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January 22, 2008

Birds of a feather?

Perhaps coincidentally, I came across the following two news reports consecutively yesterday morning. First from this BBC article:

Venezuelan President Hugo Chavez has threatened to nationalise farms, in an effort to tackle food shortages.

Government controls keep food prices low in shops to help even the poorest Venezuelans feed themselves.

But some farmers prefer to sell their produce in neighbouring countries where prices are higher, leading to shortages of bread, milk, eggs and meat.

In his weekly television show, Mr Chavez said farmers doing this should have their farms "expropriated". [. . .]

On Saturday, Mr Chavez threatened to nationalise banks which did not give enough low-interest loans to farmers.

Banks are not allowed to charge farmers interest higher than 15% - even though inflation last year ran at 22.5%.

"The bank that fails to comply must be sanctioned, and I am not talking about a little fine," he said. "The bank that does not comply must be seized." [. . .]

Critics say complying with government policy could drive some businesses into bankruptcy.

Then, a little closer to home, came this NY Times article on Democratic Party Presidential candidate Hillary Clinton's views on government control of the economy:

Senator Hillary Rodham Clinton said that if she became president, the federal government would take a more active role in the economy to address what she called the excesses of the market and of the Bush administration.

. . . Mrs. Clinton put her emphasis on issues like inequality and the role of institutions like government, rather than market forces, in addressing them.

She said that economic excesses — including executive-pay packages she characterized as often “offensive” and “wrong” and a tax code that had become “so far out of whack” in favoring the wealthy — were holding down middle-class living standards. [. . .]

“If you go back and look at our history, we were most successful when we had that balance between an effective, vigorous government and a dynamic, appropriately regulated market,” Mrs. Clinton said. “And we have systematically diminished the role and the responsibility of our government, and we have watched our market become imbalanced.”

She added: “I want to get back to the appropriate balance of power between government and the market.” [. . .]

“We’ve done it in previous generations,” she said, alluding to large-scale public projects like the interstate highway system and the space program. “But we’ve got to have a plan.” [. . .]

“Inequality is growing,” Mrs. Clinton said. “The middle class is stalled. The American dream is premised on a growing economy where people are in a meritocracy and, if they’re willing to work hard, they will realize the fruits of their labor.”

So, on one hand, Chavez is demonstrating that, even with the economic benefit of having high-priced oil to export, a government can still lower the living standards of its citizens if it tries hard enough.

On the other hand, Hillary does not appear to recognize that her proposals are quite capable of accomplishing the same thing within the world's most dynamic economy.

Posted by Tom at January 22, 2008 12:10 AM

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