Hugo Chavez — VOICES for REASON

Do you know what Venezuelan strongman Hugo Chavez said the other day? He was speaking at a televised ceremony in his presidential palace. In the room were representatives of Chevron, the American oil giant, and other multinational oil companies. They had just signed on to invest billions of dollars to exploit oil in Venezuela’s Orinoco basin.

“Dear friends, partners, allies,” Chavez told the assembly, “you know you have all the guarantees of our Constitution and our laws.”

Really? And exactly how strong are those guarantees?

Chevron might want to ask ExxonMobil about that. Whatever Chevron’s reasons (or rationalizations) for going in, the record of Venezuela’s treatment of foreign companies speaks for itself. Less than three years ago, Venezuela nationalized massive oil facilities operated by Exxon and several other western companies. They all had signed agreements guaranteeing long-term concessions. Chavez just tore those up and tossed them away.

I call it theft by engraved invitation. I say “theft” because I reject the widespread view that a nation owns the natural resources within its borders and is therefore entitled to seize private assets; when a state like Venezuela seizes private assets, I think that should be regarded as a kind of theft. And I say “engraved invitation” in reference to the so-called contracts that western companies sign with eyes wide open, delivering their advanced technology—and the engineers and technicians who understand and operate it—to the custody of thuggish governments with long histories of seizing private assets whenever they please.

What would happen if companies like Chevron and ExxonMobil were to stand up and declare that nationalization is theft? What if they called upon their own government to issue similar condemnations? What if such companies ceased propping up the world’s failing socialist economies?

I’d like to see what would happen to Chavez and his ilk if they were deprived of victims.

Image: WikiMedia Commons

There can be no doubt what social system Hugo Chavez upholds. At his most recent inauguration, in 2007, the Venezuelan dictator pledged: “Socialism or death–I swear it!” Then he added: “I swear by Christ—the greatest socialist in history.” More recently, he called on President Obama to “ally with us on the path to socialism, it’s the only road.” Commenting on the G-20 summit, Chavez said: “Capitalism needs to go down. It has to end. And we must take a transitional road to a new model that we call socialism.” And at a recent summit meeting, he gave our President a book claiming that capitalism has impoverished Latin America.

What has been our president’s response to Chavez’s insolent declarations? I haven’t heard anything of substance. Have you? The disgraceful truth is that the leader of the most capitalist society in history is unequipped to contrast capitalism’s virtues to the vices of socialism.

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How much sympathy would you feel for the victim of a theft if he parked his car in a high crime area, left his keys in the ignition with the motor running, and walked away without looking back? The analogy is not exact, but it captures something important about oil companies and the recurring nationalization of their assets overseas.

Case in point: It seems that nineteen companies have shelled out $2 million each to buy data on petroleum-rich areas that may soon be opened up for exploration–in Venezuela.

Yes, Venezuela–the socialist nation that asserts ownership of the vast petroleum reserves known to lie in the Orinoco Belt, despite having no idea how to get the oil out of the ground.

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I’ve been writing about Hugo Chavez’s socialist campaign in Venezuela, arguing that nationalization is theft and asking why there’s no moral outrage when natural resources like petroleum and gold are seized by the state. One reason, I suggested, is the widespread belief that a country’s natural resources are owned by “the people” before anyone figures out how to extract them from the ground. It follows that whatever that country does with those resources in “the people’s” name is the rightful act of an owner, not the wrongful act of a thief.

I challenged this common belief, arguing that all moral and legal rights belong to those private companies that actually extract raw materials. Government’s job is only to protect those private owners’ property rights. Over at the Canadian Mining Journal, Marilyn Scales posted a thoughtful response, which stressed that mining companies know the risks they’re running in their foreign operations:

All mining companies accept certain risks when they find promising mineralization. One of them is the political stability of the regime in which their claims are located. Others involve the grade and size of a deposit, the ability to raise money in the markets, the length of time permitting takes, the availability of skilled labour, etc. Would-be producers acknowledge such risks, plan for them, and find ways to mitigate the worst outcomes.

In the end, however, the industry’s influence on political policy in foreign countries is very limited, perhaps nonexistent.

Yes, I am disgusted by the Venezuelan government’s recent actions. But I’m going to save my energy for situations on which my opinion might affect the outcome.

If any readers know of a way to change the Chavez’s political stance, please let us know.

Ms. Scales is absolutely right that ExxonMobil, ConocoPhillips, Crystallex, and all the others know they’re dealing with governments that have a history of rejecting property rights. So they can’t claim surprise when their operations are seized.

And she’s also right that nobody can change Chavez’s political stance. But that’s not the point of denouncing him and his policies as immoral. The point is to unite good, productive people in denying the moral high ground to the Chavezes and Putins of the world. Without a veneer of morality, dictators don’t rise to power in the first place.

The stockholders and managers of global petroleum and mining companies–the frontline victims of nationalization–should give serious thought to the practical value of denouncing socialism on moral grounds. They may discover that bad government is not one of those natural obstacles, like layers of rock, to which companies must resign themselves. They may discover it’s an evil that can be fought and defeated.