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Wednesday, June 15, 2005

Capitalism or Starve

Mexico nationalized its oil industry in 1938. Today Pemex is in dire need of foreign capital infusion as it is "running out of easy oil fields to drill" reports David Luhnow in the WSJ (no link yet). It lacks the ability to use advanced technology to pursue natural gas even though Pemex's executives believe their gas resources underground are enormous.

The nationalization of the oil industry is law in Mexico. While heralded as a sign of their freedom it is now proving the flaws of socialism. Because the "energy prices are so high in Mexico...it's sometimes cheaper to make textiles in the U.S. despite lower Mexican wages," said one Mexican executive.

Besides these laws on investment, Pemex has massive benefits liabilities owed to its unionized workers. Mexico may have to do what Nigeria, Indonesia and Brazil have done. Invite in American know-how and capital in order to increase productivity. The cost, of course, is sharing the profits.

Marxists: Do you want 100% of nothing or a share in a large amount?

Answer: They'd rather starve following this failed ideal than admit the truth of capitalism.

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