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Welcome to the new books network. I'm Elliot, a session lecturer from Melbourne, Australia, recording on the lines of the Bonnarong people who sovereignty was never seated. And I'm delighted to welcome Dr. Christian Schuchard to the show.
Christian is an associate professor of sociology at the University of Regina. Welcome, Christian. Thank you for having me. And today we're privileged to have Christian on the air to hear about how much recent book the political economy of oil and Venezuela published with Brill.
This detailed and important book situates Venezuela with in not only the broader pink tide, that swept different parts of Latin America since the 1990s, but also within the dynamics and tendencies of oil extraction and class politics at a local and international scale. Much of the literature has seen Venezuela as trapped in this classic resource curse where oil exporting developing countries and windfall revenues but have been unable to translate that to sustainable growth and development, which is usually deemed to be due to poor economic planning, weak institutions and a lack of incentives for governments to invest. Christian's book argues instead that the interplay between national international structures and relations of power in Venezuela and in the global market serve to perpetuate all dependence. In making this argument, Christian presents a detailed historical analysis of the ways in which the country was sub-tuned into the global economy as an oil exporter, tracing Venezuela's development and political economy through its prior dictatorships, the crises of the 20th century, and then finally through the revolutionary Bolivarian government led by Hugo Chavez and the Nicholas Medore.
Let's dig now further into the book with Christian. Christian, your book explores the ties between oil as commodity, global capitalism, the balance of international and international class relations and state forms to understand the challenges posed to the Bolivarian project in Venezuela. Can you please describe how you theorize this resource curse affecting countries like Venezuela in your book and how it compares to other explanations? There are generally a couple of components to the idea of the resource curse in the paradox where we think that a country will be doing well economically with due to oil revenues but then they face some kind of chronic underdevelopment issues.
So the first explanation is an economic one and this is one that most people agree upon and it very much describes the Venezuelan situation. So this is the context where oil becomes a new sector of the economy. It offers far greater opportunities than other sectors and so it tends to start to draw away capital and labor from other sectors. Key industrial sectors start to decline.
There's a process of deindustrialization. So economically what happens is the economy becomes very dependent on that one resource of oil and has to start importing everything else. So that's the one element and then when oil prices rise or decline, the economy is subject to cycles of boom and busts doing very well when oil prices are high and then experiencing recession when oil prices are low. The second component of the debate has to do with the role of the state and how the state is affected and how it could possibly end resource dependence.
And this is where my work starts to deviate from some of the main perspectives. So what I do to theorize the role of the state is I rely on Marx's theory of rent. And Marx argues that rent is an economic manifestation of a particular social relationship under capitalism. And this is the relationship of landlords who hold land that capitalists need to access in order to exploit something or extract something from that land.
So in the case of Venezuela that's has to do with the Venezuelan state being the landlord having exclusive access to oil reserves and granting access to capitalist foreign companies that extract oil. So that's the relationship that exists. And what I look at in the book is I trace how this relationship is affected by geopolitics by actors in the international market and by the state form itself. And I rely on Fernando Corneal in particular who writes on the Venezuelan landlord state to theorize this as well as other theories of the state.
What this does is it shifts the debate away from why our government simply engaging in policy reforms to diversify the economy to what are the possibilities and limitations of state form, particularly as they're affected by class struggles that are going on in civil society. So why what are the limitations of the actual state to be able to change this form of accumulation and resource dependence? Excellent. Thank you so much for giving us a bit of an overview of I guess the theoretical grounding of the book.
And let's dive in a little bit into the key historical points in your text. What did the political economy of Venezuela look like before the advent of the oil industry and you know had this influence development or even the lack thereof at the time for Venezuela. So before Venezuela's oil industry developed this is the early 1900s and production was primarily based in a few agricultural products but mostly coffee. And the relationship the product and relationship look different.
So landlords ran plantations peasants worked the land and then there was a commercial class that sold coffee in the global market. So this was the system power was held by land owning elite regionally so there wasn't really a centralized state. What happened was with the decline of oil prices. There were two military generals who along with a group of army supporters seized control of the state and they sought to centralize state power which also centralized their power as well.
But this was the moment of this disruption of coffee where the state started to modernize and expand and that was really the beginning of capitalist development in Venezuela. Excellent. And it was then kind of like in that period of the early 1900s that there were these discoveries of oil reserves in Venezuela. How did the Venezuelan government at that time respond to these initial discoveries and especially under the dictatorship of Yuan Vincent Gomez and how did it also kind of fit in local and foreign dynamics as well.
So Gomez he takes over in 1908 and he holds a military dictatorship for a number of decades. What he starts to do to consolidate power more is he's seeking foreign investment. At that time they knew that there were oil that was oil in Venezuela but not how much so there was no indication of how much there actually was. But foreign oil companies they took up his call to invest in Venezuela and they started to explore under contracts that were very favorable to them.
So they start to explore in a center those conditions in 1914 that the first major oil reserve is discovered in the state of Zulia. And this is discovered by a conglomerate of shell and at that time really marks that the moment when the oil industry takes off commercially. Shell really works with the government to develop the oil industry to start to export oil in 1918 and that's facilitated by a rise in demand for oil internationally as well as using gas powered vehicles. As well as Venezuelan oil being very cheap to produce base in comparison to oil from other places like the US for example.
So that's the moment when it really takes off and other foreign oil companies start to invest in Venezuela around 1919. Yeah, seems like a very fortuitous time to find oil in this period of history when it was sort of after across the world. And during this first oil boom in Venezuela you noted that this kind of was the point where we could see the development of a rentier capitalist accumulation in Venezuela. And also maybe speaking back to your theoretical framework here and what did these kind of patterns of accumulation look like and who benefited from this oil boom.
So at this time oil becomes much more profitable than any other sector but the industry functions as an enclave industry. So there's not a lot of linkages to other parts of the Venezuelan economy. The industry primarily relies on foreign capital and even skilled workers are mostly coming from Europe and North America. So there were some jobs for Venezuelans and semi skilled or unskilled positions but generally the industry was relying on external factors.
What happens at this time is most of the revenue that goes into the country becomes what the government can collect in rents from international oil companies. So that's the characteristic of rentier capitalism that begins at that time is most of the national revenue is going to the state directly from oil companies and in the state is tasked with distributing that money in different ways. In terms of who benefits from that, there was a rise of a middle class in that period as a result of the expansion of the oil sector. So people moved in mass mass quantities to cities.
There was a rapid process of urbanization and in particular there was a rise of a bureaucratic sector. So people who were employed by the state and in a rise of the commercial sector. So people who were importing goods to satisfy growing demand given the new wealth and the economy. So it's those two sectors that really benefited as well as some of Gomez's very close supporters and families.
It was still a military dictatorship but the industrial sector, this is where it really sort of remained underdeveloped and did not benefit in that period. Yeah, and I mean, I really love in the book you go into a lot of detail about the political cleavages and struggles around this time. And I guess I want to jump ahead a little bit to the 1950s and especially following 1958 where the Venezuelan political parties at that time as I understood it made a pact to work towards common goals together following many years of different military dictatorships. Why was this period important in your book and how also was the development of Venezuela's oil industry impacted by other international and international and dynamics and especially maybe the role of OPEC?
Which you highlighted in the book too. So at that time in 1958 the pact that was signed was called the Pact of Punto Fijo and this was a time where leading up to that a number of political parties had been trying to instill democracy and Venezuela but there it was in the wake of a military coup that had to destabilize the first democratically elected government. So the idea with this pact between free parties, the main parties which were the Democratic action party, the social Christian party and the Democratic Republican Union. The idea was that these parties all agreed that whoever won the election, there would be a coalition to ensure they didn't compete with each other and there was not a military dictatorship.
They agreed to promote capitalist development so that was important as well. But what it did is it started a period of stability, political stability for decades in Venezuela as a result of this. In fact, Venezuela was known as being exceptionally politically stable compared to other Latin American countries and this allowed for a lot of foreign investment and it allowed for economic expansion as well in the country. So that was happening in the international arena.
As you mentioned, OPEC was being created in 1960 so this is the organization of petroleum exporting countries that represents oil exporting countries. Venezuela played a big role in informing this organization and so both externally and internally what was happening is governments of oil exporting companies were starting to become more powerful and were able to negotiate in increasing interest in oil revenues. So it was allowing for greater control over the oil sector and greater profits in the international arena as well as in Venezuela itself. Yeah, and I think that also leads quite now to our next question with as governments are kind of getting greater control of the respective oil industries around this time.
As you noted in your book, the Venezuelan oil industry is actually nationalized very early in 1976. What were the factors that led to this nationalization of the oil industry in Venezuela and what problems and challenges occurred following this nationalization? Generally, at that time there was an increasing support for national ownership of oil and nationalization. So this national sentiment in general, but a couple of factors really accelerated the nationalization to make it happen a little bit earlier than expected.
So why was the Minister of Mines and hydrocarbons at the time Juan Pablo Perra Celfonso, he was a big advocate for granting no more concessions to private companies. And so he very publicly was saying no more concessions. It was a slogan. So this was kind of known that the time period for these companies might be limited.
And the second thing was that a number of oil concessions were actually expiring in the 1980s. So what happened is these oil companies, they're still operating in Venezuela, but they have a sense that they're not going to be able to operate in the future. And so they stopped searching for new reserves and they increased extraction as much as possible. So this ends up accelerating nationalization because the government realizes if we wait, the industry is going to be left in disarray.
So they nationalized a little bit earlier in 1976. They create the first state oil company, Patebesa. So this is after decades of attempting to get to this point. So it was a big victory in that sense.
There were a couple of challenges with this. One was that the government did have to make huge financial outputs to upgrade the industry that had declined over time. So that was an issue. They had to rebuild the industry.
And the second part was that what happened was is they maintained many of the same managers and teams that were employed under the private companies. And so what happened is that a lot of the decision making still reflected the interests of those transnational companies. They were still in attempt to invest more money abroad rather than keep it in Venezuela. And Patebesa became commonly known as a state within a state in that time period.
And this continued actually for decades. So the idea that Patebesa, even though it was a state owned company, was in many ways acting in interests that might sometimes be against the state. Safer Ontario means more police and prosecutors making sure my car doesn't get stolen. It means building new jails to keep criminals behind bars.
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Yeah, and I mean that that error to it maybe seemed like with the increasing oil prices that Venezuela's economic fortunes were kind of also increasing. But then by the late 1980s, like many developing countries around the world too, it really had reversed and Venezuela's economy is really struggling. And how did the state respond to this new era of crisis, especially after the nationalization of the oil industry? Yeah, this is where we're definitely seeing a period of bust, right?
So that huge boom in the 1970s and then this period of bust when oil prices declined in the 1980s. And this starts to happen in the early 1980s. The government starts to respond with economic policy. There's a rise in poverty and inequality rates.
So some of the problems are occurring and kind of compounding throughout the 1980s. What happens in 1988 is a president is elected. His name is Carlos Andres-Pereis, who, and he was also the president in 1976 when the sector was nationalized. So he's reelected with the idea, some kind of idea that he would be able to fix the situation, right?
That he would be able to do something similar the second time around. But instead what happens is he sees how difficult the economic moment is, and he agrees to a structural adjustment package with the IMF in World Bank in order to access loans. This involves things like rising transportation prices, fuel and food, policies that deregulate industries and open up the market to free trade, all of the things that we think of when we think about neoliberal reforms. So this is happening in Venezuela, and it also opens up the oil sector as well to private investment.
So this is a process called the Apertura or oil opening, and suddenly private companies can participate in new ways again for different types of agreements, joint ventures, service agreements. But the idea is that in a period of low prices where the state can't fund new exploration and extraction, private capital is brought in to supplement that process. And it sounded like a lot of citizens in Venezuela were also not quite happy about this neoliberalization of the Venezuelan economy and reaching out to the IMF in World Bank for the structural adjustment programs. And throughout the 1990s, your book goes into a lot of detail about discontent, and then perhaps the pinnacle of that was the election of Chavez in 1998, who initially sounded like on a moderate social democratic platform.
Can you please situate Chavez election for us in the context of the crisis and domestic sphere, and even maybe the broader regional shift and liftwards in Latin America? Yeah, so as you say, there were a number of manifestations and movements and mobilizations against neoliberal reforms, initially against the structural adjustment package in the 1980s and then throughout the 1990s. So there was widespread dissatisfaction with this, and this is what leads up to Chavez's election. And as you say, there are many left-wing governments elected in the region across this time.
Chavez is the first, and then you see a wave of other ones being elected. What's important is not only this economic element, but also the fact that people in Venezuela had lost faith in the Pact of Puntofio and the party system, the mainstream parties that had been in power for decades. So this idea of political stability or compromise between the parties was kind of lost in a moment where the government could no longer afford to provide broadly for different class sectors, and it became clear that certain sectors were benefiting and other sectors were in dire economic conditions. So this is the context within which Chavez forms the political party that's the movement of the Fifth Republic, the NPR Party, and the idea with that is the Fifth Republic is meant to signal break with all of the previous governments which were part of the Fourth Republic.
So he's indicating that he's going to do something very different. He's elected in 1998 with 56.2% of the vote largely by marginalized classes, some of the middle classes that saw their socioeconomic positions decline under neoliberal austerity. As you say, he focuses at first on drawing up a new constitution that's going to be more inclusive and trying to increase oil revenues for the state, although with some still for participation. So it is kind of a moderate program, but takes people back to a time when there were more resources available for the population in Venezuela and social inequality was not so great.
Yeah, and it sounds like a big shift in Venezuela and politics that Chavez bought to the country and noting that initial moderate social democratic stance, you then again go into some excellent detail in the book, how Chavez bought the early 2000s and radicalized to his eventual pivot to this 21st century socialism as he described it. What were the drivers of this pivot from Chavez? So the main driver was a rise or a massive amount of popular support for the government. And this was in the face of a number of attempts by the opposition to destabilize the government.
So there were a few contexts in which there was this massive support. And the other part is the rise in primary commodity prices. So I'll just talk a little bit about the different instances where we see a large amount of support for Chavez. So as I said, there were three attempts to destabilize him.
The first was an attempted coup in 2002. He's temporarily removed from leadership for two days, but there are widespread mobilizations against the coup in term government. And what happens is this motivates the military to act and Chavez's ministers are reinstated and eventually he is too. So one moment of a massive display of support for the government.
A second moment is relates to the oil sector. In late 2002, there was an oil management lockout and professional employee strike. And here again, this relates back to what I was talking about earlier where management in Pate-Vesa tended to represent the interests of private capital. So unhappy with some of the changes that Chavez was proposing to the oil sector.
But what happened in this context is skilled and unskilled workers are restarted production. People from surrounding communities came and helped to restart production. And workers control was actually briefly established in the oil sector. So again, a second moment of widespread support that allows the government to replace previous managers and to replace them with people who would work better with government as well.
And then the third moment is the opposition instigated a recall referendum to remove Chavez from power. And this is defeated. And so after those three moments, it becomes very clear that Chavez has widespread support and he decides to take the Bolivarian Project in a more radical direction. He announces his commitment to 21st century socialism that includes transforming the economy into a communal system of production and consumption, collective property ownership, social development and inclusive political participation.
And as I mentioned, this coincides with a sharp rise in oil prices starting in the mid 2000s continuing on throughout the decade, which allows the government to engage in extensive spending to work on achieving these goals. And I mean, maybe we can also turn to talking about these oil rents for the government. And you do discuss extensively in your book how this Bolivarian government sought to distribute some of these oil rents to achieve these goals of transitioning towards 21st century socialism. And again, you go into huge amounts of detail and it's really interesting, wonderfully interesting in your book.
But for us listening here could just outline some of the forms of this rent distribution that took place and were they actually successful. So I talk about three different forms of rent distribution that the government engages in in the book. And these were used by previous governments in different ways, but it's a little bit different under Chavez because again, he's focused on this goal of 21st century socialism. But throughout the decades, rent distribution is an important part of getting these revenues to the public.
So they have been used in different ways under different governments as well. So the first is a system of currency controls and having multiple exchange rates. So the idea here is that the government sets the exchange rate of the national currency, the Bolivar, to the US dollar and by setting it at a particular rate, it can then sell dollars cheaply to citizens. So almost a subsidized rate, so one way to transfer benefit.
And by having multiple exchange rates, it had better rates, for example, for people who were importing essential goods like food, equipment, or medicine. So again, it allowed, it made sure that those essential goods were available to the public and at presumably affordable rates. So that was one form. A second form was public spending.
And this took a number of forms, one of which were social mission programs. So the idea was it provided social benefits to the poor in particular, and people who were traditionally excluded from social welfare benefits. So expensive spending on things like healthcare and education, constructing housing, as well as subsidized housing and subsidized food and basic goods. So that was part of the social element.
There was another element relating to, which I also put under public spending, relating to empowering local forms of organization called communal council or communal councils or communes with the idea that those organizations would be forms of participatory democracy and communities. People would come together to decide what the community needed. And then that would be a gateway to talking to the government to get funding for local local programs. The idea with these over time is that they would become more powerful so that the population was engaging actively in politics and it was more inclusionary.
The third form of rent distribution was spending on production. In here, state subsidies were given to other sectors of the economy to try to diversify production and oil dependence, but again with a specific focus on forms of production that were meant to be anti-capitalist in some way. So cooperatives, co-management with workers themselves, other kinds of social production and nationalization of basic industries. Those were the three forms.
They worked fairly well when oil prices were high, but when they declined, they became unsustainable. So I'll just give you an example of each one, how that happened. When the government was giving the exchange rate, for example, currency exchange as a preferential rate. So once the government no longer had sufficient access to do this, what happened was there had been a black market rate that existed, but suddenly when the government didn't have enough dollars to be able to exchange for all citizens, people started to exchange on the black market more outside of this government.
And the black market exchange rate skyrocketed. So there was huge inflation, and this is something that Ben as well was known for for quite a time, was the inflation in prices and foods and goods and how it became unaffordable for many people. Certain classes that had access to preferential rates like importers in the military were still able to benefit, but for the general population, this was very harmful. In terms of social spending, programs were actually very successful.
There were improvements in literacy rates, decline in hunger, public housing. So there were actually great improvements in indicators and development indicators and Venezuela for a time. But this depended on a constant infusion of money into those programs. So again, when well-priced declined, the government couldn't sustain those sorts of programs.
In terms of the communal councils and productive enterprises, I'll try to talk about those together. In both cases, there were challenges with being dependent on the state for revenues in terms of being able to operate independently. So with communal councils, one of the issues was that as I mentioned earlier, the Chavez government was really radicalized as a result of critical public support. And so for communal councils, it was very important in social movements.
It was very important for them to be able to challenge the government and engage in a critical dialogue to move the government in more radical directions. And one of the things that communal council members talked about is that when they became dependent on state funding, and part of state programs, it became more difficult to engage in that critical dialogue. Instead, they tended to find themselves promoting government activities more so in an uncritical way. With productive enterprises, the issue was, again, that they were relying on state funding.
And what happened was sometimes the government would ask these companies to sell goods that subsidized rates to the public. So we're funding your productive enterprise. We need to distribute food to the public. You can do this at a cheaper rate.
But what happened is these industries never became self-sufficient. So they weren't actually able to make a profit. And they depended on government management and government revenues. There were issues with sometimes upgrading technical aspects of production or difficulties in terms of worker control and a lack of wanting to give up control from management.
So again, these operations were never able to be independent of oil rents. Yeah. And I mean, this sounds like a lot of challenges for the Bolivarian government at this time, especially as oil prices dropped. And I guess now, a bit more of a speculative question.
And my final question, in terms of especially more challenges perhaps on the horizon, what now for the Bolivarian project? What do you think is in the future for Venezuela's political economy as a part of this Bolivarian project, and especially following the extremely dramatic, we'll call it kidnapping of Maduro by the United States? What do you think is next for Venezuela's oil industry and state form? So there's a couple of important things that have happened, sit from the ending of the book to the present moment.
And one is that there has been a decline in support for the Bolivarian project over the years. The Maduro government, it's never enjoyed the same support as Chavez and Chavismo. The government, it's privatized industries allowed for more foreign companies to participate. And there's been an enrichment of inter-government circles in Maduro himself.
So there's less support in general, given the direction that the Bolivarian project has taken under Maduro in the context of sustained low oil prices as well. There was also a mass migration of people out of Venezuela in the context of these difficulties. Likewise, oil production has decreased significantly over the past number of years, in part due to the government not being able to afford to upgrade the technical aspects of production, but also due to US sanctions. So before what's happened in the present moment with the US and Venezuela, the US imposed sanctions in 2017 and 2019 that caught off Venezuela from new credit and also cut it off from the US oil market and from other oil markets.
These sanctions were very recently lifted, but major work still needs to be done to increase oil production. So PETA vista still exists. It's probably not going anywhere because of the important support role that it plays in the Venezuelan nation, but there's going to be a bigger role for private capital in rebuilding the industry. So part of that is removing the sanctions.
And the other part is there's been changes to the state hydrocarbons law in January of 2026 that allow for more private participation from foreign actors. So things that were previously just under the purview of the Venezuelan state relating to extraction, relating to export, relating to control over investment in the oil sector and social investment. All of that now has been there's much more for participation, either from oil companies or from the US government overseeing operations. So people are estimating experts are estimating that it's going to take, you know, could take up to a decade and tens of billions of dollars to expand the oil sector once again.
But it looks like what that's going to include is more US companies alongside other oil companies as well, Shell and another number of companies from other places in the world. Right now, Delcy Rodriguez is the acting president of Venezuela and she's a longstanding member of Maduro's administration. She was the vice president before and the foreign minister. So it looks like her role is going to be, she still has the support of the military.
So it looks like her role is going to be an arbiter between, you know, national interest represented in the Venezuelan state versus internationally interests of foreign oil companies and US imperial intervention. And I think also, you know, whatever may happen in the future of Venezuela, it's really crucial to have a grounded historical understanding of Venezuela's political economy, its development of the oil industry and its state forms, which is why I really recommend to our listeners to grab a copy of Dr. Christian Shippers book, the political economy of oil in Venezuela. And I want to say thank you so much for joining us here at the New Books Network.
Christian is really great to talk to you about your book. Thank you for having me.