Economics of Liberty

10 Signs Your Country is a Banana Republic: A Cautionary Tale

#3. State-Ownership of Key Industries

 

One would think that state-owned enterprises are a thing of the past with the collapse of the Soviet Union and the wholesale discrediting of top-down models of economic organization. Unfortunately, certain parts of the world have not gotten with the program. Countries that follow this antiquated model are more than likely banana republics or are on their way to reaching that status.

PDVSA (Petroleum of Venezuela) is the perfect example of this dynamic. Since Venezuela nationalized oil production in 1976, PDVSA has served as the piggy bank for populist governments of all political stripes. The full-blown socialization of the country under Hugo Chavez was the logical conclusion of this unprecedented expropriation of private property.

When the State takes over one sector of the economy, with time, it will take over other sectors of the economy. The weak enforcement of property rights is a fixture of any banana republic.

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