New School Politics

Its like something out of an Orwell or Rand novel what is happening in Venezuela—freedom is going out of style quickly and its being replaced by collectivism . In the name of the common good, “cooperation”, and “transcending” capitalism with “equality and justice” a socialist was elected, and twice reelected, and rapidly escalated the government’s control over the economy.

Upon President Hugo Chavez’s inauguration to a third term, which he won by a 63% vote, his aims to continue centralizing political power became even more apparent. In his inauguration he outlined future executive goals including eliminating the independence of the Central Bank, pushing the legislature to concede to him more legislative powers, nationalization of the economy, and finally a constitutional amendment allowing him to seek a fourth term in office after the present one ends in 2013. If he achieves control over the Central Bank he will eliminate the check it has over him on monetary policy. If he achieves more legislative powers he will further blur the separation between the executive and legislature. And if he achieves elimination on presidential term limits he will have virtually eliminated all remnants of a judicial check on his power which only barely exists as is. If he is successful in all his endeavors (which he will likely be considering his party’s large majority in the national assembly) we may have to begin referring to him as, “Dictador Chavez.”  

In his inauguration speech he was crystal clear as to his vision: “We’re moving toward a socialist

His last sentence is perhaps the most ominous as he also makes clear how he will exercise his power—that he will do so without relenting or compromising. As of now he has used majority support to rise to power and that same mandate to consolidate his power. But what when that majority becomes weary? It is also clear that he will probably use that consolidated power against opposition if need be—and no longer are there any legitimate obstacles to him doing so.

His desires for the economy have always been clear—his attack on freedom was predicated on a crusade against capitalism. And he doesn’t attempt to mask his plans either: “All of that which was privatized, let it be nationalized!”  

His latest move is to nationalize

Yesterday Chavez announced that he will expedite the nationalization and not reimburse the shareholders market value:

(AP) Shares of Venezuela’s CA Nacional de Telefonos, or CANTV, plunged in

New York trading Monday after President Hugo Chavez said he wants an immediate state takeover of the telephone company and will not pay shareholders the market value.

Speaking during a Sunday broadcast, Chavez said the price for CANTV would take into account debts to workers, pensions and other obligations, including a “technological debt” to the state.

 

“I’ll pay when the law dictates and in the form the government decides. I’m going to tell them that CANTV was given away, and that they shouldn’t come here saying it must be paid for at the international price,” he said.

 

Chavez announced the plans for the nationalization this month, and on Sunday he said it should happen right away. 

It’s a joke that Chavez would be worried about paying for the shares and its even a bigger joke that anybody would be appeased by it. The fact is that his initiative is immoral by nature and the fact that he will not pay market price reimbursements does not change its evil. The price system only exists because of voluntary exchange—because of individuals offering value for value to persuade the others to engage in the exchange. But Chavez confiscated the shareholders’ property; there was nothing voluntary about it, there was just brute force. Why should the Venezuelan President even bother with reparations, he didn’t hesitate when he compelled them to give away their shares in the first place. And anyways there’s nothing stopping him. He has guns, CANTV does not. There is nothing stopping the Venezuelan government from taking its people’s wealth so long as the people continue to produce it.

But in there lies Chavez’s problem: he can only maintain his economic power so long as there are men able and willing to continue to produce for the sake of the government that takes their products from them. The President has no legitimate claim over the right of CANTV. It was not he who produced the company’s goods and services; it is not the “collective will of society” that built it into

Chavez’s policy of nationalization takes away all incentive for capital accumulation/investment in

Not only will Venezuelans relent in producing as coercion is rewarded and virtue punished but more importantly foreign investors will keep out of

And still there are many other existing and developing controls on the economy that mar the prospects for future growth. There are few checks from property being taken, labor regulations drive up the price and down the value of employment, the government controls foreign investment and financial exchange rates as well as many other prices. 

Chavez is also proposing new taxes concentrated on the rich:

(AP) Privileged Venezuelans could find living more expensive under Socialist President Hugo Chavez.

 

Chavez says he plans to tax luxury goods including second homes, expensive cars and art collections. He says the revenue will fund new neighborhood councils that focus on issues such as expanding sewer lines and repairing potholes.

 

For the first time in years, Chavez says he also plans to raise gasoline prices. But he says the price hike won’t affect the poor because they ride the buses and the trains. Chavez says he’s targeting the drivers of BMW’s and sport utility vehicles. 

But making the price of living more expensive—even for the rich—will not in any way help the economy. When you tax goods, price rises above market price, there are shortages, and less of them are produced. Socialists would say, however, they are only taxes on the rich and they won’t hurt everybody. But this is not so true. When prices are hiked and less of them are bought profit margins will decrease and companies will have less to save and thus less capital for production. This means they will have to cut costs, and that means less employment, fewer (and more costly) goods and services, and lower real wages—when production is made more expensive, simply, less will be produced. 

But what of the wealth when it is diverted to the government? Well, they spend it. Isn’t that good, you ask. No: for three reasons. First, it’s going to people who didn’t deserve it—that sounds callus, but it is only rational. And when you reward sloth and punish savings then you will find that there will be more of the former and less of the latter. Second, what is spent goes unsaved, so while it allows for present pleasure it distorts the natural consumption-savings proportions and diminishes the ability to produce more in the future. And finally, government manages the money in the opposite way that individuals do—the second use it with the intention of earning more. The difference between the rich (who do not have political pull) and the government is that the rich make their money by making more money then they spend; the government just takes money when it wants to. The money that

Even more dangerous than everything else, save nationalization, is inflation. Throughout Chavez’s presidentcy, the government has systematically inflated the nation’s money supply to a tune of 22% in 2006 alone. This enourmous inflation radically curtails the impetus for savings (consider for instance, if in one year the earnings you save diminishing by more than 1/5th their origional value, how excited would you be to put your money in the bank?). Money is the lifeblood of any economy and the manipulation of it will wreak havoc on an economy’s incentive and ability to accumulate capital. And it’s even more damaging than taxes because while taxation requires legeslative approval and is infamously unpopular with taxpayers, inflation can go virtually unchecked and is a subversive means of taxation.

In eight years since his first election,

So much has been done to paint men like Chavez as the crazy mastermind behind the madness, but he could not do it alone. Chavez received a larger percentage of the popular vote in his last election than any American president in history. It is in the name of the collective that these initiatives have been pushed and it is by the majority that they are being pushed. Ayn Rand once said, “the evil in the world is made possible by only the sanction you give it.” For the present course to be reversed the Venezuelan populous must withdrawal their sanction.

Throughout its history, utilitarian socialism has proven itself as potent an enemy of freedom as there is. With no checks on the tyranny of the majority the “masses,” in the name of the public good, are empowered to systematically rape the productive members of society and punish free men for their virtue, culminating in absolute centralization in an omnipotent federal government. It happened during the French Revolution and proceeding Reign of Terror led by Maximilien Robespierre in the name of “Equalité and Fraternité.” It happened during the Bolshevik Revolution and its Red Terror led by V.I. Lennin in the name of dictatorship of the proletariat. It happened in Nazi Germany led by Adolf Hitler in the name of the “Fatherland.” It happened in