[Marxism] Petrocracy in Venezuela?

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times Magazine, November 4, 2007
The Perils of Petrocracy
By TINA ROSENBERG

Who holds the world’s oil? You might assume it’s in the hands of big 
private oil companies like ExxonMobil. But in fact, 77 percent of the 
world’s oil reserves are held by national oil companies with no private 
equity, and there are 13 state-owned oil companies with more reserves 
than ExxonMobil, the largest multinational oil company. The popular 
perception in the United States is that if leaders of oil countries 
nationalize their oil, they are bucking a global trend toward 
privatization. In reality, nationalized oil is the trend. And the 
percentage of oil controlled by state-owned companies is likely to 
continue rising, mainly because of the demographics of oil. Deposits are 
being exhausted in wealthy countries — the ones that exploited their oil 
first and generally have the most private oil — and are being found 
largely in developing countries, where oil tends to belong to the state.

Nationalization is also a political trend in some regions, mainly Latin 
America, where the populist presidents of Bolivia and Ecuador have made 
it part of their discourse. They are led, of course, by Hugo Chávez of 
Venezuela. He has made private producers accept state control of their 
operations. When they wouldn’t, as in the case of ExxonMobil and 
ConocoPhillips, he simply nationalized their holdings. Chávez has also 
asserted his control over Venezuela’s state oil company, which before 
him operated very much like a private, profit-driven enterprise.

Chávez is a prophet in search of disciples. He seeks to present 
Venezuela as a more moral world power, uniting Latin America and poor 
countries everywhere in a socialist alliance. He has invented a new kind 
of socialism, which he calls Bolivarian socialism, named for the 
independence hero Simón Bolívar: a little Marx, a little Jesus, a little 
anti-imperialism and a lot of the whim of Hugo Chávez, dedicated to the 
“comprehensive, humanist, endogenous and socialist development of the 
nation.” His is a gospel greased by oil, which is financing his 
transformation of Venezuela. Chávez is a genius of a politician: 
charming, folksy, flirtatious. I first met him in New York in 1999, the 
year he became president. I sat next to him at an interview, very 
pregnant. He embraced me — “But you should come have the baby in 
Venezuela!” he enthused.

The appeal of his message transcends the charisma of the messenger. To 
other countries — especially the oil and gas nations in Latin America 
that watch Chávez with particular interest — the appeal is simple to 
understand. Oil- and gas-dependent countries are historically ill 
governed. Today their people are in rebellion against globalization, 
which promised much but has brought them little. They have been told 
their countries are rich, but they see they are poor. So someone must be 
stealing the profits.

Most often, nationalization is a reaction to the idea that the thief is 
a foreign company. For populist leftists, El Petroleo es Nuestro! — the 
oil is ours — is an alluring slogan. Now as the record high price of oil 
has made exploitation worthwhile even in places that are remote or 
geologically complicated (Chad comes to mind), more underdeveloped 
countries have to choose what to do with their oil. Those that have long 
held oil must decide how to spend the incomprehensible amounts of money 
oil is now bringing them.

Historically, almost every country dependent on the export of oil has 
answered this question in the same way: badly. It may seem paradoxical, 
but finding a hole in the ground that spouts money can be one of the 
worst things to happen to a nation. With one or two exceptions, 
oil-dependent countries are poorer, more conflict-ridden and despotic. 
OPEC’s own studies show the perils of relying on oil. Between 1965 and 
1998, the economies of OPEC members contracted by 1.3 percent a year. 
Oil-dependent nations do especially badly by their poor: infant 
survival, nutrition, life expectancy, literacy, schooling — all are 
worse in oil-producing countries. The history of oil-dependent countries 
has produced what Terry Lynn Karl, a Stanford University professor, 
calls the paradox of plenty.

Oil not only creates very few jobs, it also destroys jobs in other 
sectors. By pushing up a country’s exchange rate, the export of oil 
distorts the economy. “Oil rents drive out any other productive 
activity,” Karl says. “Why would you bother to produce your own food if 
you could buy it? Why would you bother to develop any kind of export 
industry if oil makes your money worth more and that hurts all your 
other exports?” The most successful societies develop a middle class 
through manufacturing; oil makes this extremely difficult.

Oil concentrates a country’s wealth in the state, creating a culture 
where money is made by soliciting politicians and bureaucrats rather 
than by making things and selling them. Oil states also ask their 
citizens for little in taxes, and where citizens pay little in taxes, 
they demand little in accountability. Those in power distribute oil 
money to stay in power. Thus oil states tend to be highly corrupt.

full: http://www.nytimes.com/2007/11/04/magazine/04oil-t.html

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