Realist, not conformist analysis of the latest financial, business and political news

Congratulations To Bolivarian Socialism – Venezuela’s Power Cut Is Your Fault

Of course that four day power cut in Venezuela is being blamed on the Yankee Imperialists for there never could be anything wrong with socialism, could there? And if you do want to reduce a nation and people to penury then that Bolivarian socialism does indeed seem to be the way to go. It’s proven very effective at it after all.

The thing being that it’s not the action of outsiders which has led to this disaster, it’s inherent in the basic economic design which has been imposed. That Bolivarian – or that socialist if you prefer – bit having entirely missed to role of capital. Even, returns to capital so that investment can and does take place. Without that everything does indeed fall apart, turn to faeces:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] A widespread power cut affecting much of Venezuela has continued ahead of planned protests on Saturday. President Nicolás Maduro and the US-backed opposition trying to oust him have blamed each other for the outage. Hospitals struggled to cope and at least one hospital patient died when her respirator stopped working. The power cuts, which started on Thursday, have reportedly been caused by problems at a major hydroelectric plant. [/perfectpullquote] [perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Venezuela depends on its vast hydroelectric infrastructure, rather than its oil reserves, for its domestic electricity supply. But decades of underinvestment have damaged the major dams, and sporadic blackouts are commonplace.[/perfectpullquote]

As we’ve pointed out the cause isn’t tough to discern:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] They froze prices, d’ye see? That made electricity incredibly cheap, sure it did. That price was frozen, inflation took off up into the upper stratosphere, the real price of electricity falls to some tiny fraction of the cost of production. What happens then? Well, as there’s no money in the electricity generation or distribution system then no money gets spent on the electricity generation or distribution system. No maintenance, no upgrading. All this at the same time as a price of spit increases demand for that electricity. For those first couple of pages in every economics textbook are in fact correct. Those supply and demand curves do describe reality. [/perfectpullquote]

We’re not the only people pointing this out either:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] There have been plenty of conspiracy theories about what caused the most serious power cut in Venezuelan history, from cyberattack to employee sabotage. But the most likely explanation is the most banal: lack of basic maintenance, corruption and human error. The power went off at about 5pm on Thursday. Earlier that day residents in Bolivar state saw a small bush fire near the Orinoco river, close to the vast Guri hydroelectric power station. The fire burnt through two 765kV ground cables that carried power to a substation. Such cables should be kept clear of inflammable undergrowth but amid a decline in public services this basic precaution has been neglected for years, insiders say. [/perfectpullquote]

As it happens government running stuff doesn’t work very well.

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Quentin Vole
Quentin Vole
5 years ago

I’m not an electrical engineer, but 765 kV sounds like an awful lot for a ground cable, 765 kW perhaps?

Bloke in India
Bloke in India
5 years ago
Reply to  Quentin Vole

I am an electrical engineer 765kV is an awful lot, but this presumably is a main feeder from the hydroelectric power station, so is entirely likely. 765kW is about the power of a truck, and cables tend to be described by voltage, not power, so I’m going with 765kV sounding accurate.

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