By Kevin D. Williamson
Sunday, September 06, 2020
Venezuela’s last oil-drilling rig has shut down.
Venezuela still has plenty of oil — about one-fifth of
the world’s known petroleum reserves are under the jackbooted feet of Hugo
Chávez’s heirs. Nothing happened to the oil, and, in spite of the recent
coronavirus-related turbulence in the energy business, nothing really happened
to the oil market, either.
Politics happened, and destruction happened. Sometimes,
those are synonyms.
What’s a barrel of oil worth? It depends. Economic values
are relational. One telephone is worthless — if there were only one telephone
in the world, it would be a scarce item, indeed, but not a valuable one, since
there would be no one to call. The thing has value because of what you can do
with it, and that depends on additional factors.
Oil is a little bit like that. It is not actually very
valuable on its own, because you can’t really do much of anything with it. But
oil in the context of a rich capital ecosystem — refineries, pipelines,
supertankers , etc. — is very valuable stuff.
Venezuelans have the oil, but they don’t have the needful
productive capital, so they don’t have gasoline for their cars or propane for
their kitchens. Venezuelans do not have cooking fuel, but, then, they also do
not have food to cook: Food moves around on trucks, and no gasoline or diesel
means no food deliveries. Tractors and irrigation systems need petroleum, too —
try running a farm without diesel and propane. The United States does not feed
its 330 million people (and much of the rest of the world) by plowing with
donkeys.
Without sufficient usable oil, Venezuelans lack
necessities. They also do without the income that they would have had from
selling oil to energy-hungry people around the world.
A few stragglers are still producing oil from existing
wells. As the Wall
Street Journal reports, the
world’s most oil-rich country is set to produce about as much oil this year as
Wyoming. No slight to Wyoming, but that is not a very impressive output.
What happened in Venezuela is a less bloodless version of
what Senator Elizabeth Warren and her colleagues propose to do in the United
States. The Chávez’s regime decided to “put people over profits,” as our
Democratic friends like to say. Senator Warren proposes to put large companies
under the control of the federal government by requiring them to secure federal
permission to operate and by giving the government the power to dictate to
corporations the compositions of their boards and to micromanage decisions from
compensation to investment. You have heard the phrase, “act like you own the
place.” Senator Warren does not propose that the state should own the means of
production, as in the classical Marxist-Leninist model, only that it should act
like it owns the means of production.
They tried something like that in Venezuela, too. The
Chávez government nullified existing energy contracts, violated property
rights, and required oil companies to reorganize their projects under the
auspices — and control — of the Venezuelan state, in the form of PdVSA, the
national oil company. The oil companies for the most part responded with some
variation on a seven-letter phrase that begins with an F and ends with a U.
They pulled out, Venezuela’s oil production tanked, and the rest of the world .
. . more than made up for that lost Venezuelan output, thanks in part to
technological advances pioneered in the United States — most prominent among
them the “fracking” that Democrats propose to prohibit. It is worth remembering
how many Democrats celebrated Hugo Chávez as a model of “people over profits”
leadership.
Prosperity is fragile. Venezuela was not a paradise
before Chávez, but it had some reasonably functional institutions. Its energy
industry was one of them. That has been destroyed. This is not a case of having
to break some eggs to make an omelet. (George Orwell: “Where’s the omelet?”)
This is socialism in action, the real socialism that we are always
hearing has never been tried but has somehow still managed to kill millions of
people around the world over the course of a century or so.
What happens at the large scale happens at the small
scale, too: Nobody is in a hurry to invest in Venezuela’s energy industry, in
spite of the country’s rich reserves — in spite of the fact that there are
potentially trillions of dollars to be made in the long run. Nobody is in a
hurry to invest in Kenosha, Wis., which had some functioning institutions,
including a great many businesses that have been burned
down and looted. They are not going to just bounce back.
Tesla is building a new factory outside Austin, a project
that will involve more than $1 billion in investment and that will employ more
than 5,000 people. Do you imagine that Kenosha is very high on the list for
future Tesla investments? Do you think there might be 5,000 people around
Kenosha who would like those jobs, contractors and service-providers who would
like a piece of that $1 billion-plus investment? There are, certainly. But no
sensible person or institution is going to invest very much in Kenosha for a
long time. This will be history repeating itself: The American cities that
suffered the worst rioting in the 1960s suffered serious economic decline
relative to the cities that did not endure similar violence.
For years, demagogues of Senator Warren’s stripe insisted
that corporations were failing to make good on an unpaid debt to the American
worker, and that they should be coerced by the state into offering up certain
political deliverables in payment of that debt. That was a big part of the
postwar economic conversation, until a great many of the corporations showed
that they could get on just fine without the American worker. When that
happened, the Warrens changed their tune, demanding that the corporations come
back and exploit the American worker again, as decency and patriotism demand.
The unpaid debt to the exploited worker became the unpaid debt to the state —
it became “You didn’t build that!” and all that nonsense.
Now, it finally is starting to sink in to our national
mind that Joe Plutocrat not only can get along just fine without the American worker,
but he can also keep his yacht stocked with champagne with little or no
dependence upon the American consumer. There are lots of people in the
world who want to make things and buy things. Capital will go where it is
treated well, and the future will go where it is welcome. And history is not an
arrow pointing unalterably in the direction of progress and prosperity. If you
think being a rich country protects you from that reality, remember that, when
Senator Warren was born, Venezuela was the fourth-wealthiest country on Earth.
A few years of left-wing radicalism had its people eating
zoo animals.
The shocking thing is: Venezuela is still a wildly
rich country. Even at today’s low oil prices, its proven reserves notionally
would be worth nearly $15 trillion at market prices, or a little more than a
half-million dollars for every man, woman, and child in the country. But that
wealth is probably just going to sit there, maybe for decades, while the people
are stunted and starving. In fact, that wealth won’t be wealthy at all. It will
just be oil in the ground, like gold in the mine.
Politicians such as Elizabeth Warren and Hugo Chávez
believe that they can reshape the world by simply barking orders at people and
institutions. But politics isn’t magic, and reality is not optional. Bark all
you like, but reality will bark back — and bite.
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