When a country’s badly-managed assets become lethal liabilities

JUST as our personal virtues, over time, become our vices, so, too, our national advantages, over time, can become disadvantages.

When a country’s badly-managed assets become lethal liabilities

Witness the Skype generation: Émigré over the past 10 years, their departure greatly facilitated by our education system creating a workforce of powerful advantage to economies other than that of their home country.

Witness, too, how low interest rates have gone from a wildly-applauded advantage to a ho-hum nuanced disadvantage.

We have, of course, never been lucky or unlucky enough to have discovered vast underground quantities of a highly saleable commodity like oil, and so the drop — by more than a third — in the price of crude has affected Ireland remarkably little in the months since the price began to slide.

Ireland has certainly not witnessed a celebratory national behaviour change such as began in the US around Thanksgiving and really took off over Christmas, when Americans took to the road in unprecedented numbers.

Americans who could not have afforded to fly, because aviation prices have not (yet?) dropped in response to the drop in the price of fuel, gassed up their cars and drove thousands of miles instead.

Some did it to visit relatives. Some did it to get to warmer states like Florida, taking two days of continuous driving shared among family members to cover the thousands of miles from their home to the sunshine state.

The inevitably increased death toll as a result has yet to be computed and was never factored into the planning of those journeys.

People who get nervous after the “fasten your seat belts and check out how near you are to an emergency exit” announcement experience no commensurate unease when sliding behind the wheel of their own car, although the latter is immeasurably more dangerous to them.

Anyway, the increased risk of death on the roads was beside the point.

The way America sees it, the roads symbolise freedom and individual rights just as vividly as a gun does to the NRA lads.

Cheap petrol indicates that God or the Force is smiling on the US.

God or the Force is certainly not smiling on Venezuela, which has found itself at the wrong end of the cheap petrol continuum.

While we in Europe think of oil as coming mainly from Saudi Arabia and Russia, if we look west, one of the biggest global sources of fuel is Venezuela.

Cuba, for example, in recent years has been getting from Venezuela roughly half of the petrol that fuels those cute 1950s American cars the size of an ocean liner that contribute to the distinctive look of Havana.

Venezuela pumps roughly 200m barrels of oil a day, and the dollars earned by its export do not go into the pockets of greedy overseas capitalists.

The country has vested its oil rights in a state-owned oil company, and it is that oil company which pays for the enlightened, not to say generous, social support programmes unique to Venezuela.

So expensive are those programmes that international economic analysts, last summer, pointed out that the price of oil would need to hit in the region of $200 (€164) a barrel if the country was to even approach solvency or a balanced budget.

In fact, however, the price of oil went the other way. Speedily, it went the other way. Unrelentingly, it went the other way. Catastrophically, it went the other way.

Scott Fitzgerald said that going broke happens slowly at first, and then speeds up. If that’s true for individuals, it’s true of nations.

By the time a country realises that it may have a problem, it indubitably has a disaster.

Before oil prices began to drift and then frankly fall down,

Venezuela had a problem, partly due to the socially enlightened policies of the late Hugo Chávez. Inflation hit 60% in the past year.

That led to shortages of staples like toilet paper while creating an economic instability which in turn speeded the departure of many international companies.

The availability to taxi drivers of subsidised oil coming out of Venezuela’s own fields facilitated major expeditions to cities believed to have a supply of such staples: When petrol is as low as 15c a gallon, a round trip of 400 miles to buy loo paper makes a crazy kind of sense.

Venezuela is one of the most oil-rich countries in the world. It sits on an asset which could have been used to make it one of the most successful nations in the world.

When Hugo Chávez came to power in 1999, his country was selling oil for $10 a barrel. By 2009, that had increased tenfold.

That’s a lot of incoming income which could have been spent on infrastructure, and industrial diversification, so that in the short term the country would attract inward investment, leading, in the longer term, to a reduction or perhaps even the extirpation of its dependency on black gold.

During the 14 years Chávez ruled, that didn’t happen.

Instead, he turned his country socialist, used the underground black gold to fund unprecedented social support systems, in the process becoming an international hero of the left.

Such was his grasp on leftwing thinking that for many years, it was possible to squelch any anti-socialist argument by mentioning “what Chávez has achieved in Venezuela”.

Next to Cuba’s healthcare system, Venezuela’s social care system was a potent argument that socialism had not, and should not have died with the collapse of the USSR, but was still provably relevant.

For the first time, the poor of a nation wherein oil had been discovered were actually gaining, rather than being pushed to the dire end of the economy while — as happened in the Arab countries and in Russia — the rich got richer.

Venezuela’s astonishing track record in pulling the poor in from the margins gave hope that it might be possible to end poverty there and in other countries.

When Chávez died of cancer two years ago, he was a hero.

That was before the dreams of the Chavistas evaporated, and evaporate they have in the intervening months.

Not only did oil not hit the £200 a barrel needed to keep the country solvent and sustainable, it did the unthinkingable, dropping so precipitously as to reach the current low of £60 a barrel.

Nicolas Maduro, the ill-starred successor to Chávez, came to power on the smallest of majorities, and immediately had to face a legacy of disaster.

Just a couple of years earlier, state subsidies embraced even Scotch whiskey, making the best brands accessible to poor Venezuelans.

Now, those same Venezuelans cannot find or afford to buy nappies for their babies, and almost fifty people have died in the consequent social unrest.

Maduro’s approval rating is a low 24%. Crime — organised and spontaneous — is out of control and, feeding off all of this turmoil, the wealthy opposition are as rampant as a lion on a coat of arms.

Even in the unlikely event of a speedy U-turn in the price of oil, Venezuela is well on the way to proving that assets, badly managed, become lethal liabilities.

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