I've been thinking about Bolivia's seizure of the country's natural gas industry since I wrote about it yesterday. I didn't really give it any attention in that post because my natural reaction to nationalizing a previously private enterprise is entirely negative.
Since a country taking over a private company's assets is seen in the business world as completely negative and would affect investment in capital assets by private enterprise because without property rights that investment is basically at risk of becoming an expense. However, Ricardo's theory of comparative advantage dictates that a country should focus it's power on those industries it does best, would effectively turning off the spigot for foreign direct investment in your country and running an economy based on natural gas extraction be an advantage for Bolivia?
53% of FDI projects are extraction projects. If the state takes over those projects and lose all the rest (they haven't had any significant FDI projects in 2 years), and they trade natural gas for other products to sustain their economy, aren't they taking full advantage of their comparative advantage?
I would think my initial reaction that state control of the industry would not be beneficial for Bolivia, but I'm interested in if it could get Bolivia to (I don't know what the opposite of autarky is) complete specialization and if that would outweigh the state control (assuming, of course, a stable government).
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