President Hugo Chavez of Venezuela has been using large amounts of money generated by the huge surge in oil prices to fund both internal developments in his nation as well as to support other Latin American nations he seeks to bring into his coalition. However, Chavez announced over the weekend that oil prices were dropping almost one third and there was now need for the people of Venezuela to take on the burden of paying for his promises. On one hand, he has been subsidizing state run enterprises, many of which are losing money, on the other hand he needs the continued existence of private enterprise if the nation’s economy is to avoid a collapse. He advocates an economic model in which the government owns business enterprises, there is private enterprise and people at the local level are responsible for shared ownership in some business enterprises.
Chavez shouts to the world: “the new economic model should be based on social ownership of the land, on social ownership of industries, on social ownership of the means of production.” If Chavez follows this model, Venezuela will have an economic collapse, he needs the intelligence and drive of private enterprise, but his rhetoric is frightening them and many will leave along with their skills.
At this point in time, he is creating an economic model centered on oil even as nations of the world are working to curtail their reliance on oil. What happens if they succeed? Where then will be the people of Venezuela?