I've been reading a raft of books recently arguing that authoritarian capitalism is a more sustainable model than us in the West appreciate.  According to this meme, entities like sovereign wealth funds, state-owned enterprises, and national oil companies will be carving up ever-greater slices of the global economy. 

Whenever I read these arguments, the question that gnaws at me is how these authoritarian capitalist institutions will operate in other authoritarian capitalist countries.  See, this kind of argument presumes a harmony of interests that doesn't necessarily exist between authoritarian states.  It also presumes a standard of competency and efficiency - or, at least, efficient corruption -- that makes these firms and institutions able to compete with private sector firms. 

For see what I'm talking about, see this Washington Times story by Kelly Hearn on China's growing frustration with Venezuela:

China has poured billions of dollars into Venezuela’s oil sector to expand its claim over the country’s massive oil reserves.

But Beijing is getting relatively little for its investments, and Chinese officials are increasingly frustrated with Venezuelan President Hugo Chavez, according to energy analysts and former managers of the state oil company, Petroleum of Venezuela, or PDVSA as it’s known by its Spanish acronym....

In 2010, CNPC signed a deal to help Venezuela develop a major Orinoco oil field known as Junin 4, which includes the construction of a facility to convert heavy oil to a lighter crude that could be shipped to a refinery in Guangdong, China.

“Although the contract was signed in December 2010, not one barrel of oil has yet been produced, much less upgraded,” said Gustavo Coronel, a former PDVSA board member.

“So far, nothing much seems to be happening, except for the arrival of a large group of Chinese staff to the CNPC’s Caracas office,” he added, referring to the Venezuelan capital, Caracas.

“Apart from money, there seems to be little that China can offer Venezuela in the oil industry,” he said, adding that a “culture gap will make working with China very difficult for Venezuelan oil people, who were mostly trained in the U.S.”....

The Chinese also seem to be increasingly wary.

Internal PDVSA documents released by a Venezuelan congressman show that the Chinese balked at a $110 billion loan request by Mr. Chavez in 2010, after PDVSA officials failed to account fully for where the money would go.

Venezuela is not the only place that Chinese foreign direct investment in energy is running into bottlenecks and roadblocks.   There was Myanmar last year:

fter five years of cozy cooperation with Burma’s ruling generals, China Power Investment Corp. got a shock in September when it sent a senior executive to Naypyidaw, this destitute Southeast Asian nation’s showcase capital, a Pharaonic sprawl of empty eight-lane highways and cavernous government buildings.

Armed with a slick PowerPoint presentation and promises of $20 billion in investment, Li Guanghua pitched “an excellent opportunity,” a mammoth, Chinese-funded hydropower project in Burma’s far north.

Then came the questions: What about the risk of earthquakes, ecological damage and all the people whose homes would be flooded? Is it true that most of the electricity would go to China?

Two weeks later, Burma, also known as Myanmar, scrapped the cornerstone of the project. President Thein Sein, a former general who took office in March, announced that he had to “respect the people’s will” and halt the $3.6 billion dam project at Myitsone, the biggest of seven planned by China Power Investment, or CPI.

As the world’s biggest consumer of energy, China has hunted far and wide in recent years for sources of power — and of profit — for state-owned corporate behemoths such as CPI. The result is a web of deals with often-repressive regimes, from oil-rich African autocracies such as Sudan and Angola to river-rich Burma.

But coziness with despots can also backfire.

Amid a dramatic, though still fitful, opening in Burma after decades of harsh repression, public anger has swamped China’s hydropower plan. The deluge threatens not only hundreds of millions of dollars already spent but also China’s intimate ties to what had been a reliably authoritarian partner, its only East Asian ally other than North Korea.

Beijing still has big interests in Burma, including a multibillion-dollar oil and natural gas pipeline that is under construction. But a partnership forged with scant heed to public opinion has been badly jolted by a barrage of no-longer-taboo questions.

These are just isolated cases -- I have no doubt that China has a boatload of successful FDI projects in energy.  What's telling, however, is that regardless of whether the host regime is democratizing or reverting to autocracy, the political economy of these investments is far from problem-free. 

One must sympathize with the Chinese firms here.  China's domestic politicsal economy of investment aren't this messy.  Oh, wait...

I think it's safe to say that Venezuela's economy has seen better days.  The government has been issuing something that looks an awful lot like food rationing cards.  Now the Financial Times' Benedict Mander reports that Venezuela's new currency controls are affecting its import sector in a really sensitive area: 

Unable to access enough dollars, local importers are feeling the pinch across a wide range of goods, from Scotch whisky, the nation’s favourite drink, to luxury foods and swanky cars....

Each month, whisky importers – some of the worst hit – say they can legally get only as much foreign currency as they would normally use in a day. Bars and restaurants fear the reaction when they run dry. “We’ve got enough boxes to last a few more weeks, but after that, I’m worried about what will happen,” said the manager of one bar.

The irony, of course, is that Venezuela is doing to itself what the United States has been trying to do to North Korea for years (and re-emphasized in the past few months) --  denying access to luxury goods for the elites. 

Let's call these kind of measures Mad Men sanctions, shall we?  Anything that embargoes sumptuous indulgences -- including alcohol, cigarettes, and Christina Hendricks -- counts as a Mad Men sanction.  The question is, whether self-imposed or externally imposed, do they make a difference? 

With respect to North Korea, I think the answer is pretty clearly no.  This is mildly surprising.  Even though I'm pretty skeptical about these kind of sanctions in general,  the DPRK is one of the few countries where Mad Men sanctions truly are "smart."  The North Korean elite leads a very segmented life, and making it harder to get Johnny Walker Blue affects very few average North Koreans.  That said, while the North Korean elite appears to be tottering just a little, it's not because they're going into Scotch withdrawal. 

Of course, there is a difference between an external actor imposing a Mad Men embargo and an internal actor screwing up the economy to the point that a petrostate needs to husband foreign exchange reserves.  For IR grad students out there, it's a good test:  is a regime hurt more from an externaly-created embargo or from an internally-created one? 

[And what about the IR effects of Christina Hendricks?--ed.  Definitely a question that begs for further research.  Dibs!!--ed.]

Developing....

I, for one, am glad that the foreign press is brave enough to cover what America's mainstream media is not -- the U.S. government's complicity in causing the Haitian earthquake. Never mind that the foreign media echo chamber aparentluy started with a false rumor -- with luck, our MSM will now start asking the tough questions.

This is a plan so brilliant that only the Evil League of Evil, in conjunction with the reverse vampires and the Obama administration, could have devised it.

Why, you might ask? What is America's motivations to trigger Haiti's earthquake and then intervene with massive aid in the hemisphere's poorest country? Well, there are different theories bandied about.

Venezuelan leader Hugo Chavez suggests that this was a practice "drill," designed to test the earthquake weapon before targeting Iran (though see the update below). Very clever!! It is unclear whether Chavez believes that this is a test of the "demonstration effect" variety or not. It is also unclear just how such an earthquake would actually destroy Iran's nuclear program -- the 2003 Bam earthquake certainly didn't.

This Canadian-based Centre for Research on Globalization's Ken Hildebrandt offers the following ingenious explanation:

You've likely guessed my suspicions about recent events. I'm not saying this is what occurred, though it's sure a possibility to be considered in my view.

This could hardly have happened at a more convenient time. The president's ratings are plummeting, and his bill to subsidize the insurance industry has essentially divided the nation in two.

What better way to lead the people into believing we're one big happy family than to reunite former Presidents Clinton and George W. Bush along with Obama in a joint humanitarian effort?

This is so convenient... and brilliant!! It makes perfect sense that the Obama administation would try to kill upwards of 200,000 Haitians in order to bring the country together as one! Because, clearly, in recent years, natural disasters have bolstered the standing of U.S. presidents!! Certainly, a calamity in Haiti would work even better! If only Rush Limbaugh had played ball....

What I love about conspiracies like these is the careful balancing of smart and stupid that the key actors have to possess in order for the plan to work as described.

Question to readers: how far and how wide will this meme travel?

UPDATE:  I just received the following from a atrategic communications advisor to the Venezuelan Embassy in the United states: 

In response to your recent post on Foreign Policy’s website, I just wanted to clarify that President Hugo Chavez never associated himself with the theory that a U.S. weapon had caused the earthquake in Haiti.  

The claim was made by a blogger on the website of a state-run yet independent television station. At some point thereafter, someone jumped to the conclusion that President Chavez had agreed or repeated the claim, which is absolutely not true. President Chavez did argue against an increased U.S. military presence in Haiti, but at no point did he question what had caused the earthquake or aligned himself with any conspiracy theories to that effect.

 

The New York Times' Simon Romero reports that Venezuelan leader Hugo Chávez is doing a 180 on allowing investment from evil rapacious capitalist pig-dogs Western oil companies:

President Hugo Chávez, buffeted by falling oil prices that threaten to damage his efforts to establish a Socialist-inspired state, is quietly courting Western oil companies once again.

Until recently, Mr. Chávez had pushed foreign oil companies here into a corner by nationalizing their oil fields, raiding their offices with tax authorities and imposing a series of royalties increases.

But faced with the plunge in prices and a decline in domestic production, senior officials have begun soliciting bids from some of the largest Western oil companies in recent weeks — including Chevron, Royal Dutch/Shell and Total of France — promising them access to some of the world’s largest petroleum reserves, according to energy executives and industry consultants here.

Their willingness to even consider investing in Venezuela reflects the scarcity of projects open to foreign companies in other top oil nations, particularly in the Middle East.

Chávez's actions pleasantly surprise me, because retrenchment and realpolitik were not the only option.  One could have envisioned Chávez reacting by ratcheting up tensions with neighbors as a short-term solution.  Although I suspect most Americans would prefer to see the back of Hugo, this kind of behavior suggests that Venezuela is never going to rise to the problem level of, say, Iran. 

The willingness of the oil companies to re-enter the fray in Caracas is more intriguing.  In recent years there has been a lot of loose talk about how holders of capital also hold the levers in a bargaining situation with debtors, because the latter must do what they can to please the former. 

In fact, recent research suggests that when debtors violate their contracts, the price to be paid is often much less than anticipated.  Chávez certainly seems quite aware of this fact. 

What puzzles me is that Chávez's reputation does suggest that the moment oil prices go up again, he'll reverse course yet again and put the screws on his foreign investors.  In understand that exploration opportunities are scarce, but the willingness of these firms to go back is item #345 on Things I Do Not Understand About Energy Markets.