History always repeats itself, yet bankrupt and corrupt governments are often too happy to ignore it in exchange for short-term gain to keep the party going and their image intact.
Venezuela is reeling after the death of Hugo Chavez, and before he could complete his socialist “Bolivarian Revolution”. The risk of unrest is felt through the country as a polarized society grapples with political fighting, a high murder rate, and an economy in turmoil.
It’s well known that Chavez’s poorly-defined dreams of utopia created an overly generous state where landowners, business, and the oil industry lived in constant fear and retreat.
But Venezuela is a textbook case of big, capitalist-hating government gone wrong. Chavez’s “Motherland, socialism, or death” attracted him goodwill among the nation’s poor, but so did talks of the Motherland in the Soviet Union.
As the Chavez’s cult of personality fades, Venezuelans are beginning to realize they may not be able to afford “Chavismo”. Politicians like the former paratrooper have one card to play: free stuff. Subsidized food, housing, and more were offered up as a modern-day bread and circus routine. And it worked.
Now, however, the country’s reign of nationalizing some 1,000 companies, imposing capital controls, and general takeover of the economy has come home to roost.
While Venezuela has enjoyed the fruits of its oil industry in the past, Chavez’s legacy of underinvestment in the industry has took over by force has left the country lagging and oil revenues falling. The socialist programs of the last decade and a half are now unsustainable.
This isn’t Venezuela’s first rodeo, however. After oil was discovered there in the 1920s, the government brought in US oil interests to run the show. Eventually, Standard Oil made a pioneering 50-50 deal with the government to split revenues down the middle.
It didn’t take long, though, before the government realized they had gotten an inch and could take a mile. In 1945, a coup ushered in a new leftist government who renegotiated the terms.
Eventually, Venezuela would become the world’s fourth wealthiest nation per capita, joining Argentina as once-wealthy Latin states whose anti-free market agenda brought down the house. The party lasted for awhile once a leftist dictatorship took over, but by the end of the 1950s, a new President had inherited the bill from a binge of social spending and waste and the place tanked again.
The new government brought about reforms and brought things back to normal. Social harmony was restored. Oil wealth was the tide that caused boats to rise. Venezuela was once again the wealthiest nation in South America. But when oil prices burst, the country had no backup plan and two-thirds of the country was plunged into poverty. Inflation reached a peak of 100% in the mid-1990s.
Enter Hugo Chavez. His playbook: ignore history and once again nationalize the oil business and turn off foreign investors. He had learned nothing from just 75 years of history in his own country and the ebb and flow that had caused mass poverty and massive public debts.
Men like Chavez function by creating the illusion of prosperity that capitalism would have really provided. Yet, now that Chavez’s godlike persona will begun to recede in the public consciousness, Venezuela has once again been stuck with a huge bill and no one to lend a helping hand.
More important to take away from this is how anti-capitalist Americans have eulogized Chavez as a freedom fighter and a uniting force. They have yet to see the full legacy that Chavez’s unsupported wild spending will bring. It’s easier to blame the oil companies for raping the people than accuse Chavez of spending money he didn’t have from an industry he put into decline.
The socialist and populist movements of the west loved Hugo Chavez for enacting a socialist dream world in Venezuela. Don’t think that his failed playbook isn’t a big part of their agenda for “social justice” at the expense of your success.
Venezuela and Argentina have shown that the path to socialist decline doesn’t take too long. The question is: how far down that path is “the land of the free”?