This past week, the nationalization of Bolivia’s gas industry has drawn much attention in the global media. In part because of the dramatic way in which Evo Morales ordered the Bolivian army to seize the country’s gas fields and “protect them with your lives”.

The militant seizure of the gas fields and refineries was more symbolic than necessary: a symbolic rejection of the neoliberal economic model, and a baby step towards proposing a viable alternative to “market justice”. Here in Bolivia it was accompanied by a sense of national pride and an assertion of sovereign authority. And abroad it was met with feigned horror and surprise, even though though gas nationalization was decided in a nation-wide referendum months before Morales was elected President.

Yet Bolivia’s (and Latin America’s) love triangle with nationalization and capitalization is not new; in fact, Bolivia has capitalized, nationalized, capitalized again and then nationalized more times that one would care to count. According to Orlando D. Martino:

In [1916], foreign firms probed for oil, marking the start of a long and sometimes bitter relationship between foreign oil companies and the Bolivian government. The government nationalized the oil industry from 1916 to 1920, denationalized it from 1920 to 1937, and nationalized it again in 1937 under the control of YPFB, where it remained in 1989.

In October of 1969, then President of Bolivia Alfredo Ovando Candia signed a decree to nationalize Gulf Oil, which resulted in the state taking control of 90% of national oil reserves. But, according to Martino:

Oil production peaked in the early 1970s but declined throughout the rest of the decade and into the 1980s. Production dropped from 47,000 barrels per day (bpd) in 1973 to only 21,000 bpd in 1988, the result of price fluctuations, obsolete machinery, minimal exploration, YPFB mismanagement, and declining reserves.

Despite the populist nature of the new Bolivian government and overwhelming public support for nationalization, it remains to be seen whether Bolivia can avoid the historical pitfalls that inevitably come with nationalization: lack of foreign investment, lack of technical expertise and heavy equipment, graft and poor management.

In the mainstream media, the powerful interests that control the punditocracy do their best to mask the question of foreign investment in a smokescreen of obfuscation.  If I had 10 tons of gold in my backyard, guaranteed, who wouldn’t loan me the money to dig it up? Capital investment seems to dry up quickly in the face of political developments that are judged unacceptable by the global elite.

But the problem of a “rentist” Bolivian society looms over the nationalization issue. For centuries urban Bolivians have lived off the exploitation of non-renewable mineral resources, each taking their small cut as mineral wealth flows through the fabric of the Bolivian economy. So prevalent has this parasitic attitude become that it is ingrained in the Bolivian mentality. Most people’s economic vision is limited to achieving some kind of comfortable position in a government bureaucracy.

The problem is this: non-renewable mineral wealth stifles the development of an innovative, entrepreneurial society. Instead, there emerges a society based on vast layers of government bureaucracy, cumbersome structures that become nearly impossible to dismantle once firmly entrenched. And yes, such systems are plagued with inefficiency, corruption, and mismanagement.

To be successful, Morales must confront these paradoxes with decisive precision. The massive increases in state revenues that are sure to follow nationalization must be used wisely to create a business environment favorable to the small business owner. More than anything, Bolivia lacks an institutional framework and a sociocultural atmosphere that levels an economic playing field rife with institutionalized inequity.

Now Bolivia must accept the challenge of reinventing a society where innovation and private initiative can maximize the incredible renewable resource base that the country enjoys. Surely state-centric planning cannot bring to fruition a process that is, by its very nature, decentralized and non-hierarchical. But the government can take important policy measures to lay the foundation by making key investments in public infrastructure and human resources.

If the capitalist in you is still causing you to scratch your head in bewildered amazement at the folly of Evo Morales and the Bolivian public, remember: nationalization is ingrained in the Bolivian consciousness for profound historical reasons. Stay tuned…