The left's capital punishment

• Published date: 06 March 2023
• Publication title: The Korea Times

CAMBRIDGE ? In the traditional (and somewhat outdated) distinction between left and right, left-wing parties represent workers, while right-wing parties represent the owners of capital. When the left is in charge, according to this view, it tends to use its power to reduce the share of national income that goes to capital, either through raising corporate taxes or taxing personal capital gains.

Some left-wing politicians, however, attempt to minimize capital's share by regulating or nationalizing capital-intensive industries, such as electricity and infrastructure. For example, Colombian President Gustavo Petro recently announced that he would default on the terms of road concessions and freeze tolls. Yet, given the terms of the contract, this forced the finance ministry to compensate investors, and left future investors on notice. Petro also announced his intention to take responsibility for setting household utility bills away from the independent regulator, so he can personally cut electricity costs.

In Mexico, President Andres Manuel Lopez Obrador (widely known as AMLO), has launched an overhaul of the electricity market that would cement the monopoly of the state-run Comision Federal de Electricidad (CFE) and effectively roll back previous pro-market reforms enacted by his predecessor, Enrique Pena Nieto. As a consequence, private investment in the Mexican energy sector has collapsed.

Petro and AMLO should heed the lessons of South Africa and Venezuela, where the attempt to cement the state electricity monopoly has led to collapsing grids and massive power outages. To overcome the disaster, made more challenging by the need to shift to clean energy, both countries will need to reverse course and regain investors' trust.

The inefficiency of South Africa's state monopoly in electricity became obvious in 2007, when insufficient capacity led to widespread blackouts and forced the government to start rationing electricity. Ideological resistance, together with rampant corruption within President Jacob Zuma's administration and at the state-owned utility Eskom, prevented the government from liberalizing electricity generation until seven months ago, when it was already too late to prevent catastrophe. On February 10, President Cyril Ramaphosa declared a national state of disaster, announcing a R254 billion ($13.9 billion) bailout of Eskom and vowing to accelerate new private energy projects.

In Venezuela, Hugo Chavez's decision to nationalize the electricity...