Daniel is one of the most exciting young economists on the planet. Born and raised in Venezuela, Daniel moved to America in 2016 to study economics, securing his PhD from Columbia in 2023. Today, he is a member of the board of advisors at Young America’s Foundation, with whom he speaks at college campuses, sharing stories of his home country and its financial downward spiral. This year, he became a fellow at the Manhattan Institute.
Why did we invite him on?
The 21st century has been a difficult one for many countries, not least Venezuela. We’ve wanted to have someone on to talk about how it happened, and if there’s any hope for change.
Daniel was the perfect candidate. In the last few years, he has carved out an impressive reputation. Few economists, let alone of his age, have won the ear of such esteemed institutions, and we wanted to hear the insights that have made him so popular.
What did we learn?
”Venezuela is the first country to have been destroyed by socialism democratically.”
Venezuela, as part of South America, is easily dismissed. Oh, that whole continent’s like that. Swing to the left, swing to the right. That’s why nothing works.
And it’s, in part, true; South America is defined by wild political shifts, with many of its nations falling into the control of far-right authoritarians and communist sympathisers. Many of its states have experienced both, often in succession.
But, as Daniel stresses, the case of Venezuela isn’t the same. Venezuela was not a failed-state-in-waiting. In reality, things could have been very, very different.
”Not only does Venezuela have great potential, it actually had a great economy. In the 1950s, it had the fourth-highest GDP-per-capita in the world. Part of that was the Second World War destroying much of the world, but Venezuela also had the greatest oil reserves in the world. Up until the ‘90s, Venezuela was richer than Spain! We welcomed people from all over the world … Venezuela was great. But over time, the state grew, and it became a socialist dictatorship.”
So what happened?
The golden age stops dead in 1999, when Hugo Chávez - a political revolutionary and military officer - is elected to the Presidency on a wave of left-wing populism. He wasted no time reinventing the role and scope of government, upturning the country’s good fortune in his wake.
”He was very charismatic … And, at first, the economy did well. But the price of a barrel of oil increased 10x between 1999 and the end of the next decade. Venezuela’s economy should have grown by the same amount. It should have been like Dubai. It didn’t, and it isn’t.”
Why not? How did Venezuela’s promising future turn so sour?
”They stole all the money. Chávez ripped the Constitution apart in his first year and totally rewrote it. He centralised power in the executive branch, took power away from the Senate and the states … He would walk down the streets of Caracas, point at private businesses and say: ‘Expropriated! It’s not yours anymore.’ Jewellery stores, banks, farms… all of them were taken.”
None of this is news to Francis. Francis shares the story of a family member who was President of the Central Bank of Venezuela. One day, Chávez came and demanded the handover of the gold reserves. When he refused, telling Chávez that it wasn’t his gold, Chávez appeared on his own TV show and declared him under house arrest until he relented.
Daniel is aware of the story and shares what actually happened to that money once it was seized by the government. Did they spend it on infrastructure? Hospitals? Good schools? New ports for trade? Industry?
“Dubai is the hub of money-laundering through gold, and that’s where all the Venezuelan gold went. Maduro’s inner circle would go and spend it on prostitutes. You can tell by the imprint placed on the gold, and it’s no surprise.”
Still, the socialist sympathiser might find this all a little unfair. If the President’s men take the money and spend it on international sex tourism, is that really the ideology’s fault? Does it even count if the money never goes back to the people?
To Daniel, socialism isn’t just a characteristic - it’s the central feature.
”Every country has corruption. You think Russia, China, and Saudi Arabia aren’t corrupt? If they are, why aren’t there millions of refugees fleeing these countries? It’s about socialism. Socialism has the worst refugee crisis on the planet - 9 million people. We don’t have a foreign country invading us, a Muslim takeover, or anything like that. We just have a socialist regime.”
But that isn’t real socialism! ‘Real socialism’ is what the Nordic countries are doing. These guys merely climbed the ladder to power and then pulled it up behind them. That doesn’t count. Right?
