Crude Nation: How Oil Riches Ruined Venezuela

Gallegos, a journalist who reported from Caracas for years, wrote this account of how Venezuela's oil wealth produced economic collapse.

The explanatory core is the currency system. Venezuela operated multiple exchange rates: an official rate at which importers with government approval could buy dollars, one or more intermediate rates, and a black market rate that eventually diverged from the official one by orders of magnitude. Gallegos shows what this produced. Access to dollars at the official rate became the most valuable thing in the economy, worth far more than any productive activity, so effort went into obtaining import licences and dollar allocations rather than into producing anything. Fictitious imports were invoiced to obtain dollars that were then sold at the black rate. Price controls set below the cost of production made domestic manufacturing unviable, which increased import dependence further.

He also covers the effects on Petroleos de Venezuela, the state oil company, where the mass dismissal of striking workers in 2003 removed technical capacity, where revenue was diverted to social programmes rather than reinvested in production, and where output fell steadily as a result. He documents the expropriations of foreign and domestic businesses, the effect on food supply, and the daily experience of Venezuelans queuing for controlled goods.

Gallegos writes as a reporter and the book is built from individual stories rather than from macroeconomic analysis. Its value is in showing how the incentive structure produced by multiple exchange rates and price controls destroys productive activity, which is a mechanism that generalises.

The book was published in 2016 and the collapse deepened substantially afterward, with hyperinflation and mass emigration. The account therefore describes the process rather than its endpoint.