Monday, May 15, 2017

"Venezuela - Socialsm's Legacy"

Sydney M. Williams

Thought of the Day
“Venezuela – Socialism’s Legacy”
May 15, 2017

Venezuela has changed forever.
                                                                                                Hugo Chavez (1954-2013)
                                                                                                President of Venezuela 1999-2013

As Mr. Chavez said, Venezuela has changed – from the richest country in South America to one of the poorest, from an economy based on abundant natural resources, including the largest oil reserves in the world[1], to one where people are starving, from a free country to a dictatorship.

Unlike many tragedies, the one in Venezuela is man-made. No natural storm or Biblical plague visited Venezuela. It was men – two in particular – who, in the pursuit of personal power and under the guise of socialism, destroyed the country and rendered its people impoverished. Venezuela, with a population of 31.2 million, is in north-eastern South America, with 1700 miles of coastline on the Caribbean and the Atlantic. Just north of the equator, it has a topography that ranges from rain forests in the Amazon basin to alpine glaciers in the Andes. The lushness of its forests prompted novelist Romulo Gallegos to write poetically of “the golden spring of the araguaneyes.” Venezuela is ranked 7th in the world, in number of plants – and now ranked near the bottom in terms of freedoms and wealth.

Besides oil, Venezuela had been an exporter of coffee, cocoa and manufactured products. Last year, the Frazier Institute’s “Economic Freedom of the world: 2016 Annual Report” ranked it dead last, as its citizens struggled to gain necessities, like food, water and even toilet paper. It has the weakest property rights in the world, according to the Heritage Foundation. How does Nicolas Maduro reward his loyalists, with oil revenues down more than 60% from their peak? Amanda Taub and Max Fisher of the New York Times recently suggested: “…the most valuable resource in Venezuela is access to favorable exchange rates. By leveraging official government rates, which value the bolivar considerably higher than the unofficial rate, someone with the proper connections can generate a small fortune out of thin air.

There are those who blame Venezuela’s troubles on falling oil prices, or on a drought that effected hydro-electric power production, but other countries have dealt with such problems. Those industries, and many others, including agriculture and banking, were expropriated and nationalized by Chavez and his successor Mr. Maduro, which meant by-passing the inherent fairness and equality embedded in free markets.

It has been socialism that has brought this country to its knees – the arrogant belief that government can assume the means of production, dictate distribution methods and affix prices better than markets. The consequence of its failure can be seen in the starving faces of children and in the desperate countenances of demonstrators. Last year, CNBC reported that the economy shrank by 18.6 percent, with inflation at 800 percent. Official unemployment rates are around 7%, but unofficially rates are between 18 and 25 percent. Real numbers are certainly higher, probably much higher, with no relief on the horizon.

Margaret Thatcher warned: “The problem with socialism is that eventually you run out of other people’s money.” Keep in mind, politics is about power. Governments control enormous budgets. According to the 2017 Index of Economic Freedom, Venezuela’s government accounted for 40.2% of GDP over the past three years, with deficits averaging 16.1% of GDP. Public debt is equivalent of 48.8% of GDP.

What should be worrisome to those of us in the U.S. (and the West), besides the human tragedy unfolding before our eyes, is that we risk treading the same path, with its inevitable destination. We are not Venezuela, however. Our Dollar is the world’s reserve currency, which masks profligate spenders in Washington and the nation’s state capitals, and we remain the world’s best example of a free and democratic people. But welfare systems and statism trend towards socialism. In the U.S., federal, state and local spending represents about 35% of GDP; deficits, about 3.5% of GDP, but total government public debt (federal, state and local) is close to 95% of GDP. Politicians would rather be Santa Claus than the Grinch. Across the west, welfare states are running out of other people’s money.

Rhetoric cannot allay the effect of bad policy. It is not the words politicians use that is critical, it is the actions they take. Rosy but empty slogans entice, like the promises of Hugo Chavez and Nicolas Maduro; but they did not improve the lives of Venezuelans. It has been policies and actions that have impoverished them. Yet, that lesson has gone unlearned in the U.S. Four out of ten Americans claim they prefer socialism to capitalism. It is seen in the popularity of Bernie Sanders, an avowed socialist. We see it in students who have not been taught the dignity of work, and that it is capitalism that has done more to eradicate poverty than any other system. We need politicians who will be honest as to the costs of their promises, and who will remind us of the pitfalls of straying from free-market capitalism; else Venezuela becomes prelude to our nation or any nation, or union of nations, that believes it can freely spend more than it takes in.

The beauty of our democracy is that its freedoms and laws, along with its checks and balances, provoke confidence and provide opportunity. Our government was designed to inhibit political leaders from assuming too much power, which is their instinctive inclination. Its limited nature should restrain the formation of bureaucracies, with unelected and unaccountable bureaucrats who thrive on size and power. Free market capitalism allows the aspirant, the creative and the hardworking to create wealth and, in turn, to generate jobs, to grow the economy. Socialism has no such governors and provides no such opportunities for the innovative, the industrious and the competitive. Jorg Wuttke, president of the EU Chamber of Commerce in China, recently wrote in the Financial Times:But when political diktats rather than market forces drive business decisions, the risks of disappointments are always high.” Nazism and communism, let us never forget, had their origins in socialism. People in socialist countries are pawns, subject to the whims of their leaders. Free and democratic societies thrive. Socialist and autocratic ones fail.

In another century and about a different country, American reporter Lincoln Steffens wrote in the early 1920s: “I have seen the future, and it works.” Steffens was writing of the Soviet Union. He was wrong then; communism didn’t work. Those who support socialism now are wrong today. Far more pertinent was Polish poet and writer Stanislaw Jerzy Lec, who lived under Nazis and communists and who died in 1966: “You cannot play the ‘Song of Freedom’ on an instrument of oppression.”

What will become of Venezuela? Power abhors a vacuum, and some group – most likely the military – will seize control of the country. Freedoms will be further curtailed. Maduro is already using military courts to try dissenters. In the meantime, we are witness to a tragedy of Shakespearian dimensions: starving children, an absence of health care and rioting in the streets. The country has become anarchical; it has devolved into chaos. So, where are the “do-gooders?” Where are the Sean Penn’s and Michael Moore’s? Where is Joseph P. Kennedy II? Where is the Clinton Global Initiative? Where is President Trump? Where is the UN? Why has no western politician brought to the attention of their people the consequence of socialism in Venezuela?

[1] According to U.S.-based EIA (Energy Information Administration).

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