This Is How You Handle A Tyrant!

John Hinderaker at Power Line posted an article yesterday about Rex Tillerson, Donald Trump’s nominee for Secretary of State. I have to say that after reading the article, I like Rex Tillerson’s style. The story that follows is an example of quietly outsmarting someone who tries to take advantage of you.

The article quotes a Washington Post story that details what happened shortly after Tillerson became CEO of ExxonMobil. Hugo Chavez needed money and demanded more of the profits of the western oil companies in Venezuela. All of the companies agreed except ExxonMobil.

The Washington Post reports what happened next:

Chavez responded by nationalizing ExxonMobil’s considerable assets in the country, which the company valued at $10 billion. The losses were a big blow to Tillerson, who reportedly took the seizure as a personal affront.

Only Tillerson didn’t get mad, at least in public. He got even.

In the deep blue waters 120 miles off Guyana’s coast, the company scored a major oil discovery: as much as 1.4 billion barrels of high-quality crude. Tillerson told company shareholders the well, Liza-1, was the largest oil find anywhere in the world that year.

For tiny Guyana (population 800,000), the continent’s only English-speaking country and one of its poorest, it was a fortune-changing event, certain to mark a “before and after” in a country long isolated by language and geography.

The Stabroek block where ExxonMobil and its partners struck oil is off the coast of a patch of wild South American jungle known as the Essequibo territory. Venezuela and Guyana have haggled over it with oscillating levels of vehemence for more than 100 years. Amounting to two-thirds of Guyana’s surface area, it is, by any practical measure, a part of Guyana and populated by Guyanese people, albeit sparsely.

But Venezuelan claims on the land have long kept foreign investors out. In 2013, a research vessel exploring the area for U.S.-based Anadarko was intercepted by a Venezuelan warship, which temporarily detained the 36-member crew. It was a warning to other companies thinking of partnering with Guyana. Tillerson’s ExxonMobil went ahead anyway.

Maduro ordered military exercises along the border, appealed to the United Nations to intervene, and cast his country as a victim of “imperialist” aggression.

But Maduro was boxed in. Tillerson had taken him to school. And he was just getting warmed up. The company has moved quickly to drill more wells since then, racking up new discoveries in the area.

Think about it. Tillerson refused the wishes of a bully, elevated a more reasonable government in a South America country without violence, and made a profit. I like his style.

 

 

Propaganda Or Ignorance?

The dream of the political left is to have a successful socialistic state. The idea of everyone having everything they need and everyone being financially secure is wonderful. The only problem is that is doesn’t seem to work in real life. Europe is an example of government spending to provide government benefits, but does not seem to be prospering. A few years ago, the political left thought Venezuela was going to prove that socialism worked.

An article appeared in Salon Magazine with the title, “Hugo Chavez‘s economic miracle” with the subtitle, “The Venezuelan leader was often marginalized as a radical. But his brand of socialism achieved real economic gains.” Chavez’s early years were very successful. He served as President of Venezuela from 1999 to 2013. So what happened?

The article at Salon reports:

For instance, according to data compiled by the UK Guardian, Chavez’s first decade in office saw Venezuelan GDP more than double and both infant mortality and unemployment almost halved. Then there is a remarkable graph from the World Bank that shows that under Chavez’s brand of socialism, poverty in Venezuela plummeted (the Guardian reports that its “extreme poverty” rate fell from 23.4 percent in 1999 to 8.5 percent just a decade later). In all, that left the country with the third lowest poverty rate in Latin America. Additionally, as Weisbrot points out, “college enrollment has more than doubled, millions of people have access to health care for the first time and the number of people eligible for public pensions has quadrupled.”

 Part of Chavez’s success can be attributed to the high cost of oil during that time.

OilPricesHowever, the Venezuelan government began to take over private companies that were keeping the oil flowing. The government did not have the technical skill to continue to operative those companies successfully. (rightwinggranny) As the price of oil began to fall, there was no one to help increase the efficiency of oil production–the companies had been nationalized so there was no incentive. The free market was not allowed to work.

So where are they now. CBN News posted a story yesterday.

CBN News reported:

Venezuela, a country rich in natural resources, is the fifth largest exporter of oil in the world. Despite its assets, however, the economy is disintegrating.

Basic necessities are scarce, and inflation is skyrocketing, with some reports suggesting it could go as high as 700 percent.

“The people of Venezuela are suffering from violence, a world record of daily murders and random kidnappings,” European Union Foreign Policy Chief Federica Mogherini said.

“They are suffering permanent shortages of food, basic goods, most medicines and medical care,” she continued. “Water is scarce and no longer guarantees the former sanitary standards. Even electricity is subject to frequent rationing.”

Socialism doesn’t work–when there is no incentive, people do not innovate. Even though it is not perfect, the free market is the only economic system in the world proven to lift people out of poverty and give everyone the opportunity to achieve. That is the history of socialism and the history of free market economics. I don’t know if the people at Salon knew that history and were hoping that Venezuela would be different, or if they didn’t know that history. Either way, the article misled anyone who does not understand economics.

Does the ignorance of economic policies and their consequences explain the acceptance of Bernie Sanders as a Presidential candidate?

Socialism Doesn’t Work

In November of last year, the government of Venezuela seized control of two oil rigs owned by a unit of Houston-based Superior Energy Services. The company had shut down the rigs because the Venezuela oil monopoly was behind on payments.

On November 3, I posted an article about the takeover (rightwinggranny.com):

Nicolas Maduro, the successor to Hugo Chavez, has not taken over any industries during the six months he has been President of Venezuela. This is the first move he has made in that direction. When Hugo Chavez began taking over industries, one news analyst observed that it would be difficult for him to keep those industries running at their profit levels without the knowledge of the companies that owned them. The seizure of these two rigs, which are repair rigs, is an illustration of that point.

So where are we now? The Wall Street Journal reported yesterday that despite being an oil-rich nation, Venezuela has now introduced food rationing.

The article states:

Here at Maracaibo’s supermarkets, hot and cranky consumers who were waiting in line recently pointed to the irony of Venezuela, a country with $114 billion in oil sales last year, having to ration toilet paper.

“It sort of makes me want to laugh, but I can’t,” said Nayibi Pineda, a hotel housekeeper. “How is it possible we’ve gotten to this extreme?”

Shoppers said the time waiting in line can stretch to more than five hours, a delay they chalk up to malfunctioning fingerprinting machines.

“I’ve spent hours standing in line, suffering in the sun,” shrieked a tearful Luzmarina Vargas, clad in a bright pink robe typical of the area’s Wayuu Indians.

Salvador González, the Zulia state finance director who oversees machines, said officials were requiring machines to be installed at each checkout point in order to shorten lines. Supermarkets must bear the cost of the machines, around $150 each.“Our objective is to guarantee cheap food,” he said in an interview.

It isn’t just food that’s rationed here. Officials shut off water to homes for up to 108 hours a week, say residents, because of problems with the water delivery system.

In the birthplace of Venezuela’s oil industry—the first well was drilled here in 1914—the sale of gasoline is also tightly controlled. Scanners read bar codes that are required on car windshields to limit drivers from filling up their sedans more than twice a week. The measure is designed to curb the sale of Venezuela’s heavily subsidized gasoline—which costs less than a penny per gallon—in neighboring Colombia, where a gallon goes for $4.50.

America learned in the days of the Pilgrims that communal property was not a good idea. The Free Republic has an article entitled “How Private Property Saved the Pilgrims” on its website.

The article states:

Bradford’s history of the colony records the decision:

 At length, after much debate of things, the Governor (with the advice of the chiefest amongst them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves; in all other things to go in the general way as before. And so assigned to every family a parcel of land, according to the proportion of their number.
So the land they worked was converted into private property, which brought “very good success.” The colonists immediately became responsible for their own actions (and those of their immediate families), not for the actions of the whole community. Bradford also suggests in his history that more than land was privatized.

The system became self-policing. Knowing that the fruits of his labor would benefit his own family and dependents, the head of each household was given an incentive to work harder. He could know that his additional efforts would help specific people who depended on him. In short, the division of property established a proportion or “ratio” between act and consequence. Human action is deprived of rationality without it, and work will decline sharply as a result.

There are a number of basic principles that can be followed by a country that lead to prosperity. One of these principles is private property rights, another is free markets. When the government attempts to control the economy of a country, they find that they are in charge of an increasingly shrinking economy. Human nature says that people work the hardest when they know they will be rewarded for their efforts. If governments want financially successful countries, they need to remember that.

Skewing The Definition Of Charity

I haven’t written about the death of Hugo Chavez. My only comment is, “If this man cared so much about the poor, why was he worth millions when he died?” In contrast, how much was Mother Theresa worth when she died? Just an observation…

Today’s New York Post posted a story about how the death of Hugo Chavez will impact Citizens Energy Corp, the organization founded in 1979 by Joe Kennedy, Robert F. Kennedy‘s oldest son. The organization provides assistance to Massachusetts residents who need help paying for heating oil in the winter. The charity is able to do this by buying crude oil from Venezuela at below market price, selling it at the market price and using the difference to provide oil for people who need it. It really is a good idea and works well.

People should be paid fairly for their work, even when they work for a non-profit organization, but somehow I think we have forgotten that a non-profit organization is supposed to be supporting a cause of some sort and that’s where most of it’s money should go.

The article reports:

After Joe Kennedy left Congress, he returned to run Citizens Energy. That job paid him $86,311 in 2010. But the bulk of his income comes from his for-profit companies — Citizens Enterprises Corp. and Citizens Investments Ltd. — which together paid him $807,390 in salary and benefits. Kennedy’s wife, Elizabeth, raked in $346,764 from the nonprofit, where she is marketing director, and from the for-profit companies.

I would have left Congress too! Note that Elizabeth Kennedy was making more than $300,000 from the nonprofit company. I really think that is a little much.

The article concludes:

The oil started to flow in 2005 via two related nonprofits. Citizens Programs Corp., a charitable foundation, takes in the heating oil — $59 million worth in the fiscal year ending June 30, 2011. It immediately sells the supply to an undisclosed “prearranged buyer,” according to its tax returns. The proceeds are used to buy 100 gallons of heating oil for 200,000 needy households in 25 states and Washington, DC.

The distribution is done through Citizens Energy, which receives a $5 million management fee from Citizens Programs.

Citizens Programs uses some of its oil riches — $4 million in fiscal year 2011 — to pay for its ubiquitous advertising program. Running a call center and the “Joe-4-Oil” hot line costs $1.3 million.

A spokesman for the groups refused to answer questions about the operation.

Kennedy also funnels cash to his family’s own causes, including the Robert F. Kennedy Center in DC.

I think Joe Kennedy’s commitment to helping the poor stay warm in the winter is wonderful. The cost of living is high in Massachusetts, and a lot of people have been helped by Citizens Energy Corp. I just wonder about the details of how the money was spent.

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What Happens In Cuba Stays In Cuba

Scott Johnson at Power Line posted an article today reminding us of the movie “Weekend at Bernie’s.” If you remember the movie, it dealt with a pair of party animals throwing a party at their dead boss’ house and trying to convince their guests that their boss was still alive. That seems to be where we are in the story of Hugo Chavez.

Meanwhile, the U. K Daily Mail reported yesterday:

Sources at the hospital in Cuba where he is being treated this week told a Spanish newspaper  in an induced coma being kept alive by life support he was showing ‘very weak’ vital signs, adding that doctors could decide to switch off the machines ‘at any moment’.

Vice President Nicolas Maduro, whom Chavez last month designated as his heir apparent, said in an interview from Havana that Chavez had recognized the complexity of his post-operative condition.

Maduro said he was returning to Venezuela after several days visiting with Chavez and his relatives, which may quell rumors his trip to Cuba signaled the president was in his final days.

So what happens when Hugo Chavez dies? Ramon Aveledo, head of the opposition Democratic Unity coalition, has stated  if Chavez cannot make it back in time, he should hand power over to the president of Congress – who would temporarily run the country while elections are called.
Congress, controlled by Chavez allies, on Saturday elects a new president. Current Congress chief Diosdado Cabello, a close Chavez ally who could be reelected to head the legislature, has at times been considered a rival of Maduro (Vice President Nicolas Maduro, whom Chavez last month designated as his heir apparent). The two have taken great pains in recent weeks to publicly deny this.

It really does sound like “Weekend at Bernie’s.”

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