Don’t Cry for Chávez, Venezuela

Chávez should not be mourned. On the contrary, the death of a dictator is cause for celebration.

Yes, Chávez was a dictator. While he didn’t stoop to the depraved despotism of Stalin, Mao or Hitler, he was still a dictator.

Once Chávez obtained the power of presidency in 1999, he did everything he could to centralize and consolidate power into his own hands, trampling on individual liberties and private property rights in the process.

Mr Chávez proceeded to dominate his country for more than 14 years until his death this week from cancer. His secret was to invent a hybrid regime. He preserved the outward forms of democracy, but behind them he concentrated power in his own hands and manipulated the law to further his own ends. He bullied opponents, and encouraged the middle class to emigrate. He hollowed out the economy by mixing state socialism and populist redistribution with a residue of capitalism. And he glued it all together with the crude but potent rhetoric of Latin American nationalism. [ref]

With this power and authority, what did Chávez accomplish during his 14 years in power?

Chávez supporters will quickly point to a reduction in poverty levels, supposedly achieved by Chávez’s nationalization of private industry, particularly the oil industry, and by a myriad of forced wealth redistribution schemes, such as government subsidized grocery stores. [ref]

The truth is that Chávez’s Socialist programs and policies likely prevented greater reductions in poverty. Chávez came into power at the beginning of an oil boom. A reduction in poverty was absolutely inevitable (and occurred throughout Latin America). Absent Chávez’s heavy-handed government intervention, which drove away investment and innovation, a free market oil boom would have created more jobs, prosperity and progress for all Venezuelans. [ref]

The Socialist central planning and control that Chávez implemented kills economies — with machine-like regularity. The only real engine of sustainable economic growth is free market capitalism. Bill Gates recently observed:

The incredible economic transition in China over the last three-plus decades occurred because the leadership embraced capitalistic economics, including private property, markets, and investing in infrastructure and education. This points to the most obvious theory about growth, which is that it is strongly correlated with embracing capitalistic economics—independent of the political system. When a country focuses on getting infrastructure built and education improved, and it uses market pricing to determine how resources should be allocated, then it moves towards growth. [ref]

Venezuela’s current economic and social state supports Gates’ assertion, in a decidedly negative way.

Back in January ABC News Univision published an article titled “5 Ways Hugo Chavez Has Destroyed the Venezuelan Economy” [ref]. Here are the five ways:

1. Venezuela has gone from being dependent on oil to being extremely dependent on oil. Oil now represents 96% of Venezuela’s export, up from 77% in 1998.

2. The Chavez government has crippled private businesses and national industry through expropriations and nationalizations. The number of private companies in industry has dropped from 14,000 in 1998 to only 9,000 in 2011. Companies need investment to grow and hire new workers. One of the biggest failures of the Chavez government has been to drive away both domestic and foreign investors. To avoid expropriation and find investment a number of Venezuelan companies have moved to Colombia, Panama and the United States.

3. The Venezuelan currency has lost nearly two-thirds of its value since it was launched in 2008. Many analysts expect Venezuela will have to go through a painful devaluation sometime this year or next. This will further reduce the value of wages and sharply increase the costs of imports of basic staple goods.

4. Inflation in Venezuela has averaged 23 percent during 1999-2011 compared to a Latin American average of 4.6 percent. This inflation, combined with stringent price controls has completely distorted the economy, creating black markets and shortages. In 2012 Venezuela will again have one of the highest inflation rates in the world.

5. Venezuela has become one of the most violent countries on the planet. The murder rate per 100,000 citizens has risen from 25 in 1999 to 45.1 in 2011. This is not an economic stat per se but violence has an economic impact. It is more challenging and dangerous than ever to do business and go to work in Venezuela.

A couple more stats: Since 1998, in spite of the oil boom, Venezuela’s public debt has grown from $34 billion to $150 billion, and imports have grown from 18% to 33%. [ref]

Then there is the anecdotal evidence of failure.

Crumbling public hospitals are struggling to treat patients who often face long waits. Doctors and nurses have held strikes to draw attention to their working conditions and the lack of basic supplies. [ref]

The once mighty factories of Ciudad Guayana, an industrial hub by the Orinoco River that M.I.T. and Harvard architects planned in the 1960s, are rusting and wheezing, some shut, others at half-capacity…. Underinvestment and ineptitude hit hydropower stations and the electricity grid, causing weekly blackouts that continue to darken cities, fry electrical equipment, silence machinery and require de facto rationing….. Harassment of privately owned farms and chaotic administration of state-backed agricultural cooperatives hit food production, compelling extensive imports, which stacked up so fast thousands of tons rotted at the ports. [ref]

In 2011, Datanálisis, an independent polling firm found that powdered milk could be found in less than half of grocery stores in Venezuela and that liquid milk was even more scarce in the country…. [The state-run Mercal supermarkets are] subject to frequent scarcities of basic staples such as meat, milk and sugar – and when scarce products arrive, shoppers have to wait in line [ref].

Sounds like the Soviet Union, doesn’t it? No surprise there, as Chávez’s failing Socialist system of government is modeled after the failed Soviet Socialist system.

If Chavez hadn’t of died, the eventual collapse of the Venezuelan economy would have been inevitable. At least now there is an opportunity to change course.

So don’t cry for Chávez, Venezuela. You’re better off without him.

(Meanwhile, here in the U.S.A we do have reason to mourn — because we have our own Chávez emulator, none other than Barack Hussein Obama, but that’s a topic for another post.)


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