TRADE THE PETROLEUM FOR THE COMMON LAW:

Why Is Bermuda Richer Than Venezuela? (Carlos A. Ball, 06/01/2004, Tech Central Station)

Other things being equal, one would think that Venezuela -- a democratic country with immense oil and mineral riches, populated by descendants of the liberators of Latin America -- would out-prosper Bermuda -- an island one-third the size of the District of Columbia, two-thirds populated by the descendants of black slaves, with one paved airport, no university, and no natural resource more valuable than its beaches.

But other things are not equal. And as a result, the per capita income of Bermudians is $36,845, one of the highest in the world, and that of Venezuelans $3,326. There is no unemployment in Bermuda, whereas over half of the Venezuelan population is either unemployed or working in the underground economy.

How can this be? [...]

In Bermuda, the only government enterprise is the postal service. There is no central bank. Bermudian dollars and U.S. dollars are interchangeable. For that reason, we have never heard of capital flight in Bermuda and economic analysts place it at about the same risk range of Singapore, where democracy is still in its infancy, but where people enjoy total economic freedom, meaning that the market functions freely and advances at a high speed in a globalized economy.

The value of the Venezuelan currency, the bolívar, was fixed at one gram of gold from 1879 to 1961. The "democratic" governments, starting in the 1960s, have destroyed the value of the bolívar, with exchange controls and a devaluation of 60,445% in the last 43 years. The average inflation in Venezuela is 20% vs. 2% in Bermuda. A low inflation rate is one of the best measures of government respect for property rights.

The rule of law that reigns in Bermuda fosters individual freedom; a non-interventionist régime, with minimum regulations, and a legislative assembly that doesn't forge and promulgate new laws all the time offers great incentives for savings, for investments and to create new job opportunities.

A referendum on independence was soundly defeated in Bermuda in 1965, and the 138 coral islands and islets remain an overseas territory of the United Kingdom, with internal self-government. Venezuela, meanwhile, is one of the oldest "democracies" in Latin America.

It is Bermuda's status as a former British colony and the presence of oil reserves in Venezuela that make things unequal. The former is a near certain predictor of successful nationhood, the latter spells doom for a developing nation.

Posted by Orrin Judd at June 3, 2004 7:33 AM