Author’s note: I wrote the below article little more than a month ago following the death of Hugo Chavez. Given Baroness Thatcher’s own passing yesterday, it seems appropriate to repost it here. While I may have (inadvertently) pre-empted them, I note that other commentators have also been remarking on the role that energy played in securing the Thatcher legacy.
Hugo Chavez, president of Venezuela, died yesterday at the age of 58. He will share the anniversary of his death with Joseph Stalin (18 December 1878 – 5 March 1953) — a fact not lost upon those who enjoy a sense of ideological irony. While it may be unfair to equate the two given the scale of the latter’s atrocities, I shall not mourn for Chavez’ passing. He was a megalomaniac autocrat that ruthlessly snuffed out opposition and openly fraternised with despots around the world. On a more practical level, I think that his preferred economic policies are dangerous and ultimately harmful for any nation that tries to emulate them – irrespective of whether they happen to sit upon a wealth of oil resources or not.
It was, of course, petrodollars that enabled and fuelled the populist Chavez regime. This sentiment was concisely expressed by Daniel Yergin, who tweeted:
Too soon to say what Hugo Chavez’ death means for oil prices but it is certainly true that oil prices are what made Hugo Chavez possible.
— Daniel Yergin (@DanielYergin) March 6, 2013
Mr Chavez is not alone in having energy resources to thank for the relative success of his economic policies. Leaders from all ends of the political and ideological spectrum have benefited (or suffered) from the vagaries of oil discoveries and price shocks.
Take Maggie Thatcher, for example. Many would consider her to be the European leader that most closely embodied the capitalist doctrine that Mr Chavez so vociferously opposed. Yet, oil and gas played an equally pivotal role in ensuring her own legacy. Gas was important because it offered an alternative to coal and so proved to be a key strategic resource in her fight against the mine unions. Britain’s “dash for gas” would also prove to be a major factor in the later liberalization of the region’s electricity market.
Oil played an arguably even bigger role in transforming the British economy according to Thatcher’s vision. The major North Sea oil fields had actually been established during the time of the previous Labour government. However, it was Thatcher who pointedly put this money to work in paying down the national debt.[*] As Edmund Conway wrote in a 2009 article in The Telegraph:
[W]hile we are apt to attribute the sudden spurt in Britain’s prosperity in the mid- to late-1980s to a deregulated and reinvigorated City, it owed far more to the massive windfall from the North Sea. Take a look at the numbers. In 1979, when Margaret Thatcher came to power, the amount Britain owed, as a nation, was £88.6 billion. In the subsequent six years, taxes from the North Sea (which had been pretty much non-existent previously) generated an incredible £52.4 billion.
Mrs Thatcher may have been lionized as the “Iron Lady”, but she had the good fortune to be able to rely on oil discoveries and unprecedented revenues precisely when she needed it most. Neither she nor Hugo Chavez were the first political leaders to discover that the arc of their political careers was closely aligned to the energy fortunes of their respective countries. It is safe to say that they won’t be the last.
[*] Note: Not everyone was taken with Lady Thatcher’s allocation of North Sea oil revenues. The late chairman of the British National Oil Corporation, Sir Alastair Morton, famously complained that “She blew it on the dole.”