CARACAS: President Hugo Chávez, buffeted by falling oil prices that threaten to damage his efforts to establish a Socialist-inspired state, is quietly courting Western oil companies once again...So I guess it only takes about 18 months from nationalization* to the realization that nationalization always results in losses, capital flight, and production collapse. Of course, it won't stop the socialists from re-nationalizing as soon as the high price of oil makes the rebuilt property worth stealing again. The oil companies and miners would be idiots to even answer Chávez's phone calls. But they will.
With oil prices so low, the longstanding problems plaguing Petróleos de Venezuela, the national oil company that helps keep the country afloat, have become much harder to ignore...
Chávez's olive branch to Western oil companies comes after he nationalized their oil fields in 2007...
But Venezuela may have little choice but to form new ventures with foreign oil companies. Nationalizations in other sectors, like agriculture and steel manufacturing, are fueling capital flight, leaving Venezuela reliant on oil for about 93 percent of its export revenue in 2008, up from 69 percent in 1998 when Chávez was first elected.
UPDATE: it is not only despotic South American governments that refuse to learn anything from history. I mentioned before how FDR's Agriculture Adjustment Administration, in an attempt to keep farm prices from falling during the last Depression, slaughtered about 6 million piglets and dumped tons of milk down drains. In other words, their solution to widespread poverty was to purposely destroy wealth**.
It seems that bad ideas never die, they just demand a new administration:
Lawmakers are looking for ways to use the forthcoming stimulus bill to help dairy farmers, and the number one priority is to dampen milk supplies and prop up prices. Translation: reduce the nation's dairy herd.Variations on the theme have been tried several times, with - as the article notes - perfectly predictable yet unforeseen side effects, like crashing the price of beef and thereby creating a whole new class of farmers in need of a bailout.
Exactly how Congress will accomplish that remains uncertain...
Not surprisingly, even if they managed to enrich the dairy farmers without bankrupting the beef farmers or young families who buy a lot of milk, the solution won't last. Too much production means low prices, and low prices mean that
farmers have a harder time finding credit to buy equipment, expand their farms or otherwise improve their businesses***...Therefore government will reduce milk supplies so dairy farmers can expand their operations.
It's genius, I tell you.
(Hat tip: Vox)
* read: wholesale theft of property by government.
** further evidence that Keynesians don't just do the wrong thing in any given situation, they do exactly the wrong thing.
*** which is the perfect market solution to too much milk on the market, lacrimations of farmers and their captive politicians aside.