oil industry is dependent on the cooperation of the people. When the people do not work with the oil industry, all aspects Venezuelan life are affected, including the economic and political aspects. This was seen in 2002 when Venezuelan workers “reduced oil production to protest [Hugo] Chavez's policies” (Web). The political realm was disturbed when Chavez was taken out of power, but things went back to normal only two days later. However, the economic realm remained disturbed and “the Venezuelan economy experienced a significant downturn” (Lapper). The actions of the people, although suppressed, were able to affect the government and the economy, simply because of their influence on the oil industry.
The economic outcome of a failed oil industry would be destruction of the Venezuelan economy. A large majority of Venezuela’s income is from the exportation of oil. This oil money is used to pay for the government as well as the needs of the people. If the oil industry were to fail, the country would spiral into extreme poverty. In many cases, the hard work of small businesses can keep an economy from becoming stagnant, but that would not be the case in Venezuela. This is because small businesses have been eliminated by Chavez and most of the businesses today in Venezuela are owned by the government. A loss of money by the government results in the loss of money of businesses, and the eventual death of Venezuelan economy.
While society and the economy would be greatly affected by the failure of the Venezuelan oil industry, the Venezuelan government would take a harder hit if the oil industry is not profitable. The toll on the government would be harder because the government is literally run by oil sales. Taxes on oil help allow the government to be financially stable. The loss of such funds for the government would mean the shutdown of many government institutions. This is especially dangerous for Venezuela because under Hugo Chavez, many of the private institutions were turned over to the government. Should the government shut down, many businesses would not be able to function. The loss of these businesses would result in the instability of the economy and in turn the instability of the people. This is because Venezuela does not produce a majority of its goods, but instead they import many goods using the revenue from oil sales. Loss of this revenue results in loss of money and goods for people and a crumbling of society.
A country with a high dependence on one export must ensure the success of that export as to make sure the country remains stable. Venezuela’s dependence on oil makes it imperative that the oil industry stays afloat. The failure of oil in Venezuela would result in revolts by the people. This would affect the economy, because the people would not work. Loss of workers would result in the Venezuelan economy spiraling downward even faster. The hurting economy and revolting people would not compare to the political turmoil that would result from the failure of the industry, as the government would shut down and the country thrown into chaos. Of all the aspects of Venezuelan life that would have a lasting impact, the political aspect is by far the most extensive.
"FACTBOX - Some Key Facts about Venezuela's Oil Economy| Reuters." Business & Financial News, Breaking US & International News | Reuters.com. 22 Mar. 2009. Web. 08 May 2011. <http://www.reuters.com/article/2009/03/22/us-venezuela-economy-fb-idUSTRE52L06W20090322>.
Lapper, Richard. "Venezuela's Oil-Based Economy." Council on Foreign Relations. Web. 08 May 2011. <http://www.cfr.org/economics/venezuelas-oil-based-economy/p12089>.
"Oil Prices and Venezuela's Economy | Venezuelanalysis.com." Venezuelanalysis.com | Venezuela News, Views, and Analysis. Web. 08 May 2011. <http://venezuelanalysis.com/analysis/3968>.
"Venezuela Politics, Government, and Taxation, Information about Politics, Government, and Taxation in Venezuela." Encyclopedia of the Nations - Information about Countries of the World, United Nations, and World Leaders. Web. 08 May 2011. <http://www.nationsencyclopedia.com/economies/Americas/Venezuela-POLITICS-GOVERNMENT-AND-TAXATION.html>.
Web. 08 May 2011. <http://www.infoplease.com/ipa/A0108140.html?pageno=2>.
Wilpert, Gregory. "The Economics, Culture, and Politics of Oil in Venezuela | Venezuelanalysis.com." Venezuelanalysis.com | Venezuela News, Views, and Analysis. Web. 08 May 2011. <http://venezuelanalysis.com/analysis/74>.
Although the political effect is definitely disastrous, the economic effect will be the most overwhelming for the Venezuelans.
ReplyDeleteThe economy for years has been primarily oil based. Chavez's election just made the situation much worse. However, the economy of Venezuela has always been unstable due to no other exports. Venezuela needs to mass produce other goods in order to have a better economy.
Although the government would be hit hard with a economic downfall, like you said, the economy would be just as bad. Inflation has decreased in the recent months because of international problems. However, if the need for oil would decrease, the economy and the lives of the people would be most devastating. The effect of it on the government would be hard too, but only because of Chavez's termination of private sectors. In the past, the government hadn't had as large of a role in oil production. Chavez needs to open oil to other companies and perhaps the government wouldn't be as tied to the economy as it is now.
The social effect mentioned is one that no one has discussed yet. It is a good point that the Venezuelan workers were not all compliant with Chavez's control, resulting in the 2002 rebellions. Also, the focus on the workers themselves was an interesting point of view. These people are the driving force behind the oil and without them, Chavez and the economy would practically be nothing.
Shereen Noormohamed
ReplyDeleteThe political effect can in no way be overlooked or put down as non-disastrous to the society. However, the economic effect of Venezuela’s reliance on oil is by far the most devastating.
Having an economy solely dependent upon the exportation of oil puts the country in a risky situation. As mentioned, “oil money is used to pay for the government as well as the needs of the people.” If the oil industry fails, the economic stability of Venezuela will decline very rapidly since there is no other major product to turn to in order to recuperate the economy.
As in several instances throughout history, when the economy fails, the country itself fails. An unstable economy leads to high unemployment and poverty rates, making it difficult for people to live there. When living conditions of an area begin to worsen, people view the government as the cause for it. So if the lifestyle of the Venezuelan people is negatively impacted by a failing economy, they will view Chavez as a weak leader. As a result, they would want to take him out of power. This serves to show that although the political effects are destructive, the economic effects are what bring about these political effects. Therefore, the economic effects are the most devastating for the society.
Although the dependence on oil would have a negative effect on Venezuelan politics, it would not be a trickle down effect on the economy, but rather a detrimental direct effect on the economy.
ReplyDeleteThe fluctuating prices of oil would indeed hurt the government, for there would be a lack of funds to support thing such as the reforms that Chavez recently passed. However, the fact that businesses are suppressed and that there is no motivation to innovate or develop new ideas is the major economic problem that results from the government's dependence on oil. It is a direct economic problem, not so much a political problem from which the economic issues resonate.
Other economic issues include the imbalance of other sectors of the economy, causing Venezuela to be a victim of the "Dutch Disease." The country will continue to fail to modernize without any new developments due to the suppression of businesses and lack of influence of other resources.
You bring up valid points about the affects of oil on society. The failure of oil would result in a loss of jobs and therefore result in much poverty in the nation. The government needs a system of checks and balances with regards to the economy to assure that a downturn in one sector of the economy does not bring down the entire country.
Amanda Chivil^^
ReplyDeleteAmanda S.: The dependence on oil in Venezuela is definitely a problem that must be fixed. Hugo Chavez must begin to relax Venezuela’s dependence on oil not only to ensure his political safety, but to allow the people opportunities to work outside of the oil industry. By allowing for private businesses to develop outside of the oil industry there is no doubt that Venezuela would survive even in the case of a failed oil industry.
ReplyDeleteShereen: It is true that the economy would suffer greatly as a result of the loss of oil profits. A country with such a strong base on oil exports cannot afford to lose those sales. Should this oil revenue be lost, the country would crumble, and the people thrown into poverty. To ensure that such a scenario does not occur, it is important that the Venezuelan leaders move the country away from oil exports.
Amanda C.: It is a good point that economics affect all aspects of a country’s life. Should the oil economy fail, it is true that the economy would fail, the people thrown into poverty, and the government dissembled. Venezuela must secure the economy through different businesses to make sure the country is not thrown into chaos should the oil industry fail.