The stirring achievements of Bolivarian socialism as practised in Venezuela never cease to amaze. They’ve managed to create, at one time, an entire country running out of beer. The banknotes cost more to print than they are worth. A fertile tropical nation has widespread food shortages. They’ve even managed that the place sitting on the world’s largest oil reserves has to import oil from the United States. To add to this list of blows struck against the imperialist yankees we can now add the possible bankruptcy , or at least default on its debts, of the monopoly oil company sitting on top of that ocean of oil which is the world’s largest reserves.Quite a list of achievements. It would be funny if the costs to the Venezuelan people weren't so high. It is the people who pay in terms on increasing poverty and hardships. Such outcomes do suggest mismanagement by the government of the economy on a massive scale.
The problems with the state oil company, in Worstall's view, include,
This is that Venezuela’s oil is very heavy and thus needs large capital investment for it to continue to be extracted. The basic operating method of the Chavez and then Maduro administrations has been to skimp on that capital spending and then spend the money saved on consumer imports into Venezuela. Largely as a means of buying political support despite their complete and total mismanagement of the domestic economy. There were also further borrowings using the oil company as the legal form doing the borrowing, again to fund such spending upon consumers.All this doesn't say much for Bolivarian socialism.
But, obviously, borrowing spent on rice doesn’t increase the ability of the oil company to produce more oil to pay back the borrowings. Production, and thus income, has been falling, even without any influence of the falling oil price itself.
You can indeed buy bread and circuses with resource rents. But do too much of it and you’ll not have the capital to keep those resource rents coming.