The Global Capitalist

Venezuela is undergoing an election of monumental proportions today that may give Socialist leader Hugo Chavez the ability to be in office for the rest of his life. The election is a complete redraft of the constitution and perhaps the most important vote in the history of the country. Many former supports of the government have recently defected, calling the newly drafted constitution a step in the wrong direction and giving far too much power to the current President. Even with such public defections and anti-constitution protests that have been seen all over the country the past week, the chance for approval is seen as greater than 50/50.

The new constitution would allow an unlimited number of re-election opportunities for the Presidential position. Chavez, who has been in office since the last 1990s is currently scheduled to be removed from office in 2012 due to current term limits on the position. Just as importantly, the new constitution propose that the central bank be removed from autonomy and be placed under governmental control. This could have severe consequences for the Venezuelan economy as all economic sanity would be sacrificed in the name of socialist policy.

With power of the central bank in his control, Chavez would have complete power to fund his socialist programs through the creation of new money. While in and of itself, this is not a terrible idea if done in moderation, his socialist program represent well over half the country’s economy. This would require massive inflows of capital to keep this scheme running, money the government has been unable to attain from tax receipts. Newly printed money would then be used to fund these programs, causing rampant inflation without additional economic output. The working class would be penalized with their salaries and savings unable to keep up to maintain their already declining standard of living.

While Venezuela has already become a basket case of a country economically, if this constitution is approved, it could lead Venezuela to become the poorest country in South America in just a few years time.