TCS Daily

Why Is Bermuda Richer Than Venezuela?

By Carlos Ball - June 1, 2004 12:00 AM

Other things being equal, one would think that Venezuela -- a democratic country with immense oil and mineral riches, populated by descendants of the liberators of Latin America -- would out-prosper Bermuda -- an island one-third the size of the District of Columbia, two-thirds populated by the descendants of black slaves, with one paved airport, no university, and no natural resource more valuable than its beaches.

But other things are not equal. And as a result, the per capita income of Bermudians is $36,845, one of the highest in the world, and that of Venezuelans $3,326. There is no unemployment in Bermuda, whereas over half of the Venezuelan population is either unemployed or working in the underground economy.

How can this be? Never underestimate the immense capacity of Latin American politicians to assume ownership of major industries, spew out legislation limiting the freedom of the people, redistributing their property, and denying them equal treatment under the law, while bombarding the population with socialist demagoguery.

Venezuela's government, directly and through the businesses it owns, is the top employer, and the people are dictated to by a ponderous and corrupt bureaucracy.

In Bermuda, the only government enterprise is the postal service. There is no central bank. Bermudian dollars and U.S. dollars are interchangeable. For that reason, we have never heard of capital flight in Bermuda and economic analysts place it at about the same risk range of Singapore, where democracy is still in its infancy, but where people enjoy total economic freedom, meaning that the market functions freely and advances at a high speed in a globalized economy.

The value of the Venezuelan currency, the bolívar, was fixed at one gram of gold from 1879 to 1961. The "democratic" governments, starting in the 1960s, have destroyed the value of the bolívar, with exchange controls and a devaluation of 60,445% in the last 43 years. The average inflation in Venezuela is 20% vs. 2% in Bermuda. A low inflation rate is one of the best measures of government respect for property rights.

The rule of law that reigns in Bermuda fosters individual freedom; a non-interventionist régime, with minimum regulations, and a legislative assembly that doesn't forge and promulgate new laws all the time offers great incentives for savings, for investments and to create new job opportunities.

A referendum on independence was soundly defeated in Bermuda in 1965, and the 138 coral islands and islets remain an overseas territory of the United Kingdom, with internal self-government. Venezuela, meanwhile, is one of the oldest "democracies" in Latin America.

President Chávez is using every trick he has learned from his mentor Fidel Castro to avoid a recall referendum of his presidency. The latest trick is that his government controls the software company that will design electronic ballots and record votes for Venezuela's new election system. A decision was taken to scrap the country's 6-year-old voting machines, which is seen as a maneuver to manipulate votes. Since Chávez controls the National Assembly, the Supreme Court, the Electoral Council, and the oil income, democracy in Venezuela is a figment of Chávez's imagination.

In the real world, the so-called "wild capitalism" of Bermuda, with its high respect for property rights, is a lot less savage than the corrupt "Bolivarian" revolution of President Hugo Chávez, which now embraces almost every evil Simón Bolívar dedicated his life to fight.

Everyone who reads newspapers and watches the news on television has heard the names of Hugo Chávez, Lula and Néstor Kirchner, the socialist presidents of Venezuela, Brazil, and Argentina. I doubt if you recognize the name Alex Scott, the head of the government of Bermuda, or of Pascal Couchepin, the president of Switzerland. As far as governments are concerned, small is very beautiful.

Mr. Ball is editor of AIPE, a Spanish-language news organization based in Florida, an adjunct scholar with the Cato Institute, and frequent TCS contributor.


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