Venezuela's interim government is privatizing the oil industry following the US ouster of Maduro and effective seizure of control over the sector.
The crisis room in Caracas, bolstered by the sudden influx of Washington’s diplomatic and economic weight, assumes it knows exactly how to reassemble a shattered petroleum sector through the strategic application of privatization. It assumes it knows which specific assets to auction, which foreign entities possess the requisite technical competence to restore extraction levels, and how to calibrate the new ownership structure to ensure both stability and profit. It does not. It cannot.
The architects of this transition are operating under the delusion that the oil industry is a static machine that can be repaired by simply swapping out a failed, state-run engine for a more efficient, privately-owned one. They treat the Venezuelan oil sector as a collection of measurable, quantifiable units - barrels, refineries, and pipelines - that can be reallocated by a central authority to achieve a predetermined outcome of economic recovery. This is the classic error of the planner: the belief that the essential information required to manage a complex, highly specialized industry is available to those sitting at the head of a negotiating table.
In reality, the vital information required to revitalize an industry as intricate as petroleum extraction is not held by an interim government or its foreign backers. It is dispersed, local, and tacit. It resides in the hands of the engineers who understand the specific degradation of a particular well in the Orinoco Belt; it is held by the logistics specialists who know why certain supply chains collapsed under the weight of previous sanctions; it is embedded in the shifting local costs of labor and security that no spreadsheet in a capital city can capture. This is the “knowledge of time and place” that no interim administration, no matter how well-intentioned or heavily backed by the United States, can ever aggregate.
When the interim government moves to privatize, it is attempting to replace a failed command structure with a new, designed order. While the move away from the disastrous central planning of the Maduro era is a necessary step toward restoring the rule of law, the current method of implementation risks creating a new form of concentrated, designed control. If the privatization process is directed by the dictates of foreign investors and the strategic interests of a single superpower, we are not witnessing the emergence of a spontaneous market order, but rather the installation of a new, more sophisticated layer of management.
The danger here is the “ratchet effect” of interventionist logic. The planners will likely argue that because the initial privatization is being managed by an interim authority rather than a purely spontaneous market process, they must exert even more control to “ensure” the success of the transition. They will feel compelled to set the terms, select the winners, and perhaps even regulate the prices or the distribution of the resulting rents to satisfy the political demands of the transition. Each time a specific, designed outcome fails to materialize - perhaps because a chosen investor lacked the local knowledge to manage a specific geological complexity - the impulse will be to increase the level of administrative oversight.
We must distinguish between the establishment of general rules and the issuance of specific commands. A true restoration of the Venezuelan economy would require the establishment of a stable, predictable legal framework - a set of rules regarding property rights, contract enforcement, and the sanctity of the judicial process - that allows for the spontaneous emergence of a market. This would allow the price system to function once more, signaling to the world where capital is most needed and where resources are most scarce.
Instead, we see the attempt to design a specific outcome: a privatized sector that serves the geopolitical and economic interests of the intervening powers. This is a pursuit of a designed order. When we attempt to design the outcome, we suppress the very signals - the prices, the competition, the trial and error of individual actors - that are necessary to navigate the immense complexity of a post-collapse economy. The interim government may succeed in transferring ownership, but unless they allow for the emergence of a system that respects the limits of their own knowledge, they will merely be managing a different kind of failure. The true recovery of Venezuela will not come from the brilliance of a new administrative design, but from the humble restoration of the institutional conditions that allow the dispersed knowledge of its people to once again find its way into the economic process.