Shakespeare tells us, “Misery acquaints a man with strange bedfellows.
” Venezuela’s 20-year slide from peaceful, prosperous democracy to violent, impoverished dictatorship has caused misery on a vast scale. And it brought together the protagonists in the story of el petro—a mashup of fringe economists and cypherpunks, socialists and libertarians, real-asset fundamentalists and next-generation financial engineers, the “Dutch disease” and exorbitant privilege. Their experiment ended in failure, but their ideas deserve exposure.
Consider the French Revolution in 1789. Its political accomplishments were short-lived: a century alternating among monarchy, republic, and empire. But the metric system it introduced spread throughout the world and persists today.
When revolutionaries took over France, they looked to the cahiers de doléances, lists of grievances. Among the most common demands was one for standard weights and measures. Peasants hated local nobles changing the size of the containers used to measure their obligations. They wanted one fixed local bushel kept where they could see it year-round.
Five brilliant Enlightenment scientists were recruited: Jean-Charles de Borda, Joseph-Louis Lagrange, Pierre-Simon Laplace, Gaspard Monge, and Nicolas de Condorcet. But they misunderstood the problem. 1 They created a good system—though not one the peasants embraced—because it was designed by smart people.
El petro is an oil-backed cryptocurrency designed at an October 2017 meeting at the Venezuelan central bank, where bemused bankers met socialist economists and cryptocurrency zealots. A white paper and official announcement followed in December. But the details kept changing. Since then, Venezuela has produced a confusing series of grand announcements, countered by denunciations from elsewhere. Amid all the debate, there has been too little analysis of the underlying theory.
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