Francisco Toro

Nov
17
2010
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El Encantado Humboldt

By Francisco Toro

There’s a particular perversity to the story of El Encantado Humboldt – the large, nearly finished housing development in Caracas chavismo decided to expropriate last week. More than 1,500 apartment owners now find themselves in legal limbo and very much at risk of losing their just-purchased homes as the government deliberates on whether other families “need them more”. At a mediation session earlier this week called by the consumer protection agency Indepabis to address the dispute, only pro-expropriations community groups were allowed to participate, with the owners’ association physically barred from the event.

Once again, the government finds itself in the odd position of acting forcefully to protect people of outrages that the alleged victims do not recognize. For instance, pro-government community groups allege that the buildings were not built to code, a pretext the owners would have contested had they been included in the discussion. And chavista officials alleged that the developer acted abusively and coercively in dealing with buyers – another allegation roundly refuted by the vast majority of Encantado Humboldt buyers. In effect, the government’s claim to the mantle of defender of the downtrodden is undermined by nothing so much as the supposedly downtrodden’s actual views. What El Encantado Humboldt’s owners do know is that the measure to expropriate the development has slammed the breaks on all mortgage negotiations surrounding the development, and made it impossible to sign final ownership papers.

The expropriation of El Encantado Humboldt is perverse on a number of levels. For years, as Chávez rhetoric became increasingly radicalized, the government tried to assuage middle class fears saying they were only interested in Big Capital – pointing at the commanding heights of the economy (as though the oil industry hadn’t already been nationalized for a generation when they took over.)

Concerns that a process that starts out targeting big capital can very easily degenerate into a generalized assault on all private property were routinely dismissed as fear-mongering or denounced as “part of an orchestrated campaign to discredit the revolutionary government.” Only reactionary cranks could believe Chávez would want to take your apartment, right?

Turns out in revolutionary times, yesterday’s shrill paranoid fears have a way of turning into tomorrow’s headline with unsettling frequency. While the ownership structure in the housing development is not entirely clear, what this sordid little episode makes clear is that the government does very much intend to extend its reach into the housing sector. Within a year or two, it’s easy to see this kind of thing becoming routine, just the way things are now. And the one-time reassurance about how the government would never ever in a zillion years consider this sort of thing? Bien gracias.

What’s most alarming about this case, though, is the way it showcases, yet again, the government’s tin-ear for the role of incentives in policy-making.

It’s easy enough to see the chilling effect this kind of measure is likely to have on investment in the construction sector: with this precedent in the books, who’s going to want to risk (or lend) a substantial sum for private housing construction? Nobody, obviously.

The government doesn’t seem to grasp that Pottery Barn rules apply: You Break It, You Own It. Having sapped private enterprise of the confidence it takes to invest in the housing sector, the only entity left to step into the breach is the government. But, for the Nth time, the government’s plan seems to be to undermine a private solution to a problem without accepting any responsibility for adopting a public one in its place.

 
Nov
1
2010
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The Workers vs. Their Paradise

In Venezuela, the only problem with the Workers’ Paradise is that the workers don’t want it.

By Francisco Toro

CaracasChronicles.com

In the wake of President Chávez’s attempt to nationalize the Venezuelan operations of U.S. bottle-maker Owens-Illinois, the firms’ Venezuelan workers spent most of the week protesting outside its factories in Valera and Valencia.

Amid the ferment of Venezuela’s self-described Socialist Revolution, you could be excused for assuming they were out waving the Red Flag, protesting the pitiless exploitation of the working class at the hands of the plant’s rapacious gringo capitalist paymasters. After all, government spokesmen spent all week trumpeting the takeover as a way of freeing O-I’s workers from the yolk capitalist exploitation and introduce them into the joys of Worker Power under socialist state-ownership of the plant.

The truth, in fact, was rather different, with hundreds of O-I employees mobilized to protest the State takeover of their plants, shouting “¡No a la Expropriación!”

Already protected by a hard-fought for collective bargaining agreement with the firm, O-I’s Venezuelan unions know full well that nationalization only imperils their working conditions. They know all about Mercal, the state-owned food retailing chain, where Collective Bargaining negotiations have been stalled for over three years and workers, in effect, have been forced to work without any contractual rights. They know all about VenIran, the Venezuelan-Iranian tractor manufacturer famous for firing workers summarily on suspicions of trying to organize an independent union. They know, in other words, that Collective Barganing agreements are enforceable if your employer is a private firm, but dead letter when it is a public one.

The dynamics here are easy to grasp. Under private ownership, any complaint the unions take to State Labor Inspectorates tend to be heard sympathetically. The socialist party appointed inspectors are, after all, mostly convinced of the horrors of capitalism and minded to be tough on private owners, demanding that Collective Barganing agreements and labor laws be adhered to absolutely to the letter.

When a firm passes into state ownership, however, that dynamic is reversed. A worker who protests an abuse by the “workers’ government” is seen as, at the very least, a walking contradiction and, more usually, as a dangerous, unreliable element: possibly a saboteur, certainly a counter-revolutionary. And so, the same complaint that will mobilize the state to your defense if you make it against a private employer can easily get you placed on a Black List of counterrevolutionary fifth-columns if you make it against a nationalized firm.

Is it any wonder, then, that Venezuelan workers have come to see nationalization as an imminent threat to their living and working conditions?

And so it is that, instead of a rapturous welcome from the hitherto oppressed proletarian masses, Chávez’s decision to nationalize O-I has been followed by a bizarre war of words between Owens-Illinois’ Venezuelan workers and the area’s pro-government Congressman, Saul Ortega, who was sent to patiently explain to the workers how outrageous their exploitation has been, while the workers themselves retort with a long list of fringe benefits in their contract – the workers’ cafeteria, the generous overtime pay, the training programs, etc. – and protest that all of these would be imperiled under state ownership.

Perhaps the biggest concern for the workers, though, has to do with the longer-term viability of the plant’s operations.

So long as it’s privately owned, O-I’s Venezuelan operations could expect to benefit from the investments, maintenance services, technology transfers and management expertise it needs to remain viable long into the future. But long experience in Venezuela – and the rest of the region – has shown that state-owned firms are badly run firms, and sooner or later, badly run firms end up shedding jobs. Undercapitalized, mismanaged, badly maintained firms that soon fall behind the technological curve and lose competitiveness: that’s long been the reality of State Owned Enterprise in Latin America.

Over time, as payrolls swell with political appointees and quality standards deteriorate, losses start to accumulate. Sooner or later – usually when the accumulation of such state-owned money-pits sets off a fiscal crisis – government’s are forced to sell them on again, typically at bargain basement prices, and often to investors whose only return path to profitability involves massive layoffs. It’s a cycles Venezuelans have suffered through before – and one Chávez, for reasons clear only to him, seems intent on re-editing.

Whether it was in the old Soviet block, in Fidel Castro’s Cuba or, increasingly, in Hugo Chávez’s Venezuela, supporters of Socialist economics have painted the State Controlled-Economy as the key to creating a Workers’ Paradise. But in Venezuela, a funny thing happened on the way to the Workers’ Utopia: the workers are wising up.