The following is published from an X thread from Dr. Peter Klein, Mises Senior Fellow.
Trump justifies his war on Venezuela by saying that “they” stole “our” oil. Unpacking this claim gives us insight into Trump’s version of crony capitalism – a system of private ownership in which the state intervenes to promote the interests of politically connected firms.
First, note that crony capitalism or cronyism is distinct from a free-market, capitalist system in which firms compete by offering better products and services, lower prices, or both. (Critics of capitalism often conflate the two).
Petroleum exists physically in the ground, where it can be publicly or privately owned, but economically valuable oil comes into existence as it is extracted, refined, transported, marketed, etc. There is no economic resource of “oil” to own until somebody produces it.
After significant oil deposits were discovered in Venezuela in the 1920s, foreign companies bought large tracts of land and drilling rights, making them the legitimate owners of the oil produced, subject to royalties they agreed to pay to the Venezuelan government.
In the 1940s, a new government dramatically increased the royalty rates, and in 1976, another government nationalized the oil industry – effectively confiscating the land, drilling rights, equipment, and inventories of the privately owned foreign companies.
This was theft! But risk of expropriation or confiscation is a hazard of doing business overseas (or domestically, for that matter). Legal and regulatory risk is priced into the cost of capital. It is bad (for owners) when such hazards occur, but the risks are known ex ante.
A common feature of crony capitalism is the subsidization of downside loss – owners keep the profits, but losses are passed onto the taxpayer. That is exactly what Trump and his allies propose here.
The US taxpayer will pay the costs of military intervention, the purpose of which is to return Venezuela’s state-owned assets to the previous, private owners (or to provide the financial equivalent).
In a free-market system, legal and regulatory risks are borne by a company’s shareholders. Under cronyism, these risks are borne, in whole or in part, by taxpayers in the host company’s government - if the company is politically connected and privileged.
Of course, none of this is unique to Trump – this basic model has been a feature of US foreign policy since the era of Manifest Destiny and especially the Open Door Policy toward Asia (as skillfully demonstrated in William Appleman Williams’s Tragedy of American Diplomacy).
What makes Trump and his supporters different is their open embrace of this particular form of cronyism. That is why this example is so instructive. So don’t be confused about “our” oil. The US taxpayer doesn’t own Venezuelan oil and never did. Some foreign companies did.
Addendum, for those who think this operation was about liberating the Venezuelan people, stopping “narco-terrorism,” or some other noble idea.
It seems obvious from this video that the administration worked with big U.S. oil companies before the attack to line up billions of dollars in capital for developing Venezuela’s oil reserves, yet they couldn’t be bothered to consult Congress. pic.twitter.com/6SXmyru2JB
— Thomas Massie (@RepThomasMassie) January 4, 2026
