Monday, May 26, 2008

Those Evil Venezuelans

by Ken Houghton

Don't let anyone ever again tell you that Conservatives support "free trade":
London’s Tory mayor, Boris Johnson, today announced that he was scrapping a discounted oil agreement with Venezuela that provides half price bus fares for London ’s poorest citizens. Fares for those on Income Support are expected to double by the end of year, causing serious financial hardship for 80,000 Londoners who had taken advantage of the scheme....

The agreement, which was negotiated by Johnson’s predecessor, Ken Livingstone, bartered London's strategic advice on city planning for cheap Venezuelan oil.

This is precisely the type of agreement you want to make in free trade: rent out your expertise (a non-rival, public good) for a discount on a commodity that allows you to raise the marginal utility to your population of its government services.

Which is also what Venezuela has been doing with its oil revenues:
Venezuela’s socialist president, Hugo Chavez, has used the proceeds from record oil revenues to roll out free health and education services across the country. Incomes for the poorest 60% of Venezuelans have risen by 130% in real terms, according to surveys conducted for the Venezuelan American Chamber of Commerce.

Now you can argue, as some are prone to do, that making life marginally easier for the poorer members of your society is not a path to growth. But that's an entirely different argument than "we should charge our poorest members of society more."

Isn't it?

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