The images of Venezuela’s economic collapse — long lines, shortages, and street protests — have quickly become a cliché of our increasingly connected internet experience. Even more played out are the simplistic arguments of why Venezuela is in ruins. In his late night TV show, leftist comedian John Oliver famously alluded to declining oil prices and other vague factors such as “mismanagement” as the main factors behind Venezuela’s collapse.

Many leftist commentators have repeated these same talking points ad infinitum as a way to downplay the Venezuelan state’s blatant disregard of basic economics. But the declining oil price rationalization takes the cake as the biggest myth in explaining Venezuela’s economic crisis. For that reason, a study of Venezuelan economic history is necessary to refute these myths.

Oil Was Not the Only Reason Venezuela Became Rich

While it’s true that oil played a substantial role in the development of the modern-day Venezuelan state, it’s misleading to attribute the country’s past prosperity solely based on its large endowment of oil reserves.

Economist Hugo Faria provides an excellent appraisal of Venezuela’s economic institutions in Hugo Chavez Against the Backdrop of Venezuelan Economic and Political History. Faria explained how Venezuela had a smaller state presence in the economy during Venezuela’s boom period from the 1920s to the 1970s. Property rights were stable, the regulatory state was light, and sound money was a fixture of the political economy (Venezuela was late to the central-banking party when it established its central bank in 1939).

Venezuela would be placed in an enviable position post-World War II. Not only was Venezuela an attractive spot for foreign investment, it also became a magnet for skilled immigrant labor from countries such as Italy, Portugal, and Spain. These factors helped bring Venezuela to the promised land of economic prosperity. According to some estimates, Venezuela found itself in the top 10 richest countries in the world — a far cry from its current economic state.

A Closer Look at Venezuela’s Oil Prices

What role did oil prices play in Venezuela’s previous era of economic prosperity? Contrary to popular belief, oil prices were not even sky-high throughout the early half of the 20th century.

According to BP’s Statistical Review of World Energy, oil prices from 1914 to 1960 were nothing to write home about. On average, crude oil prices were $19.35 per barrel — a number that would freak out any petro-state bureaucrat these days. From 1950 to 1960, oil prices were about $17 per barrel. According to conventional wisdom on Venezuela, this would have been a recipe for economic disaster. Hugo Faria proved otherwise in another article Venezuela: Without Liberals, There is No Liberalism. Faria highlights how Venezuelan economic growth did not miss a beat in an era of low oil prices:

According to Adrubal Baptista, Venezuela’s GDP growth rate during the 1940s averaged 12 percent, and the central bank puts the average growth rate during the 1950–57 period at 9.4 percent. Andreski provides a table reporting economic growth of 20 Latin American countries over the period 1945–1958, and Venezuela tops the list quite handily.

When Venezuela started to enjoy favorable world oil prices during the 1970s, the game started to change. Beginning in 1974, the world underwent a significant energy crisis which caused oil prices to skyrocket. From 1974 to 1980, the average crude oil price per barrel was $70.07, with a peak of $109.56 per barrel in 1980.

Then president Carlos Andrés Pérez took advantage of these favorable oil prices to finance his extravagant government programs. He started by nationalizing Venezuela’s oil industry. Venezuela’s oil nationalization made for popular politics, but it would have deleterious implications in the long term. Extreme centralization of political power, bureaucratic overreach, and crony capitalism became the order of the day in Venezuela.

Pérez’s spending party came to an abrupt end in the 1980s. Economic stagnation and mounting debt from the previous decade’s spending spree put the Venezuelan government in an awkward position. On the fateful day of February 18, 1983 (most infamously known as Black Friday in Venezuela), the Venezuelan government undertook the largest devaluation of the national currency, the Bolívar, at the time. This initiated Venezuela’s own “lost decade” of economic unraveling.

Venezuela trudged along the path of economic malaise until Carlos Andrés Pérez came back into the political scene in the late 1980s. This time around, Perez recognized that Venezuela’s petro-state model was unsustainable and proposed a series of sensible, market-based reforms. Sadly, Pérez’s reformist vision was derailed when he was impeached by his own political party in 1993.

High Oil Prices Couldn’t Even Save Hugo Chávez

When the former Lieutenant Colonel Hugo Chávez threw his hat into the political ring, the country was his for the taking. With a sub-optimal economic performance of -0.13 percent per capita GDP growth from 1958 to 1998, Venezuelans were rightfully frustrated with the previous political order. Naturally, they turned to a charismatic demagogue like Chávez.

During Chávez’s time in power, Venezuela enjoyed an unprecedented oil boom. From 2005 to 2014, the average price per barrel was $96.10, topping out at $121.24 per barrel in 2011. Like Pérez, Chávez took advantage of high oil prices to fund generous spending programs and consolidate his political power. Unlike Pérez, however, Chávez sought to break every law of economics by carrying out currency controls, expropriations, and price controls.

Even with high oil prices, Venezuela could not escape the harsh consequences of its destructive economic interventionism. In 2014, when the average crude oil price per barrel was at $102.45, Venezuela started to experience widespread shortages.

Institutions Matter

If resources were the be-all and end-all of economic growth and stability, countries like Hong Kong and Singapore — both some of the most prosperous countries on the planet — would be relegated to the soup kitchen of economic underdevelopment. Institutions that respect property rights and make foreign investment attractive are keys for economic growth.

Commentators can continue to deny socialism’s impact in Venezuela, but even with the highest oil prices in recent history, the country could barely eek out economic growth. Now the country is in complete shambles. In Venezuela, there is no “resource curse”. What the country is going through is part of a larger government curse which places the State as the ultimate driver of economic affairs.

Sadly, the Venezuelan people are paying dearly because of this interventionist vision. No lucrative commodity can outrun bad economic policy.