What Gabriel Zucman Gets Wrong About Venezuela

Accounting Facts, Historical Context and a Misleading Narrative

French economist Gabriel Zucman’s recent Substack post argues that U.S. efforts to unseat Venezuelan President Nicolás Maduro cannot be understood without recognizing a long history of “staggering cross-border wealth extraction” from Venezuela to the United States. The centerpiece of the claim is striking: At the peak of the oil era in the 1950s, roughly 12% of Venezuela’s net domestic product flowed “directly to the pockets of U.S. shareholders,” an amount comparable to the combined income of the poorest 50% of Venezuelans. From this, Zucman concludes that current U.S. policy aims to restore a brutally one-sided, quasi-colonial regime of oil extraction.

The numbers themselves are not obviously wrong. The interpretation is.

What Zucman describes is, in the language of national accounting, net factor income paid abroad: profits earned by foreign owners of capital operating in Venezuela. This measure is the difference between GDP (what is produced within a country) and GNI (what income accrues to nationals of the country). In countries with heavy foreign ownership of capital-intensive sectors, especially oil, this wedge can be large. Calling it “extraction,” however, collapses several distinct economic concepts into one moralized term, and in doing so obscures more than it reveals.

Start with a basic distinction that the article elides: Profits are not synonymous with resource rents. Oil revenue can be divided into wages, intermediate inputs, normal returns to capital and pure resource rents—the surplus attributable to control over a scarce natural asset. Only the last category can unambiguously be called “oil wealth” in a strong sense. Yet the profit flows Zucman cites as extraction include compensation for capital investment, risk-bearing, managerial expertise and technology supplied by foreign firms. Treating all foreign profits as Venezuelan “wealth” that was somehow siphoned off is an analytical category error.

This terminology matters because the implicit counterfactual in his argument is that, absent U.S. oil companies’ interference, this income would have accrued to Venezuelans. But that counterfactual is far from obvious. In the 1920s and 1930s, Venezuela lacked the capital, expertise, infrastructure and market access needed to develop its oil reserves at scale. Foreign concessionaires did not merely “extract” preexisting wealth; they transformed underground resources into economic output decades earlier than would otherwise have been possible. Without them, much of Venezuela’s oil would have remained in the ground, generating no wages, no tax revenue and no foreign exchange.

Historical context further complicates the narrative. By the 1940s and especially the 1950s, Venezuela had negotiated one of the most aggressive fiscal regimes in the global oil industry. The famous 50/50 profit-sharing rule, later adopted across the Middle East, was pioneered in Venezuela. Government revenues rose steadily, and by midcentury Venezuela was capturing a large share of oil rents through royalties and taxes. To describe the 1950s as the peak of a “brutally one-sided” extractive regime is difficult to reconcile with the fact that Venezuela was, at the time, a model for resource nationalism rather than a victim of it.

The period in Venezuela’s history that Zucman highlights as the most problematic is correlated with the period when the Venezuelan people saw the most dramatic improvement in their living standards. The chart below shows GDP per capita in Venezuela since 1920, with the gray shaded area representing the period that Zucman takes issue with. The peak of the chart is when the state nationalized the oil industry in 1976. However, Zucman doesn’t blame the subsequent collapse in living standards on socialist economic planning—he brushes this off as “the tightening of US sanctions in 2017.”

Zucman’s most rhetorically powerful comparison, that U.S. shareholders received income equivalent to that of the poorest half of Venezuelans, is also misleading. It juxtaposes factor income to capital owners with household income, as if they were commensurable objects. Capital income is highly concentrated by its nature; household income is not. The same comparison could be made in any capital-poor, resource-rich economy with foreign ownership, without implying exploitation. Ireland today, or Norway in its early offshore period, would generate similarly dramatic ratios if framed the same way.

There is also a subtle but important shift in Zucman’s language from ownership to extraction. Foreign investors received profits because they owned productive assets under contracts recognized by the Venezuelan state. Whether those contracts were optimal, or whether the state should have extracted more rent, is a legitimate question. But that is a question about bargaining power, institutional capacity and fiscal design, not about illicit appropriation. Calling the outcome “extraction” implies that something was taken that properly belonged to someone else. The accounting facts alone do not establish that claim.

None of this is to deny that oil shaped Venezuela’s development path in problematic ways. Dependence on foreign firms in the early period may have delayed domestic capacity-building. Oil rents distorted politics and institutions. Transfer pricing and tax avoidance likely shifted income abroad beyond what headline tax rates implied. These are serious critiques, and they require careful, granular analysis. But they are not proven by pointing to profit repatriation as such.

Finally, the leap from historical accounting to contemporary U.S. foreign policy is speculative at best. The idea that modern regime-change efforts are driven by a desire to “restore” a 1950s-style oil regime assumes that today’s global oil industry, U.S. firms and Venezuelan institutions resemble their midcentury counterparts. They do not. U.S. oil majors are no longer capital constrained; Venezuelan oil is among the most expensive and technically challenging to extract and produce in the world; and the binding constraints today are governance collapse and sanctions, not profit-sharing formulas.

Zucman is right about one thing: You cannot understand Venezuela without understanding oil and foreign capital. But understanding is not the same as indicting. By conflating foreign profits with “oil wealth,” and ownership with extraction, his argument substitutes moral rhetoric for economic analysis. The result is a compelling story but a misleading one.