Caracas Chronicles

In his book, Blood Oil: Tyrants, Violence, and the Rules that Run the World, Leif Wenar has a great riff on the parallels between oil and booze.

On average, Wenar explains, people who drink moderately have better health outcomes than people who drink either a lot or not at all. On average, moderate drinkers are usually happier, more satisfied with life and have lower mortality rates overall, though they do suffer increased risk of some illnesses.

But there’s a trick there, and it’s hidden in the two most harmless sounding words in that paragraph: on average.

Because when you start looking at individual cases, well, you find all kinds of strangeness. Some people drink titanic amounts and manage to keep it together nonetheless. Hell, some people seem to thrive because they’re always drunk.

Sir Winston Churchill is the paradigmatic example here: the guy worked through a famously prodigious amount of booze on his way to defeating Hitler, winning a Nobel Prize for literature and becoming Britain’s most celebrated leader in centuries. And plenty of people who drink no more than two glasses of wine, two or three times a week live miserably, accomplish nothing and die young.

So yeah, hard drinking is definitely bad for you on average. But we don’t live on average, we live one by one.

For Wenar, these lessons transfer beautifully when you look at nations’ relationships with mineral wealth. On average a little is better than none at all or than too much. On average countries that have too much oil wealth are basket-cases: autocratic, violent, misruled, corruption prone and indecent. But “on average” only gets you so far. “On average” doesn’t rule out the freaks and outliers. Not at all.

López and Baquero understand that the mechanism through which oil rents mess up the politics of a petrostate is by inverting the arrow of dependence in the relationship between the state and the people.

In this view, Norway is the Winston Churchill of Petrostates. It takes on oil wealth with the same kind of frenzied abandon with which Churchill guzzled champagne. By all rights, it should be a basket case…but it isn’t. It thrives. And it doesn’t thrive despite oil, it thrives because of it.

But you don’t need to go all Scandinavian to find a country that bucked the trend. Some countries make the most out of big oil revenues even when they start out poor and autocratic, even when they seem to have none of the prerequisites for “drinking responsibly.” For the whole long half century between 1925 and 1975, for instance, the best-performing economy in the planet lived almost entirely off of oil — transforming itself from a dictatorial, malaria-ridden backwater with hardly any of the trappings of modernity into a flourishing democracy with a fast-growing middle class, universal free education all through university level, fast social mobility and contested elections amid political stability.

It seems unimaginable now, but forty years ago before the Norwegians discovered oil in the North Sea, we were the Winston Churchills in this story.

The question is, can we get it back?

In their visionary new book, Venezuela Energética, Leopoldo López and Gustavo Baquero answer that with an emphatic yes. Mirroring Wenar, they concur that when we say a nation is addicted to oil what we really mean is that it’s addicted to oil rents: to the huge amounts of free money that come out of the ground in an oil economy. Like Wenar, they understand that the mechanism through which oil rents mess up the politics of a petrostate is by inverting the arrow of dependence in the relationship between the state and the people.

In a normal country, the state depends on the people. People produce wealth, through work, and the state captures part of the value they create by taxing them. If the people do badly, the state does badly. Whether he’s a democrat or a dictator, the ruler of such a country can’t afford to not care about the people. He has to care, because he has to tax them.

But in a petrostate gone wrong, that relationship is reversed: it’s the state that produces the wealth (by mining it) and the people seek to capture part of the value by cozying up to the rulers. Look around for the nearest line to get a carnet de la Patria if you need a graphic representation of how this works.

The Fondo Patrimonial de los Venezolanos they propose amounts to a distributed set of individual savings accounts made out to each Venezuelan over the age of 18 that they can tap to invest in human capital.

What López and Baquero propose to do about it is as radical as it’s simple. They want to reverse the direction of dependence, by shifting ownership over the bulk of the oil resource stream (royalties, some taxes and PDVSA dividends) directly to each adult citizen.

The Fondo Patrimonial de los Venezolanos they propose amounts to a distributed set of individual savings accounts made out to each Venezuelan over the age of 18 that they can tap to invest in human capital — that is, to pay for health insurance, education, a home or to fund a pension.

If the state wants in on that action, it can tax the income from that fund — but then  it has to do it the normal way, by putting its hands in people’s pockets in a way they will see, and they’ll get to vote on.

López and Baquero deserve plaudits for getting at the heart of the matter, and for putting a genuinely visionary proposal to address it front and center.

It is entirely clear, of course, that nothing like the Fondo Patrimonial de los Venezolanos stands the least chance of being implemented so long as the current lot stays in power. And the current lot’s relationship to oil wealth is as destructive as the most hopeless gutter drunk’s relationship to booze is.

But it doesn’t have to be like that, and it doesn’t have to last forever. And when it’s over, Venezuela will be in dire need for the kind of clear-eyed, far-seeing proposal López and Baquero have put forward.

For the next few days, we’ll be publishing pieces related to oil policy and details on the book which we hope can jump-start a much needed conversation.