How oil lubricates our enemies.

Diplomacy is the police in grand costume--Napoleon

With the collapse of the Soviet Union, Marxism was discredited as an unworkable--and often murderous--alternative to consumer capitalism. Eastern Europe was freed and began to prosper in a manner unimaginable just a decade earlier. China and India jettisoned statism, and found prosperity by emulating Hong Kong, Japan, Singapore, South Korea, and Taiwan. South America was democratizing and began to liberalize its economies (with mixed success).

Here in the U.S., Americans grew freer and richer than at any time in their history. In contrast, Europe's creeping democratic socialism left much of the continent with low economic growth, high unemployment, a demographic crisis, and a growing cultural pessimism. In short, there was global proof that the more individual freedom and capitalism, the more the good life followed.

Why, then, are socialists such as Hugo Chavez in Venezuela and Evo Morales in Bolivia now expanding an anti-capitalist bloc in Latin America--nationalizing companies, jailing dissidents, and whipping up the cult of Che Guevara and Fidel Castro from Peru to Mexico? Why here at home, when the stock market is near all-time highs, the unemployment rate low, and home ownership at record levels, with interest rates and inflation both in check, do the American people express little confidence in their economy and President Bush's leadership?

And given that there are more democracies now than in the history of civilization, why is the United Nations proving more illiberal than ever--blackmailed by Saddam Hussein to waffle on sanctions, mired in a tawdry $50 billion scandal, and unable to bring a renegade theocracy in Iran to meet minimal compliance with international nuclear nonproliferation standards?

The answer to all of these diverse anomalies is oil, oil, and more oil. During the last two years, a booming global economy, uncertainty in the Middle East, and the arrival of newly capitalist but petroleum-poor India and China have created a seller's market unprecedented in the history of the oil industry. The resulting jump in the price of petroleum has distorted both politics and perceptions of what works in economics and politics, and what does not.

Take away the $300-500 billion in windfall profits piled up in the coffers of the ...