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Venezuela Goes to the Dogs
One would think it was bad enough that Sen. Barack Obama and the Democrats want to enact a windfall profits tax grab on U.S. oil industry, the same action that in 1980 effectively has reduced exploration and production in the U.S. by nearly sixty percent, but Venezuela’s takeover of its oil industry is a case history example of why so many of the world’s national oil companies are badly managed and under-performing. Venezuela has a long history of problems with its various governments dating back to the 1800s when Simon Bolivar fought for its independence from Spain. What followed “was characterized by coups, civil wars, and battle after battle,” says Kyle D. Guerrero, an academic who has lived in both Venezuela and the United States. The June issue of Energy Tribune is devoted to Venezuela because, as its editor Michael J. Economides points out, it has the Western hemisphere’s largest oil reserves. Don’t bother looking for Newsweek or Time to provide the real story because they are still telling Americans that global warming is real and “fossil fuels” are bad, bad, bad. Consider instead that, aside from its oil, Venezuela with a population of twenty-six million, most of whom reside in its cities, could comfortably fit its 352,145 square miles into the State of Alaska’s 663,267 square miles. Despite the billions president Chavez is spending on arms for its army of 120,000 soldiers, claiming that the U.S. intends to invade, the truth is that the U.S. is wisely waiting for the inevitable ouster of this jackass. Economides says that “Hugo Chavez is in free-fall” and warns that “the uncertain transition that will follow him bodes ill for the stability of the country.” This is worrisome for the United States because by 2006 our Venezuelan crude oil imports amounted to about eleven percent of our needs. They represent 60 percent of Venezuela’s total exports. This mutual dependency stands in vast contrast to the diplomatic relationship between our two nations. “Chavez,” says Economides, “would be a comical character were it not for the $100-plus oil prices which have papered over his shortcomings and prolong the eventual day of reckoning.” It is astonishing to see the way he has devastated the industry that permits him stay in power. In 2003 he fired more than 18,000 highly trained oil workers who went on strike against him. This set in motion a huge brain-drain as ten thousand of them have left the country. An estimated two-thirds of the rest of the population wants to leave as well. Proving once again that Communism is the worst possible political and economic system known to man, Chavez’s only friends these days are people like Cuba’s Fidel Castro, and thugs like Iran’s Mamoud Amadinejad, Zimbabwe’s Robert Mugabe, and the FARC guerillas in neighboring Colombia. The one thing they have in common is the way they have destroyed their nation’s economies and spread misery among their captive citizens. In 1992 Chavez led a military coup against the government of Carlos Andres Perez. In 1994 he was pardoned and, in 1998, he was elected president of Venezuela. If that sounds improbable, one has to consider the long history of coups and other difficulties endemic to the governments and economies of South American nations. The Chavez platform was one of “change” that would redistribute the wealth of the nation based on a variety of “free” programs of medical care, price controls, and other giveaways. It this sounds a lot like a certain Democrat candidate, it is not a coincidence. The result has been the highest rate of inflation in Latin America, 23 percent last year and still increasing. The breakdown of society is reflected in the way Venezuela in 1988 had 4,500 murders and, during the Chavez regime from 1999 to 2007, this has increased to over 105,000. There is virtually no foreign investment and domestic businesses have suffered. Its health system reflects his “reforms” as childbirth mortality rates rise and cases of malaria have doubled. Poverty is the only growth industry in Venezuela. Aside from oil, its position as a place for illegal drug transit keeps the money flowing, but only for those in charge. This is a nation that choose Communism at a time when the Soviet Union had already collapsed, whose citizens preferred a typical Latin American “strongman” over democratic reform, and who will suffer far more as the price of a barrel of oil inevitably and eventually returns to a more realistic level. The real question will be what kind of transition will follow the fall of Hugo Chavez and his followers and the odds are the answer will be very ugly. Here’s an invitation to visit my blog if you haven’t already. These days I hear from people around the world who find it of interest. Not bad for a kid from New Jersey, A Global, but Glacial Shift of Economic Power Americans are feeling very gloomy these days thanks to the rapid increase in the cost of gasoline and food. There has been a slight shift upward in unemployment and there is much talk of the rising economies of China and India. There is a need to examine and understand what is happening and why. There is a need for some good news.
Putting things in perspective, Smith reminds us that, in 2005, “China’s contribution to the world’s Gross National Product (GNP) was about a sixth of that of America” and India accounts “for less than two percent of the world’s economy, compared with more than 28 percent for the United States.” In terms of our respective populations, America’s still out-produces much of the world. Barring some calamity, we are likely to continue to lead the world. “The key point is that the focus on population,” says Smith, “is misleading. It is misleading in terms of the competitive threat (from China and India) as it is when it comes to the size of their markets.” Critics of the United States are forever berating us for consuming too much, but one needs to pause and examine who these critics are. As often as not they are environmentalists whose whole reason for existence is to reduce the world’s population and reduce consumption, ours and the rest of the world’s. People, however, need and want to eat every day! Economic growth is directly tied to energy consumption. Those whose business is to chide everyone for wanting a better life are wearing out their welcome and this process will accelerate as the Earth continues its present cooling cycle. Some scientists believe it will likely last two or three more decades. Both China and India have populations in excess of one billion each. Smith points out that “Large populations do have one vital characteristic—they consume resources. Thus, both nations are going to require more of the world’s resources. China, for example, “now out-consumes the United States in four of the five basic food and industrial commodities: grain, meat, steel and coal—oil being the only exception.” Smith furthers notes that their “impact on oil is easy to overstate. Between them they account for only eleven percent of consumption, though that share is growing.” The huge populations of both China and India are not an indicator of economic growth because, as Smith points out, only a relatively small percentage of those populations represent the growth industries of information technology and manufacture. For example, “Even by 2030, according to the Chinese government’s own estimates, 600 million people will still live in the country. They are not the world-beating competitive labor force the rest of the globe fears.” The same can be said for India where more than seventy percent of the population lives in rural areas and that population continues to grow. Poverty, in terms of per capita income, remains the most compelling feature of life in both China and India. Thus, those of us in the developed, industrialized world are infinitely better off. The present and future danger here in America is that we have debt-driven, consumption based economy with a trade deficit of $800 billion or seven percent of our gross domestic product. Unless Congress addresses reform of the entitlement programs that are consuming our national budget and also begins to reduce our deficit, America will at some point hit the proverbial wall. There are few signs they are willing to do this. There are ample signs Congress wants to keep spending the diminishing discretionary part of the budget. Ultimately, however, as both China and India “join the club”, attracting and welcoming foreign investment, growing their economies, the prospect is good for both America and the rest of the world. Isolating “rogue” nations that threaten their neighbors and eliminating non-state enemies of capitalism and freedom, will do much to improve the future for everyone. Karl Marx was wrong. Very wrong. Everyone wants to be rich. Getting there together is the key to the future. The Center is definitely not rich! In fact, each week we ask for your donation in order to underwrite the costs of our communications program. Be a part of our effort. If everyone who visits our site every week gave just $15 each, we could stop asking!
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Coming just a week or so after Rep. Maurice Hinchey (D-NY) publicly said the U.S. government should nationalize the nation’s oil refineries, echoing a similar earlier threat by Rep. Maxine Waters (D-CA) to nationalize the entire industry, it is instructive to see what has happened in Venezuela where a Communist wannabe dictator, Hugo Chavez, nationalized that nation’s oil industry.
Happily, David Smith, a British economist, has written “Growling Tiger, Roaring Dragon: India, China and the New World Order.” The news is not all that bad. As he points out, “We are talking about a geographical shift in patterns of economic activity, not entirely new ways of doing things.” The fact is that parts of the world awash in petro-dollars, plus others taking advantage of a decline in the value of the U.S. dollar, are eagerly investing in America and they are not doing that because they want to throw good money after bad.