L'Ombre de l'Olivier

The Shadow of the Olive Tree

being the maunderings of an Englishman on the Côte d'Azur

21 January 2008 Blog Home : January 2008 : Permalink


Latin America's answer to Africa's Comrade Bob Mugabe and Asia's Dear Leader Kim, Venezuala's T'Hugo has decided to copy another piece of the successful Zimbabwean economic program. The BBC reports that Chavez threatens to seize farms and goes on to explain the background:

Venezuelan President Hugo Chavez has threatened to nationalise farms, in an effort to tackle food shortages.

Government controls keep food prices low in shops to help even the poorest Venezuelans feed themselves.

But some farmers prefer to sell their produce in neighbouring countries where prices are higher, leading to shortages of bread, milk, eggs and meat.

In his weekly television show, Mr Chavez said farmers doing this should have their farms "expropriated".

and then to show that he isn't just picking on farmers

On Saturday, Mr Chavez threatened to nationalise banks which did not give enough low-interest loans to farmers.

Banks are not allowed to charge farmers interest higher than 15% - even though inflation last year ran at 22.5%.

"The bank that fails to comply must be sanctioned, and I am not talking about a little fine," he said. "The bank that does not comply must be seized."

Amazingly the BBC manages to note that this might be a bad idea:

Critics say complying with government policy could drive some businesses into bankruptcy.

What the BBC doesn't say is that we can be 100% sure that this will not work. This is the sort of basic economics that we've known about since Adam Smitho, Ricardo, Malthus etc. in the 18th/19th century wrote about incentives, corn laws and so on and lest we think these folks were merely some theoretical economists pontificating from their ivory towers it has to be noted that every government that has attempted to buck these ideas has, to one degree or another, screwed up their economy.

Venezuela seems to be doing a truly magnificent job in demonstrating that even with the cushion of oil to export and record oil prices a government can still lower the living standards of its subjects if it tries hard.