Cuba and Venezuela seem to share a lot in common. Both are effectively Socialist dictatorships. Cuba's government has been Communist for many years, while Venezuela has been socialist for much less.

I would like to know why Venezuela's socialist economy has failed so catastrophically, while Cuba's has endured for so long? Both nations have governments which own the largest corporations, subsidise food, and limit private enterprise. It seems like these reasons cannot explain the disparity.

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    It is an oversimplification to describe Venezuela as a socialist dictatorship. There are many worrying autocratic tendencies, but there is also still a major open opposition-controlled press which almost by definition does not tend to exist in dictatorships, and certainly does not exist in Cuba or any former European communist-party-led countries. – gerrit Sep 10 at 12:03
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    @gerrit There is a term which may be relevant: "illiberal democracy"... as Viktor Orban terms it. But given Maduro's defacto power, I did say they were "effectively" dictatorships. Elections, a political opposition, and opposition press, sometimes occur in political systems where power is effectively dictatorial. Russia, Syria, Jordan, Venezuela all have some political diversity... but whether any of that is meaningful is another question. So I don't think it's unfair to characterise Maduro's Venezuela as defacto dictatorship. Especially given allegations made in the last election. – inappropriateCode Sep 10 at 12:32
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    Illiberal democracy may be the correct term. I don't know if Maduro has more domestic power than, say, Erdoǧan or Putin. – gerrit Sep 10 at 13:25
  • See "Venezuela Defense of Human Rights and Civil Society Act of 2014" for reasons why Venezuela has been having trouble selling their oil. American hegemony is certainly not helping Venezuelans. – Max Vernon Sep 11 at 13:01
up vote 89 down vote accepted

The reason Venezuela's economy collapsed was its over-reliance on oil exports. In the last half of the 20th century, the Venezuelan economy focused on growing its oil industry, while relying on imports for most other products. This worked quite well while the oil prices were exceptionally high.

It stopped working in 2014 when the global oil price plummeted and the oil industry was no longer generating enough revenue to maintain the imports of critical goods from abroad. This chart shows you the imports and exports of Venezuela over the years (there is a huge gap between 2013 and 2016, but you can see two dots at the right edge which show you the numbers from 2016). Exports went down from 144B to just 26.6B and in turn imports were reduced from 44.5B to 15.1B (in US$).

See the Wikipedia article on the economic crisis in Venezuela for details.

Cuba did suffer a similar crisis in the 90s, which was caused by the dissolution of the Soviet Union which back then was Cuba's main trade partner. Cuba responded with diversifying their import and export sources and by becoming more self-sufficient in the agrarian sector. Today's Cuba does not suffer from an over-reliance on any one product like Venezuela does. Well, the Cuban sugar industry is important, but not as important as the oil industry is for Venezuela.

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    Just curious; the magic word "corruption" is not present in this answer. Is it not a factor? – RedSonja Sep 10 at 12:16
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    @RedSonja Cuba and Venezuela are both pretty corrupt countries. So no, this isn't really an important factor if you compare these two countries to each other. – Philipp Sep 10 at 12:28
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    I'm not sure this is the right answer. Oil prices "crashed" in 1998, and have been rising ever since. It's not "oil", it's "Venezuela's Oil Production" that's messed up - which begs the question: why is their oil production messed up? – Kevin Sep 10 at 14:50
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    @inappropriateCode "Venezuela's exports however are worth almost twice their imports. Surely this means they should be fine?" Not really. Venezuela is a planned economy that was foolishly designed to produce almost exclusively oil. They produce almost nothing else. Every single need they have, whether food, technology, clothing, has to be imported. A trade balance isn't enough to predict whether all of a country's needs are met. A favorable trade balance + producing one's own food will yield a different result than a favorable balance but no production of own food. – John Sep 10 at 16:53
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    While I don't agree with this answer, it doesn't make sense to post, "No, the real answer is X" comments here. If you think the answer's something else, post it as an answer – Kevin Sep 11 at 14:28

Wait up a minute. Who says Cuba didn't fail spectacularly?

Miami (and Florida in general) have a huge Cuban population. Generally, because Cubans did anything they could to leave that country during the 90's - even to the extent of risking their lives trying to boat/raft/etc their way up north.

Here is the story of a person who grew up in Cuba after the fall of the Soviet Union. There aren't any pets in Venezeula because starving people have killed them for food. Well, that happened in Cuba as well.

This story is a bit less depressing. Basically, Cuba imposed price controls on food, and all of a sudden, the people had less to eat and started losing weight. Funnily, the newspaper presents it as, "Hey, everyone got to go on a diet, and got healthier!" even though it admits the people themselves hated it and thought of it as a crisis.

(Other stores I found have details about the zoo being raided so that the animals could be eaten; I hadn't realized that the same zoo-raids that have plagued Venezuela also occurred in Cuba.)

Anyway, the issue is largely one of price controls. Basically, when someone in power says, "Product X is too expensive; from now on, it will only cost Y!" what they're really saying is "If you make product X, you're no longer going to be able to sell it for a price that covers your expenses and your cost of living!" - which understandably leads to shortages on Product X since people that produce it stop doing so. Venezeula has very good farmland - yet they can't farm. Why? Because between trying to obtain/purchase supplies, and dealing with corruption at all levels, they're not going to make enough money with the sale of their crops.

Both Cuba and Venezuela tried to deal with the issue of 'food prices are high' by imposing price controls. Which spiraled into shortages. It's not that Cuba didn't fail - it's just that it's had time to try to recover a bit from what happened in the 90's.

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    "Who says Cuba didn't fail spectacularly?" I was wondering the same thing. Good to see your answer! – Lan Sep 10 at 17:15
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    Re "...dealing with corruption at all levels..." is it really "corruption" when the obstacles are official government policies, rather than individuals seeking bribes? Indeed, if the level of bribery is reasonable and fairly predictable, so that a business can factor it into its costs, why would it be an obstacle to a decently-functioning economy? – jamesqf Sep 10 at 18:53
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    @jamesqf - I debated even whether to add corruption in there, since it doesn't really have anything to do with Cuba vs Venezuela. But, yeah, it's not just state corruption or state policies. A great example are military units that seize incoming cargo ships with imports into Venezuela. The individual unit doesn't allow the ship to unload its cargo until they've received a kickback. ap.org/explore/venezuela-undone/… – Kevin Sep 10 at 20:46
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    @Kevin: And how does that differ (to the business) from a tariff? If for instance the business imports automobiles and the military unit always seizes 20% of the cars, or wants to be paid 20% of their value, seems like the effect on the business is exactly like the government suddenly imposing a 20% tariff on imported autos. (Not to be topical at all, oh my no :-)) – jamesqf Sep 11 at 5:09
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    When someone in power says, "Product X is too expensive; from now on, it will only cost Y!" what they're really saying... depends on many other things (do they intend to simply punish you for setting a price higher than Y? are they going to subsidize the difference? is everything already owned by the state, so you, as a "hired worker", don't give a damn?) – Headcrab Sep 11 at 6:36

Venezuela made a headlong rush into state ownership of businesses, at the direction of Chavez and Maduro. Consequently, the businesses saw their experienced executives replaced by friends of Chavez and Maduro, with more of an eye on loyalty than competence.

As a direct result of this displacement of experienced people, not only was Venezuela hurt badly by the decrease of oil revenues, it also wrecked its economic infrastructure by disrupting formerly well run businesses. It wasn't a turn to socialism/communism that wrecked Venezuela's economy. It was sheer incompetence on the part of Chavez and Maduro.

Cuba's government has functioned in its current form for decades, and has established some meritocracy in its staff. While the Castros ran Cuba, they did make some effort to insure competence on the part of party officials.

This is essentially a replay of the Zimbabwe situation: Mugabe nationalized all of the farms, and redistributed the land to his friends... who couldn't run a farm. Consequently, Zimbabwe's farm output dropped dramatically, cutting off their chief export: food. Like Venezuela, Zimbabwe wasn't done in by an economic model, but the stupidity of the people in charge.

One of the problems with a dictator or near dictator is - no sanity checks on their decisions.

In a twist of irony, Venezuela's confiscation of foreign owned businesses actually helped out some of the foreign companies. GM had an auto plant in Venezuela that not only wasn't profitable, it had accrued a huge pension liability in excess of the value of the plant. When Maduro nationalized that plant, he also assumed responsibility for that pension liability. Surprise!

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    This is a good answer, but would benefit from a few links to supporting evidence! – inappropriateCode Sep 11 at 7:59
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    I'm not saying this is wrong per se because I may be misreading it, but you seem to be saying the problem was "wrong people in charge". Any strongly-centralized system has the potential for this. Always. It's never a question of just "putting the right people in charge". – Jared Smith Sep 11 at 17:55
  • @JaredSmith: Abstoluley, the potential incompetence of decision-makers is a problem with any strongly-centralized system. The answer is pointing out that this potential actually occurred in Venezuela and Zimbabwe, to a much greater extent than it did in Cuba. – Peter LeFanu Lumsdaine Sep 12 at 14:17
  • "Like Venezuela, Zimbabwe wasn't done in by an economic model, but the stupidity of the people in charge." - This sentence alone shows why centrally planned economies will always be inferior to laissez faire. – MplsAmigo Sep 12 at 15:05
  • "It wasn't a turn to socialism/communism that wrecked Venezuela's economy. It was sheer incompetence on the part of Chavez and Maduro." - It was Socialism that caused the incompetence. – Adrian Bartholomew Sep 12 at 19:06

Lots of economy is about trade. If someone (external) can punish you by means of affecting your trade you will likely have a bad time regardless of what internal politics or reforms you push through. For whatever reason the global market for oil changed - to which Venezuela was sensitive. It would have been sensitive to that also if it was a democracy or whatever it was.

  • @mathreader I live in Sweden. I have a pretty good insight in the Norwegian society. It is ruled by a center-right government, most of the economy is "free market", private ownership is protected by the constitution, they have freedom of contract, courts are based on rule of law and so on and so on. Norway is not socialist if you know anything about socialism. – d-b Sep 10 at 21:14
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    @mathreadler Your answer is bad because it doesn't have any details. You say, "Hey, trade stuff happened and it sunk Venezuela - it didn't have anything to do with democracy/socialism/etc". Okay, awesome - that's a viewpoint that hasn't been listed. So, what about some details? Which nations refused to buy Venezeulan oil? How much extra oil did Venezeula produce that other nations wouldn't buy? All you've got now is, "Hey, it could've been Reason X!", but no actual facts to support the argument. – Kevin Sep 10 at 21:14
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    I think people are downvoting because this seems to repeat what another answer said. Perhaps you should move this to a comment on the aforementioned answer? – can-ned_food Sep 10 at 22:26
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    @mathreadler Your answer has likely been down voted for a few reasons. Firstly, it is short and lacks depth. Secondly, it lacks references to supporting evidence. Answers on stack exchanges usually need depth and quality. If you can edit your answer to add more detail, and to support that with quality sources, then it will probably be fine. An unusual answer is fine so long as it is good. This is too short and unjustified right now. – inappropriateCode Sep 11 at 12:46
  • @inappropriateCode yes surely I will be able to find such sources. – mathreadler Sep 11 at 12:50

protected by Philipp Sep 10 at 21:27

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