Saturday, February 18, 2006

Dell Theory and Oil Security

Wow, the Master Thug Hugo Chavez has just threatened to stop exports to the US if the US keeps pissing him off. Big threat when Venuzuela is one of the big sources of American oil consumption! Is he serious? Can this be a threat?

Thomas Friedman postulated in his book 'The World is Flat' what he called the Dell theory - essentially no two countries that make parts for a Dell computer will go to war. Essentially, it means economics beats rheotoric every time, so sleep easy because markets are at work. I'm a great believer in free markets, and think they are a better system than any bureaucrat-controlled one. But there are limitations, and one of them is that when markets are not truly free, we have some issues.

What do I mean? When a country is ruled by a despot or a "democratically elected" leader who thrives on sentiment rather than performance, we have an issue. The argument is that no leader would take such an economically disastrous step for fear of losing the next election, but the reality is that leaders in many such countries either do not have to worry about elections, or can sway an uneducated public with false hope and rheotoric.

We love to wax about the incredible promise of democracy, and it's one I truly believe in. But it requires people to make unemotional choices, and think of the consequences of their choices, as President Bush aluded to following the Hamas election. The reality is democracry after democracy elects leaders who will bring misery on them, all on the promise of justice or just sticking it to the US or the world (even as they take US aid!)

So should we be worried about the Chavez threat? Absolutely. It underscores a point I made in a previous blog post - the major sources of oil are far fewer than we'd like and in countries who aren't necessarily full of warmth for us. I'd say let's pull out those plans for the nuclear power plants! There have been many safety concerns, but if we don't try to penny pinch, we can build safe reactors that make us safer (in energy terms at least).

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