What is the Lesson Boys and Girls?

WaPo |  Venezuela’s economy is a catastrophe of Dickensian proportions. And for plenty of readers, that’s hardly a surprise. Every time I write about it, dozens pipe in with some variant on the same comment: “Socialism leading to total ruin — who would’ve thought?!” The temptation to read Venezuela’s collapse as ideological comeuppance seems to be irresistible. My country, people tell me again and again, is just the end of the line on the Road to Serfdom.

There’s just one problem with all this bashing of socialism: Bolivia.

Since 2006, Bolivia has been run by socialists every bit as militant as Venezuela’s. But as economist Omar Zambrano has argued, the country has experienced a spectacular run of economic growth and poverty reduction with no hint of the chaos that has plagued Venezuela. While inflation spirals toward the thousand-percent mark in Venezuela, in Bolivia it runs below 4 percent a year. Shortages of basic consumption goods — rampant in Caracas — are unheard of in La Paz. And extreme poverty — now growing fast in Venezuela — affects just 17 percent of Bolivians now, down from 38 percent before the socialists took over 10 years ago, even as inequality shrinks dramatically. The richest 10 percent in Bolivia used to earn 128 times more than the poorest 10 percent; today, they earn 38 times as much.

How can this be? It’s true that Bolivia has been on the receiving end of a staggering boom in natural resources for much of the past decade, as both the volume of its gas and mining exports and the price they fetch abroad jumped at the same time. Export revenue grew six-fold in the decade after Evo Morales, the charismatic hard-left president, took power, from $2.2 billion just before of his election to $12.9 billion at the peak of the boom.

So yes, that’s a bit like putting the game settings on “easy” when it comes to development. But it can hardly explain why Bolivia thrives while Venezuela spirals: Venezuela enjoyed an even bigger commodities boom, with exports climbing from $23 billion before the oil boom to $153 billion at its peak.

Turns out it’s not the boom itself that matters, it’s what you do with it.