Enemy of My Enemy

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Fracking Ferment and Malthusian Myths

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The revolution in American oil and natural gas production brought about by fracking continues to roar. Recently, the price of oil dropped to about $65 per barrel, and natural gas is still hovering around record low prices. In fact, as an article in Bloomberg suggests, it is entirely possible that oil may sink to $40 in the near future.

All of this was unthinkable before the last couple of years, but thanks to the miracle of fracking, it is becoming reality. It is Schumpeterian creative destruction with a vengeance. But as the theory of creative destruction emphasizes, revolutionary innovations typically bring deep disruptions in their wakes. And as a flood of recent reports illustrate, fracking is indeed a disruptive revolution.

On one side are the thieves that want to cut back on production to drive the world price for oil back to its recent high levels.

Let’s start at the level of geopolitics. With barely controlled glee I note a recent Wall Street Journal report that our fracking energy renaissance is fracturing OPEC. You remember OPEC, the cartel that drove our economy to the wall with the “oil shock” of the 1970s. As oil prices continue to fall, a split has developed among OPEC states.

On one side are the thieves that want to cut back on production to drive the world price for oil back to its recent high levels. Venezuela is the leader of this fraction, and for good reason. Its particular brand of socialism has devastated its economy (as socialism is wont to do), and it has been living off its oil imports. Well, it can’t now, and as the aforementioned Bloomberg story notes, the arrogant Mini-Me of Marxist Cuba is running out of hard currency and may have to devalue its money, raise domestic gasoline prices, cut oil subsidies to other leftist states (such as Cuba), and cut imports of consumer goods. In this socialist hell, crime is exploding as quickly as inflation, and the consumer goods shortages are growing as quickly as the rioting is.

On the other side of the OPEC rift are countries such as Kuwait and Saudi Arabia, which oppose limits to production. These countries have indicated that they will respond to the drop in prices by exporting more oil. They appear to have several interlocking motives.

First, they are desperate to hold on to their worldwide market shares. The Saudis have been pushing existing customers — especially European ones — to commit to continued purchases of Saudi oil. Clearly, the prospect of the US loosening its ludicrous laws restricting the export of its own oil (which would put us in direct competition with the vile OPEC countries) is concentrating Saudi minds wonderfully. Moreover, Iraq has cut its prices to its existing European and Asian customers, desperately hoping to hold onto its global share.

Second, as a recent UK Telegraph piece explores, the Saudis clearly want to stall if not snuff out the fracking revolution. They want to force US shale production down from the current million barrels a day (bpd) to 500,000 bpd. As the article note, the last eight years of fracking have seen the US cut net its oil imports by 8.7 million bpd, the equivalent of what it was importing from Saudi Arabia and Nigeria, combined.

We now know for sure that we have virtually endless supplies of oil and natural gas right under our own soil, resources that can profitably be extracted at prices from $40 to $80 per barrel.

To what extent the Saudis and other OPEC countries can really contain America’s frolicking frackers is a matter for considerable conjecture. As another report points out, the International Energy Agency notes that only 4% of fracked oil production requires that the market hit $80 a barrel if the production is to be profitable. Most of the oil from the Bakken field (the most productive field currently being exploited in America) would still be profitable even if the price were $42 a barrel. At that price, yes, American frackers would feel pain, but nothing like the pain the Russia and the OPEC states would feel.

As Ambrose Evans-Pritchard recently pointed out, the Saudis are playing a dangerous game: “A deep slump in prices might equally heighten geostrategic turmoil across the broader Middle East and boomerang against the Gulf’s petro-sheikhdoms before it inflicts a knock-out blow on US rivals.” He quotes Harold Hamm, the main genius behind fracking, as saying the most productive shale field is still profitable at $28 per barrel. And as Evans-Pritchard adds, quoting Citigroup, the break-even cost for oil is $161 for Venezuela, $160 for Yemen, $132 for Algeria, $131 for Iran, $126 for Nigeria, $125 for Bahrain, $111 for Iraq, $105 for Russia, and $98 for Saudi Arabia.

Remember this: even if all American frackers had to halt production tomorrow (say, if oil dropped to $20 per barrel), the shale fields, along with the technology now well developed to exploit those reserves, would remain, however long the Saudis and everyone else tried to keep the price low. We now know for sure that we have virtually endless supplies of oil and natural gas right under our own soil, resources that can profitably be extracted, with even today’s technology, at prices from $40 to $80 per barrel. As the technology develops, that strike price will only go down. Any possible “knock-out blow” would knock us out only momentarily.

The third reason the Saudis and other Arab states are so desperate to keep their revenues at present levels — even if it means precipitously pumping down their known reserves — is that the autocrats in charge have been buying their citizens’ passivity with lavish welfare spending. If that ever gets cut, the citizens would probably rise up and cut the heads off the pompous princes and egotistic emirs who have so greedily gorged themselves on the wealth of their lands. As the Wall Street Journal notes, Saudi Arabia needs oil to be at $99 a barrel to balance its budget. So the current low price of oil is making the Saudis use assets from their reserves of foreign currency — which, while extensive, are not inexhaustible.

Another geopolitical change that fracking has introduced involves the Mexican oil industry. A piece in a recent WSJ notes that Mexico is foreseeing a rebirth of its own oil industry, with the aid of US technology and investment. The new president of Mexico, Enrique Peña Nieto, did something last year that no president before him had done, since Mexico nationalized its oil industry 70 years ago. Nieto got the Mexican Congress to pass a law (actually, to change the nation’s constitution) allowing private industry, including foreign industry, to help develop new production. Until now, Mexico has jealously guarded its industry, out of an excess of nationalism. While enjoying its national pride, it witnessed a decline in national revenues; but with the rise of fracking as a tool to get old wells producing again, it now anticipates a resurgence of a lucrative industry. The national oil company, Petroleos Mexicanos (Pemex), doesn’t have any expertise in fracking, but US and other countries surely do. As Joel Vazquez, CEO of DCM, a Mexican-Canadian drilling company, put it, “A boom is coming. Not a week goes by without an oil company contacting us asking about making a joint venture, or saying they’re interested in investing here.”

The UK, like Germany, is discovering that so-called Green energy is grotesquely costly.

Mexico will shortly start auctioning off leases for oil exploration. One hundred sixty-nine blocks of Mexican land will be opened for outside development, with about a third of them within 70 miles of Tampico. Most will require fracking and horizontal drilling. It looks as if BP and Royal Dutch Shell will go after the deep-water sites, while Canadian company Pacific Rubiales Energy and a new Mexican startup will focus on the shallow-water and mature onshore sites. Mexico projects an increase of half a million BPD over the next four years.

Another geopolitical impact of our fracking revolution on other countries is the subject of another recent Journal story. The surge in US oil and natural gas production — we now produce more oil and natural gas than do either Russia or Saudi Arabia — is making the British rethink their energy policy.

British billionaire James Ratcliffe, head of the petrochemical giant Ineos, is urging that the UK push fracking. To overcome NIMBY (not-in-my-backyard, anti-development sentiment), the resourceful Ratcliffe plans to offer a generous 4% royalty to property owners and a 2% royalty to municipalities that allow his company to drill fracking wells on their land.

The logic for the Brits — a most logical people, indeed — is clear. Fracking has lifted American production of liquid petroleum products over the past ten years by nearly 60% (from 7.3 million to 11.5 million BPD) and has lifted natural gas production by 30%. But the UK’s own production (of its North Sea fields by conventional drilling) has plummeted, resulting in rapidly growing petroleum imports.

The UK, like Germany, is discovering that so-called Green energy costs a lot of green; in fact, it is grotesquely costly. Because of a Green scheme, one of the UK’s biggest power plants (one that supplies 7% of the country’s power) is converting to wood pellets imported from the American South. But compared to natural gas, wood is immensely productive of carbon emissions. And the switch to wood is going to increase the electricity rate consumers have to pay by — 100%!

Of course, the prescient Ratcliffe is already facing opposition from the same fatuous fools — i.e., environmentalists — that our own energy heroes have had to face. But my guess is that the Brits, after seeing their power and tax bills rise, will see the light and finally favor fracking.

Doubtless, however, the biggest geopolitical impact of the American fracking revolution is on Russia. This is leading to what can best be termed “the Russian rage.” The Putin regime is clearly distraught about the fact that our oil and natural gas renaissance is eclipsing Russia as an energy superpower. A number of articles explore aspects of this phenomenon.

It is now obvious why Putin has seized Crimea and parts of eastern Ukraine: he wants to stop Ukrainians from becoming another major competitor in exporting natural gas to Europe.

One of them concerns the recent hubristic boast by the Russian oil tycoon and Putin puppet Leonid Fedun that OPEC’s decision to keep pumping oil and let the price drop will ensure the crash of the US shale industry. Fedun prophesied, “In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again.… The shale boom is on a par with the dot-com boom.”

Fedun’s claim was that when oil breaks $70 per barrel, most American fracking companies will become unprofitable and collapse, or will do so when their existing hedges (prior contracts to sell their crude oil at $90 per barrel) expire. But he made this boast when oil was still over $70 per barrel. We certainly don’t see any American fracking companies hitting the wall even with oil now in the mid-$60 range, and as indicated by the Evans-Pritchard article discussed earlier, other exporters believe most production from the Bakken field would remain profitable in the range of $40 or even lower.

Also amusing was an article in the Russian regime’s propaganda newspaper Russia Beyond the Headlines by Pat Szymczak. She writes about Ukraine, the country that the dictator Putin has invaded repeatedly and dismembered. Her argument is that Ukraine has tremendous shale gas reserves — the US Energy Information Administration estimates them at 42 trillion cubic feet, the third largest in Europe; and Ukraine’s Black Sea oil potential might exceed that of the North Sea. But these resources haven’t been developed, she claims — with evident crocodile tears! — because in the 20 years since it became independent, Ukraine has had only corrupt oligarchical regimes. And recently, when Shell Oil drilled some exploratory wells, fighting amazingly and mysteriously broke out nearby between the government and Russian separatists. This forced Shell to close out operations.

With smarmy alarm, Szymczak warns that, “Ukraine’s inability to get its act together and take advantage of its assets has created an opening likely to be filled by North America. The US has seemingly overnight moved from being an energy importer to a potentially massive exporter, at a time when Russia is struggling to maintain its position in the midst of a production decline in its prolific West Siberian fields.”

She adds that the US may be planning (as part of the sanctions) to divert to Europe some of its diesel exports currently bound for Latin America, and that the EU is apparently pushing the US to end its current ban on crude oil exports (about which more below). And one of Spain’s largest power companies has just signed a 20-year deal to import $5.6 billion in American liquefied natural gas.

Of course, this article is hilarious on many levels. It is uproariously hypocritical that this Russian propagandist should point to Ukraine as a corrupt oligarchy. What is Putin’s regime if not a corrupt oligarchy? And who does Szymczak think caused fighting to break out close enough to the Shell installation to force it to shut down, if not Putin himself? The Putin regime is funding and arming the ethnic Russian separatists. It is now obvious why Putin has seized Crimea and parts of eastern Ukraine: he wants to stop Ukrainians not only from achieving oil independence but also from becoming another major competitor in exporting natural gas to Europe.

Indeed, yet another recent piece — a major New York Times article on the wave of anti-fracking protests suddenly sweeping Eastern Europe — touches on the attempt by Russia to stop Western oil companies from fracking development in Eastern Europe. The article recounts what happened in Romania, when Chevron leased land last year to explore for natural gas. Immediately, a large group of violent “protestors” (read: Putinesque paramilitary provocateurs) showed up and started fighting with the local police. The provocateurs — obviously well-funded — were able to portray the mayor who allowed Chevron in as a traitor to rural Romanians and a sellout to American capitalism. The protestors temporarily made him flee.

Reflecting on the fact that his town never before had demonstrations, and that the moment Chevron showed up, so did a horde of vociferous demonstrators, the mayor concludes that they were a rent-a-mob paid by Russia’s state-controlled oil company, Gazprom. (The Romanian prime minister agrees with the mayor’s assessment). The protestors are, in other words, Putin’s posse, aimed at keeping Western energy companies out of Eastern Europe, which is the former Soviet Empire Putin is eager to reclaim.

What is Putin? He is a megalomaniacal narcissist who wants to be another Stalin.

The story notes that this view — that Russia’s oil arm is funding and fielding anti-fracking armies — is shared by Lithuanian authorities, who saw Chevron chased out of their country by organized violent protestors. The departing secretary-general of NATO, Anders Rasmussen, has voiced the same view: “Russia, as part of their sophisticated . . . disinformation operations, engaged actively with so-called nongovernmental organizations — environmental organizations working against shale gas — to maintain dependence on imported Russian gas.” The statement was echoed by Romanian industrialist Iulian Iancu, who sagely observed, “It is crucial for Russia to keep this energy dependence. It is playing a dirty game.” The rent-a-mob anti-fracking “protests” started three years ago in Bulgaria, which went so far as to ban fracking and cancel Chevron’s licenses.

Of course, both Gazprom and the so-called environmentalist groups heatedly deny that there is Putinesque collusion in all this. And Gazprom exec Alexander Medvedev adds the friendly warning to Europeans that they cannot possibly have a fracking revolution similar to America’s, because of the differences in geology and population density.

The NYT article’s author (Andrew Higgins) gives this view some credibility, pointing out that test wells have proven disappointing in Poland, Romania, and Ukraine. But one might reply that these were only a few wells, all drilled by Chevron, hardly the leader in the art of fracking. My advice to these countries is to ask Harold Hamm, the principal genius behind the fracking revolution, to come out and take a look.

What reasons are there to conclude that the Putin regime is behind these seemingly “spontaneous” demonstrations? Many, I would suggest. To start with, as the prescient Anca-Maria Cernea (leader of a Romanian nationalist group) noted, these “spontaneous” protests involved a coordination of groups that have no natural affinity or historical alliance, such as radical socialists and Eastern Orthodox clergy. Furthermore, the state-controlled Russian “news” media blanketed the airwaves with coverage of the protests over and over, along with warnings about ecological disasters caused by fracking.

Additional evidence is the obvious corporate interest of Gazprom. The Romans bade us ask, “Qui bono?” (“For whose benefit?”). If you want to ask why something is happening, ask in whose self-interest it lies. If Chevron (say) develops Eastern European shale fields, not only will Gazprom (and the Russian regime that controls it) lose out on that market. Eastern Europe could easily become the dominant supplier of energy to Western Europe, displacing Gazprom. Oh, and this could unify Eastern and Western Europe economically, putting the former out of reach by revanchist Russia.

Despite assurances from many of its backers that wind is so efficient that its subsidies would wither away after a few years, the subsidies are proving eternal.

Tied in with this point is another clue — a dog that isn’t barking. By this I mean that while Gazprom is itself exploring (through its Serbian subsidiary Nis) both Serbian and Romanian shale fields, there have been no demonstrations opposing Gazprom. The demonstrating dogs know who their master is. They can smell him even in the dark.

Further, as I noted in a piece not long ago, it’s old news that petro countries fund seemingly independent environmentalists to help stop America’s fracking development. The anti-fracking propaganda movie Promised Land was funded in large part by the United Arab Emirates. And Project Veritas investigative reporter James O’Keefe recently caught on tape a couple of Hollywood producers (Josh and Rebecca Tickell) and a couple of environmentalist activist actors saying they would be happy to work with Middle Eastern petro sheiks.

If American Green ideologues are willing to collaborate with those who want to keep their country energy dependent, why would anyone assume that Eastern European Green ideologues — many of whom were communists working to keep their countries part of the Soviet Empire before it collapsed — are unwilling to see their countries energy dependent? As Joan Rivers would say, “Oh, grow up!”

Finally, who controls Gazprom? Putin. What is Putin? He is a megalomaniacal narcissist who wants to be another Stalin. And what is Putin’s background? He was a career KGB agent who was trained in disinformation campaigns and in the suborning of foreign citizens to work against their own countries. Faced with the threat of the US — which he believed he had neutered because he cowed Obama and Hillary Clinton — becoming the dominant petro-power around the world, enabling the Eastern European countries to be energy independent from Russia, Putin, it is reasonable to assume, would use the tools he was trained to use.

And threatened the tyrant is. As political scientist Ian Bremmer put it recently, Putin has been “backed into a corner” by the drop in prices fracking has caused, “leaving him little option but to continue his aggression toward Ukraine and confrontation with the West.” Bremmer added, “I think that lower oil prices simply squeeze him harder, pushing him farther into a corner. He feels he has to fight as a consequence.”

The theme of Russian vulnerability is echoed by Allan von Mehren, chief analyst at Danske Banke, who said, “Russia in particular seems vulnerable [to dropping oil prices].” He notes that the big decline in oil prices in 1997–98 was a major cause of the subsequent Russian default. The reason for this vulnerability is obvious. Oil and natural gas constitute almost 70% of Russia’s exports, and fund half the country’s federal budget. The country has had to spend $90 billion of its foreign currency reserves to stop the utter collapse of the ruble, which has already dropped in value by over a third.

In sum, as fracking flourishes, look for Russia to become even more aggressive.

Turning from geopolitics to domestic policy, a recent WSJ article explains how the fracking revolution is forcing a long-needed change in America’s ban on oil exports.

Yes, believe it or not, since the Carter era of the 1970s we have restricted the export of our own domestic crude, under the delusion that by restricting the market that our domestic oil producers could sell to we would induce them — to drill for more. Despite calls from major oil companies such as Exxon Mobil for the government to end the moratorium, politicians have been reluctant to deal with populist fears that allowing our companies to sell into an international market will somehow drive up our own prices — as if there were just a fixed amount of oil in this country, and if we sold even a drop of it abroad, our own stash would be diminished.

As the fracking revolution has shown, there is no foreseeable limit to how much oil we can produce. But some oil companies are finding ways around the benighted ban. For example, BHP Billiton has made a deal to sell two thirds of a million barrels of “minimally processed” ultralight crude oil abroad without formal approval from the feds. It is selling the petroleum to the Swiss trading firm Vitol. This move — which is called “self-classification” — is likely to open the gate for many other companies to enter.

The amount of fossil fuel that lies beneath our feet is essentially infinite, and if it ever did reach a limit centuries from now, substitutions would be found.

The idea is clever. Under the decades-old law, the US allows the exporting of refined petroleum fuels (diesel and gasoline) but not of crude oil itself. However, some companies (such as Enterprise Product Partners and Pioneer Natural Resources) have prior governmental approval to export minimally processed oil (called “condensate”). BHP is classifying very lightly processed crude as “condensate,” exempt from the law. BHP is doing its light processing without explicit government approval, although the Commerce Department has been quiet about the practice.

It would be great if more companies followed BHP’s lead. That would encourage more drilling in the long term, and help stymie Saudi Arabia’s efforts to throttle our fracking industry, by making sure that our production can be sold abroad whenever we have an excess here. Of course, it would be even better if we just removed the ban on crude oil exports altogether.

As for the crony, corrupt Green energy industries (the so-called renewable energy producers, especially wind and solar), fracking is pushing them to the wall. Consider wind power. As another recent WSJ piece explains, American wind power has been subsidized for over two decades. Despite assurances from many of its backers that wind is so efficient that its subsidies would wither away after a few years — like the state in the old Soviet Union! — the subsidies are proving eternal. Wind power’s subsidy is a taxpayer gift to wind power producers. This subsidy handed these rentseekers over $7.3 billion since 2007 alone, and it will pay them an additional $2.4 billion next year.

With all subsidies accounted for, the Institute for Energy Research reckons that in 2010 (the last year for which conclusive data are available) wind power received $56.29 per kwh in subsidies, compared with only $3.14 for nuclear power and a meager $0.64 for natural-gas produced electric power. That is, wind power sucked up nearly 90 times the subsidies that natural gas power did.

In short, wind power has managed to shred billions of taxpayer dollars as quickly as it has shredded millions of birds. But this subsidy expired at the end of last year, and wind power producers are desperately trying to renew it before the Senate falls into Republican hands. It looks quite possible that in the face of plummeting oil and natural gas prices, the incoming Congress will end the subsidy once and for all. At which point, wind power will be — well, gone with the wind.

Also worth noting is a WSJ article reporting another possible target for fracking’s creative destruction. I refer to the (again) heavily taxpayer-subsidized electric vehicle (EV) industry. Its only real success has been Tesla, whose zippy, stylish cars have sold well compared to all other EVs. But as gasoline prices have dropped, so has Tesla’s stock. It’s down about 8% recently (after a dramatic rise during the last couple of years).

If oil prices remain low, or fall even further, the EV market will be threatened. And if the EPA manages to kill the coal industry, thus dramatically raising costs of electricity, the EV market will become moribund. It only exists now because of those enormous taxpayer subsidies, and it is unclear how much longer Congress will keep them.

As the Journal noted, we can already guess what the advocates of EVs and the other Green companies will start pushing for if gasoline prices continue to drop: massive new taxes on gasoline to force consumers to go Green. Elon Musk (CEO of Tesla) has already proposed taxing gasoline to make it $10 per gallon at the pump — not from self-interest, you understand, but only from a dispassionate concern for the ecosystem. He thus joins Barack Obama, Nancy Pelosi, ex-GM exec Bob Lutz, and others calling for steep gasoline taxes so that their preferred Green schemes (EVs, ethanol, biodiesel, etc.) will survive. We will see if the new Congress complies with their proposals. I rather doubt it will.

People aren’t bacteria. People consume resources, but they also produce them.

Lastly, however, I want to mention a non-material but very important effect of the fracking revolution: the creative destruction of a myth. The myth is the notion of “peak oil.” That phrase comes from the idea that any oil-producing area (be it a field, a state, or a country) will eventually reach a peak of production, then tail off, making something like a statistical bell curve.

The concept of peak oil has been around since the start of the oil era. Eminent energy analyst Daniel Yergin quotes the state geologist of Pennsylvania in 1885 as predicting that the amazing early production of petroleum was only a “temporary and vanishing phenomenon — one which young men will live to see come to its natural end.” But the notion was given a scientific patina by M. Kind Hubbard, a geologist for Shell Oil company, in an influential paper of 1956, predicting that American aggregate oil production would peak in the early 1970s, then decline forever after. It appeared that Hubbard’s theory was empirically confirmed when America’s oil production hit a peak of slightly less than 10 million barrels per day (bpd) in 1974, and started declining.

It is now clear that this theory is about to be refuted yet again. Fracking has pushed our production of oil past Saudi Arabia’s current level of 9.7 million bpd. And the International Energy Agency projects that we will overtake Russia’s production of 10.3 million bpd next year.

People still keep predicting peak oil — as Paul Krugman did in 2010, when he crowed that “peak oil has arrived.” With fracking, indeed, we will reach another peak; but very likely someone will come up with another technological improvement, maybe “smacking.” The amount of fossil fuel that lies beneath our feet is, almost surely, essentially infinite, and if it ever did reach a limit centuries from now, substitutions would be found — perhaps from the vast spread of methane hydrates that lie on the ocean floors.

The theory of peak oil is a myth, and it is just a special case of a bigger myth — Malthus’ myth. Malthus held that, sustained by resources, the members of any living species will incrp/prsquo;s federal budget. The country has had to spend $90 billion of its foreign currency reserves to stop the utter collapse of the ruble, which has already dropped in value by over a third.ldquo;minimally processedease their numbers exponentially, so that no matter how plentiful the resources, the species will soon exhaust it. So he held that while people may increase agricultural production, it will only increase arithmetically, while the population will increase exponentially, resulting sooner or later in mass starvation.

But as economist Julian Simon argued, people aren’t bacteria. People consume resources, but they also produce them. People have mouths, but they also have hands, minds, and hearts. They can find new ways of getting any resource, and new substitutions for it also, for time without end.




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How Much Ruin, Exactly?

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“There is a great deal of ruin in a nation.” It’s a remark Adam Smith made to a young colleague, John Sinclair, who worried that the cost of quelling the American rebels might lead to the downfall of Great Britain. It’s also a remark Liberty’s founder, Bill Bradford, quoted back to me on several occasions, whenever I was doom-and-glooming about how some country or another was on the road to ruin.

It’s a remark that comes to mind often still, whenever I’m agitated about governmental stupidity or malfeasance. Foolish wars in the Middle East have not ruined the US, and neither have decades of profligacy, proliferations of acronymic agencies, or a succession of villains in our highest offices. Communism did not ruin Russia, and has not ruined China; even Nazism could not permanently ruin Germany, though it did succeed in splitting it for a while.

It’s a familiar feedback loop: the more that’s seized, the worse the economy gets; the worse the economy gets, the more can be seized.

Nonetheless on occasion I read of some insane diktat in one or another corner of the globe and wonder just how far that corner’s leaders are prepared to stretch the maxim. Sovereign debt will likely not ruin Spain, or Portugal, or even Greece, though the EU seems intent on testing that out a while longer yet. Debt (again) and a shrinking population will probably not ruin Japan, but its prime minister Shinzo Abe, with his “Abenomics”—a reheated and desperate Keynesianism—is trying his hardest to make things worse. Unemployment and labor unrest will certainly not ruin France, but French president François Hollande, meanwhile, has yet to pass up a chance to kill off jobs and push companies abroad.

And then there’s Venezuela.

Venezuela, of course, was one of the great experiments: Hugo Chávez’s “Bolivarian Revolution” was supposed to prove the superiority of socialism (economic, of course; its moral superiority was assumed long ago), provided only that said socialism is backed up by seemingly inexhaustible national resources. Chávez, wasting no time after his election in 1998, set about “redistributing income” through land grabs and price fixes, threatening hesitant businesses with expropriation and then often following through on that threat. Under “Chavismo,” Venezuela assumed ownership of much of the nation’s construction, telecommunications, utilities, and food production industries, insisting at each step of the way that the takeovers were necessary to combat the predation of profiteering capitalists.

This sets up a feedback loop familiar to anyone who’s given even the slightest attention to modern government, where every gain (however temporary) is attributed to the extraordinary wisdom and foresight of the government agents, while every loss (all too often permanent) is attributed to the greed of speculators and other enemies of the people. Naturally, the more that’s seized, the worse the economy gets, but on the other hand, the worse the economy gets, the more can be seized. It’s brilliant, really—at least until the shortages of basic goods become too great for anyone but an ideologue to ignore.

Say this in Chávez’s favor: his policies—and those of his successor, Nicolás Maduro—have encouraged innovation in the Venezuelan people; for instance, consider the smartphone app created to help them find toilet paper, in perpetually short supply thanks to price controls. But, as with the more traditional example of broken windows, this innovation isn’t going toward the sorts of things that would convince anyone of Chavismo’s superiority. And as other nations, especially the United States, Canada, and Brazil, have become more energy-independent, Venezuela and President Maduro are finding fewer buyers for their one undoubted asset, while the state-owned oil industry has become ever more wasteful and unprofitable.

With revenues plummeting and prices held artificially low, inflation has, inevitably, kicked in. And here’s where the “ruin” starts coming in: Maduro’s response (other than continuing to threaten or outright seize businesses) was to devalue the currency, and impose controls on currency exchange. As account holders desperately tried to get their money out of the country ahead of impending hyperinflation, Maduro doubled down by devaluing further, attempting to cut off foreign travel. Finally, he enacted a “Law on Fair Prices,” prohibiting profit margins of over 30%—which is to say, no profit, for anyone running an import business—while at the same time enacting long jail terms to punish “hoarders,” or, less insanely, anyone refusing to sell at a loss.

The socialist policies have certainly encouraged innovation in the Venezuelan people—take for instance the smartphone app that helps them find toilet paper.

Now, I’m no expert on Venezuela. I’ve never been there, I don’t know anyone from there, and I can’t get more than the barest sense of any articles written in Latin American Spanish. But I can’t imagine any experience of the place that would convince me that those Venezuelans who protest Chavismo are just, in the words of professional useful idiot Oliver Stone, “sore losers”—though they certainly aren’t winners, either, not while they’re getting gunned down for demonstrating against the ongoing depredation and repression. And so long as the government is willing to arrest the opposition leader, or expel consular officials for so much as meeting with protesting students, things don’t seem likely to improve.

It’s impossible to know where it will all end, or whether it could be enough to ruin Venezuela. I suspect not: prior to Chávez, Venezuela was no more or less stable than any other Latin American nation since the time of Bolívar himself. Oddly enough, in this era of globalization, the idea of a nation may be more susceptible to ruin than individual nations themselves. Those that are nearest ruin are those that were highly unstable and unwanted to begin with: Somalia, Iraq, Yugoslavia—lines drawn on a map as a convenience to colonial invaders or international do-gooders (if you can tell those apart). Yet even those fictions hold up longer than one might expect—just look at Zimbabwe.

So yes, there is likely a great deal of ruin still in Venezuela. But it is a shame, and likely will be a tragedy, to see the depths its rulers are willing to plumb before they hit bottom.



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Latin America: Autumn of the Antipodes?

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In response to last November’s flooding, mudslides, and destruction of homes that left tens of thousands of Venezuelans destitute in makeshift shelters, Hugo Chávez went camping to show solidarity with his people. The luxurious tent was a gift from Libyan strongman Muammar Gaddafi. Piling insult atop bad grace, Chávez was photographed inspecting the devastation in a Cuban(!) military uniform. He is not one to dwell on the negative. Instead of looking grave, concerned, and statesmanlike, he pursed his lips and spread his cheeks in a smirk that bordered on the manic, sticking his head out the window of a Jeep like a dog without good sense. Not since Mexican President Antonio López de Santa Anna (he of the Alamo) buried his leg with full military honors has a Latin American leader been this much fun.

But for Chávez, the bigger crisis is his impending loss of power. Though the 2010 parliamentary elections netted his United Socialist Party 95 seats, the opposition, successfully united, won 64 seats, thus depriving Chávez of the two-thirds and three-fifths majorities required to pass organic and enabling legislation or fiddle further with the constitution. But never mind, Hugo has a plan.

He requested that the lame-duck legislators grant him unlimited powers to rule by decree for 18 months, limit legislative sessions to four days a month, turn control of all parliamentary commissions over to the executive branch, limit parliamentary speeches to 15 minutes per member, restrict broadcasts of assembly debates to only government channels, and penalize party-switching by legislators with the loss of their seats. The lame duck legislators dutifully complied. Vice President Elías Jaua says the powers are necessaryto pass laws dealing with vital services after the disaster and with such areas as infrastructure, land use, banking, defense and the “socio-economic system of the nation.” For good measure, the lame-duck Chavista legislature also passed a law barring non-governmental organizations such ashuman rights groupsfrom receiving US funding; another law terminating the autonomy of universities; more broadcasting and telecommunications controls; and the creation of “socialist communes” to bypass local governments.

Not since Santa Anna buried his leg with full military honors has a Latin American leader been this much fun.

Opposition newspaper editor Teodoro Petkoff called it a “Christmas ambush,” writing in his daily Tal Cual that Chavez is preparing totalitarian measures that amount to “a brutal attack . . . against democratic life.” Chavez’s end-run around the new National Assembly, which convened on January 5, was blatantly illegal, as such emergency powers can only be granted by the legislature to cover a period within the term of the legislature in office. Chávez demanded powers that extend well beyond the previous legislature’s term and effectively emasculate the new legislature, which would never have given him the two-thirds vote he would need, since 40% of its members are in opposition. Venezuelans have reacted with roadblocks and peaceful but energetic massive resistance. Security forces and government thugs have counter-reacted violently. Many people have been injured, not only physically, but economically as well. On New Year's Eve the Bolivar was halved in value, from 2.6 to the dollar to 4.3.

The most infamous precedent for this maneuver was the German Reichstag’s March 1933 enabling law granting Adolf Hitler the right to enact laws by decree for four years, making him dictator of Germany. No doubt the affair will end up in court — decided by Chávez-appointed judges. Still, it’s only a matter of time before the ship of state either turns or crashes.

By contrast, Sebastián Piñera, Chile’s new president, responded to the March 2010 earthquake with grace and alacrity; and six months later rallied the country behind the 33 miners trapped for 70 days in a deep mine cave-in. Unlike President Obama, in his autarkic response to the BP fiasco, Piñera requested and received international assistance. But Piñera is perhaps more notable as the poster boy of a subtle, newly evolving trend throughout Latin America, a trend only now being recognized: the “normalization” of its politics.

Normalization means the peaceful alternation of center-left with center-right governments, which is the status quo in most developed, liberal democracies. Piñera, a center-right candidate, followed two decades of center-left government.

By definition, normalization is dull, boring, and bereft of transformational ideals. But it is nonetheless great news, especially when compared to the radical swings of the past, when left-wing revolutions followed right-wing golpes de estado (or vice versa). The inevitable mayhem, war, and death were always followed by authoritarian regimes.

Chávez demanded powers that extend well beyond the previous legislature’s term and effectively emasculate the new legislature.

In Chile, the Marxist government of Salvador Allende, which had begun to forcibly expropriate property, was overthrown by a military coup after inflation exceeded 140%. To restore order, General Augusto Pinochet brutally imposed a right-wing authoritarian regime. To his credit, however, he laid the groundwork for the political and fiscal stability Chile now enjoys. He invited the so-called Chicago Boys — Milton Friedman and his acolytes — to design a stable and prosperous economic framework, and he relinquished power slowly and honestly by means of a new constitution and open plebiscites. In 1989, Pinochet lost an election to the Concertación, the center-left coalition that would hold power until Piñera’s election.

As Fernando Mires, a Chilean political science professor at the University of Oldenburg, Germany, has observed, “Everything that does not directly deal with war and death, is a game.” Politics is a game, and games require rules. Once war and death enter the scene, the game of politics is over. Latin America is now anteing up to the table. Though not always perfectly correlated, political stability goes hand-in-hand with some degree of fiscal and institutional stability — preconditions for people’s ability to lead healthy, productive lives.

Independence and Chaos

When Father Miguel Hidalgo’s Grito de Dolores declared Mexican independence from Spain on September 16, 1810, it began a protracted independence movement throughout the continent. Two days later, Chile, at the other end of Latin America, instituted de facto home rule. To be sure, Haiti had already defeated Napoleon in 1804 to gain independence, and Cuba would throw off Spanish rule with US help as late as 1898 (and, some would argue, didn’t actually achieve full independence until the Castro regime nullified the Platt Amendment, which gave the US Congress a veto power over foreign affairs). But the main course of events took place within two decades.

In 1821, Spain recognized Mexico’s independence. By 1823, after it had recognized the independence of much of the rest of Latin America (with Portugal ceding Brazil in 1822), US president James Monroe felt comfortable enough to declare the Americas a European-free zone, in spite of Spanish forces still holding out in what was to become Bolivia.

Latin American independence movements were products of the Enlightenment, influenced by the US Declaration of Independence and subsequent constitution — in the context of the times, left-wing revolutions. But, as Marxist commentators never fail to decry, the American revolutions were not “true,” social revolutions, but rather bourgeois realignments. The original Spanish conquest had left most of the basic indigenous structures of authority intact, replacing Moctezuma and Atahualpa with the throne of Madrid. Latin American independence movements recapitulated that strategy, replacing the Spanish aristocracy with homegrown landed gentry.

Meanwhile, a new model of revolution had emerged: the French Revolution, in which the ideals of the Enlightenment metastasized into a nightmare. The monarchy was decapitated; the ancien regime gone; an empire was founded. Traditional concepts of how societies ought to be organized had been put aside.

In Latin America, would-be liberators, criticized from both Right and Left, became disillusioned and turned away from democracy. Up north, Agustín de Iturbide, the Mexican heir of a wealthy Spanish father, switched sides to fight for Mexican independence and declared himself emperor of Mexico; Santa Anna, another side-switcher, overthrew him and established a republic, then a dictatorship. Santa Anna ended up ruling Mexico on 11 non-consecutive occasions over a period of 22 years. Asked about the loss of his republican ideals, he declared,

It is very true that I threw up my cap for liberty with great ardor, and perfect sincerity, but very soon found the folly of it. A hundred years to come my people will not be fit for liberty. They do not know what it is, unenlightened as they are, and under the influence of a Catholic clergy, a despotism is the proper government for them, but there is no reason why it should not be a wise and virtuous one.

This general sentiment came to be shared by most of Latin America’s liberators.

Meanwhile, Central America (including the Mexican state of Chiapas but excluding Panama), and known as the Captaincy General of Guatemala, seceded from Mexico, becoming “The Federal Republic of Central America” after a short-lived land grab by Mexican Emperor Iturbide who pictured his empire extending from British Columbia to the other Colombia. The Federal Republic didn’t last. In the 1830s Rafael Carrera, led a revolt that sundered it. By 1838, Carrera ruled Guatemala; in the 1860’s he briefly controlled El Salvador, Honduras, and Nicaragua as well, though they remained nominally independent.

Not one to be left behind, the Dominican Republic jumped on the bandwagon in 1821, but was quickly invaded by Haiti. Not until 1844 was the eastern half of Santo Domingo able to go its own way. Sandwiched between Cuba and Puerto Rico (both still held by Spain), in 1861 the Dominican Republic — in a move unique in all Latin America — requested recolonization, having found the post-independence chaos untenable. Spain gladly acquiesced. The US protested but, mired in its own civil war, was unable to enforce the Monroe Doctrine. In 1865, the Dominican Republic declared independence for a second time.

Sebastián Piñera, Chile’s new president, represents a subtle trend only now being recognized: the “normalization” of Latin American politics.

South America fared no better. Simon Bolívar, after a series of brilliant campaigns that criss-crossed the continent, created the unstable Gran Colombia, a state encompassing modern Colombia, Panama, Venezuela, and Ecuador, with himself as president — a model Hugo Chávez aspires to emulate. Bolívar then headed to Peru, to wrest power from Joséde San Martín, its liberator. Bolívar was declared dictator, but the Spanish still held what is now Bolivia. He finished San Martín’s job by liberating it and separating it from Peru. The new state was christened with his name. By 1828, Gran Colombia proved unmanageable, so Bolívar declared himself dictator, a move that ended in failure and more chaos.

Southern South America was liberated by San Maríin and Bernardo O’Higgins, with Chile and Argentina going their separate ways. In Chile, Bernardo O’Higgins turned from Supreme Director into dictator, was ousted, and was replaced by another dictator. A disgusted San Martín exiled himself to Europe, abandoning Argentina to a fate of civil war and strongmen. Uruguay and Paraguay carved themselves a niche — but only after Uruguay’s sovereignty had been contested by newly independent Brazil. In Paraguay, José Rodriguez de Francia, Consul of Paraguay (a title unique to Latin America) became in 1816 “El Supremo” for life. An admirer of the French revolution — and in particular of Rousseau and Robespierre — he imposed an extreme autarky, closing Paraguay’s borders to all trade and travel; abolishing all military ranks above captain, and insisting that he personally officiate at all weddings. He also ordered all dogs in the country to be shot.

Strongmen and Stability

The Latin American wars of independence were succeeded by aborted attempts at unity or secession; wars of conquest, honor, and spite; land grabs, big and little uprisings, civil wars; experiments in democracy, republicanism, federation, dictatorship, monarchy, anarchy, and rule by warlords or filibusters; and even reversion to colonialism; all with radical “left-right” swings — in a word, by every imaginable state of affairs, none long lasting. It all culminated in the era of the caudillo: a populist military strongman, usually eccentric, sentimental, long-ruling, and (roughly speaking) right-wing.

In his novel Autumn of the Patriarch, Colombian author (and confidante of Fidel Castro) Gabriel García Márquez offers a profile of a caudillo that has yet to be surpassed. The stream-of-consciousness, 270-page, 6-sentence prose “poem on the solitude of power” was based on Colombia’s Gustavo Rojas Pinilla (1953–57) and Venezuela’s Juan Vicente Gómez (1908–1935), with dashes of Franco and Stalin thrown in. But its indeterminate timelessness, stretching from who-knows-when to forever, also evokes Mexico’s Porfirio Díaz (1876–1911), Paraguay’s Alfredo Stroessner (1954–89), the Dominican Republic’s Rafael Trujillo (1930–61), and Nicaragua’s Anastasio Somoza (1936–56). It could also easily include Brazil’s Getulio Vargas (1930-54), Argentina’s Juan Perón (1946–55 and 1973–76), Haiti’s “Papa Doc” and “Baby Doc” Duvalier (1957–86), and, yes, the longest ruling military strongman of all — Fidel Castro (1959–201?).

The caudillo period had no specific time frame; it was rather a response to instability (or injustice, in the case of left-caudillos) that varied over time, country, and cultural conditions. Take Mexico for example. Besides the usual post-independence chaos, it also suffered invasions from the US and France. So, in 1846, Porfirio Díaz, an innkeeper’s son and sometime theology student, left his law studies to join the army — first, to fight the US, then to fight Santa Anna in one of the latter’s multiple bids for power, and finally to fight the French-imposed Emperor Maximilian.

Politics is a game, and games require rules. Once war and death enter the scene, the game of politics is over.

In the war against Maxmillian, Díaz rose to become division general under Benito Juárez’ leadership but retired after Mexican forces triumphed and Juárez assumed the presidency in 1868. It didn’t take long for Díaz to become disillusioned. One principle that had developed in Mexican politics and ironically — especially considering the nearly 35 years in power that Díaz would enjoy — became institutionalized, was one-term presidential term limits. So when Juárez announced for a second term in 1870, Díaz opposed him. Losing, he cried fraud and issued a pronunciamento, a formal declaration of insurrection and plan of action accompanied by the pomp and publicity emblematic of Mexican politics. After another pronunciamento and additional revolts much politicking, and a term in Congress, Díaz succeeded in ousting his adversaries. He was elected president in 1877. Having based his campaign on a platform of “no reelection," he reluctantly stepped aside after one term and turned over the presidency to an underling, whose incompetence and corruption ensured Díaz’s victory in the 1884 contest.

He set out to establish a pax Porfiriana by (as he termed it) eliminating divisive politics and focusing on administration. The former was achieved by stuffing the legislature, the courts, and high government offices with cronies; making all local jurisdictions answerable to him; instituting a “pan o palo” (bread or a beating) policy, enforced by strong military and police forces; artfully playing the various entrenched interests against each other; and stealing every election. Porfirio Díaz opened Mexico up to foreign investment, built roads and public works, stabilized the currency, and developed the country to such a degree that it was compared economically to Germany and France.

Classifying caudillos as Left or Right is not always easy. Caudillos who focused on economic development, fiscal stability, and monumental public works are generally perceived as right-wing, while those who improved education, fought church privilege, or imposed economic controls are perceived as left-wing. Nearly all were initially motivated by idealism, followed by disillusionment with democracy and addiction to power. Nearly all lined their pockets. Venezuela alone, between 1830 and 1899, experienced nearly 70 years of serial caudillo rule, which, some would argue, continued intermittently to the present.

In Ecuador, 35 right-wing years initiated by a caudillo were followed by 35 left-wing years initiated by another caudillo. General Gabriel García Moreno had saved the country from disintegration in 1859 and established a Conservative regime that wasn’t overthrown until 1895, when Eloy Alfaro led an anti-clerical coup. Alfaro secularized Ecuador, guaranteed freedom of speech, built schools and hospitals, and completed the Trans-Andean Railroad connecting the coast with the highlands. In 1911, his own party overthrew him and further liberalized the regime by opening up the economy. The Liberal Era lasted until 1925. Altogether, Alfaro initiated four coups — two succeeded, and one finally killed him — that made him the idol of Rafael Correa, Ecuador’s present, left-wing, president.

One right-wing caudillo, the Dominican Republic’s Rafael Trujillo (1930–61), was prematurely Green, restricting deforestation and establishing national parks and conservation areas in response to the ravages in next-door Haiti. His successor (after a five-year, chaotic interregnum that included a civil war and US Marines) was Joaquín Balaguer, an authoritarian who dominated Dominican politics until 2000 and continued Trujillo’s conservation policies.

Some caudillos combined elements from both Left and Right, coming up with ideologies that were internally inconsistent but extremely popular. Argentina’s Perón absorbed fascism, national socialism and falangism while stationed as a military observer in Italy, Germany, and Spain. Back in Argentina he allied himself with both the socialist and the syndicalist labor movements to create a power base. In 1943, as a colonel, he joined the coup against conservative president Ramon Castillo, who had been elected fraudulently.

In Paraguay, José Rodriguez de Francia closed the borders to all trade and travel; abolished all military ranks above captain, and insisted that he personallyofficiate at all weddings. He also ordered all dogs in the country to be shot.

When Perón announced his candidacy for the 1945 presidential elections as the Labor Party candidate, the centrist Allied Civic Union, the Socialist Party, the Communist Party, and the conservative National Autonomous Party all united against him — to no effect. As president, his stated goals were social justice and economic independence; in fact, he greatly expanded social programs, gave women the vote, created the largest unionized labor force in Latin America, and went on a spending spree that nearly bankrupted Argentina (it included modernizing the armed forces, paying off most of the nation’s debt, and making Christmas bonuses mandatory). Perón also nationalized the central bank, railways, shipping, universities, utilities, and the wholesale grain market. By 1951, the peso had lost 70% of its purchasing power, and inflation had reached 50%.

During the Cold War, Perón refused to pick either capitalism or communism, instituting instead his “third way," an attempt to ally Argentina with both the United States and the Soviet Union. Today, Peronism remains a vital force in Argentina, with President Cristina Fernández at its helm.

Sandino Lives!

Not that caudillismo needed any intellectual justification, but the social Darwinism that developed during the late 19th century helped to rationalize many of the abuses committed under its aegis. Then, fast on its heels and in rebuttal to it, Marxism burst on the scene, invigorating the Left by advocating the forcible redistribution of wealth. The Left-Right divide widened, and conflict sharpened.

In 1910, old and ambivalent about retiring, Porfirio Díaz decided to run once more for president of Mexico. When he realized that his opponent, Francisco Madero, was set to win, he jailed him on election day and declared himself the winner by a landslide. But Madero escaped and, from San Antonio, Texas, issued his Plan de San Luis Potosí, a pronunciamento promising land reform. It ignited the Mexican Revolution.

The Zapatista Army of National Liberation now sells t-shirts and trinkets to finance its anti-capitalist jihad.

Though not specifically Marxist, the Mexican Revolution has been interpreted as the precursor to the Russian Revolution. Its ideologies — especially “Zapatismo” — are part of the progressive, Fabian, and socialist zeitgeist of the time. In fact, however, the Mexican Revolution — a many-sided civil war that lasted ten years — was so indigenously Mexican as to elude historians’ broader interpretive models. Yet it was the first effective and long-lasting leftist Latin American movement. Its successors are Cuban communism, liberation theology, Bolivarian socialism, and many others. Out of it coalesced Mexico’s Institutional Revolutionary Party (PRI), heir to a coalition of forces and ideologies that were, at last, fed up with fighting. The PRI, a member of the Socialist International, instituted de facto one-party rule, and controlled Mexico for over 70 years.

Other radical leftist revolutionary movements followed — some sooner, some later, not all successful — operating either by force or through the ballot. The earliest (1927) was that of the Sandinistas in Nicaragua. Augusto César Sandino identified closely with the Mexican Revolution. Although he was not a Marxist, his movement adopted that ideology after his death. Five years later, in next-door El Salvador, the Farabundo Martí National Liberation Front (Martí was a Communist Party member and former Sandinista) rose in revolt. Guatemala followed in 1944 with the Jacobo Arbenz coup, then Cuba in 1952 with Castro’s insurrection.

With Castro’s accession to power in 1959, the outbreak of Marxist revolts in Latin America intensified. During the 1960s the Tupamaros rose in Uruguay. In Peru, various groups, including the Shining Path, revolted. The FARC, ELN, and M-19 followed in Colombia. In 1967, Fidel’s own Che Guevara met his death while trying to organize a premature revolution in Bolivia. Then, in 1970, Chileans voted in — by only 36%, a plurality in a three-way race — the first elected Marxist regime in the Americas.

Venezuela was next. Hugo Chávez launched his first, unsuccessful coup in 1992. After a stint in jail he was pardoned, ran for president in 1998, and won.

In Bolivia, Evo Morales, a former trade union leader, and his Movement Toward Socialism won the 2005 elections with a majority.

Latin American Marxism, unlike the European sort, has little to do with the industrial revolution or conditions of the working class. Not only is it currently more tolerant of religious belief; it is more relaxed about ideology and — again, currently — lacks gulags and killing fields. It is more about land distribution and “Social Justice” — a term whose words, innocuous and benign in themselves, don bandoliers and carbines and become fighting words when capitalized.

Social Justice is the concept of creating a society based on the principles of equality, human rights, and a “living wage” through progressive taxation, income and property redistribution, and force; and of manufacturing equality of outcome even in cases where incidental inequalities appear in a procedurally just system.

The term and modern concept of "social justice" were created by a Jesuit in 1840 and further elaborated by moral theologians. In 1971 Peruvian priest Gustavo Gutiérrez justified the use of force in achieving Social Justice when he made it a cornerstone of his liberation theology. As a strictly secular concept, Social Justice was adopted and promulgated by philosopher John Rawls.

The Other Path

Mario Vargas Llosa is a Peruvian writer and 2010 Nobel laureate — pointedly awarded the prize for his literary oeuvre, as opposed to his political writings, but this from a committee that awarded Barack Obama a Peace Prize for nothing more than political penumbras and emanations. Vargas Llosa started as a man of the Left. His hegira from admirer of Fidel Castro to radical neoliberal candidate for president of Peru in 1990 is a metaphor for Latin America’s own swing of the pendulum today.

In 1971 he condemned the Castro regime. Five years later, he punched García Márquez (patriarch of Marxist apologists) in the eye. Their rupture has never been fully healed (or explained), but it is attributed by some to diverging political differences. In 1989, when Peruvian economist Hernando de Soto published his libertarian classic, The Other Path (an ironic allusion to the Shining Path guerrilla movement), Vargas Llosa wrote its stirring introduction. He and de Soto advocated individual private property rights as a solution to property claims by the Latin American poor and Indians. Both the fuzzy squatters’ rights of the urban poor and the traditional subsistence-area claims of indigenous communities were being — literally — bulldozed by corrupt or insensitive governments; the two authors believed that the individual occupiers of the land should own it as their private property. This proposed solution did not sit well with the Social Justice crowd. To them, communal rights trumped individual rights.

But it struck a chord with the poor and dispossessed. So Vargas Llosa declared for the presidency in 1990 on a radical libertarian reform platform (the Liberty Movement). In Peru, the Shining Path guerrillas were terrorizing the country and the economy was a disaster, having been run into the ground by left-wing populist Alan García, who was now running for reelection. In the outside world, Soviet communism and its outliers were disintegrating, both institutionally and ideologically. Between García and Vargas Llosa in the three-way race stood Alberto Fujimori, the center-right candidate. Vargas Llosa took the first round with 34%, nearly the same majority that had put Allende into office in next-door Chile. But he lost the runoff, handing Peru over to the authoritarianism (as well as the reforms) of the Fujimori regime.

Latin American politics culminated in the era of the caudillo: a populist military strongman, usually eccentric, sentimental, long-ruling, and (roughly speaking) right-wing.

Without skipping a beat and less than a month later, Vargas Llosa attended a conference in Mexico City entitled "The 20th Century: The Experience of Freedom." This conference focused on the collapse of communist rule in central and eastern Europe. It was broadcast on Mexican television and reached most of Latin America. There Vargas Llosa condemned the Mexican system of power, the 61-year rule of the Institutional Revolutionary Party, and coined “the phrase that circled the globe”: "Mexico is the perfect dictatorship.” “The perfect dictatorship,” he said, “is not communism, not the USSR, not Fidel Castro; the perfect dictatorship is Mexico. Because it is a camouflaged dictatorship."

But the “perfect dictatorship” was already loosening its grip. Recent PRI presidents had been well-degreed in economics and public administration, as opposed to politics and law. They had already moved Mexico rightward, to the center-left, by privatizing some industries and liberalizing the economy — especially by joining NAFTA. By the 1994 election, the PRI had opened up the electoral system to outside challengers: the center-right National Action Party (PAN) and the strong-left Party of the Democratic Republic (PRD). In the 2000 elections the PRI ceded power to the PAN’s Vicente Fox, though not entirely.

The popular but hapless Fox ended Mexico’s last Marxist uprising, Subcomandante Marcos’ Zapatista Army of National Liberation (they now sell t-shirts and trinkets to finance their anti-capitalist jihad). But he was unable to further the rest of his reform agenda through the PRI-controlled legislature. So Mexico reelected the PAN in 2006. Today, in a move emblematic of Latin America’s change to European-style, alternating center-left/center-right administrations, the PAN and the PRD are exploring avenues of cooperation to pass legislation through the PRI-controlled Congress.

But Vargas Llosa wasn’t through yet. During one of Hugo Chávez’s marathon television tirades in 2009, he challenged Vargas Llosa to a debate on how best to promote Social Justice. When Vargas Llosa accepted, Chavez — in his most humiliating public move to date — declined.

Ho-hum

Peru’s increasingly discredited Fujimori resigned because of corruption, a questionable third presidential term, and the exercise of disproportionate force, once too often. He was followed by Alejandro Toledo, an economist so centrist and dull that he bored his people into not reelecting him. By the 2006 elections, Peru’s centrist politics were entrenched in the most ironic of ways. Alan García, the disastrous, populist left-wing ex-president, ran on a center-right, neoliberal platform — and won. And against all odds, he kept his word. In 2009 Peruvian economic growth was the third highest in the world, after China and India. In 2010 it remained in double figures. The 2011 elections won’t include García, as he can’t succeed himself. They are expected to be contested by the technocratic Toledo and the center-right Keiko Fujimori, Alberto’s daughter and leader of the Fujimorista Party.

It’s much the same — with few exceptions — in the rest of Latin America. Brazil’s widly popular, fiscally prudent, and social justice-sensitive center-left Lula da Silva administration was reelected, this time led by Dilma Rouseff, Brazil’s first female president. She has promised more of the same. In next-door Paraguay, the exceptionally long-ruling (61 years) Colorado Party ceded power in 2008 to the country’s second-ever left-wing president, Fernando Lugo, an ex-bishop and proponent of liberation theology. But Lugo has moved to the center, distancing himself from Chávez and tempering his social and fiscal promises by seeking broad consensus. GDP growth in 2010 was 8.6%.

In 2009 Uruguay elected as president José Mujica, a former Tupamaro guerrilla. But Mujica, described by some as an “anti-politician,” has moved radically to the ceemnter. The tie-eschewing, VW Beetle-driving president has promised to cut Uruguay’s bloated public administration dramatically. He identifies with Brazil’s Lula and Chile’s Bachelet rather than Bolivia’s Morales or Venezuela’s Chávez. After 6% growth in 2010, Uruguay is expected to level at 4.4% in 2011.

With the unexpected death of her husband and her disastrous left-wing populist policies (inflation is close to 30%), Argentina’s Fernández is not expected to win reelection in 2011. Reading the writing on the wall, she (unlike Chávez) is tiptoeing toward the center.

In Colombia, the feared authoritarian tendencies of Alvaro Uribe turned out to be wildly exaggerated; and his successor, Juan Manuel Santos, has moved even closer to the center. The two — Santos was Minister of Defense under Uribe — brought the FARC insurgency to its knees, reducing the guerrillas to little more than extortionists and drug dealers. With Colombia’s new-found safety, high growth, and low inflation, its tourist industry is booming.

El Salvador, long the archetype of extreme polarization between the now-peaceful FMLN Marxist revolutionaries and the ex-paramilitary rightwing Arenas coalition, elected Mauricio Funes in 2009. Funes, the FMLN’s surprise candidate, ran on a centrist platform and has stuck to it — throwing the Arenas coalition into disarray. He enjoys a 79% approval rating, which makes him Latin America’s most popular leader. Neighboring Honduras, after deposing a power-grabbing Chávez clone in 2009, elected the center-right Pepe Lobo, who promised reconciliation and stability. Even Guatemala shows signs of progress. The 2007 elections inducted Álvaro Colom, the first center-left president in 53 years.

Latin American Marxism, unlike the European sort, has little to do with the industrial revolution or conditions of the working class.

Costa Rica, long Latin America’s exemplar of democracy and moderation, is becoming ever more so. The 2009 elections turned Laura Chinchilla into Costa Rica’s first female president (one even more stunningly beautiful than Argentina’s Fernández). In spite of being socially conservative, she continues Óscar Arias’ vaguely center-left policies. With the traditional center-right and center-left parties always closely vying for power, the libertarian Partido Movimiento Libertario (PML), which retains a 20% popular vote base (and 10% of the legislature), has emerged as the policy power broker in the Congress.

Latin American politics’ move to the center is even mirrored in its ancillaries. The Cuban American National Foundation, largest of the Cuban diaspora’s political representatives, abjured the use of force after the death of its founder, Mas Canosa, and advocates a more open US policy toward Cuba.

Not all is good news. Though Cuba is showing microscopic hints of change (as reported in Liberty’s December issue), Chávez’ power play in Venezuela after his electoral defeat is yet to play out, and Bolivia’s Evo Morales holds steady after a barely avoided civil war, Nicaragua’s anti-capitalist tyrant Daniel Ortega is bound and determined to hold onto power come what may. But their days, too, are numbered.




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