It’s hard to understand the Hugo Chavez phenomena in Venezuela with its mix of Marxism, Peronism and racialist fascism wrapped in Bolivarian rhetoric, explains Norman Gall here and here, without seeing the connection between oil and the social conditions of Caracas.

Before oil was discovered there in the early years of the 20th century, Caracas was a backwater capital of a largely dispersed society in which the leadership often came from generals whose strongholds were in the Andes. But with oil, the population both exploded and centralized. Caracas doubled in population between 1920 and 1936 and doubled again between 1936 and 1950. Then it tripled between 1950 and 1971.

Many of the newcomers were campesinos who fled the brutal poverty of rural life and established a vast slum population perched precariously in the hills of a city subject to massive mudslides.

But just as important was the growth of a statist oriented middle class that lived off of oil revenues. The curse of abundant petrodollars seemed to make it unnecessary for Caracans in particular and Venezuelans more generally to develop the technical and managerial skills essential for a modern society – a society that might create employment for the campensinos. That’s left the poor, often of Indian and mixed Indian and African descent to suffer egregious rates of poverty and murder in the shantytowns surround the capital while the oil revenues subsidized the high life for the politically well-connected and often corrupt upper middle class with its government ties and generally European origins. This was a combustible combination.

The oil revenues fertilized what anthropologist Fernando Coronil described as belief in The Magical State, an expectation that all the accoutrements of a modern civilization were expected to flow, as a matter of course, from the oil revenues. In what sounds like a description of Iran, he explains that “the state became a site for the performance of illusion…a magical theater where…commodities, institutions, steel mills, freeways, constitutions were transformed into potent tokens that could be purchased or copied….the state became a place possessed with the alchemic powers to transmute liquid wealth into civilized life. “

The irony is that the failure of this magic has produced Chavez who presents himself as the greatest alchemist of all.

Chavez has many admirers—he enjoys close relations with Cuba, Iran, Belarus and North Korea—but none friendlier than that with London’s Jihadi friendly mayor, Ken Livingstone. Chavez sells London oil at below market prices and Livingstone provides technical consultants on transport, housing and garbage disposal.

Gall, who originally hails from the Bronx, lived in Venezuela for six years. In his two part extended essay on Chavez, he argues that the regime—which like Iran is losing technical capacity to produce oil —may having only two or three years until the magic runs out. But when Chavez’s “Socialism for the 21st Century” finishes running its course, it’s likely that Venezuela will be left in ruins. Still if the past is prelude to the future, the infrastructure may collapse, but the illusions will be self-reinforcing.