One of those arguments in favour of socialism, in favour of governments doing things, is that the free market is just too short term. Capitalist companies – capitalist economic actors in fact – are just too, too, interested in the next dividend check, the next ability to conspicuously consume, to run anything for the long term. This has always been a rather odd contention as very few indeed think that any politician thinks beyond the next election. But there we have it still, capitalism is short-termist in outlook, therefore more government please.
Well, yes and no really:
As Mark Perry, who has allowed us to use this chart, says:
The chart above shows average daily oil production on a monthly basis from January 1994 to May 2018 in Venezuela and Texas, based on EIA data here and here. During the period between 1994 and 2011, Venezuela produced at least 1.5 times more oil than Texas, and between 1997 and 2010 Venezuela produced at least twice as much oil as the Lone Star State. But starting in mid-2013, thanks to America’s shale oil boom, Texas started out-producing Venezuela as the state’s oil output increased by a factor of four times in less than a decade. And then thanks to the economic collapse in socialist Venezuela and its neglect of investment in the country’s nationalized energy infrastructure, its oil production fell below 2 million barrels per day (bpd) in late 2017 for the first time in at least a quarter century, before falling further to below 1.5 million bpd in May of this year. Over the last year, while oil output in Texas soared by nearly 24%, production in Venezuela has dropped by more than 29%.
The point being that it is not what a government could potentially do – look to the long term – it is what a government actually does. And we should recall here that Venezuela has the largest oil reserves in the world. An oil reserve being, by definition, oil that we know where it is, we know how to extract it, and at current prices and using current technology we can extract it and still make a profit. Texas’ oil shale hasn’t even been profitable all through this time and they’ve been developing the technology as they go along too.
Quite clearly, the capitalist companies, undirected by any politician anywhere, have been better at extracting oil than the government of Venezuela. Our lesson being, again, that we shouldn’t look at what governments could potentially do but at what they actually do. Which is, in general and here just as a particularly awful example, nothing very well. We might therefore want to think about government being used to do fewer, not more, things as a result.