The Greatest Natural Resource

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Mr. McLaughlin’s comment tonight about the steel company he
worked with in Venezuela who’s financials showed a remarkably low cost of
production reminded me of a conversation I had this summer with my friend
Fabiani in Maracaibo.

Fabiani is a senior in industrial engineering at the
Universidad de Zulia in Maracaibo, Venezuela. When she was 12 years old, her
dad was fired from his job with the state run petroleum engineering company for
his non-socialist political allegiance. With that background, you can imagine
Fabiani’s views on Socialist economic policy. When I told her I was blown away
to find out that the cost of a full tank of gas for a large SUV in Venezuela is
roughly 35 cents, she responded with simple answer that with everything else so
expensive, the government had to at least give them cheap gas.

In Venezuela, it is impossible to get a good deal on
imported goods. The Socialist Party’s mercantilist system leaves customers
paying up to $9 for a box of corn flakes, which is already a rip off for our
standards -let alone when you’re earning Venezuelan wages. Everything’s
expensive. Cars, shaving cream, peanut butter, computers, iPods (and not even
the up-to-date generations that we enjoy) -so maybe you can understand
Fabiani’s answer when I suggested that the government should raise gas prices
to increase revenues. To her, raising prices would only stunt the sale of gas,
and due to the country’s abundance, there wouldn’t be any point to it.

It’s interesting to see the way that natural advantage will
hardly benefit a nation if it lacks proper leadership to exploit its endowment.
Mr. McLaughlin also described China’s rise as a world-class steel producer.
Interestingly enough though, China’s only real natural endowment is its
extremely large labor force. They don’t actually have a lot of coal or other
essential components to produce steel, but they found a way to exploit more
well endowed countries like Russia and Australia that lacked the capital and
labor to take full advantage of their own resources.

What really stumps me though when comparing Venezuela and
China though, is that although they are both neo-mercantilist (wanting to
export more than import), socialist economies, China has grown its economy in
ways that Venezuela, despite being overwhelmingly rich in natural resources,
can only dream of. Because of this, I have to conclude that labor -human
capital is the richest of all natural resources.

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