Bolivia and the Lessons of Income Redistribution

A few weeks back I wrote an article about a trip Dick Morris took to Bolivia. Morris was in Bolivia meeting with the leaders of four provinces: Beni, Pando, Santa Cruz and Tarija. These four provinces are currently on a collision course with the central government of Eva Morales. The dispute centers around a plan by the central government to nationalize the oil industry. These four provinces are oil rich and this plan would force them to give up much of the wealth and share it with regions that don't have the same wealth. (Ironically enough, this is similar to what we consider a positive step in the right direction in Iraq) These four provinces are so opposed to this plan that they have taken steps toward forcing independence from the central government. Morris was in Bolivia consulting the leaders in their independence movement.

At the center of this dispute is the concept of income redistribution...

refers to a political policy intended to even the amount of income individuals are permitted to earn.[citation needed]The basic premise of the redistribution of income is that money should be distributed to benefit the poorer members of society, and that the rich should be obliged to assist the poor.[citation needed] Thus, money should be redistributed from the rich to the poor, creating a more financially egalitarian society.[citation needed] Proponents of redistribution often claim that the rich exploit the poor or otherwise gain unfair benefits. Therefore, redistributive practices are justified in order to redress the balance.[citation needed]This differs slightly from wealth redistribution or property redistribution, a policy which takes assets from the current owners and gives them to other individuals or groups.

In this case, the redistribution takes the form of oil wealth from regions where it is plentiful and distributing to where it isn't. The irony here is that most Americans would likely side with the four provinces in their battle against the federal government.

This is ironic because our own politicians have also embraced income redistribution. For instance, the whole entire Democratic party has embraced the concept of universal health care

is health care coverage which is extended to all citizens, and sometimes permanent residents, of a governmental region. Universal health care programs vary widely in their structure and funding mechanisms, particularly the degree to which they are publicly funded. Typically, most health care costs are met by the population via compulsory health insurance or taxation, or a combination of both.

Democrats have bemoaned the 40 million in uninsured Americans. The reason they are uninsured is largely due to the fact that they can't afford health insurance. While politicians can dress up this concept, the reality is that if 40 million people, who can't afford health insurance, receive it, that means it is taken from wealth of those that can. In fact, in an ironic twist of fate many of the same politicians that are proposing the redistribution of wealth through universal health care are also proposing to increase the taxes on oil companies specifically. In Bolivia, that sort of policy has lead to a revolution and an independence movement. In America, it is nothing more than a tool to get votes.

The second main area of income redistribution in America is in the form of taxes and jobs. In fact, Barack Obama has unabashadly proposed a job's plan that is nothing more than income redistribution.

Democrat Barack Obama said Wednesday that as president he would spend $210 billion to create jobs in construction and environmental industries, as he tried to win over economically struggling voters. Obama's investment would be over 10 years as part of two programs. The larger is $150 billion to create 5 million so-called "green collar" jobs to develop more environmentally friendly energy sources.

Sixty billion would go to a National Infrastructure Reinvestment Bank to rebuild highways, bridges, airports and other public projects. Obama estimated that could generate nearly 2 million jobs, many of them in the construction industry that's been hit by the housing crisis.

how would he pay for this...

Obama explained that the money for his spending proposals will come from ending the Iraq war, cutting tax breaks for corporations, taxing carbon pollution and raising taxes on high income earners.

Now, Obama can dress this up all that he wants, but when you raise taxes on one group in order to create income opportunities for other groups that is called income redistribution. Hillary Clinton's own bouts with income redistribution through taxation is even more confrontational.

Income inequality has risen to the highest levels since 1929, and wages have
stagnated. In the meantime, health care premiums and college tuition have
skyrocketed, squeezing middle class families who have largely relied on their
home equity to make ends meet. The burgeoning problems in the housing market
further threaten many middle class families.

How does she propose to close the so called income gap? She will lower taxes and provide spending programs geared specifically at the middle class and she will pay for it by raising taxes on the rich, corporations, and the capital gains which she believes is a tool of mostly the rich.

There is frankly little substantive difference between what is happening in Bolivia and what is being proposed by some in America. In Bolivia, a tool of wealth, oil, is being centralized and redistributed from the wealthy, the regions that have it, to the less wealthy, the ones that don't. In America, the wealth itself is being redistributed from the wealthy to the not so wealthy. In Bolivia, the central government foolishly targeted a whole entire geographic region for income redistribution. That region is rising up and revolting. In America, a class is being targeted. Since that class crosses geography, it becomes more difficult for them to revolt. Of course, it is ironic that many of the same people cheering on the provinces in Bolivia are supporting the exact same concept that these provinces are revolting against.

Dick Morris in Bolivia: Struggling for Independence

Last night, Dick Morris joined H&C from Bolivia. Morris is down there trying to help eastern provinces, Beni, Pando, Santa Cruz and Tarija gain their independence from the leftist government.

Bolivia's leader, Evo Morales, is a well known ally of Hugo Chavez in the region. (in fact, Venezuela gives Bolivia 100 million dollars yearly in aid) While Bolivia's economy has gone through a period of privatization over the last twenty years, it continues to be largely influenced by socialism. Now, it seems that a confrontation between four Eastern provinces and the Morales government is coming to a head.

differences with the four provinces, where officials approved statutes last week that would give them control over petroleum royalties and other functions, such as creating their own police forces.

After these provinces took steps to create more autonomy in their own regions, the Morales government responded by amending the Constitution...

acknowledged that the dispute had intensified after his supporters approved a controversial draft constitution.

Still, Mr. Morales said he believed that the constitution, which would bolster indigenous rights and dismantle large landholdings in eastern Bolivia, was legitimately approved despite a boycott of the vote by the political opposition and the abrupt transfer of the constitutional assembly to Oruro, a Morales bastion in the western highlands.

While this referendum must still pass through the national referendum, tensions are quite high. The context of this dispute is quite complicated. First, Morales is of Aymara descent,

a native ethnic group in the Andes and Altiplano regions of South America; about 2.3
million live in Bolivia, Peru, Northern Chile, and Northwestern Argentina (in particular in Salta Province). They lived in the region for many centuries before becoming a subject people of the Inca, and later of the Spanish in the 16th century

This makes Morales the first indigenous leader of Bolivia. His sharp anti American rhetoric make him a lightning rod. For instance, here is how he described the American economy...

The worst enemy of humanity is U.S. capitalism. That is what provokes uprisings like our own, a rebellion against a system, against a neoliberal model, which is the representation of a savage capitalism. If the entire world doesn't acknowledge this reality, that the national states are not providing even minimally for health, education and nourishment, then each day the most fundamental human rights are being violated.

As such, he has moved aggressively to nationalize many vital industries most notably natural gas.

As of May 1, 2006, President Morales signed a decree stating that all natural gas reserves were to be nationalized: "the state recovers ownership, possession and total and absolute control" of hydrocarbons (Bolivia has the second largest resources of natural gas in South America — 1.38 trillion cubic meters — after Venezuela). He thus put to some effect his electoral promises made during the various Gas Wars, declaring that "We are not a government of mere promises: We follow through on what we propose and what the people demand."

The area which the four "rogue" provinces are located on is rich in natural gas. Morales' drive to nationalize the industry also creates a situation in which their fruitful natural resource is rendered to a central government that the provinces don't believe is looking out for them. Morris has allied himself with these provinces and no doubt this story is constantly evolving.

There is more at stake than whatever internal domestic issues this addresses in Bolivia. In Venezuela, there was also nearly a grass roots uprising when Chavez closed down a television station. If this particular uprising is successful it may signal that Chavez' brand of leftism is dying in the region and that the folks in the region are rejecting their demagoguery. Here enters Dick Morris who has allied himself with the four provinces seeking their independence. This story is sure to evolve over the next several months and I will track it.