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Wednesday, January 03, 2007

Not Your Father's Socialism

James Surowiecki of the New Yorker on "the most business-friendly socialism ever devised":

Synergy with the Devil, by James Surowiecki, New Yorker: ...To people on both the left and the right, [Venezuelan president] Hugo Chávez is a kind of modern-day Castro, a virulently anti-American leader... He calls for a “socialism of the twenty-first century,” and regularly floats radical economic ideas... When he spoke in front of the United Nations General Assembly in September, a day after President Bush, he said, “The devil came here yesterday.” And ... after he was overwhelmingly reëlected to the Presidency, he dedicated the victory to Castro and proclaimed it “another defeat for the devil who tries to dominate the world.”

Chávez’s rhetoric might not be out of place in “The Little Red Book,” yet everyday life for many Venezuelans today looks more like the Neiman-Marcus catalogue. Thanks to the boom in the price of oil, many Venezuelans have been indulging in rampant consumerism... In the past year, auto sales have doubled, property prices have soared (mortgage loans are up three hundred per cent)... And while Chávez has done a good job of redistributing oil revenue to the ... poor ... to improve education, health care, and housing, and has forced oil companies to renegotiate contracts, there has been no nationalization of industry, relatively little interference with markets, and only small gestures toward land reform. If this is socialism, it’s the most business-friendly socialism ever devised.

Even stranger, Chávez’s demonization of the U.S. has had little or no impact on business between the two countries. The U.S. continues to be Venezuela’s most important trading partner. Much of this business is oil... But the flow of trade goes both ways and across many sectors. ... And, even as Chávez’s rhetoric has become more extreme, the two countries have become more entwined: trade between the U.S. and Venezuela has risen thirty-six per cent in the past year. ...

The result is that the ties between the U.S. and Venezuela have actually tightened. And there is only so much Chávez could do to loosen them without wrecking his economy... In any case, it’s far from clear that most Venezuelans want those ties loosened at all; Venezuela has traditionally been more America-friendly than other South American countries. Baseball is bigger in Venezuela than soccer, and there are Subway and McDonald’s franchises throughout the country.

The paradox is that Chávez’s anti-Americanism is central to his global appeal, while American consumers and companies are central to the economic performance of his regime. So, while he’s going around the world giving speeches about how the goose should be killed, he relies on the golden eggs to keep himself in power. This may seem like a state of affairs that can’t last, and Chávez’s supporters and detractors alike assume that, soon enough, his deeds will begin to live up to his rhetoric: he’ll cut off oil supplies to the U.S., or the like. But deep-seated ideological and political hostility between countries is often less of an obstacle to trade than you might think. Japan, for instance, is South Korea’s second-largest trading partner, despite the fact that Korean resentment toward Japan runs very high... Trade does not, as Enlightenment thinkers like Thomas Paine believed, always bring peace in its wake, “operating to cordialize mankind.” (Think, after all, of the First World War.) But the benefits of trade often excuse even the most grievous of sins. Sometimes, it just makes sense to deal with the devil.

    Posted by on Wednesday, January 3, 2007 at 12:15 AM in Economics | Permalink  TrackBack (0)  Comments (10)

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