Sunday, April 22, 2007

Hugo Chavez

"The imperialist, mass murdering, fascist attitude of the president of the United States doesn't have limits. I think Hitler could be a nursery baby next to George W Bush," said Hugo Chavez, President of Venezuela, who has made Caracas the Latin American capital of anti-Americanism. Hugo sees Fidel Castro as a hero and model, Bush as a villain.

Hugo's America-bashing is so bad that the BBC, of all sources, feels compelled to defend America:

"You've got to wonder if there is any end to the capacity of the rest of the world to blame the United States for its problems. ... Why? Is it all the fault of the imperialists from the north? Or is just a little of it the result of local attitudes to poverty, local attitudes to honesty in government, and local attitudes to the rule of law?

In other words, in Latin America as elsewhere in the world, is anti-Americanism a smoke screen, a very convenient smoke screen, whose noxious fumes hide the reality of local failure?

As Otto Reich, a former Bush administration ambassador to Venezuela and public enemy number one (or two?) among many anti-Americans, told us: 'The United States is the scapegoat. It provides an easy excuse for the failures: if something isn't working, blame the Americans. Scratch the surface of some of these anti-Americans and you find self-loathing.'"

Hugo's hate for America knows some bounds. For example, Hugo does not hate America so much that he won't trade with it, accepting 39 billion imperialist Yankee dollars in exchange for its oil. There is something about big oil deposits that inclines countries to despotism. It also doesn't stop Hugo from allowing the hundreds of millions of dollars in remittances to be shipped back home from Venezuelans working jobs in America. Don't expect any praise for the American job machine for providing food and rent to the poorest Venezuelans. In fact, Latino immigrants sent $45 billion home in 2006, up from $30 billion in 2004. Don't expect any thank you notes from Latin America for any of that. If anything, such dependence on America fuels their resentment and promotes goofy conspiracy theories about how America somehow is holding them down.

It is a worthwhile question to ask why North America is rich and South America is not. The answer, it turns out, is simple: The English colonized North America while the Spanish colonized South America. Their different styles of developing their colonies laid the foundation for their respective success and failure.

The Spanish founded their colonies for the benefit of their King, who took his Royal Fifth off the top. All businesses were developed top down, centralized to benefit Spain. Consequently, they managed their colonies with bureaucracies dedicated to ensuring that government controlled everything. Those bureaucracies slowed development to a crawl. A small group of merchants with royal connections controlled the economy of each colony.

The English founded their colonies to benefit England, but did so in a decentralized fashion, using joint stock companies, ie corporations. Individual investors founded colonies in America. Their rules were kept to a minimum to promote the formation of individual businesses. Real estate developers like Daniel Boone probed deep into the wilderness to find good spots to build towns, surveyed them, and then sold plots in places like Boonesboro to settlers looking for their own land. Unleashing such entrepreneurial spirit spurred development to the maximum.

As the twig is bent, so grows the tree. North and South American economies progressed differently because they were founded differently. The centralized economies of South America lagged behind, while the decentralized economies of North America lept ahead. This contrasting pattern of development was not limited to the New World, either. The Spanish Philippines remains poor while the English Hong Kong and Singapore became economic powerhouses.

Hernando de Soto, a Peruvian author, takes up this difference in his book, "The Mystery of Capital: Why Capitalism Triumphs In The West And Fails Everywhere Else." De Soto points out that in Canada, colonized by England, it only takes a day to register a new business with the government and costs less than a day's pay. By contrast, in Peru, de Soto found it took 289 days and 2.5 years pay to register a small business, using a team of people working six days per week filling out every form required and paying every fee demanded.

This is the case throughout South America and much of the Third World. The bureaucracy of the former Spanish colonies forms a giant obstacle to business formation, so that it's impossible for the ordinary guy to build a legal business bigger than a pushcart. Small businesses are how wealth is created in great nations. If you make it impossible for businesses to be created, you kill the goose that lays the golden eggs of wealth. Such countries do not succeed because they are organized to fail.

The second major stumbling block to the creation of wealth in Third World countries is dead capital. Most people in the Third World do not have clear legal title to their homes, the result of record-keeping neglect by governments who are more interested in maintaining their control than the property rights of individuals. Consequently, citizens can not use their homes as collateral to take out a loan to fund a business. Such loans are how most businesses are started in the US.

The value of such assets held by citizens is immense. De Soto says it amounts to forty times all the foreign aid distributed in the world since 1945. The poor of the Third World already possess all the capital they need to fund businesses to create wealth. However, those assets are held in the form of homes and extra-legal small businesses which can not be leveraged to fund business ventures. Their assets are dead capital.

Corporate law is a third obstacle to the creation of wealth. Corporations are a method of funding large enterprises. There are few individuals who can fund such a large-scale enterprise by themselves and they would be foolish to bet their entire fortune on one business. Forming a corporation is a way to collect the capital to fund a factory while spreading the risk among many investors. The rights and responsibilities of corporations in the Third World are ambiguous and favor the unscrupulous. Consequently, investors are leery of them. Without corporations, successful business ventures are starved of the capital they need to grow to serve their markets.

These and other internal factors are the true reasons why Latin and South America remain poor, along with most of the rest of the Third World. They are not conditions imposed upon other countries by the United States, but rather conditions inflicted upon underdeveloped nations by themselves. When they reform themselves by clearing away all the self-imposed obstacles to creating wealth, they will enjoy the same success as the English-speaking countries.

Hugo Chavez and his brand of anti-Americanism are great obstacles to that much-needed reform. Bashing America serves powerful psychological needs for the failed nations south of the border. It removes the stigma of failure and shifts the blame to an imaginary oppressor. It also relieves the haters of having to make the difficult changes to their dysfunctional countries they need to succeed. For the favored few who profit from centralized control of the economy, like Chavez and his crew, it is to their advantage to displace the blame for their mismanagement of the economy from themselves to imaginary American imperialism.

It is Hugo Chavez who blocks the development of Latin America by rejecting the successful American model and embracing a vision of democratic socialism, which is the same failed philosophy of centralized economic control which manacles the entrepreneurial spirit of individuals, stopping them from creating wealth.


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