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Belmont Club

Matilda He Take The Money and Ruin Venezuela

January 4th, 2013 - 2:11 am

Hugo Chavez is dying. Dr. Jose Marquina, who correctly told the public based on his own private sources that Chavez was in respiratory failure (before the Venezuelan government announced it), denies the rumors that a special team of Russian doctors has flown into Cuba to save the Venezuelan president. But even without the Russians, things are dramatic enough, Marquina adds. Chavez is unrecognizably bloated with edema; he is in a medically induced coma to keep him quiet enough to tolerate the tubes snaking into his body and to limit his need for oxygen. Marquina was pretty certain: barring a miracle, Chavez ain’t gonna make it back to Venezuela to take his oath.

Even though the Venezuelan Constitution requires a new election within 30 days if the president is incapacitated, Chavez’s supporters have learned, maybe even from reading this blog, that constitutional provisions are made to be elastic. His supporters say Chavez should be given “time to recover”. They’ve even suggested that Venezuelan justices be flown to Havana to administer the oath to the unconscious man.

The New York Times, in its own low key journalistic manner, has already declared Chavez dead. They’re run his political obituary in a special called The Future of Venezuela.

“What future?”, Moses Naim of the Carnegie Endowment for Peace asks. He writes that Chavez has managed to bankrupt oil-rich Venezuela. It was hard, but he did it. The Commandante Presidente gave away oil to nearly anyone who backed his anti-American agenda. Cuba, even China got theirs compliments of Hugo. The only source of hard cash he had coming in was the oil he sold to America at market prices. Naim writes:

President Chávez has bequeathed the nation an economic crisis of historic proportions.

The crisis includes a fiscal deficit approaching 20 percent of the economy (in the cliff-panicking United States it is 7 percent), a black market where a U.S. dollar costs four times more than the government-determined exchange rate, one of the world’s highest inflation rates, a swollen number of public sector jobs, debt 10 times larger than it was in 2003, a fragile banking system and the free fall of the state-controlled oil industry, the country’s main source of revenue.

Oil-exporting countries rarely face hard currency shortages, but the Chávez regime may be the exception. Mismanagement and lack of investment have decreased oil production. Meanwhile oil revenue is compromised partly because of Chávez’s decision to supply Venezuelans with the country’s most valuable resource at heavily subsidized prices. Thus a large and growing share of locally produced oil is sold domestically at the lowest prices in the world (in Venezuela it costs 25 cents to fill the tank of a mid-sized car).

Chavez was the progressive dream on steroids. He spent on entitlements, lived off capitalism. But even this couldn’t halt the process of economic collapse. But by dying, Chavez can now escape blame for an economy set to implode on his low-information electoral base. Poverty may be around the corner for most Venezuelans, but when it comes they’ll blame Bush, probably literally. Francisco Toro of the Caracas Chronicles explains how it works:

Chávez has spent all of the windfall from Venezuela’s enormous oil exports, and then some: the country’s debt has quintupled in 14 years. Time and again spending has been hiked just ahead of elections to give Chavistas an edge. This last one was no exception.

It’s been a wildly popular and successful strategy, but this kind of spending-led “socialism” can’t last. For years, Venezuela has been borrowing at credit-card level interest rates. As the country runs out of money and out of people willing to lend it more, the real question is who’s going to be left holding the checkbook when the spending must screech to a halt?

It’s a great strategy. Burn down the house to roast marshmallows, but rig it so that whoever takes over the ruins gets blamed for the leaking roof. The narrative in the making is that Chavez brought the good times, the compassion, the caring, and when he died — as Evita did — then the bad old capitalists came back and stopped the music, raised retirement ages, implemented austerity, etc. Nobody will notice that Chavez ran everything into the ground and died taking orders from Castro. Toro writes:

What we’re seeing, in other words, are the building blocks of a heroic narrative arc for Chávez’s memory falling into place. It reads like a chapter of the book Open Veins of Latin America, the heroic leftist leader who held back the rapacious capitalists up until his last breath, only to be betrayed by his closest ally.

Maybe there’s a movie in the works featuring Sean Penn. Senor Hugo’s Los Miserables. I Dreamed a Dream of Days Gone Bad. But it’s not just Venezuela that will miss the credit card binges of the Commandante Presidente; the regional deadbeats will be hurting too. The Cato institute notes:

Regionally speaking, Chávez’s death will have an important effect on Venezuela’s satellite countries. Cuba is certainly the most vulnerable.

The Cuban economy would probably implode without the massive oil subsidy it receives from Venezuela. This would jeopardize the continuity of the Castro regime. This is why Havana is playing such an active role in deciding who will replace Chávez and how the succession should play out. Other regional allies such as Nicaragua, Ecuador and Bolivia would also face cutbacks in economic assistance but not big enough to threaten their leaders’ hold on power.

What does the Obama administration do in all this? It has found itself before a succession of opportunities in recent years. The fall of Assad in Syria was potentially a chance to get at Iran; now the natural demise of Chavez threatens to knock out the pins from under Cuba. The Christian Science Monitor writes:

Experts suggest that a change in leadership in Venezuela could have huge consequences for Cuba. … Business with Venezuela consists of 40 percent of all Cuban trade, and Cuba receives 60 percent of its energy needs on preferential terms from Venezuela.

Havana has “30,000-50,000 Cuban technical personnel working in Venezuela as physicians, teachers, and other instructors” who will be unemployed if they have to return to the Worker’s Paradise. But if the Syrian case is any guide, the Obama administration will manage to turn gold into pyrite; to get the worst of all worlds plus its embassy burned to boot, metaphorically speaking. In the Middle East they’ve watched the growing destabilization of a region without the recompense of a decisive gain against the American foe.

What happens in Latin America after Chavez dies remains to be seen. But unless the administration’s luck or skill changes, the Venezuelan president’s death may simply result in an unrest more easily directed from Havana than Foggy Bottom. Certainly if Venezuela goes bust, it won’t be Fidel who will be asked to foot the rescue bill.

It will be — guess who.

Leftist politics in its essentials is identical, whether practiced on an international or domestic scale. Transfer money and take credit. Domestically, it depends on income transfers between citizens of varying incomes. Internationally, it does as well. To do this it manufactures a drama with a hero and a villain; the Left always stars as the Hero. Why does it work?

Perhaps the only reason world socialism has survived as long as it has is through subsidies from the American taxpayer.

Hugo Chavez’s career is a cautionary tale. You can’t live on the Socialist Credit Card unless you can trick someone into paying the bill. Of course, that’s not hard if you graduate an entire generation of people trained to buy the world a Coke. But when they have to buy themselves a Coke and can’t, then what? The ultimate reason why socialism can never in the long term work in America is that when the U.S. goes bust, there’s no one left to pick up the tab.


The Three Conjectures at Amazon Kindle for $1.99

Storming the Castle at Amazon Kindle for $3.99

No Way In at Amazon Kindle $8.95, print $9.99

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