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<nettime> Bruce Sterling & Venezuela´s Curse
Ricardo Bello on Thu, 30 Jan 2003 14:41:07 +0100 (CET)

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<nettime> Bruce Sterling & Venezuela´s Curse

From: Bruce Sterling [mailto:bruces {AT} well.com]
Sent: Tuesday, January 28, 2003 5:35 PM
Subject: Viridian Note 00360: Venezuela's Curse

Key concepts: oil riches, economic destabilization,
carbon mining

Attention Conservation Notice:  A FORTUNE magazine
article points out that carbon mining has ruined
Venezuela.  But why wasn't this helpful tip delivered much
earlier?  And what about all those other formerly
prosperous countries massively harmed  by corrupt carbon
domination in their centers of government?   Not that
we're naming any names.

It's so bad in Venezuela that even oil technocrats are
really scared. Man, it's hard to be a rich, educated guy
on strike.

Here come the next eager victims *after* Venezuela.

Ever seen terrifying, naked, out-of-control class warfare
from immiserated, dirty, semiliterate slum dwellers? Go
see this movie and find out how that worked in America.

Hey wait, since the North Pole is melting, we don't
need Venezuela any more.  We can ship in some handy
Russian oil where there used to be solid ice.

But wait!  Russia is a carbon-mining state just like
Venezuela, so it doesn't have a workable economy, either.
It's wall-to-wall corrupt energy moguls selling out the
population wholesale!  Let's pretend that's really
respectable, though. We don't have much of a choice.

Okay Australians: brace yourselves, and check out this
ghastly prediction about what's going down in China.

Source:  Fortune magazine, Feb 3, 2003
page 96

"The Devil's Excrement"

by Jerry Useem

"'Ten years from now, 20 years from now, you will see,'
former Venezuelan Oil Minister and OPEC co-founder Juan
Pablo Perez Alfonso predicted in the 1970s, 'oil will
bring us ruin.'

   (((Well, oil brought Perez Alfonso's nephew some ruin
recently, after he tried to throw a Venezuelan coup and
had to scram to Florida.  Perez Alfonso himself died
years ago in Maryland of  pancreatic cancer.)))

     "It was an oddball statement at a time when oil was
bringing Venezuela unprecedented wealth == the
government's 1973 revenues were larger than all previous
years combined, raising hopes that the black gold would
catapult Venezuela straight to First World status.  But
Perez Alfonso had a different name for oil: 'the devil's

     "Today he seems a prophet. When it hit the jackpot,
Venezuela had a functioning democracy and the highest per-
capita income on the continent.  Now it has a state of
near civil-war and a per-capita income lower than its 1960
level.  (((Venezuela also has a screwed-up climate and is
badly polluted, but who's counting.)))

     Far from an anomaly, Venezuela is a classic example
of that economists call the 'natural resource curse.'  A
1995 analysis of developing countries by Jeffrey Sachs and
Andrew Warner found that the more an economy relies on
mineral wealth, the lower its growth rate.  Venezuela
isn't poor despite its oil riches == it's poor because of

(((Read it 'n' weep.  This Sachs-Warner thing is 8 years
old.  Ever heard of it before? Me neither.)))

     "How could that be?  For the same reason so many
entertainers go bankrupt. (((Hey, at least we make people
laugh, fella.)))  Showered with sudden windfalls,
governments start spending like rock stars, creating
programs that are hard to undo when oil prices fall.  And
because nobody wants to pay taxes to a government that's
swimming in petrodollars == 'In Venezuela only the stupid
pay taxes,' a former President once said == the state
finds itself living beyond its means.  (((Boy,
irresponsible deficits like that would never happen in
America.  Rich people get no tax breaks, either.)))

     "A cycle begins.  The economy can't absorb the sudden
influx of money, causing wages and prices to inflate the
the nation's currency to appreciate (by an average of 50
percent, according to a World Bank economist's study)."

(((Euros now worth more than dollars.  My goodness me.)))

     "That makes it harder for local manufacturers to
compete.  Incentives, meanwhile, become wildly distorted.
When free money is flowing out of the ground, people who
might otherwise start a business or do something
innovative instead busy themselves angling for a share of
the spoils.  Why slog it out in a low-margin industry when
steering some oil business toward a contact could make you
a millionaire?  Thus a deadly double dynamic: a ballooning
public sector, a withering private one."  (((Unless you
are Enron, in which case you innovate in angling for
spoils, while privatizing the public sector.  No wonder
FORTUNE loved those guys for years on end.)))

    "Eventually you're 16th-century Spain.  (((Do we
really have to stretch this far for a cogent comparison?
The US National Security Council is chock-a-block with oil
people)))   It too, once struck it rich on gold (not the
black kind) from the Americas.  Its monarchs spent like
loons,  ((nice turn of phrase there)))  expanding the army
15-fold, creating an elaborate patronage system and
sending conquistadores in search of El Dorado.

    (((This piece is so politically touchy that it reads
like an Aesop's fable.  'You see, one king is a kind of
log, while the other king is a kind of stork, and....')))

    "(...).  While inflation and currency appreciation
slowly killed industry and agriculture, a parasitic class
of noblemen lived off gold money (think of Saudi Arabia's
idle princes) (((hereditary nobleman unknown in American
politics, thankfully))) waiting for the next ship to come
in.  By the time the ships stopped coming, Spain wasn't
able to feed itself, forcing it to declare bankruptcy
eight times and finishing it as a world power."

(((For a rather less business-friendly economic analysis,
check out this Hazel Henderson jeremiad on a Venezuelan

    "But the Midas myth dies hard.  'This is a country
that can never, ever sustain itself on oil,' Terry Lynn
Karl, author of 'The Paradox of Plenty: Oil Booms and
Petro-States,' says of Venezuela.  'But everyone from the
President to the poor believes it can.'  And therein lies
the trap."

(((Looks like the peace for oil is even more debilitating
than the war for oil.)))

     "President Hugo Chavez rode popular rage into office
by focussing on corruption.  But what neither he nor
anyone else will face up to is this:  oil is not an
economy. (((!))) Creative economic activities have
spillover effects that become self-sustaining.  Oil spills
only into a barrel == and from there usually into the
hands of a favored few.  That's the real reason
Venezuela's productivity growth has been roughly half the
Latin American average."

(((It might be useful to have a word with people on the
coast about Spain about where that oil spills.)))

    "Can the curse be avoided?  A few smaller countries:
Malaysia, Norway, Mauritius == curbed its worst effects by
spending slowly and using the money to diversify their
economies.  In Venezuela oil still accounted for 80
percent of exports before a devastating strike made even
that scarce.  As a 16th-century Spanish economist said of
his homeland, 'What makes her poor is her wealth' == a
suitable lament for Venezuelans who have been waiting so
long for their ship to come in."

(((So the answer to the debilitating oil disease is to get
those lazy decadent locals to work  a lot harder.  I have
another suggestion.  How about using less oil?)))

O=c=O O=c=O O=c=O O=c=O
O=c=O O=c=O O=c=O O=c=O

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