History of the Venezuelan Oil Industry

-Didn’t have gold so the spanish didn’t really care about it
-Had tons of oil seeping out of the ground, but nobody cared at first
-1908 Juan Vincente Gomez becomes president and grants several concessions to explore, produce, and refine oil to his closest friends, who then sell them to foreign oil companies
-1914 The foreign oil companies pretty quickly realize that there is a TON of oil in Venezuela. Caribbean Oil Company (which gets acquired later by Shell) is the first big one.
-Things develop slowly during WWI
-1922 The blowout of the Barroso No. 2 well in Cabimas really gets everyone’s attention
-1928 Venezuela becomes the world’s leading oil exporter, 2nd producer after US. Now Venezuela is someplace people actually care about
-By the end of the 1930s the Soviet Union overtook Venezuela in production, making it #3, but it was still #1 exporter
-In the 20s, agriculture was 1/3 of economy, by the 50s it was 1/10th. Got a serious case of Dutch Disease and most other industries collapsed.
-All of this pretty understandably created a deep distrust of the foreigners, some dude called them “The New Spaniards”
-From a 1927 novel: “The workers asked for a miserable salary increase and those blond, blue-eyed men who own millions of dollars, pounds and gulden in European and U.S. banks, refused.”

-1941 “Isaías Medina Angarita, a former army general from the Venezuelan Andes, was indirectly elected president.”
-1943 Angarita enacts the Hydrocarbons Law, which demanded 50% of oil profits for the government. Stayed in place until nationalization of the industry in 1976
-WWII ramps up the demand for oil, and Venezuela grants more concessions which leads to further development of new fields. They supplied the Allies

-Post-war oil demand continues to rise due to consumer automobiles,
-1950s Middle Eastern countries started exporting more, US institutes import quotas, world has an over-supply of oil, and prices plummet
-1960 Venezuela, Iran, Saudi Arabia, Iraq, and Kuwait start OPEC

1973 Oil Crisis
-1970s Persian Gulf oil exporters start pushing to get an ownership share of oil companies.
-By 1973 they had a 60% share (this is so vague, need to read that article up there for more info). Then they raise their prices 70% and embargoed countries friendly to Israel. This is great for Venezuela, between 72 and 74 government revenue from oil quadrupled
-Rest of the 70s president Carlos Andrés Pérez promises to use all that money to do awesome stuff
-But then in the 80s the price drops again because the OPEC countries were violating their quotas, and Venezuela ends up in a bunch of debt

-August 1971 president Rafael Caldera passes law nationalizing the country’s natural gas industry.
-Also in 1971 the law of reversion passed, says “all the assets, plant, and equipment belonging to concessionaires within or outside the concession areas would revert to the nation without compensation upon the expiration of the concession.” (quote from wiki, not necessarily the law)
-Decree 832 says all exploration, production, refining, and sales programs of the oil companies had to be approved in advance by the Ministry of Mines and Hydrocarbons.
-January 1 1976 oil industry officially nationalized under Carlos Andres Perez, creates Petróleos de Venezuela S.A., the national oil company.
-In 1980 PDVSA bought refineries in USA and Europe as the American Citgo, became 3rd largest oil company in the world.
-Between 1990-99, Venezuela’s industrial production declined from 50 percent to 24 percent of GDP, compared to decrease from 36 to 29 for rest of Latin America, even though production kept rising until 1998
-From 1976–1992, 29% of PDVSA’s income went towards the company’s costs, leaving 71 percent for the government. From 1993 to 2000, 64 percent of PDVSA’s income was kept by PDVSA, leaving 36 percent for the government

-1999 Chavez takes power. PDVSA kinda falls apart. Doesn’t bring any new fields onstream, and generally business kind of falls apart
-Chavez tries to reinvigorate OPEC and goes on a big tour and holds a big conference trying to get everyone to stick to their quotas again. Prices do go up, but this was probably because of the Iraq war and the rise of China
-2000 Chavez gets a huge boos in his authority from the national assembly, and he uses it to make a lot of changes to the oil industry. He enacted a new Hydrocarbons Law in 2002, but no info on what it did. Wikipedia says everyone was mad about everything he did though. One thing it says is he mandated 10% of PDVSA’s investment budget be spent on social programs.
-2002 there’s a strike by oil workers that leads to a big shutdown and subsequent price increase. Strikers wanted Chavez to resign. But they all get fired and replaced by loyalists. There were lots of protests against Chavez though, and there was even a coup attempt
-After the failure of the coup, combination of labor unions and business groups called for an “indefinite national strike” which, in many places, turned out to be a forced “bosses lock out” where the employees were prevented from working.[citation needed] When the strike ended, unemployment was up by 5 percent to over 20 percent in March 2003.
-2005 PDVSA opens first office in China and announced it would triple its fleet of tankers in the region. Chavez had been saying for a while that he wanted to sell more to China so he could be independent of the USA.
-2007 Chavez makes deal with Brazil to refine some oil there, and with Ecuador to refine some of Ecuador’s oil in Venezuela. Also a deal with Cuba to trade medical treatment for cheap oil
-State income from oil revenue grew “from 51% of total income in 2000 to 56% 2006”; oil exports increased “from 77% in 1997 to 89% in 2006”
-2012 “96% of the country’s exports and nearly half of its fiscal revenue” relied on oil production.

Weak Nationalism

He’s been talking about the ways the idea of Black Nationalism has been perverted and diluted. Then he mentions how Italians faced discrimination, so they created a community of Italian businesses which got strong enough that they were eventually integrated into “mainstream American society.” The idea here is a “nation within a nation”, which he calls “weak Black nationalism” or “community nationalism.”

Anyway, then we get to this quote from Carmichael and Hamilton’s book Black Power:

“Before a group can enter the open society, it must first close ranks. By this we mean that group solidarity is necessary before a group can operate effectively from a bargaining position of strength in a pluralist society… by building Irish Power, Italian Power, Polish Power, or Jewish Power, these groups got themselves together and operated from positions of strength.”

Then later, from Andrews:
“From a radical perspective, the fundamental problem with the idea of the nation within a nation is that it leaves the regressive structure of the nation state intact.”

Liberalism vs Radicalism

Liberalism: MLK and the civil rights movement as its generally considered. “Liberals acknowledge the problems of racial inequality but put them down to a lack of access to the system.” Black people are poor because they’re not treated fairly in the job market, laws are unfair because they’re underrepresented in the legislature, etc. “The system is not the problem in this analysis, just the fact that we are not fully part o fit. If Black faces were in high places then of course a different set of decisions would be made and equality would emerge.”

Radicalism: Malcolm X, who had no interest in being part of the “American nightmare.” “In the radical tradition, the system is the problem. There can be no reform, no adjustments, and we as Black people should not waste time daydreaming of equality.” … “the battle is not to get good jobs or to be elected, but to end the system of oppression and create the world in a new image.”

The plight of the Ghanian rice farmer

-“Rice farming was one of the successes of the post-independence economy, because it was supported by government subsidies and there was a ban on foreign imports.”
-In the 80s they wanted to improve rice production by developing irrigation systems, so they got loans from the IMF and World Bank on the condition it liberalize their markets. This meant ending the subsidies and allowing foreign imports
-Surprise! Cheap foreign rice now flooded the market, mostly from American farmers. Which is cool because guess what? America subsidizes its rice farmers.
-So now everyone buys the “cheaper, higher quality” rice from America and the Ghanian rice industry has collapsed.


“As Angela Davis explained, ‘radical simply means grasping things at the root’. Radicalism is based on rejecting the fundamental principles that govern society and creating a new paradigm.”

He’s using this to contrast against “extremism,” which “is based on taking the fundamental principles of an idea to the extreme. Making them solid absolutes with no room for flexibility or different interpretations.”

Barbarian Law Codes

After the breakdown of the Roman Empire, Germanic peoples and then later tons of other people “from Russia to Ireland” created very extensive law codes detailing the proper compensation for all kinds of wrongs, in minute detail. Like for stealing sheep of various ages and genders or for losing a hand vs finger vs various fingernails.

“Compensation in the Welsh laws is reckoned primarily in cattle and in the Irish ones in cattle or bondmaids, with considerable use of precious metals in both. In the Germanic codes it is mainly in precious metal… in the russian codes it was silver and furs”

Graeber: it’s difficult “to imagine how a system of precise equivalences– one young healthy milk cow is equivalent to exactly thirty-six chickens– could arise from most forms of gift exchange. If Henry gives Joshua a pig and feels he has received an inadequate counter-gift, he might mock Joshua as a cheapskate, but he would have little occasion to come up with a mathematical formula for precisely how cheap he feels Joshua has been. On the other hand, if Joshua’s pig just destroyed Henry’s garden, and especially, if that led to a fight in which Henry lost a toe, and Henry’s family is now hauling Joshua up in front of the village assembly– this is precisely the context where people are most likely to become petty and legalistic and express outrage if they feel they have received one groat less than was their rightful due.”

“Say the fine is in marten pelts but the culprit’s clan doesn’t have any martens. How many squirrel skins will do? or pieces of silver jewelry?”

Since these cultures were in the post-roman age, they converted everything through roman money. Lots of things were listed in these codes which weren’t really for sale on the open market at the time. So their price relationship wasn’t being determined by some sort of market equilibrium. It was just about using money as a pass-through for all these goods that might need to be equivalitized. This does seem to be a pretty decent approximation of the barter system economists imagine, even though its history and purpose is wildly different.

pg 60-62

From Primordial Debt to real debt

How do we get from the debt we owe the cosmos creating us to actual debts between people? By creating a system to calculate the specific debts we owe society through fines, fees, penalties, and debts to specific individuals. All the people “to whom we stand in a relation of ‘sin’ or ‘guilt'”.

Related note that I’m sticking in here: cattle is so often used as a currency by early societies because it was the most common sacrifice to the gods.

There’s lots of anthropological data on how stateless societies’ economies worked, but economists don’t like it because they used currency more for arranging relationships between people than they did for buying and selling things. Mostly they were used to “arrange marriages and settle disputes, particularly those arising from murders or personal injury.”

The phrase “to pay” comes from a word for “to pacify, appease”, meaning it’s about making up for something that pissed someone off. “To express just how badly you feel about having just killed his brother in a drunken brawl, and how much you would really like to avoid this becoming the basis for an ongoing blood-feud.”

pg 59-60

Primordial-debt Theory

“The core argument is that any attempt to separate monetary policy from social policy is ultimately wrong. Primordial-debt theorists insist that these have always been the same thing. Governments use taxes to create money, and they are able to do so because they have become the guardians of the debt that all citizens have to one another. This debt is the essence of society itself. It exists long before money and markets, and money and markets themselves are simply ways of chopping pieces of it up.”

-At first debt was expressed by religion, not states. See the Sanskrit religious literature like the Vedas and Brahmanas. Earliest Vedic poems from like 1500-1200 BC are very concerned with debt, which is “treated as synonymous with guilt and sin.”

-In very early texts, “Debt seems to stand in for a broader sense of inner suffering, from which one begs the gods… for release.”

-The Brahmanas started weaving together a more comprehensive philosophy in which human existence itself is a debt to the gods. “A man, being born, is a debt; by his own self he is born to Death, and only when he sacrifices does he redeem himself from death.”

-Leads to the question, “If our lives are on loan, who would actually wish to repay such a debt? To live in debt is to be guilty, incomplete. But completion can only mean annihilation.” So the tribute of ritual sacrifice is like an interest payment, and the sacrificer’s life is the principal.

-Two famous passages in the Brahmanas: “We are born as a debt not just to the gods, to be repaid in sacrifice, but also to the Sages who created the Vedic learning to begin with, which we must repay through study; to our ancestors, who we must repay by having children; and finally, to humanity as a whole, to be repaid by offering hospitality to strangers.”

-Primordial-debt theory say these ideas aren’t peculiar to “a certain intellectual tradition of early Iron Age ritual specialists in the Gange valley, but that they are essential to the very nature and history of human thought.”

-Sovereign powers’ legitimacy comes from their representation of the entire cosmos, and so they invented money as a way of settling debts. So instead of owing the unpayable debt of your life to death, now you have money that you can use to settle more manageable debts. That currency is put into circulation, and then you have to repay it in taxes, and that is a much more reasonable ask than “You owe your life to the God of Death.”

-“The primordial debt is that owed by the living to the continuity and durability of the society that secures their individual existence.”

Armies and Early Currency

Markets did spring up around ancient armies. See Kautilya’s Arthasastra, Sassanian “circle of sovereignty,” Chinese “Discourses on Salt and Iron”, they show “that most ancient rulers spent a great deal of their time thinking about the relation between mines, soldiers, taxes, and food. Generally they realize creating markets help not just feed soldiers but also helped them get a lot of other stuff out of their people too.

They used to need royal estates or workshops to produce things, or to “requisition” it directly from workers. But now they can just use markets to incentivize production of what they needed.

pg 50

Why did they make subjects pay taxes at all?

State Theory helps us solve one of the mysteries of the fiscal policy of early kingdoms: Why did they make subjects pay taxes at all?

If Adam Smith were right, and gold and silver naturally became money because free markets wanted them, then why wouldn’t the king just grab control of the gold and silver mines and become powerful that way?

Lots of early kings DID do that. But then what was the point of extracting the gold, stamping a picture on it, circulating it, and then demanding that people give it back again?

But if money and markets DON’T emerge naturally, it makes sense. That’s how you create a market.

If you want to support a standing army of 50,000 men, feeding them is really hard. But if you just give them coins and then demand that everyone in the whole kingdom pay you some of those coins, you turn your whole economy into a big machine to feed soldiers, because now everyone in the kingdom has to find a way to help feed soldiers so they can get the coins they need to pay you.

pg 49-50