Venezuela used to be a South American nation that was extremely rich. Why is it so poor now?

Venezuela used to be a very wealthy nation in South America. Why it is so poor now is actually because Venezuela has not escaped the oil economy. Venezuela used to make a fortune by exporting oil. But Venezuela’s own nation’s economic development relies on oil. When oil prices fall, it is a fatal blow to Venezuela's economy.

Venezuela has the world's largest oil reserves. But during Venezuela’s oil boom in the 1970s, Venezuelan politicians made the decision to keep all of the country’s oil revenues rather than share them with foreign oil companies that helped manage Venezuela’s oil fields.

Venezuela’s politicians are worried that the country may deplete its largest resource, oil, and have decided to limit the growth of oil production. Around the same time, a global oil glut depressed oil prices. The combination of falling oil production and falling oil prices has hit the nation's economy. From 1980 to 1990, Venezuela's per capita GDP collapsed by 46%. Things got worse in the 1990s. Although oil production is picking up again, low oil prices mean the economy is further deteriorating.

Implement universal subsidies, free medical care, free education, free housing, etc. Subsidies are a powerful tool for politicians. Because few people give them free stuff, especially in poor countries. And as things unfold, subsidies become the glue that holds the entire Venezuelan economy together.

But subsidies distort economic incentives. And providing subsidies to everyone could destroy the economy in the long run. As a result, the overall quality of Venezuelan citizens is lagging behind, and they do not like to study and play. This is what Venezuela has experienced.