Subsidy socialism

Most of us are not sure whether we should be happy or sad: Hugo Chavez appears to have warded off a complex and determined effort to recall him from the presidency of Venezuela.

Neither are the Venezuelans sure. There were both dancing in the streets and grim protests in the streets of Caracas the other day after the trend in the voting became clear.

Over the past few years, Venezuela has become an increasingly polarized society under the erratic and eccentric rule of Chavez – a leftist populist straight out of the 19th century.

Chavez has antagonized the Venezuelan middle class and business community with his quaint and naïve policies. But he has pampered the poor with generous dole-outs and subsidies of every sort funded from the country’s oil revenues.

Venezuela is the fifth largest oil exporting country and holds the record for selling the cheapest gasoline. Bottled water in Venezuela costs ten times more than premium gasoline.

Chavez, an ardent admirer of Cuba’s Fidel Castro, has declared of the "Bolivarian Revolution" in all of South America (with reference to Simon Bolivar, who led movements of independence in the 1800s). In a way, he is the Saddam Hussein of this continent – although a bit funnier.

Through the length of his rule, Chavez pursued policies hostile to business and biased against the educated middle classes. Instead of preparing Venezuela to be a competitive society when the oil runs out, Chavez has fostered a patriarchal state and a culture of dependence among the poor. He has set up some unsustainable sort of "subsidy socialism" funded from the country’s oil revenues – revenues that could have, instead been used to modernize this economy.

His populist policies are extremely shortsighted and will surely result in the long-term retardation of the Venezuelan economy.

But Chavez does not appear to understand that. His severely challenged populist mind cannot grasp why the business community and the middle class is up in arms against him. For Chavez, all is well so long as the oil pumps run, oil prices remain high and he is able to but the support of his nation’s grateful poor.

As the August 15 recall elections drew nearer, global anxiety pushed up the price of crude to historic levels. The global economy seemed hostage to the quirkiness of Chavez’s fate.

Everyone else, save the happy beneficiaries of Chavez’s oil-funded subsidies, wanted this myopic fool out of power. However, doing that will probably create incalculable turbulence in a major oil exporting country during a most sensitive time.

Tragically, no one was willing to gamble with turbulence in Venezuela at a time when oil prices are at their highest highs and speculative pressure runs strong in the international markets.

Chavez, after all, does not only have bottomless subsidies to keep reinforcing his base of political support. He also has a lot of armed partisans who threaten all hell will break lose if their man is taken out of power.

Some of these partisans opened fire the other day at people peacefully protesting the conduct of the recently concluded recall elections.

Imagine Bayan Muna in power with all their friends in the NPA freely roaming the streets with their assault rifles. That is how it is in Caracas these days.

And so it was that Chavez, on the eve of elections, proudly declared he was the candidate of Wall Street. At least this wild character has not lost his sense for the ironies of history.

Hugo Chavez, the Communist Clown of Caracas, is a resounding lesson on the perils of populism.

Like Joseph Estrada in our own case, Chavez rose to power on the crest of the poor people’s unbridled expectations for goodies handed out by the state. He was brought to the pinnacle by the pompous expectations for endless subsidies by those sections of society who cannot know any better and for whom modern sensibility is most distant.

It might not be quite right to call Chavez-style socialism a "Robin Hood regime."

He does not steal from the rich in order to give to the poor. He steals from his nation’s own future in order the give the poor a short-lived joyride.

By doing this, he maintains himself in power, secure enough to play around with his people’s sensibilities and toy with his own perverse ideological whims.

Hugo Chavez’s "subsidy socialism" is simply populism in its most extreme – and therefore most clarifying – form.

Other countries, ours included, have repeatedly traded future sustainability for the fleeting benefits dictated by present contingencies.

In our case, we did not fund our immense apparatus of subsidies from oil revenues. At one time, we subsidized the pump prices of oil products and borrowed tons of money to be able to do so, passing a heavy debt load to our children and our children’s children.

Our local populist-leftists are currently demanding a return to that sort of subsidy utopia based on debt-addiction through a re-nationalization of the oil industry.

Earlier, instead of properly taxing our citizens, we sold off our natural heritage in order to keep an under-taxed society happy. Instead of oil, as the Venezuelans do, we sold off our forests.

Unfortunately for us, our forests ran out much more quickly than Venezuelan oil does. But not to worry: if Chavez-style subsidy socialism remains in place, Venezuela will soon become like us. They will soon become a society where populist expectations are high and government revenues scarce.

In Chavez ran for president here, he would surely win. And just as surely, we will be deeper in debt every minute he stays in power.

There will be relief in the international market, and relaxation of crude oil prices, if the political situation in Venezuela does not become tenser than it already is. But I am not sure we can call that good news.