His Failure is Complete

by Pejman Yousefzadeh on September 2, 2011

Why doesn’t Hugo Chavez resign as president of Venezuela? His health might improve if he did not have to bear the burdens of leadership, and the quality of life in Venezuela might improve if it did not have to bear the burden of Hugo Chavez’s leadership:

Venezuelan President Hugo Chavez says he feels “great” after another dose of chemotherapy for his as-yet-unspecified cancer. If only the Venezuelan economy was in as good shape as Chavez says he is in. In fact, what Chavez ought to explain is why his vaunted “21st Century Socialism” bears an uncanny resemblance to the garden-variety 20th century kind: replete with widespread inefficiencies, declining production, and rampant shortages.

A new study out, Gestión en rojo (Management in the Red, a play on the ubiquitous color of Chavez’s Bolivarian Revolution), explains why, in part, the Venezuela economy remains in critical condition: Chavez’s excessive confiscation and nationalization of private sector companies.

Convinced that profiteers, speculators, and assorted other chislers have been rooking the Venezuelan people by charging “unjust prices” for their goods and services, Chavez has ordered up the seizure of some 1,000 companies since 2002. In fact, this week, while lying in a military hospital where he is being treated, Chavez demanded that the takeover of land from Irish company Smurfit Kappa be expedited. “We have to take the last square meter of land from Smurfit,” he announced on TV. “Let’s move more quickly, that’s an order.”

It’s telling how Chavez announces each nationalization with great fanfare, but then never seems to report back to anyone on what becomes of that enterprise a few years down the road.

In Gestion en rojo, three Venezuelan economists did just that, tracking the performances of 16 nationalized companies over a two-year period. The results are hardly surprising: most of the enterprises are running at only a fraction of their capacity and depend on direct government subsidies to maintain operations, if they are operating at all.

According to the lead author, Richard Obuchi, “Government ownership of companies is often accompanied by deficit problems and lack of incentives to be effective and efficient.

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