What Cues Can South America Take From Europe?

Over the past few years Greece has probably made the news more than ever before. Whether it be protesters in the streets, election results, or the announcement of some new government policy, whatever happens in Greece seems to be written about in all corners of the world. Just recently the fierce rhetoric of a relatively obscure populist left-wing party made international headlines and fueled new speculations about the future of one of the world’s major currencies, if not the world economy and financial markets. The eventual ascent of that same party, Syriza, to Parliament has all eyes both on the Old Continent and across the world focused on its plan of action. Mind you, we are talking here about a country whose GDP represents less than 0.4% of the world economy.

In the meantime, incessant government intervention into the economy has caused major upheaval in several countries in South America. Venezuela is currently experiencing the worst depression in decades, Argentina’s economy is in shambles once again on the heels of its most recent default, and since the World Cup bubble popped Brazil has equally dipped into recession. These countries dwarf Greece in terms of population as well as contribution to world GDP, and some of their resources make them important players in global commodity markets. Yet aside from some news outlets’ reporting on Venezuelans having to stand in line for hours for even the most rudimentary items or the mysterious death of a federal prosecutor in Argentina, major media are hardly paying attention.

The latter, far from being the result of a massive media cover-up, reflects a general sentiment in South America. Here in Chile, for instance, nobody in their right mind would dream up some theory about the aforementioned woes causing a spillover effect that might bring the entire continent to its economic knees. Unlike in Europe, xenophobia has not been on the rise here, nor have there been any incidences of heads of state being compared to blood-thirsty dictators. As much as some populist leaders like to speak of a “Latin American brotherhood”, in truth the misery even in neighboring countries is hardly discussed except in case of any personal ties.

While it would clearly not be a fair comparison to put the South American economy on equal footing with that of Europe, the events that have unfolded in recent decades can certainly serve as valuable lessonsEurope-SouthAmerica for the continent. The mere suggestion that one day, Europe’s economic fate would seemingly come to hinge on the outcome of Greek elections would have seemed outright preposterous as recent as the nineties or even in the early 2000s. Indeed it would be like predicting that two decades from now, all of South America would be trembling at the prospect of a severe recession in Guyana.

Still, a lot more can be drawn from European history than simply a long list of don’ts. Going further back just a few centuries can literally provide a blueprint for sustainable growth and pave the way for prosperity on a continent too long haunted by the destructive and backward forces of socialism. Historians and other scholars have written extensively on “the European miracle” and its foundations. As it turns out, the terminology belies an astonishingly simple recipe; defense of property rights and decentralized power structures limited by competing jurisdictions in their ability to intervene in and expropriate resources out of the market.

Whilst academia and politicians would have us believe economics is an incredibly complex field of study that should be left safely and exclusively in the hands of the “experts”, historical evidence proves them utterly wrong. In fact, the more power is centralized into the hands of these conmen, the lower the odds of the kind of sustainable economic growth that has permanently lifted millions out of poverty, and continues to do so to this day.

Political leaders and their outdated and misplaced allegations of imperialism cannot be allowed to stand in the way of free people and free markets in South America. In the words of Ron Paul: “An idea whose time has come cannot be stopped by any army or any government”!


The National-Socialist Legacy of Chávismo in Venezuela

Loved by some and hated by others, Hugo Chávez was arguably one of the most influential Latin American leaders in recent history. After his death earlier this month and with new presidential elections coming up on April 14th, now is an opportune time to analyze what the man who liked to portray himself as a friend and advocate of the poor, did and did not accomplish.

Chávez’s reign started in 1998 when he won the presidency using his typical populist rhetoric, The national-socialist legacy of Chávismo in Venezuelaproclaiming he wanted to create “optimum prosperity for the fatherland”[1]. He subsequently launched his “Plan Bolívar 2000” named after Simön Bolívar, a military and political leader who fought for Latin American independence from the Spanish empire in the nineteenth century. The plan encompassed rewriting the constitution and putting it up for a referendum. For this purpose, a Constitutional Assembly was created, for which elections were held in 1999. Its first meeting took place in August of that year, when Chávez urged the members to produce the new constitution as fast as they could, kindly providing his own draft to give them a head start. The plenary sessions that were subsequently held were eventually abandoned in favor of twenty-one specialist commissions tasked with defining and rewording the separate articles of the constitution[2]. So much for the will of the people being heard..

The powers of the Constitutional Assembly, which had now become the country’s supreme authority as far as most jurists were concerned, seemed to be at odds with those of the democratically elected Congress. To make matters worse, Chávez declared a “judicial emergency” and appointed a nine-member commission with the power to dismiss the Supreme Court, resulting in its president resigning in anger, declaring the “Supreme Court was now dead” and “the democratic system in danger”[3]. The final outcome of the political standoff was that the opponents of the government in Congress agreed not to pass laws that might obstruct the work of the Constitutional Assembly[4].

Furthermore, Chávez blocked the approval of articles referring to the freedom of the press and “the right to life”. The final version of the constitution, while including a so-called “right to work” and supposedly guaranteeing “full care and social security benefits” for senior citizens, made no mention of such basic rights as self-ownership or freedom of the press. Nonetheless, nearly 72 percent of Venezuelans voted Yes, giving the president the green light to move forward with his plans.

The referendums and re-elections might lead one to think that the Venezuelans are a free people who were perfectly content with the reign of “El Presidente”. Those re-elections, however, left many Venezuelans wondering time and time again where the votes had come from or whether their votes were being properly registered by the electronic voting machines. Those concerns cannot simply be dismissed as unjustified claims made by sore losers either, considering the lack of transparency, lack of independent electoral observers and the closure of the consulate in Miami to prevent the city’s large opposition voting bloc from having their voices heard. Such measures would make any election unfair if not outright illegitimate.

A closer look at the effects of Chávismo on the country and the daily lives of its citizens reveals why opposition against the late president may have been stronger than anyone was supposed to know. Part of the people’s discontent has to do with the economic chaos caused by Chávez’s national-socialist policies aimed at micro-managing every aspect of Venezuelans’ lives. In many ways the economic policy pursued by the Chávez government for many years is a classic example of how some government intervention invariably and inevitably leads to more and more intervention, until the Leviathan decides to just go the whole nine yards. In the case of Venezuela, the results included the nationalization of “strategic companies” deemed too important to be owned and controlled by foreigners, a massive loss of purchasing power and devaluation upon devaluation of the bolívar followed by shortages of foreign currencies, most notably U.S. dollars. Strict currency controls were then implemented aimed at stopping the black market from supplying dollars, further aggravating Venezuelans’ misery, whose consumption consists for 70 percent of imported goods. None of that stopped Chavez from  using state oil funds to finance his latest re-election campaign, though, thereby leaving his political successors and the entire country with serious budget deficits.

Despite his professed benign intentions, Hugo Chávez leaves a country in ruins and a people in despair. Let’s hope the next Venezuelan president will do more than pay lip service to the plight of the country’s vast poverty-stricken underclass, If the new elect knows anything about history, he might give free market capitalism a try.

[1] Richard Gott, Hugo Chávez and the Bolivarian revolution. (London: Verso, 2005). pp. 136-137

[2] Richard Gott, Hugo Chávez and the Bolivarian revolution. (London: Verso, 2005). pp. 146-147.

[3] Ibid.

[4] Richard Gott, Hugo Chávez and the Bolivarian revolution. (London: Verso, 2005). p. 147