The government acquisition of private enterprise has no economic or social justification.
BY CARLOS SABINO
The 21st-century socialism that Venezuelan President Chavez has begun to put into practice is already showing some concrete results. Both the Caracas Power Company and the nation’s main telecommunications company, CANTV, are now nationalized, or, to be more precise, have fallen under the state’s direct control. In both cases, the Venezuelan government has purchased—at market price—shares that were in private hands, in order to gain absolute control of those companies. The government’s outlay has not been minor; it exceeds $2 billion. On CANTV alone, which was in private hands for 16 years, the government has spent about $1.6 billion.
It is very likely that SIDOR, the Orinoco Steel Manufacturing Co., will soon meet the same fate, along with several other companies the government considers to be “strategic” for the nation’s economy. A decision has also been made to revoke the crude-oil concessions granted for the past ten years to several international corporations to extract heavy crude and bituminous sand found in southeast Venezuela, a process that requires an extremely advanced technology.
More serious still, from a political point of view, is the fact that the government has decided not to renew the concession of the Venezuelan television station with the widest coverage, RCTV, the only open-signal station that remained beyond the control of Chávez supporters. In the meantime, an extremely strict currency-exchange control remains in effect, which seriously hampers private imports and (of course) foreign investments, which are now practically nil. Caracas is experiencing shortages of many products, from foodstuffs to medicine, which are not imported in the quantities required or with the speed necessary to satisfy the needs of the consumer.
The government acquisition of private enterprise has no economic or social justification, because the companies that were bought operated successfully, making reasonable profits and providing good service to consumers. CANTV, for example, was privatized in 1991, because, while under state control, it had been incapable of meeting the needs of the population. Under state control it had been practically impossible for the company to function normally: It was hard to obtain new telephone lines, the facilities became obsolete, the business lost money constantly, and cases of corruption abounded.
After its privatization, however, CANTV completely changed. With almost 4 million land lines and 8 million mobile or cellular connections, in a country with 26 million inhabitants, CANTV was the main telecommunications company in Venezuela. It provided excellent service and did so for a reasonable price, making the service totally accessible to the consumer, as the figures above clearly indicate. Why, then, buy it again? Why bring it under state control again?
The reasons are obviously of a political nature. Chávez and his followers want to consolidate the control they already enjoy over the country, extending their domain to the economy. By taking over communications and television broadcasting, they can assure their complete control over everything that happens in Venezuela, because the oil business has been state-run for more than three decades and the state is powerful, thanks to its huge oil revenue. Chávez and his people will also hold in their hands most of the major industries and, by means of currency-exchange controls, will be able to exert as much pressure as they want on the private enterprises left standing after this nationalization tsunami.
Venezuela will then be a thoroughly socialist nation, although some illusory appearance of freedom will be maintained. Private property will exist, true, but all companies will have to submit to the dictates of the government; otherwise, they will disappear. There will be elections, sure, but with an electronic apparatus so cleverly designed that it will ensure the continuous victory of the government and the perpetual re-election of Hugo Chávez. There will be freedom to travel inside and outside the country, at least for a while, but the government will make sure it absolutely controls education and the courts.
This 21st-century socialism will greatly resemble the regimes established by Mussolini in Italy and Hitler in Germany, in Fidel Castro’s Cuba, and other countries that, whether fascist or communist, completely strangled individual freedoms during the nefarious dictatorships so characteristic of the 20th century. The only important difference is that Chávez will achieve all of this without resorting to violence, and by maintaining a certain outward democratic appearance that he wants to preserve so he may continue to be accepted by the civilized world.
How long will this situation last? We cannot tell, of course, though we do know that the poor will remain poor and that the oil money will run out sooner or later. Sad to say, the implacable dictatorship of the man who controls all the political and economic ropes of power is likely to continue for a long and anguish-ridden time.
Carlos Sabino is an adjunct fellow with The Independent Institute, a fellow of the Francisco Marroquín Foundation in Guatemala, a director at CEDICE, a public policy institute in Venezuela, and the author of many books on development. This column was republished with permission from The Independent Institute.