Monday, February 1, 2010
The Wall Street Journal on Chavez's Bolivarian Revolution
To the short and brutal list of life's certainties, let us add that socialism invariably leads nations to economic ruin. Latest case in point: Hugo Chávez's "Bolivarian" Republic of Venezuela.
Earlier this month, the Venezuelan strongman moved the official U.S. dollar exchange rate to 4.3 bolivars to the greenback from 2.15. At a stroke, he wiped out the savings and purchasing power of the very working-class people he purports to represent, most of whom have barely been getting by. News of the devaluation instantly sent the country—where consumer prices had already risen by 25% in 2009, according to official figures—into a panic, with consumers standing in line to stock up on goods before prices rose.
Mr. Chávez next decreed that he would fine and even arrest any merchant caught adjusting prices, eliding the fact that Venezuela imports nearly everything and exports only oil. Now Venezuelans have the Hobson's choice of either complying with the diktat, which means shortages, or disobeying it, which means inflation.
Yet no sooner was one catastrophe of "21st-century socialism" inflicted on Venezuelans than Mr. Chávez unveiled another. On January 12, the government instituted a series of rolling blackouts due to an electricity shortage that had been building for months. Ostensibly, the reason for the shortage was a drought that had left water levels at the country's huge Guri Dam—the source of more than 70% of its electricity—at critically low levels. But that is a function of the government's failure to maintain the dam and build additional capacity.
The instant result of the blackouts was chaos, particularly in Caracas, where people were left "stuck in elevators or in dangerous parts of town without street lighting," according to Reuters. The capital city already has one of the highest per capita murder rates in the world, and Mr. Chávez was forced to suspend blackouts there two days later. The rest of the country, however, remains subject to sporadic power outages.
Behind the crack-up of Mr. Chávez's utopia is the fact that he's running out of money because Venezuela's oil production is plunging. In 1998, the year Mr. Chávez was first elected, the country pumped 3.3 million barrels a day. Today, the figure is 2.4 million barrels, and that's an optimistic estimate.
Venezuela isn't running out of crude. The problem is that Mr. Chávez has expelled or seized the assets of foreign companies capable of properly maintaining the country's fields, including ExxonMobil and ConocoPhillips. It didn't help, either, that in 2002 Mr. Chávez fired thousands of skilled employees of state oil company PdVSA because he didn't like their politics and replaced them with his political cronies.
On Monday, Mr. Chávez made a grudging concession to reality when he agreed to a joint venture with Italian oil major ENI, which itself had been run out of Venezuela in 2006. We'll leave it to the Italians to place their own bets about the limits of Mr. Chávez's caprice. They've already had fair warning that Bolivarians, like other predators, rarely change their spots.
Posted by Mario at 8:04 AM