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  HOME | Opinion (Click here for more)

Venezuela National Assembly Puts Finishing Touches on the End of Private Property
Venezuela's National Assembly has begun to discuss openly, in the context of the new Labor Bill, the end of private property in Venezuela by redefining "the need to get rid of market forces as the supervising element in the economy." Noted Venezuela expert Miguel Octavio takes us through this latest law making its way through Venezuela's National Assembly.

By Miguel Octavio

The Venezuelan National Assembly has begun to discuss openly, in the context of the new Labor Bill, the end of private property in Venezuela. Remarkably, this contravenes what the voters expressed in saying “no” during the 2007 referendum which contained changes to the Venezuelan Constitution aimed at diluting the concept of private property rights in the country.

According to a document generated by the National Assembly, the challenge politically is how to put an end to private property as a way of “appropriating the added value of the productive sector.” The document also discusses the need to get rid of market forces as the supervising element in the economy and replace it by human beings who will take into account the common good when making decisions.

While this is not surprising and would seem to be a natural follow up to the policies the Government has been implementing, the surprise is that it is openly discussed in a document when polls indicate 75% of Venezuelans believe that the concept of private property should not be tampered with.

In the last few weeks, the Government has continued its attacks on private property and labor rights. Unions continue to demand discussion of contracts, while the Government delays pushing for pro-Chávez friendly unions that will not strain the finances of the companies owned by the Government.

The National Assembly even notes that there is a need to end the distinction between owners and workers, not only as a way of giving the workers more “social and not economic benefits”, but also as a way of limiting labor actions.

While on the one hand the Government attacks the capitalist system, on the other it wants to take advantage of it by issuing loads of new bonds to finance the State companies that have been mismanaged in the boom years and now need funds to pay labor debts and invest in technology and maintenance.

The truth is that even in figuring out how to eliminate private property rights, the revolution is a hodge-podge of concepts and strategies, with dozens of individuals “inventing” new controls and legislation daily, supposedly in order to share the wealth and make the system fairer. Of course, most of these actions do not follow analysis or studies that look at the economic consequences of the measures implemented.

Even Central Bank studies show that during the ten years of the Chávez administration, manufacturing has collapsed and only the service industry has expanded -- which reflects in part the high fiscal spending of the last few years. But it also is a consequence of misguided Government policy and the threat to private property rights scaring away new investments.

But such evidence is simply irrelevant to the authorities. President Chávez has by now surrounded himself with mostly radical ideologues who have their minds set about what they want to do, independent of the economic impact or implications of the policies. Unfortunately, there will be a lot of damage done to the country’s infrastructure, private and public, that will take decades to rebuild.

Remarkably, within this context, the Venezuelan financial system remains incredibly profitable, particularly for the larger institutions, as interest rates remain high and spreads are quite large even in the face of Government regulation. In fact, the Government itself retains huge deposits in the banking system which moves according to not only rates, but under the table payments, in the best capitalistic tradition.

Just this week, the Government also announced that the country will slowly move towards a model in which the private sector will not participate in importing foodstuffs, a scary ´prospect when you consider that the Government regularly has to send emergency missions abroad looking for a particular item which is in short supply due to the lack of planning.

In the end, the lack of efficiency and response time will complicate the financial picture at all of these state companies and only ever higher oil prices could possibly mask the effects of these misguided and improvised policies. We are already seeing this in PDVSA and the CVG companies, but somehow the revolution continues blindly celebrating non-existing triumphs in Government ownership of the productive structure of the country.

 

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