I'm a writer with 6 years of experience in writing from Venezuela, South America. I love learning about science and discoveries
Venezuelans wonder if Venezuela can return to the relative prosperity they had between 1918 and 1983 - for 65 years – “when they were happy and did not know it”
To answer this question, it is important to review and analyze part of Venezuelan history and ponder over what was being done differently in the country at that time, in order to have a relatively healthy and growing economy, which produced prosperity and wellness to the inhabitants.
Between July 28, 1914 and November 11, 1918, the First World War took place and Venezuela, being an oil producer and exporter country, received a considerable amount in foreign currency, for the supply of crude to the allied countries, being also that in the government there was a citizen named Don Juan Vicente Gómez - who was called the Benemérito - a good leader, with a vision of a statesman, implanted a currency called the gold bolivar in 1918, which had a backing of 0.29 grams of gold and was in force until the end of 1974, maintaining average annual inflation of 1.3% for 56 years, a growing GDP, and a low unemployment rate.
In the 1920s, the United States and the rest of the world lived through the roaring twenties, when consumption, monetary liquidity and bank credit soared, much of which was used to leverage speculation in the stock market with stocks, which at first generates a false sense of wealth, prosperity, and euphoria.
But experience shows that obtaining monetary benefits without producing anything real is not sustainable over time - and then, in 1929 a stock market crash occurred in New York City, which bankrupted banks, companies, citizens, and nations, causing the Great Depression of the 1930s, which led to World War II between 1939 and 1945.
Although this crash had no collateral effects serious for Venezuela since it had a strong, stable, and trusted currency, in 1929, the national government devalued the Bolivar at the request of the United States, after having implanted the gold bolivar, passing the exchange rate from 3.35 bs/dollar to 3.90 bs/dollar to make the oil export cheaper at around 2 dollars per barrel.
During the mandate of Mr. Eleazar López Contreras, following the correct monetary practices for an oil-exporting country, in 1937 the gold bolivar was revalued and the exchange rate returned from 3.90 Bs/dollar to 3.35 Bs/dollar. This exchange rate remained stable until the second devaluation in 1961 under Rómulo Betancourt who devalued the Bolivar from 3.35 Bs/dollar to 4.30 Bs/dollar, a rate that remained stable until 1983.
It should be noted that during the Second World War –1939 to 1945– Venezuela also received a considerable amount in foreign currency, for the exports of crude oil and fuels, which were necessary to move the war machinery of the allied countries. These currencies served to further support and international reserves, at the same time the Bolivar kept strong and continued to be backed by gold.
On December 30, 1974, Carlos Andrés Pérez eliminated the gold bolivar, emulating the serious mistake that Mr. Richard Nixon had made in the United States on August 15, 1971, when he repudiated the Bretton Woods agreements by eliminating the convertibility of an ounce of gold for 35 dollars.
By doing so, they opened the Pandora's Box and successful countries like Venezuela and the United States screwed after eliminating the gold standard, which kept economies healthy and booming.
This was the outcome of listening to the siren songs of "economy experts", which led governments to implement failed economic theories such as Keynesianism and monetarism, which are based on the production of money by central banks - the monetary base - and commercial banks - credits of inorganic origin, through fractional reserves - in astronomical quantities without having tangible support and therefore, it is money without the ability to preserve its value but aims to finance populism, wars and unproductive bureaucracies or, on the other hand, to leverage speculators, so that they obtain great benefits with other people's money without working or producing something real - tricking the simpletons into believing that the economy is the stock market and that the stock market is the economy.
Such methods prompt global economic crises to recur periodically, such as the great world depression of the 1930s in the twentieth century.
Due to the monetary error of Mr. Carlos Andrés Pérez in 1974, thanks to the economic inertia inherent in the existence of the gold bolivar in the previous 56 years, despite the generalized corruption, financial speculation, waste, and indebtedness in foreign currency to pay for the nationalization of the iron and oil companies to the international concessionaire corporations, together with what was plundered by economic groups such as the twelve apostles led by Dr. Pedro Tinoco, the country was able to endure nine years without devaluing the bolivar, until Dr. Luis Herrera Campins, on February 18, 1983, devalued the currency for the third time, remaining at 4.30 Bs/dollar for some privileged people; at 6.50 bs/dollar for others and 7.50 bs/dollar for others, what was called "Differential Exchange Regime or Recadi". This generated great exchange corruption.
As a result of this devaluation, the manipulative campaign of apologists for devaluation practices - supposedly biased economic experts and ignorant or corrupt politicians, who should at least apologize to the nation, for their repeated gaffes - intensified through the repetition of such mantras such as: “the bolivar is overvalued”, “Venezuela suffers from the Dutch disease”, “It is necessary to make competitive devaluations to export oil and ore”, “the expansion of liquidity does not generate inflation”, “it is necessary to reduce the legal reserve”, “it is necessary to implement exchange controls”, “an exchange control can lead to a sociopolitical outburst” and all these fallacies.
All governments after Dr. Luis Herrera continued to devalue the bolivar and generated exponential amounts of worthless money, delighting politicians and corrupt officials, speculators and supposed investment banks, whose modus operandi to appropriate someone else's money was requesting credits in national currency, buying foreign exchange and send them to foreign banks, ruining the citizens, while the manipulators divided and confronted the population with dumb dichotomies like left or right-wing, red or blue, socialist or capitalist and other stupid taxonomies so that the majority did not realize that they were being scammed, thus appearing the paradox of millionaire but ruined citizens, for not knowing how to distinguish between nominal and real magnitudes, which generates the mirage of the growth of zeros, 14 of which had to be eliminated in the last 13 years.
In conclusion, what was done correctly in part of the last century was keeping a solid, strong, stable and trusted currency; having a fixed exchange rate; having a serious, responsible and ethical financial system along with the existence of capable and efficient rulers who had the vision of statesmen and sought the best for the nation and its citizens.
A famous phrase by Vladimir Lenin stated: "If you want to destroy a country, destroy its currency" and we could reply to that statement with the phrase: "If you want to rebuild a country, rebuild its currency", which is the most correct and priority action that should be done by the government of Venezuela and fortunately, there are already some positive changes of erroneous paradigms, such as allowing the free circulation of foreign currencies and the management of foreign currency accounts in the national bank.
From a fiscal point of view, it is essential to change administrators in deficit public companies, to honest, recognized, efficient private investors through concessions via international tenders capable of producing quality goods and services to make them self-sufficient and thus be able to achieve a strong currency, stable financing of public spending, which does not depend on the issuance of money by the BCV (Central Bank of Venezuela), in such a way that Venezuelans recover their purchasing power of his real monthly income, which should be at least 60 kilograms of first quality beef and then, the necessary conditions to return to the former period of prosperity can be created.
But this will only be achieved with the participation and contribution of all Venezuelan citizens.