In the late 1970’s, I took an extended leave to visit the country of my birth. During that most memorable trip, I had the joyful pleasure of meeting countless individuals and families, who, in true Venezuelan fashion were not shy in sharing their opinions about the direction the country was taking at the time. 

That direction was, in a word, “nationalization” or forced divestment, principally of the iron ore and petroleum industries. This phenomenon was worldwide at the time, especially in Africa and Latin America, and it had devastating consequences. 

What I saw — gargantuan enterprises with protean manufacturing plants, power centers, chemical processors, and assorted buildings and dormitories, accompanied by massive hirings of blue and white collar workforces and countless foreign workers, some of whom were housed on cruise ships docked on the Orinoco — did not “pass the sniff test”.

I had a number of vigorous but mostly friendly debates on the merits of government-run versus privately run operations. Already the mining camp where I was born had shown deterioration. One lady expressed sincere surprise at this, “How is it that now that this belongs to us, we haven’t managed to maintain it, let alone improve it?”

“Could it be that when something belongs to ‘us all’ it actually belongs to no one?” was one refrain I found myself repeating throughout the trip. 

At my expressed concern about the immense power and wealth being concentrated in the Venezuelan government, something usually seen in Communist or Socialist regimes, the usual reply by those who disagreed with my concerns, was along the lines of, ‘it’s about time that “our” wealth remained here instead of being transferred to the United States.'”

Conversely, the reply by those who somewhat agreed with my concerns was along the lines of, “the Venezuelan military would never allow the government to devolve into outright Socialism or Communism.”

Interestingly, neither camp was concerned about what all this nationalization activity would lead to. In one heated and less friendly exchange, a more recent acquaintance at the time ridiculed my concerns, expressing disdain that I would question the massive wealth now owned by the Venezuelan people. He mocked my assertion that the people actually “owned” nothing. It was all owned by the state.

According to a scholarly analysis by the Federal Reserve Bank of Kansas City in 2013, “Nationalization brought considerable declines in productivity in the oil industries of the sample countries. Productivity fell by more than 70 percent in the Venezuelan oil industry. Despite enormous efforts put into expansion, it took Venezuelan’s nationalized industry about 20 years to return to its early 1960’s productivity levels.”

Sadly, shortly after the 20 years, another, more serious wave of nationalization was launched with even more catastrophic results. To take just one example, the enormous Venezuelan steelworks, Sidor, the crown of Venezuelan heavy industry, saw its production go from 4 million tons of steel in 2007, the year before its nationalization by the Chavez Socialist government, to 1.5 million in 2014, with triple the number of employees. Between late October, 2013 and August 2014, it had operated for only 90 days. I have no access to more recent figures nor would I trust them if I did.

Well, the wealth is gone for the most part; other than the billions in the private foreign bank accounts of a relative handful of Socialists. As for the massive mineral and petroleum reserves, those await the capital and the expertise to extract it. That explains the intense interest and activity in Venezuela on the part of both China and Russia.

As to the military, in later trips, friends were more subdued as they told me of the heavy Cuban influence in the Venezuelan forces. Why was this not being reported, they wondered.

Fidel Castro ruthlessly applied the tactic of buying or otherwise coopting the military. A tactic he taught Hugo Chavez and Nicolás Maduro. Hence, the failure of the Venezuelan military to “never allow the government to devolve into outright Socialism or Communism.”

To read more about the emasculation of the Venezuelan military, refer to the Reuters article linked below, “How Cuba Taught Venezuela to Quash Military Dissent”. The article is appreciated, but why did it not appear a decade ago when it might have made a difference?

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=CEF2014&paper_id=90
The macroeconomic analysis of the negative impact of nationalization on productivity

https://www.yahoo.com/news/special-report-cuba-taught-venezuela-121454933.html