Marching againstHugo Chávez

A Quarterly Message on Liberty

Summer 2008Volume 6 Number 3

Yon Goicoechea is the winner of the 2008Milton Friedman Prize for Advancing Liberty, awarded biennially to an individ-ual who has made a significant contributionto advancing human freedom. Goicoechea,leader of the Venezuelan student move-ment, was instrumental in preventingHugo Chávez’s regime from seizing broaddictatorial powers in December 2007.

t all started with the shutdown of RCTV,Venezuela’s oldest and most significant televi-sion station. Privately owned, it had become a national institution, its 50-plus years of news

programming inextricably linked with Venezuela’sdemocratic past. But on May 27, 2007, RCTV was no more. President Hugo Chávez, who accused thestation of aiding a 2002 coup d’état attempt, decidednot to renew RCTV’s license, forcing the station toshut down.

The closure of RCTV touched a nerve amongVenezuelans. When we watched RCTV go black, it feltas if someone had come into our living rooms andturned off our televisions. Even those who largelyagreed with Chávez’s policies were deeply troubled byRCTV’s shutdown. When you clamp down on free-dom of expression in a country, you are coming dan-gerously close to totalitarianism.

YON GOICOECHEA

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Marching againstHugo Chávez

2 • Cato’s Letter SUMMER 2008

ut of the closure of RCTVemerged the studentmovement, which would

go on to play a major role in opposingChávez’s plans to institute “21st cen-tury socialism” in Venezuela. That itwould be university students whowould ultimately rise up to defendour liberties in the face of a would-bedictator is surprising to some. Butthe truth is, as university students,protests were nothing new to us.Chávez had already tried to advanceplans to undermine our schools,plans we had opposed en masse. Andas young people we have the most atstake in the future of Venezuela. Wedo not want to see the politicalprocess deprive our nation of the pathout of poverty. We greatly desire to seea Venezuela as modern and prosper-ous as the developed nations of theworld. So when Chávez began to sig-nificantly undermine our liberties, itwas only natural that it was studentswho rose to oppose him.

The student movement offered anew message: one of modernity, of

hope, of a new Venezuela. We calledfor equality under the law and liberaldemocratic institutions to enforce it.We offered enthusiasm: our creativedemonstrations were able to capturethe attention of the segment of themedia that had so far escaped state

control or shutdown. But mostly, weoffered numbers: our marches, tak-ing place in the streets of Caracas andother major cities, were massive—tensof thousands strong. We marchedthrough the streets, our palms paint-ed white to indicate nonviolence.

Despite our marches and ac-tivism, the student movement wasnot able to prevent the shutdown ofRCTV. But we had mobilized a largepart of the populace. Hugo Chávez’stop-down “revolution” meant ourfreedoms were receding every day.Every week there was something newand dangerous that had to be opposed. Starting in June, over a six-month period, we marched 45times, averaging 80,000 students perdemonstration.

That much of the population ofVenezuela has been excluded fromthe political process is a sad legacy ofVenezuelan history. Chávez is a con-sequence—a product—of this exclu-sion. His fiery rhetoric and willing-ness to challenge elites excites aportion of the populace long used to

having no stake in the politicalsphere. The trouble is thatChávez threatens to exclude ahuge portion of Venezuelansthrough his actions, too.

That’s why the first thing wesaid when we took to the streetsduring our marches was “I re-spect you. I respect that youthink differently.” We acknowl-

edged that Hugo Chávez was presi-dent, elected by the Venezuelan peo-ple. But we asked that his supporterstolerate our own viewpoints and dis-agreements, too.

The Constitution is somethingupon which everyone can agree. The

We marched 45 times, averaging 80,000 studentsper demonstration, ourpalms painted white to indicate nonviolence.

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O

Constitution doesn’t excludeanyone. That’s why, whenHugo Chávez threatened to up-end the Constitution with a ref-erendum on proposed consti-tutional reforms in December2007, the student movementrose up to oppose him.

The proposed constitu-tional revisions would haveabolished presidential termlimits, allowing Chávez to serve aspresident of Venezuela indefinitely.They would end the autonomy of thecentral bank, placing it and the na-tion’s international currency reservesunder Chávez’s control. They wouldmake it easier for the state to expro-priate property. And they would pro-hibit many types of funding of politi-cal campaigns. In sum, the reformsrepresented a serious and dangerouscentralization of power.

These revisions were not a step

forward for Venezuela—they were astep back. Like the failed govern-ment policies of past regimes, theserevisions served to exclude a largepart of the populace.

Students stopped people in thestreets to explain to them how the pro-posed constitutional reform would ef-fectively anoint Chávez a virtual dicta-tor. When in the process we wereattacked, we invited our opponents tosit down and debate our differences.We were very clear that we would notanswer violence with more violence.

The proposed constitu-tional revisions would have abolished presidentialterm limits, allowing Hugo Chávez to serve aspresident of Venezuela indefinitely.

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SUMMER 2008 Cato’s Letter • 3

The massive protests we had per-fected during the closure of RCTVspread throughout Venezuela’scities. On one occasion, our marchwas 200,000 people strong—impossi-ble to ignore. For his part, Chávezdidn’t know what to do with us.First, he condemned us. But we onlygrew. Then, he tried to stop us. Butwe were resolute and continued to

march. Finally, he creat-ed a student movementthat favored his “Bolivar-ian Revolution,” but itpaled in comparison tothe size and strength ofour movement.

Perhaps the most im-portant thing our stu-

dent movement did was to monitorthe polling stations during the voteon the constitutional referendum.Thousands of students were sent outthroughout Venezuela’s cities tomonitor those stations and to ensurethat all votes were counted.

On December 2, 2007, a day thatmarked a new era in Venezuela, theconstitutional reform was defeated.

The true revolution inVenezuela will have happenedthe day we have strong andliberal institutions that defend the rights of everyVenezuelan.

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4 • Cato’s Letter SUMMER 2008

Holding the Venezuelan flag aloft, Yon Goicoechea accepts the 2008 Milton Friedman Prize for AdvancingLiberty. He is joined by members of the Venezuelanstudent movement, who hold T-shirts bearing a whitehandprint, a symbol of nonviolence.

This defeat was totally unexpected. Itrocked Chávez, Venezuelans, and theworld. Hugo Chávez had been con-sidered invincible. But the defeat ofthe constitutional reform showedthat a vast and energetic oppositionexisted. On that day, the possibilityof a better Venezuela won.

What does the future hold forVenezuela? Though more successesfor the student movement would fol-low in the wake of the defeat of thereferendum, still, it is hard to say. Iwould, however, like to say this: Wedo not fight against one man. HugoChávez does not define Venezuela.

Much like the student movementitself, a new Venezuela is emerging. Anew Venezuela that believes that the

only way forward is through liberty.Liberty unleashes the human capaci-ty to innovate. It unleashes humancreativity. The poverty that plaguesLatin America cannot be solved by adictator. It cannot be solved by amessiah. It cannot be solved by thestate. The only way to get rid of thisscourge and move forward is for mil-lions of people to work and fight fortheir families without the interfer-ence of the state. We will not reachour goal in a month or a year, so wehave to prepare ourselves for a longstruggle. The true revolution inVenezuela will have happened theday we have strong and liberal insti-tutions that defend the rights ofevery Venezuelan.

SUMMER 2008 Cato’s Letter • 5

6 • Cato’s Letter SUMMER 2008

You’ve served as chief economist at FordMotor Company, a professor at two top univer-sities, a senior analyst in the Defense Depart-ment, and a senior aide to President Reagan.In some sense, you’ve been at the top of aca-demia, government, and business over thecourse of your career. What’s the most impor-tant thing you have learned in the process?My wide experience has taught me one impor-tant lesson: it often takes only a few people toachieve major change—for better or for worse—because most people are either ignorant aboutor indifferent to most issues. I make this pointboth to encourage those who aspire to leader-ship and to warn the larger community to sup-port institutions that limit the power of anyone person or group.

Many Cato’s Letter readers remember the Rea-gan years fondly. What was it like working forPresident Reagan? President Reagan was not a very analytic per-son, but he had very good judgment on a widerange of issues. I was puzzled how anyonewhose early career was as a movie actor coulddevelop such good judgment, and I onlylearned later that his judgment on many issueswas formed by his personal study of the issuesthat he addressed as a spokesman for GeneralElectric. When he did not understand an issueor was uncomfortable with the response pro-posed by others, he would usually defer theissue and seek broader advice. His judgmentabout people was more mixed—his worst judg-ments were to appoint General Alexander Haigto be secretary of state and Don Regan as hissecond term chief of staff—but he made a su-perb judgment that he could work productively

with Mikhail Gorbachev to end the Cold War.

As an economist, you’re best known for yourwork in public choice economics. Your newbook Reflections of a Political Economist con-tains selections from the large body of workyou’ve done on this subject. What does publicchoice say about politics that you won’t find inthe pages of a newspaper?Public choice leads to numerous conclusionsthat the general public may not understand:Many elections may not select the candidate orissue position that most of the electoratewould prefer. Reducing marginal tax rates mayincrease government spending. On one issue,however, the standard public choice theory ofvoting behavior is wrong and the perception ofthe general public is more likely to be correct:the issue positions of candidates in a two-can-didate election do not converge but are stronglyrelated to the issue positions of their respectiveparty bases.

What can libertarians expect from the 2008elections?Libertarians have reason to be very concerned.The most likely outcome is a Democratic presi-dent and increased Democratic margins inboth the House and the Senate. The major near-term threats to limited government are the pro-posals for universal health insurance and for asubstantial reduction in the emissions of car-bon dioxide. The major long-term threats arethe huge unfunded liabilities for Social Securityand Medicare, problems that most Democraticpoliticians have yet to acknowledge. For someyears, the best outcome for which we have anyreason to hope is a divided government.

Cato Scholar Profile:WILLIAM A. NISKANENWILLIAM A. NISKANEN has been chairman of theCato Institute since 1985, following service on PresidentReagan’s Council of Economic Advisers. His 1971 bookBureaucracy and Representative Government is considered aclassic. Niskanen holds a B.A. from Harvard and a Ph.D.in economics from the University of Chicago.

SUMMER 2008 Cato’s Letter • 7

The IRA Rollover: coming back?emember that handy little provision(now expired) that allowed you tomake a gift directly from your IRA

account to a favorite charity? Well, it may becoming back! The House has already passed aone year “extender” and the Senate is likely todo so too. Any House/Senate compromise willprobably contain the same $100,000 cap thatwas found in the original legislation.

Just to be clear, this IRA rollover won’t saveyou gobs of money, but even small tax savingsare welcome. The rollover only facilitates chari-table giving rather than offering any newbreakthrough deduction. Without the rollover,if you want to fund a gift with IRA dollars, youhave to take a distribution from your IRA andinclude that distribution in income. You thenmake your gift and claim a charitable deduc-tion on your income tax return. Since charita-ble deductions are subject to various “percent-age” and “clawback” limitations, you may notget to deduct the full amount of your gift.

But with the rollover in place, you are as-sured of a perfect one-for-one match—at leastup to $100,000. No distribution need be in-cluded in income and no charitable deductionneed be claimed—since the dollars are rolled di-rectly from your IRA to charity.

Right now the prospects for a one-year ex-tension of this popular provision look good. Itwould be great if this benefit were made perma-nent, but that is not in the current legislativecards. We’ll keep you posted on the fate of thelikely one-year extension package.

The Estate Tax: not going away anytime soon!You may also be wondering what is likely to

happen with the estate tax. As you are probablyaware, prospects for total repeal are dim indeed.

Just to set the stage, bear in mind that right

now, in 2008, we have a $2,000,000 per personexemption from estate tax. The exemptiongoes to a fairly generous $3,500,000 in 2009and in 2010 the Estate Tax is repealed—but therepeal is effective for one year only. Then, as thelaw now stands, the Estate Tax comes backwith a vengeance in 2011: the per person ex-emption would be a miserly $1,000,000 andrates would peak at a prohibitive 55 percent.

Obviously this kaleidoscopic mélange cre-ates an unworkable situation—how can folksplan in the midst of constantly shifting ratesand exemption levels? If you are wonderingwhen some semblance of order and sanity islikely to return, you should know that mostcommentators agree that Congress will hashout a compromise after the elections and be-fore the one-year repeal takes effect.

The compromise could look pretty differ-ent depending on who wins the White House.Senator Obama seems to favor a $3,500,000 ex-emption and Senator McCain favors a$5,000,000 exemption. In the past, McCain in-clined toward repeal, but, since repeal is nolonger politically viable, he now favors relativelygenerous exemptions and low rates.

Of course, Cato scholars have long backedcomplete repeal of the estate tax, a tax thatmostly serves to tax, for a second time, assetsthat have already been subjected to income tax.But that is unlikely to happen in the short orintermediate term. But we do promise to keepyou informed on whatever compromise Con-gress ultimately crafts.

If you have questions on estate or gift planning, please contact Gayllis Ward, atgward@cato.org or 202.218.4631.

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