Oil and Development in Venezuela during the 20th Century

Oil and Development in Venezuela during the 20th Century

Oil and Development in Venezuela during the 20th Century

Oil and Development in Venezuela during the 20th Century


This book advances the theory that a potential leading export sector- in this case, the oil sector- is capable of inducing economic growth even in peripheral countries where the product line is primary in nature. In Venezuela the oil sector has contributed directly and indirectly to the development of the country's overall economy, particularly from 1936 to 1973, when that sector met the criteria of a leading sector, i.e., one that expands rapidly and obtains a large specific size relative to the economy as a whole. Oil investment in Venezuela contributed to the fiscal sector, the foreign sector, GDP, income, backward and forward linkages, the multiplier and accelerator effects, and the retained value of total expenditures. In spite of recent efforts to diversify the production and export mix, the Venezuelan economy continues to remain heavily dependent on oil production for export.

During the midcentury decades of solid growth, it became evident that government oversight was needed to ensure that the numerous contributions flowing from the oil sector would be put to good use. Overall, it appears that the contributions were well utilized by the Venezuelan government, although there was plenty of room for improvement. Income distribution problems and other social inequities continued to beset the development process, leaving the economy rigid and inflexible. Consequently, when the oil sector faltered (1974 to 2000), Venezuela was unable to shift into other product lines. Political disarray soon followed, and with it a pervasive aura of economic uncertainty that persists to this day.


In explaining the patterns of international trade for different countries, economists have usually relied on the concepts of labor productivity and factor proportions. Such explanations have been challenged by a group of economists who, in turn, point out that labor productivity and factor proportions are themselves a function of the previous pattern of trade and production. Based on this reasoning, the latter group of economists recommended promoting patterns of trade and production that will lead to economic development and, thus, to the desirable factor proportions and labor productivity levels that are now characteristic of more advanced economies. Such a trade and production mix, they believe, would deviate from the dictates of comparative advantage.

It can be argued, however, that many of today's high income per capita countries started out with patterns of trade and production that were no different from what peripheral countries had in the past and still have, in agreement with the comparative advantage rule. Because diverse patterns of trade appear to have been conducive to the economic development of these high income per capita countries and their attainment of desirable levels of labor productivity and factor proportions, would this not also apply to today's developing countries? That is, can a traditional pattern of trade based on primary production for export be conducive to such economic change in peripheral countries?

To answer these questions, the sources of growth in economies characterized by a pattern of trade based on primary exports must be specified. If the dynamic sector in such an economy is either total exports with . . .

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