Eric Farnsworth devotes a Barron’s column to the possibilities for Venezuela‘s political future.

Venezuela is in free fall, and it’s already presenting an early foreign-policy challenge for the new Trump administration. Once Latin America’s wealthiest nation and a tourist destination touted in airline ads from the 1950s, Venezuela now faces shortages of food and basic medicines, galloping inflation, a multi-year recession, and a massive drain of human capital as the professional class abandons a sinking ship.

Caracas is the most murderous city in the world, according to the U.S. State Department. Allegations of official corruption surrounding the state energy company are rampant, with estimates of wealth lost to self-dealing and outright theft running to tens of billions of dollars. Drug trafficking has expanded, and the corruption is eroding democratic institutions across the Caribbean Basin. Late in 2016, two nephews of the president were found guilty of trying to ship cocaine to the U.S. The sitting vice president has been designated by the U.S. Treasury as a narcotics kingpin.

Venezuela produces essentially one basket of goods: oil and related products. When oil prices were high, the government spent lavishly on politically motivated social programs and foreign-policy adventures, while outright giving away tens of thousands of barrels every day to allies such as Cuba. Now that the price of oil is lower, there is much less to sustain government spending, including imports of things that Venezuela doesn’t produce but which the population desperately requires.

But the story is bigger. All oil-producing nations have been hit by the same market shock, but they do not all face Venezuela’s dire circumstances. In fact, the price of oil today is around three times the level it was when Hugo Chavez took power in 1999. Since then, Venezuela has been on a path he called 21st century socialism, financed by oil, the central bank, and loans from China. His socialist policies have caused severe underinvestment in the energy sector, led to an assault on the broader private sector that has destroyed productive capacity, and created ample opportunities for official corruption. In general, the government has grossly mismanaged the economy.