Sunday, 15 February 2015

The Economist vs the socialists

Having picked up this week's Economist I have made an amazing discovery. A disinterested observer might be tempted to think that oil-producing countries are nearly certain to struggle during an oil glut especially following OPEC's decision to not curtail production.

This is evident in the cases of Russia, Venezuala, Brazil and even Nigeria. America should be treated as something of a special case. The shale gas producers are certainly being squeezed be low oil prices but the size of the US economy and its central position in world investment means that the boost to economic endeavour given by the low prices helps to offset damage to the exporting energy industry.

However, if you read the Economist it becomes clear that these failings are due to the number one suspect. Venezuala is suffering for decades of, unfathomably, attempting to fund social progress with oil profits rather than stakeholder dividends. Brazil could have avoided this crisis entirely if it had nipped corruption and state control in the bud with a healthy dose of market forces.

I'm not saying that this is entirely a fabrication. The corruption in Brazil's Petrobras company is abominable (although it wouldn't look out of place in the modern state capitalist China). What seems unfair is the special pleading that the same journalists would apply in analogous cases for devout capitalists. The Coalition are heaped with praise for staying the course with austerity even though it is clear that low oil prices (over which they had little control) are responsible for much of the recent upturn in economic growth.

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