Why Chavez Will Be Bad For Venezuela

The news came down early this month that Hugo Chavez intended to nationalize industry in Venezuela. There have been many media glorifications of Chavez in recent times, who has been using the oil wealth of Venezuela to improve the lives of the poorest in the nation. Many socialists think this might be their one bright point in the history of the movement. They see Chavez as the guy who will prove that socialism can work.

But it won’t. Why won’t it work? Atlas is shrugging, and the capitalists have been pulling up stakes for years.

Asked about the AES investment by a Venezuelan newspaper in May 2000, Chavez said, “I do not have to meddle in that, because I consider it strictly private.” He said the company’s executives “displayed a quite progressive vision.”

Forbes magazine at the time said the AES move was “perplexing,” noting that other investors were fleeing because they saw Chavez as an unpredictable, self-styled revolutionary autocrat.

Yep. It seems that when Chavez first showed up, he told a few businessmen that their investments were safe. Quite a few other businessmen didn’t believe him, and started pulling their investments out of the country. Those who did believe Chavez ended up getting screwed anyway, even if it was 6 years later.

Why does this matter? Well, regardless of whether you’re a capitalist or socialist, capital is necessary to expand business and expand an economy. You can believe capital comes from people looking to make a profit by investing, or you can believe that capital comes from the desires of workers and the central planning of government. Either way, capital is necessary.

Unfortunately, though, people who want to make a profit get very scared when someone who is advocating nationalizing industry get elected into power. They force the socialists to put their money where their mouthes are, by removing their money from the equation and asking the government and workers to actually put that investment where it is needed. And by pulling out their investment when the economy is nationalized, they give the socialists profits (which used to go to investors) with which to distribute that capital.

We’re going to watch the real-life effects of socialism before our eyes. External investment, faced with the understanding that property rights have now been nullified, has ceased. But the socialists in Venezuela have ample national resources that they may be able to use to remain afloat. If any country can show how wonderful socialism can become, it’s probably Venezuela. It’s too bad— for the people of Venezuela— that it’ll fail.