As the federal government works to control more aspects of American life, Venezuela's downfall provides a powerful lesson in the dangers of allowing D.C. to continue on their current course. The following excerpt was originally published in the Wall Street Journal.
Milton Friedman once joked that if you put the government in charge of the Sahara Desert in five years there would be a shortage of sand. He could have been talking about Venezuela and its oil wealth. But it is no joke.
On Monday Caracas missed interest payments due on two government bonds and one bond issued by the state-owned oil monopoly known by its Spanish initials PdVSA. Venezuela owed creditors $280 million, which it couldn’t manage even after a 30-day grace period.
Venezuela is broke, which takes some doing. For much of the second half of the 20th century, a gusher of oil exports made dollars abundant in Venezuela and the country imported the finest of everything. There were rough patches in the 1980s and 1990s, but by 2001 Venezuela was the richest country in South America.
Then in 2005 the socialist Hugo Chávez declared that the central bank had “excessive reserves.” He mandated that the executive take the excess from the bank without compensation. Today the central bank has at best $1 billion in reserves.
Falling oil prices are partly to blame, but the main problem is that chavismo has strangled entrepreneurship. Faced with expropriation, hyperinflation, price controls and rampant corruption, human and monetary capital has fled Venezuela.
If we want to avoid a similar downfall, we're going to have to reverse course, and the most effective way to ensure economic freedom for future generations is an Article V Convention of States. A Convention of States can propose constitutional amendments that enshrine limited government principles in our Constitution. That way, the American people can control this nation's economy, not the feds. Click here to learn more.
