Episode 134: Benevolence Backfires: The Cobra Effect
Words & Numbers
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The Unintended Consequences of Socialism
In the 1990s, Venezuela was 1976. The oil companies were largely foreign owned. Venezuela's government pointed to all the profits these foreign companies were earning and said that's not right. This was broadly seen to be a good thing for maybe a long while it worked. But once the government took over the industry, no person had a profit incentive to reinvest the oil company profits into maintaining the physical capital. And when that happens, you can bet that physical capital will deteriorate. It did in Venezuela and things started going south at exactly that point.
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