Luis Pedro’s Turn of Phrase

It’s not easy to think up ways to infuse life into the tired old political economy discussion we’ve been having since the 1930s, but Luis Pedro España manages it,

Que el Estado pueda asignar recursos sin tener que distribuirlos es una particularidad que permite que nuestro clientelismo sea particularmente perverso. Para decirlo de una vez y sin tapujos, el clientelismo petrolero, ese en el cual una parte de su gasto no tiene por contraparte un pagador doméstico de tributos, puede beneficiar a unos sin necesariamente generar prejuicio en otros. En otras palabras puede otorgar subsidios o transferencias, otorgar bienes y servicios, sin que exista alguien interno que se queje porque está pagando una cuenta dispendiosa. En Venezuela sí hay almuerzo gratis, o mejor, quien lo paga es un externo que no cuenta para la política interna.

That’s lovely and well put, as is the rest of his column.

Now, political scientists will tell you that the statistical link in comparative perspective between resource abundance and democracy is problematic, and arguably quite weak. A zillion and a half studies have looked into it and the picture that emerges isn’t that clear.

But my Venezuela-driven intuition is that “democracy” is the wrong variable to look at. What undermines petrostates and other resource-cursed countries isn’t the absence of democracy but rather run-away pro-incumbent bias. In the normal run of affairs, petrostate elites just have way too many distributional levers to pull to keep themselves in power that voting stops functioning as a realistic route for contestation.

Less developed petrostates sometimes turn to institutional constraints to maintain some space for contestation. But those institutional constraints – like the 1961 constitution’s rule against immediate re-election – are inherently unstable: always just one charismatic populist away from getting chucked out the window. The competitive dynamics that democracy itself creates builds in massive incentives to fiddle with those norms – either around the edge, like Lusinchi, or by just driving a Mack truck through them like el que te conté. 

Where I differ from Juan is that I really don’t think this is about Chávez. It’s about the political economy of oil. Petroclientelism poses a grave challenge to democratic contestability as traditionally understood. It may be that petrostate regimes are really only challengeable in power in exceptional circumstances, when a hiccup in the world-oil market plunges the petroclientelist machine into crisis, à la 1998.

How you create institutions strong enough and stable enough to prevent petrostate elites from performing their usual conjuring trick – turning petroleum into power – is the great unanswered question of our generation…and the one before it…and the one before that one, too…

86 thoughts on “Luis Pedro’s Turn of Phrase

    • I guess the classic response is that they had the institutions in place for a couple of generations BEFORE they hit oil. It’s when you find oil first and start trying to create institutions later that you’re in trouble.

      • I agree. Norway built it’s institutions and political reality under scarcity. Since industrialization started there were always scarce resources, but apart from the 20s/30s crisis and WWII and the years after the scarce conditions were relatively stable preventing extreme social turmoil (which can damage institutions).
        However, apart from the point of the development path where oil was found (post industrialization), another crucial difference is the lack of clientelism and more deeper a tradition of patron-servitude. Essentially nature in Norway is so unforgiving that it was always difficult to support anything but a small non-farming upper class. For that reason and others, as industrialization started, many Norwegian were independent farmers and/or fishermen (not employees, servants etc), and there was no patron to get favours from or be treated good by. You couldn’t suck up to nature to get a favour, you had to work or starve, nobody was going to give you anything anyway. Still, in Norway, almost nobody has servants, in fact it is frowned upon. A lot of people even frown upon not cleaning your house yourself.
        The role of collectivity is very different. In Norway, the collective/society was always to some degree a strict teacher whose norms you trusted as beneficial and correct (read protestantism). You do your duty, and harvest the fruits of your own work, and the collective/society doesn’t help you, but it doesn’t screw you over either. My impression is that in Venezuela many people traditionally see the collective as controlled by a mostly unjust patron which you occasionally manage to align with to get some support.
        I guess the job in Venezuela is to convince the non-believers that building impartial well-functioning institutions is possible and beneficial, but how do you build that trust in people who feel that they always received next to nothing from the institutions unless they have a personal relationship to someone inside that institution?

      • Please Toro, its time to get off the “oil curse” nonsense. Venezuela was a terribly poor country long before it discovered oil, and would look more like Nicaragua or Honduras right now if it didn’t have oil. Somehow you have to explain why Venezuela was already poor before oil, and why neighboring countries exhibit very similar economic problems despite not having oil.

        The whole oil explanation just doesn’t make any sense.

    • It’s true that the Venezuelan society cannot be compared to the Norwegian. But could it be that the biggest difference is neither nature nor nurture, but the levels of poverty and extreme poverty in both countries?

      As for the political side, any nation in a dire economic situation can fall under the spell of a gifted charlatan regardless of the nature/nurture thing. Germany in the 1930s and Venezuela in the 1990s have nothing in common but a severe economic crisis, and both fell for swindllers like Hitler and Chavez.

  1. BTW, it’s not true that we can’t break away from this cycle of “money for nothing and chicks for free” that permeates our political economy. Everything from giving out a slip of paper every time you pump gas explaining what you could have done with that money, to Mi Negra, to extorres’ proposal gets at the heart of that. It’s just that we haven’t had the will to implement such a scheme, or the luck to elect a person willing to do it.

    • “giving out a slip of paper every time you pump gas explaining what you could have done with that money” That’s actually a brilliant idea that could so easily be implemented.

    • How about the MUD talking about specific policies like those and promoting them among the people. They would more credible if they discussed such policies not just during the electoral campaign (Like Rosales and La Negra) but through the entire year…

      We can complain as much as we want about communicational hegemony and whatnot, but the truth is that the MUD is failing building a credible alternative. Yes, they proposed Ley de Misiones and Ley Desarme, but the government stole their thunder and they did nothing about it. As for the MUD program was nice and all, but it meant nothing to the common folks. It was filled wth good intentions, but it lacked specifics.

      I understand that the opposition is busy trying to win as much Governor, Mayor or representatives positions as posible, but they should not forget the real, serious politics, i.e. building a solid, credible alternative to the chavismo.

      What about calling for a referendum on the Ley de Misiones? Or what about a referendum on La Negra? What abouta referendum on – God forbid – an increase on the gas price?

  2. One of the problems is that institutions only seem to have some degree of independence as a mean of survival when they see that the current regime is unpopular and probably falling. Like Congress and the CSJ when CAP, CSE and others institutions in 1998. How do you built institutions that can control a President in the middle of an oil boom? You know you have a messed-up system when institutional independence is inversely proportional to how well the economy is going.

    • You have to limit the power the President holds over the purse strings – but in a Presidential system like ours, that would require the President purposefully limiting his own power!

      If you think of Mexico, for example … it took a guy like Ernesto Zedillo to lay the groundwork, to implement the institutional changes, that paved the way for his party’s own loss of power. Something like that is needed for Venezuela, a leader willing to sacrifice his/her own position of power for the greater good.

      • Usually, the cases of a President limiting his own alliances come when he its held together in power by an weak alliance and negotiating and limiting his own power are a mean of survival (its a rational and selfish decision in these case because you might be the opposition tomorrow) But in petrostates, victories tend to come by a landslide, giving really opportunity for a different result, it really bugs me when people say that the 1999 Constitution is one of the best of the world, quite on the contrary, it only included a lot of bs about rights and gave more power to the Executive, deepening the Presidential model and the worst tendencies of concentration of powers in Latin America with things like enabling laws. Juan Linz has written about the failure of Presidential models to create liberal democracies. http://www1.american.edu/ia/cdem/pdfs/linz_perils_presidencialism.pdf

        • I mean, to create liberal democracies, except the US (which is disfunctional to some extenct) and mixed systems like France

  3. Mr. Espantosa stresses the absence of counterparties; the oil revenues are from an apparently inexhaustible source, not from the pocketbooks of electors.

    Since that setup won’t change anytime soon, it seems to me that clientelism could be addressed as a rule of law issue. Where I live, Canada, there are strict criteria of eligibility for each of the relatively generous social programmes. No one gets Unemployment Insurance because they vote right; they get it if and only if they meet the legal requirements.

    Any departure from the rules actually creates
    Counterparties; if you are cheating, the money
    might not be there for my kids, if they need it.

    I’m sure thus is hopelessly naive in a Cenezuelan context; it is a useful starting point nonetheless I think.

    • Bueno, but in Canada the oil is basically in private hands, and the state extracts money from the sector by taxing it, not owning it! In that sense, Canada isn’t really a petrostate. It’s a normal state that happens to have oil.

      • I think the same dynamic would occur if most of the tax revenues were oil dependent, too. For example, in Alberta the provincial government sends everybody a cheque for $500 or so just before the election (by purest chance). But, because of the rule of law, they don’t get away with distributing it to cronies only.

  4. Quico, your post is so complicated that I have a lot of difficulty to get a clear message from it.
    Next time pleas write about Quantum Physics or NP-Completeness so that this poor soul has a chance at getting it!

      • Quico, I had read the Pedro España post and perfectly understood that. What is REALLY complicated is your writing, my friend.

        Anyways, I think that if Norway did it, Venezuela can too.

        It is a matter of putting aside oil resources for future generations, just like Norway. Do not allow the petro dollars to enter the economy.

        As for Canada, it is more complicated. Canada is not an oil producing country, the Province of Alberta is! When oil prices increase, we actually suffer in Québec because the canadian dollar increases and we have more difficulty exporting goods.

        • And on that point, I don’t know if the goverent of Alberta will change hands in my lifetime…

          • Well, I think in Norway’s case it makes sense to limit the use of petrodollars, given that the country is highly developed. But, if spent correctly, petrodollars could boost Venezuela’s development. It would benefit Venezuela much more to get a better education system and reduce crime significantly in the short term, than to save up a few billions for the long term. Sadly the government is wasting most of the government coming in.

            • I remember now a podcast about how Norwaz dealt with oil exploration and production. From the beginning, they decided that they would limit oil production in order to avoid a sudden oil windfall. I believe the guy behind this strategy was a geological engineer from Irak.
              Before moving to Norway due to personal reasons, he saw how Irak wasted its oil windfall. Irak, like Venezuela and many other petrostates, fell for the theory of “now or never” and wasted its windfall. So, this engineer suggested to Norway to play it long term and give a limited number of licenses to oil companies.
              Of course, you can do that when the subsistence of the people is not on the line. In our case it all came down to poverty. On the other hand, there should be ways to avoid wasteful spending.

        • Isn’t the effect the same in Venezuela? As oil prices go up, so does the bolivar. It becomes harder to export anything except oil. In Canada, Alberta has the oil, but makes equalization payments to other, poorer, provinces. Quebec got seven billion dollars last year from the programme. Of course, export jobs would be preferable!

        • I agree with Bruni. Quico, your eye-candy is always so pertinent and wonderful. But you need to simplify what is the verbal equivalent of talking with a mouthful of marbles. For example, using a simpler word than ‘contestation’, or using prepositions to make a sentence flow better, rather than bunching up a couple of adjectives before a noun, might be where I’d start. Anyway, just a suggestion.

  5. As Herbert said : “whoever controls the Spice controls the Universe” , the same applies to oil, if it is not one “elite” it will be another. A government can try to enact laws and regulations to “control” the power to whoever is pulling the levers, but at the end “Herbert’s principle” applies.

    • Excelent paper from the CGD
      “Direct Distribution of Oil Revenues in Venezuela: A Viable Alternative?”
      by Pedro L. Rodríguez, José R. Morales, and Francisco J. Monaldi

      Is basically the ex-torres proposal.
      The CGD has been proposing this approach in several countries.

  6. I hope it’s not too rude to suggest that when it comes to Venezuela analysts, there’s really just two types: those who understand (or are willing to understand) the petro-state, and those who don’t. Trying to overlay conventional liberal democratic models atop Venezuelan politics is a little like trying to fit a square peg into a round hole. That’s not to suggest that democracy isn’t possible in Venezuela. It’s more a challenge to think about forms of democracy that aren’t strictly bound by liberal democratic forms. And no Virginia, the options aren’t just liberal democracy or statist socialism.

    Just to thread together several comments written above, at root the issue seems to be about realizing that 1) the modern Venezuelan state rose in tandem with the development of petro-politics, and 2) that symbiotic development helped consolidate distortions that both engendered and deepened severe structural inequality. If you accept that much, then it’s not especially difficult – I think – to see that responding to the immediate needs of significant sectors of the population mired in poverty forestalls the very kind of save-today-so-you-can-have-economic-stability-tomorrow arguments that seem to animate a lot of the discussion about why Venezuela can’t be more like Norway. It really is a zero-sum game at that point, part of what Terry Karl wrote about in the 80s and 90s comparing Venezuela and other oil rich countries: the history of development of the petro-state that explains both the possibilities and the limitations (depending on your perspective) of what’s possible in Venezuela. All else is window dressing. Or as Federico Vegas suggests, en Venezuela tenemos mucha histeria y poca historia.

      • ” If you accept that much, then it’s not especially difficult – I think – to see that responding to the immediate needs of significant sectors of the population mired in poverty forestalls the very kind of save-today-so-you-can-have-economic-stability-tomorrow arguments that seem to animate a lot of the discussion about why Venezuela can’t be more like Norway.”

        I think you hint at the nub of the debate: what do we pay attention to – immediate needs, or not-so-immediate needs? It’s the difference between those two that governs the choice of a Haier washing machine instead of a properly functioning public school.

  7. “How you create institutions strong enough and stable enough to prevent petrostate elites from performing their usual conjuring trick – turning petroleum into power – is the great unanswered question of our generation…”

    Oh, it’s been answered, all right. Blue in the face, answered, and then some. Supplicants to citizens, you called it…

      • I have both. What’s really blocking the road is what Juan described above:

        “It’s just that we haven’t had the will to implement such a scheme, or the luck to elect a person willing to do it.”

        I guess I’ll celebrate that we’re half-way there if you are implying it’s a desireable end-state…

    • I don’t see a way to implement that without it being torn down or perverted by the traditional elites. You think the powers that be will just implement a direct cash transfer program with no strings attached? If you really believe that you’re more naive than you let on. So no, it hasn’t been answered when the answer has unaddressed flaws.

      • One way is to prepare a very well written article for the constitution, and carry out a very well orchestrated referendum to impose said article.

          • Francisco (FC) Sarcasm aside, I think this kind of article would be different. The reason for it is the same reason I don’t think this kind of article could be removed if ever implemented: Too many people will immediately feel ownership of that oil money. Your own thinking points to people in power not being willing to give it up; apply that same thinking to the people who would start feeling even more empowered by such an article.

            If you don’t like that venue, however, then how about just putting Mi Negra on steroids, as Quico described it? Simply make Mi Negra unconditional, daily, and for distribution of 100% of all non taxed revenues.

            Whether you agree with either of these proposed implementations, can we at least agree that there implementation proposals exist, which was my point?

            By the way, I’m happy that this discussion is about implementations; at least it seems we have the goal as our common ground. It seems obvious to me that the first step is getting the neediest to realize that their demand for the cash would meet with support from us. How would you suggest getting to the point of the cash being distributed?

            • From the wreckage of old institutions that would follow a tax-based reform, save and pump up the cedulación process, make that the negra.

              • I agree. The cédula should be the debit card. At one point, with another group, what we were discussing is how long it would take a corporation like MasterCard to agree to give every single Venezuelan a pictured/fingerprinted debit card with the flag on it, and if they would do it for free if they were guaranteed exclusive rights for a few years.

              • That means big fees though. Who handles the deal? trillions could be lost. I say: develop our own system. It can’t be that much R and D that would go into making a national system, a la voting machine.

              • Agreed, not just for the reasons you give, but many others including security ones which were my main concern. Another hurdle is keeping record of deaths and births, as well as nationalizations, all three of which are corruption weakspots. I was just giving an example of the kind of ideas being bounced around in other circles.

            • Such things should not be constitutional articles. Constitutions should be about rights and responsibilities not a grocery list of wants. You could try to make it a law, organic if possible. Try to win as many seats as possible in 2015, by then it’s possible the economy will have bombed and a repeat of 2010 may be possible with most pro-chavernment staying at home with the government unable/unwilling to do extensive vote buying. Then you can try as part of your campaign to point out that the government is not suited to distributing oil wealth and that we should cut the middle man and instead make direct transfers to everyone.

              I have a sticky point though: the Oil industry needs money for maintenance and investment so as to grow. So what % of profits are you going to distribute? Who handles that? What if prices fall? Whatever you decide to implement I have a feeling it will be FAR more complicated than you paint it to be. Your answer may very well generate a ton of questions and unforeseen consequences as people demand more of their fair share of the oil pie and try to kill the golden goose.

              • See, what you propose is yet another venue of getting this to happen. There must be many others, too. It’s just a matter of deciding that this is what we want to happen.

                One reason for going the referendum route is that it’s much easier to convince a large percentage of poor people than a large percentage of government level people.

                The reason for thinking constitutional level, is that the topic is already at the constitutional level. The “petroleo es de todos” is derived directly from a constitutional article. I would think that an ammendment to that article making, not just oil, but all natural resources “de todos”, and specifying that the single role a government can take with their respect is to manage their sales at the maximal revenues to then go directly to a shock absorbing account from where it gets only distributed directly and equally to all living citizens in a daily average fashion. In complement to this article, I would adjust the articles regarding government budgeting and specifically state that all budgeting must be derived from taxation, not from any other source.

                Regarding your sticky point, I see a clear distinction between an oil company’s revenue and oil revenue. Oil revenue is the price paid by an oil company for crude. The government’s role would be to allow companies to extract oil for a price per barrel. This price should be strictly a free, competitive type pricing (highest bidder type) to prevent “deals” with government officials. The oil companies would then make as much profit from their purchased oil as they can. It would be up to the oil company to decide how much it wants to spend on its own maintenance and research and development in order to compete against others and comply with regulations. The government should be out of the oil business (and any other business, for that matter). As I mentioned earlier, the government’s only income should be from collected taxes. This simplifies things, not complicate them.

              • To the excellent answer by ‘extorres’ I can only add: Don’t fool yourself, Francisco, because that golden goose is currently dying…

  8. Free lunch? This expendture has at least two negattive consecuences. 1) a direct impact on money supply. Therefore, without a contractionary monetary policy, it causes inflation. 2) since it is allocated on non-traded goods, it will appreciate real exchange rate.

      • Hi to both Omars,

        Venezuela ALREADY have one of the worst inflation rates in the world, and the real exchange rate keeps going out. The Torres proposal has never being marketed as a free lunch, and it won’t make us fare worse than we are already doing.

        • “it won’t make us fare worse than we are already doing”, well, that’s an hypothesis that has to be both theoretically and empirically tested, sorry it is not a matter of opinion.

          • Je, je, that particular hypothesis is easy to test: If we already have the worse inflation in the world, anything we do will either improve the situation or keep it the same… ;-)

            Bad jokes aside, what we should be wondering about the Torres proposal is if it could cause hyperinflation, and if so, how bad it could be, during how much time, and if the end result will anyway be better than the current expected trajectory of the Venezuelan economy… that looks probably headed to a bad case of hyperinflation.

            • There are a lot, and I mean a LOT, of issues worthy to be investigated further to assert distributing the oil rent in unequivocally superior to the status quo. In general, I agree with the argument of this proposal being transformative for good of the relationship State-Citizens, but policy design and implementation can’t be based on broad untasted presumptions. Examples of issues: What are the tax, tax rate and collection strategy that makes this proposal fiscally neutral to avoid a fiscal crisis?. Is it socially optimal to transfer the intrinsic volatility of oil revenues to households severely credit constrained? What are the external equilibrium implications of transfer the oil revenue to households that might have a much higher propensity to imported consumption? and very long etcetera…

              • Unfortunately, the comments section of this blog is NOT the venue to be cobbling, after now, two years, a cash transfer mechanism that has still not been fully thought out by its proponent, in micro/macroeconomic and in more practical business/marketing and delivery terms.

                It’s a fluffy idea. But after all this time, I’m no closer to being convinced of its viability. Nor have I seen any credible efforts whatsoever to present the idea in a serious and systematic format.

                Tirando pelotitas a la luna cansa, vale …

              • you’re fairly new to this environment Dago. Let me know if you get tired of the little bits and bobs of a discussion, two years later. That would make it 4 years for most of us.
                As I said, Tirando pelotitas a la luna cansa, vale..

              • Omar,

                “What are the tax, tax rate and collection strategy that makes this proposal fiscally neutral to avoid a fiscal crisis?”

                Firstly, consider that the money will enter the consumer market, changing hands there until it reaches tax paying hands. So, keeping taxes as they are should still get the same amount of collection into the government hands or better, than spending the same amount of money on big government projects, perhaps with a new lag. The reason I say possibly better is that lower end consumers are more likely than high end consumers to spend on local products and services. Large projects tend to have higher percentages of money ending up abroad before having any effect locally, if ever.

                Secondly, consider that by distributing the money bottom up rather than top down, many of the government programs created to alleviate inequality become redundant, so some taxation can be redirected as if more taxes had been collected. After all, poverty, by definition, would have been eliminated serveral times over.

                Thirdly, consider, assuming we agree that the oil belongs to the citizens to begin with, that spending of oil money by the government is equivalent to a regressive taxation whereby the government has taken a greater percentage from the poor than from the rich. By collecting taxes from the market after the oil money has been changing hands in the consumer market will even further help the progressiveness of the taxation system, as is. (There’s another proposal to simplify the taxation system and prevent evasion, but let’s stick to natural resource revenue distribution, for now).

                Finally, consider that by taking the control of the spending of this non taxed money from government hands and forcing them to only budget and spend from taxed money, they will be forced to prevent the waste and theft that is currently draining the economy.

                Note that all the above, and a long list of etcetera’s, tend to improve the nation’s fiscal situation. The alternative, the status quo, tends towards the well known petrostate model, of decades, which is fiscally dismal.

                “Is it socially optimal to transfer the intrinsic volatility of oil revenues to households severely credit constrained?”

                Firstly, consider that I’ve always proposed together with the transfers a shock absorbing account, similar to the FIEM. I would suggest that it at least shock absorb the volatility of the oil prices by averaging revenues entering the account, but also the the market’s ability to react to changes by averaging the distributions exiting the account.

                Consider also that by having taken the oil revenues out of the government’s spending, the volatility of the government spending, the truly damaging aspect of oil price volatility, will be reduced.

                Socially, I am often told that people are not informed enough about oil pricing volatility to accept oil revenue variations. Well, socially, what better way to learn about said volatility than to have a daily reminder, shock absorbed, of course?

                Note again that the above tends to improve the nation’s fiscal situation. The alternative is the petrostate model continuation, fiscally dismal.

                “What are the external equilibrium implications of transfer the oil revenue to households that might have a much higher propensity to imported consumption?”

                Quite the contrary. As mentioned above, poorer persons are more likely than less poor persons to purchase local goods and services. In fact, the market currently provides few products and services to the poor because the poor have no consumer power. This would change very quickly.

                Remember that if the distribution is daily, the amounts we are talking about per transaction are small though many, so even if imported lettuce is purchased, the local grocer providing the lettuce competes against other local grocers and will expand by spending on local construction for a new location, and will hire local personnel to work there. This is still an improvement over a petrostate government striking mega deals with foreign nations at wasteful prices and low incentive for competitive quality.

                Again, every aspect of distributing the oil money to the citizens will tend towards improved fiscal handling of the money, since the fiscal *decisions* are distributed, too, though this way amongst people with extreme vested interest. The alternative, again, is continuation of the petrostate model in which government officials have little vested interest.

                “and very long etcetera…”

                Don’t stop on my account.

              • Omar,

                Torres has demonstrated time and again that he’s completely incapable of even considering the possibility that his whole scheme won’t work. He simply can’t do it. He has basically brainwashed himself into believing in it 100% without a shadow of a doubt… despite the fact that we have pointed out its flaws on countless occasions.

                The way this can be proved is to simply ask Torres to explain the reasons that the scheme might not work. He simply can’t do it.

              • Get a Clue, you could have asked me yourself… I wonder, however, how you reached a conclusion without asking. Regardless, there are many things that could go wrong. My reason for focusing on the right is that weighing the proposal against alternatives, the pros of this proposal exceed the pros of others, and the cons of this one are so difficult to find, especially against the glaring cons of others, that not even you has been able to spot them, so instead you resort to finding fault in my person. No worries, I just take the personal attacks as signs that the proposal holds its own.

                By the way, if you are sincere about your interest to educate others, just point them to Pedro L. Rodríguez, José R. Morales, and Francisco J. Monaldi’s “Direct Distribution of Oil Revenues in Venezuela: A Viable Alternative?” and you’ll that the proposal is not a single lunatic’s idea, but a fast becoming mainstream socio-economic-political stance.

              • Get a Clue, your point was that I was “completely incapable of even considering the possibility that his whole scheme won’t work”, that I “simply can’t do it”, that I believe “in it 100% without a shadow of a doubt… ”

                What’s ironic in your comment is that it is precisely just a couple of days after I posted three corruption weaknesses in the proposal in a comment in this very page, proving your unforgiving statements wrong.

                You then claim that to prove that your unforgiving statements are true, one need only ask me to “explain the reasons that the scheme might not work”, that I “simply can’t do it.” Yet, you never have asked me so you wouldn’t know, but, worse, how would my not being able to explain that prove the other? And again, what’s ironic is that I had already explained earlier several points of potential failure, proving that your reiteration is wrong.

                And just so you know that I realize that you’re just trolling, you still haven’t addressed any relevant issue, you’re merely getting personal, corroborating my point. So, thanks.

                By the way, one of the reasons this proposal has so few flaws is that I’ve been asking people to point to any that they see for decades, and I’ve been diligently addressing each one with tweaks to the initial proposal. The shock absorbing account to deal with oil price volatility was one of the first major additions to the original concept. This is the reason I most welcome any discussion regarding possible points of failure. So, I invite you to try to pile it on, please. All I hope is that you stick to discussing what’s on the table, and not who’s sitting around it.

  9. And yet, only in 1963 and 1988 did the incumbent party retain power in Venezuela. Elections were competitive (so much so, that Chavez won in 1998), the CSE was ruled by independent technicians. The 1959-1960 constitutional commission put enough constraints, but they were trampled not by the victory of Chavez, but by the way the other powers (and the Academic and Economic elite) decided to give the elected president leeway to promote a Constituyente beyond the scope and limits defined by the 1961 Constitution.

    LHC used to say that we were democratic not because of oil, but despite of it.

    Alas, Prof. España’s good point is that Venezuelan welfare state (or clientelism, or whatever) could survive without taking away much from the former extractive elites (which, in turn, could reap some benefits). However, that was also the model of 1958 onwards. In this case, there’s an important dismantling of relevant social sectors (trade unions, industry and services, and so forth) and an attempt (in a radical shift from the 1958 model) to promote some sort of class enmity and a growing ideological hegemony.

    I guess many people -from all classes- can bear a relative prosperous hegemony than a less prosperous and challenging democracy.

    • Sure, but I’m sure you know the standard reply. It’s been exaggerated and distorted in chavista rhetoric, of course, but that doesn’t mean it doesn’t contain a nub of truth: the whole point of puntofijismo was to limit the stakes of electoral competition. Parties alternated in power, but other than in 1988, and in very irregular circumstances, policies did not. The twin clientelistic machines left most voters without a real choice under normal circumstances, and only big crises arising from exogenous shocks (1988, 1998) really resulted in major policy shifts.

      The fact that it’s annoying when chavistas take these points and exaggerate them well beyond breaking point doesn’t mean that it’s an entirely specious argument. It isn’t.

  10. I prefer the idea that we can make use of the free lunch, a la Torres, than the idea that the free lunch is intrinsically crippling, a la JC. I can’t make up my mind, though…

    • It’s like inheritance money… What’s the right thing to do? I say give it to its rightful owners, taking it out of the hands of those who’ve been grafting it for decades. That’s like 4k per year for each Venezuelan, at current prices. Do we really think more than less than 66% of the Venezuelan population is going to say no to that?

    • A $200 barrel of oil would not be enough for these crooks. Another 6 years of blatant plundering with the complicity of half of the population, the same population that would set a city on fire for an increace of $0.25 in a bus fare. It is just sad…

  11. Refrito…
    This is a very old theme and it hasn’t solved the dilemma. This feeble theory of petro-states and autocrats does not sustain any strong counterargument. By the way, at the end of the article you do a funny comment, saying the crisis was in 1998, or at least I understood it like that. It does a poor contribution to our understanding of this tragedy called Venezuela. The system held the line for a long time, since black Friday until the traitors, AKA los notables, judged CAP in the Supreme Court. 1998 is just a date.
    It’s interesting how adverse elections create this climate of remorse among losers.
    BTW someone complaint about my comment in a previous article where I said something “politically incorrect”, but I must say Virtok made a nice contribution. Wouldn’t you go for the leaders then???

  12. We’ve come around full circle here at cc. Remember, years ago, whe we were discussing Fernando Coronil’s “The Magical State”? May I suggest a re read? It will probably be even more interesting now…

  13. “Where I differ from Juan is that I really don’t think this is about Chávez.”

    I agree with you. Chavez is what could be, and then was.

    The Petrostate combines the ugliest features of Hydraulic Despotism and of Boomtown. The inequality, the economic instability, the eventual destruction of any productive class, the lack of accountability and the lack of demands for accountability, the seeming adoration of political power, etc. etc…

    And the problem is neither distribution nor redistribution. I will never ever tire of saying it. The differences between “left” and “right” (and their fantasies) in normally functioning countries seem trivial compared to the abyss in comprehension and the divorce from reality that is generalized in Venezuela. For instance, European leftists want redistribution of wealth, but the reddest of them knows perfectly well that to have public health and libraries and generous welfare regimes, you have to produce wealth to afford them. Which is done by having knowledgeable and motivated people engaging in inspiration and perspiration, and that a part of that which they produce has to go into public use. This is simply lost on Venezuelans.

    It’s that the Executive does control hydrocarbon resources, their extraction and the use of their revenue. “Nationalization” (which is the name given to this) should be replaced by another model where the State does not control this revenue.

    • Loro:: While agreeing that oil wealth can have a corruptive/destructive influence in many countries , sometimes the good it brings outweights the disadvantages , take the case of Norway for instance ,or the way its benefited countries bereft of any other resource like Kuwait and others in the middle east. Ive read that the mongolians are doing many good things with their mineral wealth . I grant you that wealth that is born of the effort and ingenuity of a hard working population is the most lasting and admirable , but sometimes certain peoples arent all that talented or competent in the way they naturally do things or their culture handicaps them in some manner that hinders them from achieving development . For them oil wealth is their basic means of achieving some measure of welfare , however incomplete in their lives. The problem with too much wealth is the same as that which springs from absolute power, it brings out the spirit of hubris in the primitive and ultimately the seeds of their own self destruction!!

  14. The level or degree of democracy or democratic reforms in a petro state, is inversely proportionate to the price of oil. The higher the price the less democracy and democratic reforms.

      • I wonder whether the Wests belligerent insistence that Liberal Democracy is the ony system of government worth pursuing,i.e. the ‘only game in town’ does not represent a kind of cultural conceit ,
        that the high demands that a well functioning democracy makes on its inhabitants may not always be in accord with the fundamental ethos or cultural instincts of all peoples in all places , That there is sometimes a chance for the vagaries of history to create not formally democratic governments but rather more authoritarian forms of rule which are better suited to the limits of a particular peoples capacity for engaging in civilized politics.
        No one can quarrel with Singapores success as a country and yet their government is much more authoritarian in character than is to be found in the Developed West . Im not sure that Saudi Arabians paternalistic monarchy is not a better match , at this moment for the temper of the sauid people than the frenetic democracy that Egyptians have now adopted as their own. We see liberal democracy as a kind of natural system of government and all other forms of rule as aberrations and yet history tells us of times and ages in which an enlgihtened authoritarian government has brought developement and a good life for ordinary people . By the way I dont count Doctrinaire Sectarian Collectivist systems of governments such as those sponsored by Communism as civilized or acceptable in any way!! .

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