“The key to sustainable resource development is private property rights to the subsoil, not monopoly government deciding what public projects to undertake. The history of government and petroleum is clear on this.”
In a Council on Foreign Relations study, “Venezuela: The Rise and Fall of a Petrostate” (2024), authors Diana Roy and Amelia Cheatham wrote:
Venezuela’s ongoing descent into economic and political chaos is a cautionary tale of the dangerous influence that resource wealth can have on developing countries.
Calling Guillermo Yeatts and his case for privatizing the subsoil for mass wealth creation and democratization! But the authors work within the socialist, nationalist paradigm. Their Summary follows (verbatim):
“Poor governance” is linked to the “petrostate” problem, not statism.
Venezuela, home to the world’s largest oil reserves, is a case study in the perils of becoming a petrostate. Since it was discovered in the country in the 1920s, oil has taken Venezuela on an exhilarating but dangerous boom-and-bust ride that offers lessons for other resource-rich states. Decades of poor governance have driven what was once one of Latin America’s most prosperous countries to economic and political ruin.
Rampant statism under the United Socialist Party of Venezuela (PSUV) under Nicolás Maduro (2013–2026) and Hugo Chávez (1999–2013) is described:
In recent years, Venezuela has suffered economic collapse, with output shrinking significantly and rampant hyperinflation contributing to a scarcity of basic goods, such as food and medicine. Meanwhile, government mismanagement and U.S. sanctions have led to a drastic decline in oil production and severe underinvestment in the sector. Though Washington eased some sanctions on Venezuela’s oil and gas sector in 2023, signaling a potential détente, Caracas’s failure to meet conditions for a fair election prompted the U.S. government to reimpose sanctions in 2024.
Petrostate, defined
“Petrostate is an informal term used to describe a country with several interrelated attributes.” Continuing:
“Countries often described as petrostates,” the authors mention, “include Algeria, Cameroon, Chad, Ecuador, Indonesia, Iran, Kazakhstan, Libya, Mexico, Nigeria, Oman, Qatar, Russia, Saudi Arabia, the United Arab Emirates, and Venezuela.”
Bad Analytics, Bad Policy
Failing to understand the central role of Statism in the so-called “resource curse” or “oil curse” or “Dutch disease,” the study ends on a fallacious, politicized note. “If a country strikes oil or another resource before it develops its state infrastructure, the curse is much harder to avoid.”
However, there are remedial measures that low-income and developing countries can try, provided they are willing. For instance, a government’s overarching objective should be to use the oil earnings in a responsible manner “to finance outlays on public goods that serve as the platform for private investment and long-term growth,” says Columbia University’s Jeffrey Sachs, an expert on economic development. This can be done financially, with broad-based investing in international assets, or physically, by building infrastructure and educating workers. Transparency is essential in all of this, Sachs says.
Freedom, Please
The key to sustainable resource development is private property rights to the subsoil, not monopoly government deciding what public projects to undertake. The history of government and petroleum is clear on this.
The U.S. experience under private property rights offers success stories in place of monopoly-resource Statism. Energy exceptionalism can be seen in Houston, Texas. Joe Pratt, formerly the Cullen/NEH Professor in History and Business, University of Houston, wrote:
The wildcatters showed their gratitude to their city through their philanthropy. They were not the only ones who supported good causes in our region, but many of the foundations in Houston had their beginning in the oil and gas industries.
Oil Exceptionalism … Houston Exceptionalism … Texas Exceptionalism … U.S. Exceptionalism: Private Oil and Gas for the Social Good–this was Joe Pratt’s soulful message to the world. Venezuela can be so successful–and more.