Petro-State Corruption On Display


Hugo Chavez, who first came to national attention when he led a military coup attempt in 192, is on his way to buying a massive reelection victory, thanks to high oil prices and the willingness to use the revenue for patronage. Former Transparency International representative Gustavo Coronel explains some of the process in his paper “Corruption, Mismanagement, and Abuse of Power in Hugo ChÃ?Â??Ã?Â?Ã?¡vez’s Venezuela.”

The general problem of Petro-States and the obstacle they pose to democratic, constitutional liberalism — in Venezuela, in Russia, in Iraq, in Saudi Arabia, in Nigeria — deserves much more attention on the part of political scientists, economists, and political historians and journalists.

(Op-eds based on the study have also been published in Russian and in Arabic in a number of papers. Hats off to my colleagues at and

6 Responses to “Petro-State Corruption On Display”

  1. I remember the crowd going up and defending Chavez (quite similar to what they are doing with Putin and his fellow tyrant in Belarus). I think you should search for articles by Jacob Hornberger. Heck, even Cindy Sheehan is quite fond of Chavez as well consider her notorious photo with him.

  2. Christopher Przywojski

    As a college student, I have come across many individuals who have expressed great approval with Mr. Chavez and I have found difficulty arguing my point. For example, many believe that he is a beacon of Democracy, despite the supposed corruption, and that he is a savior of the Venezuelan people because of his anti-corporate imperialism stance. His missions have, in fact, done much to reduce poverty and increase the nation’s overall GDP, they argue, and the simple fact that he does not ‘give into’ American influence proves their point. The question I have, then, is there really such a thing as corporate imperialism? Has past government corruption, alone, played the major role in the wide spread poverty and wealth gap that existed in Venezuela prior to Chavez, or was it the result of international corporations taking advantage of Venezuela? Also, is Chavez’s form of socialism, despite some of it’s negative impacts, the best alternative? You may argue that the only reason Venzuela’s GDP has been growing is due to oil revenue, but is there anything wrong with that? After all, the GDP is growing, and that’s saying more than what any other previous leaders has accomplished.

    Finally, when Chavez was waving a book by Noam Chomsky, was his point valid that American Foreign Policy is to blame for Venzuela’s and other poor countries’ economic state?

    Thank you

  3. Christopher,

    At the risk of invoking Godwin’s Law, Hitler significantly improved Germany’s GDP. That number is fairly easy to centrally inflate if you’re willing to do what/ever it takes…just use your authority as head of state and commander in chief of an army to direct resources, human and monetary, towards an extremely profitable end, like munitions or oil. Hence Chavez’s crackdown on employees of PetrÃ?Â??Ã?Â?Ã?³leos de Venezuela S.A., the state-owned oil company, who oppose him politically.

    You’d better ask your friends for a consistent argument.

  4. Tom G. Palmer

    I’d take a look at the paper by Coronel to which I linked. Venezuela is experiencing an influx of money due to the rise in the price of oil. That’s a pure rent, not due to wise investment decisions, hard work, etc. With such a jump in income one can spend a lot (and buy a lot of support in the process), but it’s not a very good formula for lasting wealth. Chavez and his bizarre policies have had nothing to do with it.

    You might ask your friends what would happen to such countries if the wealth-producing parts of the world (Netherlands, Germany, USA, Japan, Korea, etc.) weren’t actually producing goods and services, on the basis of a well ordered legal system based on private property, rule of law, etc. Those rents wouldn’t exist at all.

    There’s no good reason to think that poverty in Venezuela (or in Zimbabwe, which has a similar “democratic dictatorship,” but without the oil) is a result of U.S. policies. That’s an excuse for failing to ask questions about the failures of domestic policies in other countries. Would they be richer if the U.S. didn’t exist? Or are there any actual policies to which your friends could point that might be responsible for economic failure?

    If you’re interested in such questions as what accounts for economic success and economic failure, I’d recommend looking at the work of William Easterly, Deepak Lal, and other economists.

    (Here’s a piece on economic mismanagement in Venezuela that was published in 1995 . The rise in oil prices explains roughly 100% of the rise in incomes in Venezuela recently, not wealth-production in Venezuela itself.)

  5. Here’s what’s wrong with GDP growth based entirely on the increase in oil prices: sustained economic growth requires an increase in productivity, which in turn requires constant improvements in technology, human capital, and institutions.

    Increases in the price of oil simply mean that the “national assets” have become more valuable, not that country is more productive, more competent at producing things of value. And this kind of prosperity lasts only as long as the prices, or the oil, holds out…exactly why Dubai began diversifying into things like port management, and why Chavez socialism — which promotes *lower* productivity, holds the seeds of economic debacle in the long run.

    (This is also why Russia’s impressive economic growth is less impressive than it might seem, although Russian productivity is at least growing.)