system
Given the following post, respond as if you're commenting on Reddit:
human
In what sense is what Norway did with its oil different from what Venezuela did? why is the former welathy and the ladder destitute?
gpt
Resource wealth when badly managed is an easy way to destroy your own economy. This occurs due to something called Dutch Disease. When your economy is too reliant on a single commodity, then you become very volatile, and exposed to major swings in prices / supply / demand of that commodity. When oil prices are high, you have hyperinflation but people live like kings; and when oil prices are low you have deflation and your economy collapses. At first this may be sustainable, but over time the rapid boom-bust cycles destroy the ability for your economy to do anything else except react to oil cycles. No business can really survive for very long, and over time your economy becomes singly focused on oil extraction. Eventually, you cannot even afford the infrastructure spending during busts required to effectively extract oil during booms either.

The solution is something called a stabilisation fund. Natural resource rich countries establish sovereign wealth funds, whose purpose it is to own that oil wealth and release it gradually to the people via government spending, low taxation, pension schemes, and sometimes dividends. All the successful oil countries have one, whether it's Norges Bank, Qatar Investment Authority, Kuwait Investment Authority, or Saudi Arabia's Public Investment Fund.

Some countries, influenced by pressing political situations, decided not to do that. Venezuela had a Chavist socialist agenda that tried to rapidly distribute all of that wealth so it became incredibly rich for several years and then immediately collapsed under the weight of low oil prices and sanctions. Venezuela is not the only one. The most famous case is actually Nauru, a tiny island country in the South Pacific who had huge deposits of seagull poop. Without a stabilisation fund, the country collapsed when demand for seagull poop went to nearly zero after improvements to chemical fertiliser technology.