How to Fix Venezuela

Part 1: Value-Trade Analysis

Nov 2014

SORAnomics (our proposed alternative science to Economics) uses the Value-Trade Theory to diagnose the economic health of societies according the maxims of Adam Smith. A society, whether it be a family, corporation, or country, is wealthy if its productivity (value produced) exceeds its own demand (value needed). This productivity is shown in the “Industry” column (below) while its demand is shown in the “Demand” column. A society is wealthy if its Industry bars are higher than its Demand bars and poor if it is lower. Societal industry is dependent on capital and influenced by trade. Capital is anything that produces value via Industry while Trade is any exchange of the valuable produce of that Industry.

We start our analysis at 1999 when Chavez came to power and before his policies were fully implemented. We compare this to 2013, the year which has the latest data and when his policies have had its full effect. We include 2007, as the middle point between the two years to establish a basic trend.

Venezuela 2014: Low Industry, High Trade

Identifying the Cause of the Problem

Now that we have pinpointed the cause of Venezuela's problems to low industry, we need to find out the specific policy changes between 2007 and 2012 that led to a decline in industry in 2013. The two main culprits are:

Part 2  will discuss the solutions