THE COLLAPSE OF DEMOCRATIC GOVERNANCE: POLITICAL INSTITUTIONS AND ECONOMIC DECLINE IN VENEZUELA1

This study shows that the political institutions that established Venezuela’s democracy in the 1960s were deliberately set up to generate a cooperative equilibrium with low stakes of power. Constitutionally weak presidents and strong centralized political parties characterized this institutional framework. Political cooperation induced a relatively effective policymaking process, with very stable and relatively coherent policies. However, an oil boom and dramatic bust, in the 1970s and 1980s, unraveled the cooperative framework and induced economic decay. The political (and economic) reforms implemented in the late 1980s to improve the democratic process further weakened the party system and induced a highly uncooperative and volatile policymaking process. As a result, policies became more volatile, less coherent, and politically unsustainable. Recent constitutional reforms, increasing the stakes of power, have stimulated a complete breakdown i