This is what happens when the government controls too much:
Venezuela’s economy is in trouble despite the country’s huge oil reserves. Blackouts plague major cities. Its inflation rate is among the world’s highest. Private enterprise has been so hammered, the World Bank says, that Venezuela is forced to import almost everything it needs.
The situation is creating a serious challenge to President Hugo Chavez’s efforts to transform his country into a socialist state.
Take, for instance, the Three M metal works, tucked into an industrial zone in San Cristobal, the capital of Tachira state in western Venezuela.
On a recent day, big machinery stamps out sheet metal. For a moment, things seem normal in the plant. But more often than not these days, the contraptions are dead quiet — shut down.
“Just like us, everyone is suffering,” says manager Marta Medina. She reels off a list of problems the company faces: lack of spare parts, power shortages and falling orders.
The workforce is down to just eight, from more than 50 people employed a year ago.
It’s a common experience in Venezuela, where the economy contracted 3.3 percent in 2009 and is expected to shrink further this year. Few business owners see a rosy future, at least in the short term.
Jose Guerra, a former Central Bank economist, says state intervention in private businesses is hitting the economy hard.
“The government is nationalizing, expropriating, or confiscating,” he says. “They are not creating new wealth; this is wealth that was already created.”
If that weren’t bad enough, another factor is hobbling the economy — an unprecedented energy crisis.
Remember that Hugo Chavez is the hero of union leaders and university professors here in America, both groups being core constituencies of American Demcorats.