Atlas Shrugs in Venezuela

March 2007 issue -- The late novelist and philosopher Ayn Rand once said that she wrote her last novel, Atlas Shrugged , “to keep it from becoming prophetic.”

Based on recent news reports, she may not have succeeded.

A sweeping novel of ideas, Atlas depicts the frightening, near-future disintegration and collapse of civilization into chaos and anarchy, due to widespread acceptance of toxic philosophical ideas: e.g., egalitarianism, pragmatism, religious dogmatism, the morality that extols self-sacrifice for the sake of others.

Every day, we are seeing such ideas embodied and acted out on the world stage, in increasingly bloody scenes. To take just one example, the rise of Islamic fundamentalism—and the daily, global carnage produced by its glazed-eyed suicide bombers—are manifestations of religious fanaticism and self-sacrifice so extreme in their depravity that not even Rand, for all her prescience, could have imagined them.

Now, in the fiftieth year after its publication, her classic bestseller is being proved prophetic in other ways, as well.

In the story, a group of businessmen (to use the word loosely), led by railroad president James Taggart, use their high-placed political connections in Washington and abroad to destroy their competitors, manipulate markets, and enrich themselves through subsidies, favors, and other forms of legalized plunder. In the meantime, however, their business decisions—made for political reasons, not sound economic ones—leave their companies increasingly exposed and vulnerable.

Capital is fleeing Venezuela.

Taggart constructs an expensive branch line of his railroad in the now-Marxist state of Mexico, purely for self-aggrandizing and political reasons: the move makes no economic sense. However, his public rationalizations for it drip with the sort of altruistic and egalitarian pieties that would cause even Jimmy Carter to gag. “It is our duty to help an underprivileged nation to develop….When considering an investment, we should, in my opinion, take a chance on human beings, rather than on purely material factors….Material greed isn’t everything.”

Much to Taggart’s shock, however, the Mexican regime unexpectedly nationalizes the line, leaving his railroad to take a huge financial hit. Taggart tries to minimize the disaster to his Board: “I have full confidence,” he reassures them, “that our government will negotiate an equitable settlement with the government of the People’s State of Mexico, and that we will receive full and just compensation for our property.”

Now, switch from the novel to the newspapers. The following is from The Washington Post on January 18, 2007:

Dennis W. Bakke remembers Venezuela’s President Hugo Chavez as a charming conversationalist. Chavez loved to talk about baseball and closely followed the fortunes of Venezuelan players in the U.S. major leagues.

And when it came time to talk business, Chavez was supportive. Bakke, then chief executive of AES, wanted to know what the populist leader of Venezuela thought about an Arlington power-generation company spending about $1.7 billion to buy a controlling stake in the Caracas electric utility [Grupo La Electricidad de Caracas (EDC)].

“He was very reassuring,” Bakke says. On April 28, 2000, after one of their meetings, Bakke and Chavez emerged from the presidential residence La Casona all smiles, according to one newspaper report. Chavez called Bakke a “revolutionary entrepreneur who wanted to invest in Venezuela.” Bakke said he had come to Caracas to “learn how to be a revolutionary businessman.”

“Revolutionary businessman.” How nice. How Politically Correct. But did Bakke’s investment in socialist Venezuela make any economic sense?

Forbes magazine at the time said the AES move was “perplexing,” noting that other investors were fleeing because they saw Chavez as an unpredictable, self-styled revolutionary autocrat. But Bakke, now retired from AES and running a chain of charter schools, said the opinion of AES executives and directors was unanimous back then.

In fact…

Bakke said the…investment was one of a handful made during his tenure that violated his own guidelines limiting AES’s exposure in any one place.

So, what could possibly have motivated their decision?

Asked about the AES investment by a Venezuelan newspaper in May 2000, Chavez said, “I do not have to meddle in that, because I consider it strictly private.” He said the company’s executives “displayed a quite progressive vision.”

And there’s this:

. . .Chavez was impressed by Bakke, a devout Christian who still believes that “the purpose of business is not making money or making a stock price go up, but to do something wonderful for society . . . in an economically sustainable manner.”

Well, by those altruistic moral premises, Dennis Bakke and his “progressive” fellow-executives, like the fictional James Taggart, have admirably achieved their self-sacrificial objectives:

Seven years later, no one at AES is smiling, and there was nothing reassuring about the Jan. 8 announcement by Chavez that he would nationalize the telecommunications and electric utility industries, including the 82 percent AES stake in the Grupo La Electricidad de Caracas (EDC). The minister of mines and energy, Rafael Ramirez, said on Monday that it was a “reasonable” goal to take over EDC by June as part of a nationalization in which at least four utilities could revert to state control.

Ramirez didn’t say how the Venezuelan government would compensate AES or other investors, but the mere talk of nationalization has knocked $138 million, or 15 percent, off EDC’s market capitalization on the Venezuelan stock exchange. . . .

Shelby G. Tucker, a utility analyst with Bank of America, told investors that if AES does not get any compensation for EDC, it would lose about $1.5 billion, or about 10 percent, of its value.

There are sobering lessons for businessmen here. In Atlas Shrugged , productive businessmen—that is, entrepreneurs completely unlike James Taggart and Dennis Bakke—become tired of constant exploitation and expropriation by “progressive” dictators and ideologues demanding their “self-sacrifice.” Rather than continue “to do something wonderful for society” at their own expense, these productive giants, who support the rest of the world, go on strike. They quit their jobs, taking their productive talents with them into hiding, thus hastening the collapse of the society that is cannibalizing them. Hence, the metaphor of the novel’s title: Atlas shrugs.

In fact, in late 2002, Venezuela experienced a nationwide two-month-long work stoppage to protest the increasingly thuggish Chavez regime, drawing media comparisons at the time to the events described in Rand’s great novel.

Today, investors are “going on strike” against Venezuela in their own traditional manner, by dumping their shares in Venezuelan firms, whose stock prices are plunging in global markets. And capital is fleeing the country.

Can more be done? According to an Associated Press story on January 8: “The United States remains the top buyer of Venezuelan oil, which provides Chavez billions of dollars for social programs aimed at helping the poor in countries around the region.” Moreover, the Venezuelan regime owns assets in the United States that could be frozen by U.S. courts. And one of those assets is Citgo, the petroleum and energy company.

To anyone who has dealings with Venezuela—or with its cash cows, like Citgo: Please take a lesson from Ayn Rand ’s novel. Stop supporting capitalism’s enemies.

It’s time for you to shrug.

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