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The Economic Benefits of American Intervention in Venezuela

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The Economic Benefits of American Intervention in Venezuela

July 9, 2018

A recent Associated Press report states that President Trump asked top aides such as Lieutenant General H. R. McMaster about a military intervention in Venezuela, going as far as to say the United States could invade Venezuela as it did in Panama. McMaster and others dissuaded the President from invading to avoid an international backlash—just as they urged him not to fulfill his campaign promise of moving the U.S. embassy from Tel Aviv to Jerusalem. While calls for the use of military force were dismissed among diplomats, American intervention could have economic benefits for both Venezuela and the United States.

Venezuela tops the annual Misery Index, published by Johns Hopkins University economics professor Steve Hanke. Prices double roughly every six weeks, more than 60 percent of the population is in extreme poverty, and many are starving. Even when a Venezuelan has enough saved to buy something, it is often not available as a result of government price and foreign currency controls. According to the International Monetary Fund, unemployment has increased to 33 percent and the economy has contracted by half in the last three years.

For years Venezuelans have voted against the regime, but constant fraud stops any meaningful electoral success or action. The people have protested and tried to oust the dictatorship, but all efforts have failed since the population is disarmed. Although military families also suffer from the crisis, Cuban infiltrators and continual disappearance of “traitors” prevent a coup.

Consequently, many Venezuelans call for the United States and other nations to use military force to depose Maduro and organize free elections. Ricardo Hausmann, a prominent Venezuelan who is the Director of the Center for International Development at Harvard, has supported an international military intervention. Antonio Ledezma, an exiled opposition leader, is traveling the world asking countries to intervene in Venezuela militarily under the principle of “humanitarian intervention.”

President Donald Trump’s August 2017 statement that the “military option” was possible for Venezuela brought hope among Venezuelans. But the media and Republicans downplayed Trump’s statement while Democrats condemned it.

If President Trump decided to liberate Venezuela, the economic miracle that would follow would be unprecedented. The aftermath of Operation Just Cause in Panama in 1989 provides a good comparison. Panama, like Venezuela, was ruled by a narco-socialist dictatorship. Moreover, 10 months before the U.S. intervention, Panama’s economy had shrunk by more than 20 percent on a per capita basis. But, after the United States toppled the regime, the economy recovered, with inflation-adjusted GDP per capita increasing from just $2,400 in 1989 to its previous high of nearly $3,000 by 1992 and surpassing $15,000 in 2017.

Operation Just Cause resulted in 23 American casualties out of 26,000 soldiers, and 297 civilian deaths. If civilian deaths were to be extrapolated for population in Venezuela, it would amount to about 3,500 in one month, approximately the monthly number of deaths from criminal activity.

If President Trump were to intervene militarily, the famine in Venezuela would end in a matter of months or weeks. Price and currency controls could be lifted, allowing production to increase and imports to cross the border.  In post-World War II Germany, shortages, inflation, and black-market activity persisted as the Allied forces had imposed price controls, but these ended one week after economy minister Ludwig Erhard lifted price controls and announced the replacement of the currency. The same is true in varying periods of time for post-socialist countries in eastern Europe.

Furthermore, oil production would surge in a free Venezuela. The oil industry could employ tens of thousands of workers and lower the cost of oil, which would improve both Americans’ and Venezuelans’ standard of living. Since Venezuela has the largest oil reserves in the world, production could reach 10 million barrels per day in the medium term as has been the case in Saudi Arabia, Russia, and the United States.  U.S. oil production has more than doubled since 2011, reaching nearly 11 million barrels per day. Venezuelan oil production could also increase rapidly after returning to a free market. Increased oil production at this scale could significantly lower oil prices worldwide, benefiting American consumers while bringing jobs for Venezuelans.

Free elections in Venezuela would provide opportunities in the oil sector for American multinationals since the leading opposition leader, María Corina Machado, supports privatization, and all other leaders want to open the industry to private investment. Additionally, the opposition widely supports returning all nationalized industries to their owners and guaranteeing private property, which would give foreign investors substantial opportunities.

Time is essential. The situation in Venezuela is dire and getting worse. Murder, kidnapping, robbery, and other types of crime are widespread. More than 30 children a day die from diseases such as tuberculosis, polio, and measles that were once eradicated. Lack of food has resulted in 68 percent of children being malnourished, and 280,000 of them could die of malnutrition in 2018 alone, according to Cáritas, a healthcare non-profit.

This humanitarian crisis has led 4 million people, 14 percent of the population, to leave the country since former dictator Hugo Chavez took office in 1999 through 2017. This number includes my family and our many friends and acquaintances who have emigrated to countries including Argentina, Chile, Colombia, Italy, Panama, Peru, Spain, and the United States. If the exodus continues at the current rate, 20 million Venezuelans could emigrate in the next few years, making this the greatest refugee crisis since World War II.

The President’s advisors do not want him to take a risk by using military force in Venezuela. However, not intervening will surely result in millions of deaths and many more refugees, whereas an intervention would bring enormous rewards for Americans and Venezuelans alike. The only feasible way to liberate Venezuela is military force; President Trump should follow his instincts and intervene.

Read the Spanish version of this article here

Daniel Di Martino is a contributor to Economics 21. Follow him on Twitter @DanielDiMartino

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