Caracas Chronicles

Long-time readers know extorres, our frequent (yet annoyingly anonymous) commenter who has been pushing the direct distribution of oil wealth for a loooong time.

Today, the Wall Street Journal’s Mary Anastasia O’Grady buys right into his idea. Citing a study by our friends Pedro Rodríguez, José Morales, and Francisco Monaldi (great read), she talks about the scheme as a possible cure to Venezuela’s toxic brand of petro-populism.

Just today, we learn of yet another arbitrary change in the way the government “distributes” its oil wealth – now, more will go to the BCV and less to Fonden. These decisions are always made outside of the public eye, with zero accountability. But when citizens perceive their oil income directly, and the State taxes them instead of some oil company … well, that just turns the relationship between the citizen and its petro-state on its head, and in a good way.

O’Grady’s money quote:

When the state uses oil taxation from a narrow group of producers to run the government it breaks the connection that voters normally make between what they pay in taxes and what they expect back in services—what the authors call “positive governance dividends.” Also, when the state has discretion to distribute the fruits of oil extraction without accountability, it is likely to use them to reward political allies.

Under the DDM, the direct payment from the oil income is subsequently taxed. In this way, the cost of running government programs hits the taxpayers. According to the authors, the cost of running the large off-budget development fund known as Fonden and “various social programs,” including what Mr. Chávez calls “the missions,” amounted to almost $125 billion from 2003-2011, or some $480 per person per year.

Smart lady, that Mary Anastasia.