A tale of two countries: rich free-market Chile and starving Marxist Venezuela

“Look here upon this picture, and on this…” Consider the contrasting economic situations of two Latin American countries: Chile and Venezuela. Then consider the equally contrasting political systems that have produced such different outcomes and the lessons to be drawn from their respective experiences.

Chile is regarded as the free-market shop window of Latin America; Venezuela is the Marxist basket case unnecessarily repeating the discredited experiment that produced such iconic economies as East Germany and North Korea. Yet in Britain there is no shortage of useful idiots, mainly congregated in Jeremy Corbyn’s Labour Party, willing to proclaim that the future lies with the dustbin ideology of Marx and to salute Venezuela’s exercise in self-harm as an inspiration to others.

Chile, too, at one point (1970-73) fell into the hands of predatory Marxists led by Salvador Allende, a dictator whose militia – the quaintly named Groups of Personal Friends – under Cuban and North Korean trainers terrorised the country. Allende, contrary to Marxist myth, never commanded a parliamentary majority but ruled tyrannically by presidential decree. When a resolution against his rule, citing his suppression of more than 7,000 Supreme Court and other judicial decisions, was passed by the Chamber of Deputies by 81 votes to 47 and the armed forces overthrew Allende, this was misrepresented by Marxist propagandists as the ousting of a “democratic” president and parliamentary rule.

“The Miracle of Chile” was Milton Friedman’s term for that country’s post-Marxist economic recovery under reforms implemented on the advice of the “Chicago Boys”, American gurus of free-market capitalism. This recovery began under Augusto Pinochet. Property and businesses were denationalised, price controls abolished, imports liberalised, the financial market deregulated and taxes cut.

The miracle was not consistent. Pegging the peso to the US dollar turned out to have serious disadvantages and the pan-Latin American crisis of 1982 hit Chile hard. Nor was the transformation as purist as the Chicago school would have liked: copper, Chile’s greatest asset, was not privatised, though independent miners were allowed to operate outside state ownership.

Pinochet, unlike Allende, left office voluntarily after losing a referendum in 1988 and the economic recovery accelerated. At the fall of Allende inflation stood at 508 per cent; at the end of this year it is expected to be 2.6 per cent. Chile became the first Latin American country to gain admission to the Organization of Economic Cooperation and Development (OECD) in 2010 and is now the strongest Latin American economy.

Chile’s prospects currently look promising. Business confidence is high. Copper prices rose in August for the third consecutive month, to the highest level for more than two years, as the copper glut ends. A cabinet reshuffle is unlikely to affect economic policy and the likeliest presidential contender, currently leading in the polls, is a centre-right free marketeer.

That is the good news. Now for the bad news, the reverse side of the Latin American coin: the “Bolivarian” Republic of Venezuela. It took an even greater miracle than the Chilean recovery to convert oil-rich Venezuela into a global basket case, but the late Hugo Chavez rose to the challenge. “El Comandante” as he liked to be known, in the infantile traditions of revolutionary mythology, came to power in 1999 and pledged to impose “21st-century socialism” on Venezuela.

In the equally puerile vocabulary of Marxist posturing, the regime vowed to pursue “counter-hegemonic epistemologies against the capitalist state” (university snowflakes would love the jargon). In practical terms, this meant that Venezuela, sitting on top of 55,000 square kilometres of crude oil, in 2009 became the only country in the world to boast a Minister for Electricity Shortages. Nationalisation of utilities provoked a water shortage, but the Comandante responded to the crisis with revolutionary sternness, restricting time in the shower to three minutes and forbidding singing in the bath.

In Bolivarian Venezuela wealth creators became officially termed the “Squalid Ones”. The government and individual functionaries, however, contrived to squirrel away deposits totalling $14.8bn in Swiss bank accounts. Healthcare is at Third World levels, with many Venezuelans dying needlessly due to shortages of drugs and basic amenities.

When Chavez and his PSUV party came to power during the leftist surge in Latin America at the turn of the century, which free-market commentator Alvaro Vargas Llosa called “The return of the Latin American Idiot”, their declared objective was to transition “towards a communal state socialism, with the strategic objective of totally neutralising the law of value within the functioning of the economy”. They might as well have pursued the less ambitious goal of neutralising the law of gravity. Venezuela today is a basket case, a pit of misery – the classic outcome of Marxist governance.

The destruction of the oil industry was the revolutionaries’ most impressive achievement. Starved of investment, as income was squandered in handouts to the regime’s supporters, the industry infrastructure is now a rust-bucket shambles. In 2002 the government sacked many of the 20,000 oil industry technicians because they were deemed politically dissident. Many more departed of their own volition to work in other OPEC countries. The state oil company PDVSA is run by party hacks, telling the government what it wants to hear, i.e. fantasies such as a prediction in 2011 of a production rate of 4m barrels a day by 2015, when the actual figure turned out to be 2.65mbd.

The regime is kept in power by a politicised army, a 120,000-strong Marxist militia and shameless electoral fraud. Despite this, in December 2015 the opposition won a “supermajority” of 112 parliamentary seats out of 167 and would have removed Chavez’ successor Nicolas Maduro from power, but the government-controlled Supreme Court disqualified three opposition deputies. This illustrates the contrast with Chile, where the army backed parliament and overthrew Allende. Venezuela is a vision of what Chile would have been today, but for Pinochet.

The fraudulent new National Constitutional Assembly, designed to rewrite the constitution to hand Maduro and the PSUV permanent power, has de-legitimised the regime in the eyes of many foreign governments and further polarized the country. Venezuela is collapsing: inflation is at 813 per cent and forecast to reach 933 per cent by the end of 2017. Central Bank data has shown the money supply increased by 327 per cent last June, the 11^th consecutive triple digit increase. Riots in supermarkets over shortages of lavatory paper could escalate to broader issues and provoke civil war.

So, there we have a tale of two countries – and two ideologies. How many people does Marxism have to impoverish or kill before Utopian cretins draw the logical conclusion? We in Britain can hardly take a patronising attitude to Venezuela, when Her Majesty’s Loyal Opposition regards it as a vision of an idealised future.