It seems that Hugo Chávez could take a lesson on the definition of insanity from Ben Franklin. In his defense, it's not that Chávez is repeatedly trying something that's previously failed for him, just something that's failed every other time a state actor has attempted to put it into place. Perhaps it's just insanity by proxy, then.
Of course, I'm talking about his aggressive advancement of the long-vaunted "Bolivarian Revolution". From the Mother Jones article linked left:
To his increasingly frustrated political opponents in Venezuela, Chavez, a former army colonel, is a leftist demagogue who stirred up a wave of class and racial resentments and rode it to the presidency, and who, in office, has dealt himself new powers at every chance, on his way to becoming an out-and-out caudillo. And to a certain school of international opinion, exemplified by The Economist magazine, Chavez is an wacky utopian who sooner or later will run the Venezuelan economy into the ground.
That introductory paragraph leads into an October 2005 interview with Richard Gott, a former correspondent for the London Guardian who seems knowledgeable and sympathetic to the fiery populism that sometimes seems the prime illuminating factor for Latin American progressive governments. The interview was done in support of his then-updated book, "Hugo Chavez and the Bolivarian Revolution":
...the first account in English to place Chavez in historical and intellectual perspective. In Gott’s sympathetic account, Chavez is a magnetic personality of the Clintonian type, “a genuinely original figure in Latin America,” a radical left-wing nationalist, to be sure, but a pragmatic improviser, and certainly no dogmatic socialist.
Among his statements during the interview, you'd find:
Okay, it's true that Chavez, for the first time this year, has used the word "socialism"—he talks about a "21st Century Socialism"—but he's given absolutely no indication that he wants to emulate Soviet socialism, Cuban socialism, or indeed the sort of state capitalism that existed in Europe for much of the late 20th century. {...} I think he [Chávez] still recognizes the significance of the ideas of Bolivar. He's more interested in culture than in economics. All leftist revolutions in the past have been based on an economic restructuring of society.
Whoops. Looks like Mr. Gott spoke too soon. Because the wacky utopian, contrary to Gott's expectations, seems to have moved even farther left, embracing something that looks a lot like Soviet/Cuban socialism, and has recently chosen to dispense with even the veneer of normal government.
Last week, as reported in the WSJ, he took steps to nationalize the remaining bits of the Venezuelan oil industry that were still in private hands, handing control of them to PDVSA, the state oil company.
The flamboyant leader set the worker's holiday as a deadline for the companies involved to transfer the facilities to state firm Petroleos de Venezuela SA, or PDVSA. This past week, five of the six companies agreed to hand over the keys: Exxon Mobil Corp., Chevron Corp., BP PLC, Total SA, and Statoil ASA. ConocoPhillips was the only holdout, but in the end will have no choice.
And when they said ConocoPhillips would have no choice, they weren't kidding. From today's Houston Business Journal:
Venezuelan officials vowed to boot ConocoPhillips Inc. out of their country Thursday if the Houston-based oil giant doesn't cooperate in nationalizing its multibillion-dollar assets in the Orinoco reserve.
Of the five companies with major oil investments in Venezuela, ConocoPhillips (NYSE: COP) has been the only one to refuse to sign an agreement ceding financial control to Venezuela as part of President Hugo Chávez's plan to take back his country's largest economic driver.
{...}
Alongside the other companies, ConocoPhillips participated in an operational transfer Tuesday ordered by Chavez, but it's the unsigned agreement that has Venezuelan officials steaming.
Reuters reported that Oil Minister Rafael Ramirez told state television that ConocoPhillips has been knocked to the lowest priority in the negotiations, and went on to say that the OPEC nation would not offer cash concessions or assume debt.
Ramirez also said that if talks break down, Venezuela will assume a 100 percent financial stake.
Conoco has already ceded physical control, mind you; they just haven't signed the agreement Chávez wants indicating that they think it was a great thing to do, and wondering why they hadn't thought of it earlier, on their own, apparently. The end result could be their expulsion from the country, and the loss of 100% of their assets there. The deal breaker, of course, is that entire "no concessions, no assumption of debt" thing. As it should be.
The six private companies whose assets have been expropriated have stated their intention to stay in the market, for the time being. Why? Because they don't want to completely lose their business opportunities and investment in a project that, overall, produces something like 600,000 barrels/day of oil, but perhaps more so because they have no expectation that PDVSA will be able to proceed without their help. From the 4/28/2007 WSJ article in which the nationalizations were originally reported:
PDVSA, saddled by Mr. Chávez's social spending demands, is already struggling to keep production from falling in other parts of the country. If it bungles the operations at the Orinoco, that could be bad news for the oil market.
A rational observer might ask what this all has to do with insanity, even though the autocracy referenced in the title of this post seems clearly explained.
Chávez, notwithstanding Gott's complete misreading of his intentions several years ago, isn't stopping with the oil industry. Having paid off all debts to the World Bank and IMF, he's pulling out of both organizations, citing his feeling that
...the two organisations are implements of US imperialism, with their lending policies perpetuating poverty across the world.
It's a symbolic gesture, then, but symbolic of what? He's chosen the US as his stalking horse, the imperialist yin to his socialist yang, and he needs to use that imaginary relationship as a prop. From the other side of the table, the US ignores him assiduously, not commenting very much on anything he does, partly because Venezuela, while providing 15% of US oil supplies, really doesn't have the capacity to affect the US in any meaningful way. And partly because I'm sure that the US basically ignoring him must drive him crazy.
And, having already nationalized the telecom and electricity industries and threatened the same in the hospital market, he's not stopping with the oil industry asset-thievery, or the withdrawal from the IMF and World Bank and a mandated 20% rise in the minimum wage. Next on the list? The banks and Sidor, a steel company. What's driving all this, one might wonder?
"Privately owned banks must prioritize low-cost financing for Venezuela's industry. If they don't want to do this they can leave, they can give us the banks, we can nationalize them."
and this, about Sidor:
"If the company Sidor ... does not immediately agree to change this process, they will obligate me to nationalize it," Chavez said. "I prefer not to," Chavez added, as he ordered Mining Minister Jose Khan to immediately head over to Sidor's headquarters and come back with a recommendation with 24 hours.
"Sidor has to produce and give priority to our national industries ... and at low cost," he said.
Reminiscent of the old Mafia stereotype, "Nice store you've got here - a shame if something were to, uh happen to it"? Quite a bit. Command economy? Unquestionably. That's been tried before, of course, and has never led to sustainable success. Its aftermath is poverty, and without regard to Venezuela's supposedly massive oil reserves, it will do the same in Venezuela. And it's already started - see the article "Venezuela — Inflation -> Price Controls -> Shortages" at The Liberty Papers, or this Reuters story pegging inflation through April at nearly 20% per annum. Huge inflation in Venezuela's not unprecedented, as seen in a 1989 NYTimes piece pegging inflation that year between 65% and 70%. But the country's exit from the international government lending system seems ill-timed, because they're going to need help eventually, and perhaps sooner rather than later, with the trajectory they're on.
The odd thing about this is that Chávez gives every impression of meaning well for his people, and has been rewarded by ultimately credible, if perhaps a bit inflated, majorities in the last several elections (recall and re-election). Meaning well and doing well are of course two completely separate things, and he also gives every impression of taking his country down a road which from he won't be able to navigate back as it all falls down around his ears.
He's not implementing one of those fuzzy-soft socialist systems commonly found in Europe - this isn't socialism, it's communism. It's got socialism at its core, but add in the enforced state control and the mandated indoctrination, and the only difference between Venezuela and the USSR is the gulags. Well, the gulags and the oil. And the language. But it will fail, and that will happen without overt involvement from what he presumes to be his greatest enemy, the United States. Chávez's actual greatest enemies are economic reality and a willful ignorance of history in pursuit of the utopia he seeks.
Utopia is as unattainable as is perpetual motion, and for similar reasons. Notwithstanding the breathless reporting, low-rent activism, and opinionating in the years since Chávez came to power, history won't be kind to this attempt, either.
(also posted at issuesblog.com)
May 2007
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