Remember last time an oil economy crashed catastrophically?
Anders Aslund writes: Venezuela is not the first developed country to put itself on track to fall into a catastrophic economic crisis. But it is in the relatively unusual situation of having done so while in possession of enormous oil assets. There aren’t many precedents to help understand how this could have happened and what is likely to happen next.
There is, however, at least one — the Soviet Union’s similar devastation in the late 1980s. Its fate may be instructive for Venezuela — which is not to suggest Venezuelans, least of all the regime of Nicolás Maduro, will like what it portends.
Venezuela has been ailing ever since the decline in oil prices that started in June 2014, and there is no reason to think this trend will shift anytime soon. Energy prices move in long quarter-century circles of one decade of high prices and one decade of low prices, so another decade of low prices is likely. Similarly, the biggest economic blow to the Soviet Union was the fall in oil prices that started in 1981 and got worse from there.
“Maduro seems intent on printing money like crazy, so the next step will be hyperinflation.”
But the deeper problem for the Soviet Union wasn’t the oil price collapse; it’s what came before. In his book Collapse of an Empire, Russia’s great post-Soviet reformer Yegor Gaidar pointed out that during the long preceding oil boom, Soviet policymakers thought that they could walk on water and that the usual laws of economic gravity did not apply to them. Soviet policymakers didn’t bother developing a theory to make sense of their spending. They didn’t even bother paying attention to their results. The math seemed to work out, so they just assumed there was a good reason.
This is as true of the current Venezuelan leaders as it was of the Soviet leaders. The Venezuelan government, though it doesn’t claim to be full-fledged in its devotion to Marxism-Leninism, has been pursuing as absurd an economic policy mix as its Soviet predecessor. It has insisted for years on maintaining drastic price controls on a wide range of basic goods, including food staples such as meat and bread, for which it pays enormous subsidies. Nonetheless the Venezuelan government, like the Soviet Union’s, has always felt it could afford these subsidies because of its oil revenues.
But as the oil price has fallen by slightly more than half since mid-2014, oil incomes have fallen accordingly. And rather than increase oil production, the Venezuelan government has been forced to watch it decline because of its mismanagement of the dominant state-owned oil company, PDVSA.
And now Venezuela seems intent on repeating the Soviet folly of the late 1980s by refusing to change course. This is allowing the budget deficit to swell and putting the country on track toward ultimate devastation.
The Soviet Union in its latter years had a skyrocketing budget deficit, too. In 1986 it exceeded 6 percent of GDP, and by 1991 it reached an extraordinary one-third of GDP. Venezuela is now following suit. The Soviet Union used its currency reserves to pay for imports, but when those reserves shrank, the government financed the budget deficit by printing money. The inevitable result was skyrocketing inflation.
It seems as if President Nicolás Maduro has adopted this tried-and-failed combination of fiscal and monetary policy. Venezuela already is dealing with massive shortages as a result of its controlled prices, because the government can no longer afford its own subsidies. But it will get worse from here.
Maduro seems intent on printing money like crazy, so the next step will be hyperinflation. Inflation is already believed to have reached 700 percent a year, and it is heading toward official hyperinflation, that is, an inflation rate of at least 50 percent a month. Read the rest of this entry »
Nicolás Maduro es Encantador y Persuasivo! Venezuelan President Nicolás Maduro Threatens to Jail OpponentsPosted: October 29, 2016
Caracas (AFP) – Venezuela‘s President Nicolas Maduro threatened on Friday to jail his political opponents if they follow through on their vow of launching a legislative trial to remove him from power.
Shrugging off a partially-observed strike which the opposition called to raise pressure on him, the socialist president went on the counterattack.
Maduro sharpened the tone in a volatile political and economic crisis that has sparked food shortages and riots in the South American oil producer.
“If they launch a supposed political trial, which is not in our constitution, the state prosecution service must bring legal action in the courts and put in jail anyone who violates the constitution, even if they are members of Congress,” Maduro said in a speech Friday.
Friday’s strike was called after authorities blocked a bid by the center right-dominated MUD coalition to hold a referendum on removing Maduro from power.
After that move, the crisis heated up this week. Opposition lawmakers vowed to put Maduro on trial and exchanged accusations of coup-mongering with the mustachioed president.
Friday’s strike seemed to be only partially observed.
In the capital Caracas and cities such as Maracaibo and San Cristobal, the streets were quieter than normal but public transport was running and banks and some schools opened as usual.
Clashes broke out in recent days between riot police and pro- and anti-government protesters around the country.
Maduro earlier threatened to break the strike by sending the army to take over firms that took part in it.
The center-right coalition’s latest move to pressure the unpopular leftist leader came after anti-government protests drew hundreds of thousands of people on Wednesday.
Maduro vowed to respond forcefully. Read the rest of this entry »
It is safe to predict that more countries will refuse to learn from history and give socialism a go.
Chavez became the bugaboo of American politics because his full-throated advocacy of socialism and redistributionism at once represented a fundamental critique of neoliberal economics, and also delivered some indisputably positive results… When a country goes socialist and it craters, it is laughed off as a harmless and forgettable cautionary tale about the perils of command economics. When, by contrast, a country goes socialist and its economy does what Venezuela’s did, it is not perceived to be a laughing matter – and it is not so easy to write off or to ignore.
Last Sunday, Nicholas Casey of The New York Times reported in an article Dying Infants and No Medicine: Inside Venezuela’s Failing Hospitals,
By morning, three newborns were already dead. The day had begun with the usual hazards: chronic shortages of antibiotics, intravenous solutions, even food. Then a blackout swept over the city, shutting down the respirators in the maternity ward. Doctors kept ailing infants alive by pumping air into their lungs by hand for hours. By nightfall, four more newborns had died… The economic crisis in this country has exploded into a public health emergency, claiming the lives of untold numbers of Venezuelans.
I start with these rather long quotations with a heavy heart. Contrary to Sirota’s glib prediction, I do not intend to laugh off as “harmless and forgettable” Venezuela’s “cautionary tale about the perils of command economics.” I do not find dying children laughable. But then, I did not laugh when I read about starving Ukrainians eating their children during Stalin’s Holodomor.
I did not laugh when I read of Khmer Rouge soldiers shooting infants off their bayonets in communist Cambodia. And I certainly did not laugh when I saw with my own two eyes children reduced to starvation by the Marxist dictator of Zimbabwe, Robert Mugabe. In fact, there is nothing laughable about the almost incomprehensible degree of suffering that socialism has heaped upon humanity wherever it’s been tried. Read the rest of this entry »
The country is poised between chaos and dictatorship
“THIS government is going to fall!” chanted hundreds of protesters alongside the Avenida Libertador in central Caracas. Staring them down were ranks of security forces—from the police, the national guard and the feared, black-uniformed SEBIN (secret police)—charged with making sure that does not happen. Looming above was a huge grinning portrait of the late president, Hugo Chávez.
The protesters’ aim on May 18th was, as it has been on two previous occasions this month, to march to the offices of the National Electoral Council (CNE). The supposedly independent, but nakedly biased, institution has been delaying its consideration of a petition it was handed weeks ago, the first stage of a process to recall Venezuela’s president, Nicolás Maduro, through a referendum. With government forces blocking all routes to the CNE, the protesters were never likely to get close.
When a handful broke through the cordon, some attacking the police, the authorities had the excuse they needed. Multiple, deafening volleys of acrid tear gas burst above the crowd. At least 18 people were wounded and 26 detained. Pamela, a retired agricultural engineer in her 70s, was standing outside her home overlooking the avenue, holding a small handwritten cardboard sign saying “Maduro. Resign Now!” Tears in her eyes, she retreated inside. “This breaks my heart,” she said.
The regime may feel the day was a success. The protests were not huge. The poor have yet to stream down from the barrios en masse to demand the president’s ouster. But they are enraged and the government is worried. Almost 70% of Venezuelans want Mr Maduro to leave office this year, according to a recent poll. That demand is fuelled by the appalling deterioration of living standards under his incompetent rule. Venezuela is suffering the world’s deepest recession. Self-defeating price and currency controls and rampant corruption are causing shortages of everything from medicines to rice. “I am here because I am sick of queuing from dawn,” said José Galeano, a protester who describes himself as a poor man. “This has to end.”
Across Venezuela, small protests are now commonplace. Social media are awash with videos of shoppers plundering supermarkets and brawling with each other. As crime soars, the lynching of petty criminals is becoming more common.
The desperation such incidents reveal is dismissed by the increasingly delusional Mr Maduro during his endless television appearances. The shortages, he says, are the consequence of an “economic war” waged by enemies at home and abroad. Some in Caracas joke that he must be the only man who can claim to fight a fictional war, and then lose it. But they fear the direction his rule might now take. Read the rest of this entry »
What’s the real definition of socialism? How is it distinct from regulation and a social welfare state? Why are intellectuals still enamored of a system that brought us Stalin, Hitler, and more recently Hugo Chavez and Kim Jong-Il? And what can the United States learn from Sweden about free enterprise and capitalism?
Reason.tv’s Nick Gillespie sat down with Kevin Williamson, who is deputy managing editor of National Review and author of a new book, The Politically Incorrect Guide to Socialism, to discuss the meaning of socialism in history and the current moment.
— The Economist (@EconAmericas) August 12, 2015
Defenders of the Venezuelan regime would never allow the White House to arrest opposition leaders and shut down unfriendly media outlets. So why the double standard?
Dictatorship and Double Standard
Michael Moynihan writes: At the southernmost point of Central Park, on a small strip of sidewalk abutting 59th Street, hundreds of Venezuelans swarmed a statue of Simon Bolivar, the Caracas-born liberator of South America and a figure now most commonly associated with the bolivarian revolution of Hugo Chavez and his rechristenedBolivarian Republic of Venezuela. But it’s an association that when mentioned inthis crowd produces furrowed brows and narrowed eyes, quickly followed by a rapid-fire recapitulation of Chavez’s many crimes.
“Duarte was merely cataloging the massive shortages of basic goods (rice, milk, toilet paper) that have crippled Venezuela in recent years, not engaging in a bourgeois, fascist bakeoff.”
The necessary symbolism of the meeting point trumped practicality: the crowd quickly swelled, spreading like an inkblot from the small patch surrounding Bolivar into a lane of midtown Manhattan traffic. They banged pots. They shouted slogans about the Cubanization of their patria, from which many are exiled. They carried signs detailing spiraling crime rates (23,000 murders last year), many plastered with grim photos of those abused and murdered, and others with mordant slogans (“In Venezuela everything is scarce, except bullets”).
We are far from the bloody streets of Caracas; these protesters are ringed not by heavily armed and body-armoured National Guardsman, but are politely attended to by a handful of paunchy and bored New York City cops. There was no threat of violence here–with the single exception of a slobbering, toothless, and possibly blotto Spanish speaker who, while ambling past the crowd, shouted something that drew the ire–and very nearly the flying fists–of a man with a large Venezuelan flag tied around his neck–the anti-Chavez superhero.
Tim Stanley writes: How are things coming along in Venezuela, that paradise of democratic socialism? You must remember Venezuela. That’s the country that Diane Abbott said was showing “a better way”, which Owen Jones told us had proven that “you can lead a progressive, popular government that says no to neo-liberalism”? The apple in the eye of Marx, the last hope for humanity in a world of fat cat banksters and austerity Scrooges. The Copacobana of the international revolution. Viva!
“How is Venezuela doing? …It’s going to hell in a handcart, that’s how it’s doing.”
How is Venezuela doing? Well, tens of thousands of protesters are in the streets, the army’s been sent to crush revolt, an opposition leader has been arrested and supporters of the government just shot dead a former beauty queen. It’s going to hell in a handcart, that’s how it’s doing.
The late dictator’s children won’t move out of the president’s official residence, which is filled with antiques and priceless art
It’s hard times in Venezuela these days. The economy is in shambles, crime is spiraling, and the opposition is leading increasingly strident protests on the streets. To make matters worse, President Nicolás Maduro can’t even deal with the crisis from the comforts of the presidential palace.
Constitutionally, of course, Maduro has been able live in La Casona, a luxurious villa in the heart of the capital, since he was sworn in last year. The only problem: Almost a year after Maduro’s predecessor, Hugo Chávez, passed away, his three grown children—Maria Gabriela, Rosa Virginia and Hugo Jr.—are still living in the villa. Apparently, they have no intention of leaving.
The two daughters have allegedly converted La Casona into a social club for friends of the family. According to recent media reports, neighbors complain of “deafening” parties. Fast-food restaurants and catering agencies refuse to deliver to the mansion, allegedly, because the Chávez kids have stopped paying their bills. Even concert organizers are complaining; Chavez’s daughters allegedly force them to hand over dozens of free tickets so they can share them with their friends. (Both the country’s Information Ministry and the Chávez family were unavailable for comment.)
Originally built in colonial times, the glamorous La Casona residence was acquired by the government in the 1960s, during the presidency of Raúl Leoni. The mansion features six main bedrooms and several more for guests. There’s a swimming pool, a private movie theater and a series of private gardens.
Asked for his thoughts on the recent protests, Oliver Stone described the students as “sore losers.”
…Chavez successor, Nicolas Maduro, won a narrow election in 2013. But this came after former President Hugo Chavez announced he would alter the Constitution so he could be President for life and then announced he would rule by decree without any input from legislators…
Frances Martel reports: Venezuelan dictator Nicolás Maduro has a violent situation on his hands, as protests against the socialist regime escalate and the death toll rises. Reuters reports that protesters have vowed to continue until Maduro resigns, but Maduro has only escalated the oppression, raiding Caracas homes in search of opposition leader Leopoldo López.
The streets of Caracas–already among the world’s most violent thanks to more than a decade of rule under Hugo Chávez–were aflame this weekend as Venezuelans used the national “Youth Day” holiday to trigger protests against the socialist dictatorship this weekend. This Youth Day, a holiday celebrating a battle of independence against Spain, three student protesters were reported dead and 23 injured thanks to government violence. The protest itself was peaceful; violence began when it culminated and police agitated the remaining protesters.
“I tell you, Maduro, you are a coward. You will not force my family nor myself to submit. To my family: Strength, I love you”
López tweeted yesterday. He also posted a video describing the protest and the next steps for his supporters…
Fermín Lares reports: For the Venezuelan President, Nicolas Maduro, the murder of a former beauty queen wasn’t so much a tragedy as an opportunity. Although Venezuelans have become accustomed to violent crime – at an annual average of 79 per 100,000, the country has the world’s highest homicide rate after Honduras – the horrific murders in Carabobo, involving as they did a much-loved celebrity and her family, convulsed the entire nation in shock. Enter Maduro, who loudly declared that he would use an “iron fist” against Venezuelan criminals.
Sure enough, within days of the killings, seven men said to belong to a gang known as “Los sanguinarios del Cambur” (“The bloodthirsty ones of Cambur”) were in custody. But if Maduro was expecting plaudits from a country whose citizens are even more fiercely divided than during the rule of his predecessor, Hugo Chavez, he must have been sorely disappointed. The swift response of the authorities in the Monica Spear case was a stark contrast to the thousands of other murders – there were a total of 24,763 murders in 2013 alone, according to the independent Venezuelan Observatory of Violence (OVV) – that are seldom investigated or resolved.
To the casual observer, it is not immediately clear how the various strands that compose Venezuela’s current economic and political crisis relate to this fundamental breakdown of law and order. What therefore needs to be understood is that, after 15 years of Chavista misrule, the Venezuelan state is not an enemy of the criminal networks that have conquered the country, but their ally.
Venezuela Jails 100 ‘Bourgeois, Barbaric, Capitalist Parasite’ Businessmen in Crackdown: Obama Observes Wistfully, Longingly…Posted: November 15, 2013
Andrew Cawthorne and Deisy Buitrago report: Venezuela‘s socialist government has arrested more than 100 “bourgeois” businessmen in a crackdown on alleged price-gouging at hundreds of shops and companies since the weekend, President Nicolas Maduro said on Thursday.
“They are barbaric, these capitalist parasites!” Maduro thundered in the latest of his lengthy daily speeches. “We have more than 100 of the bourgeoisie behind bars at the moment.”
The successor to the late Hugo Chavez also said his government was preparing a law to limit Venezuelan businesses’ profits to between 15 percent and 30 percent.
Officials say unscrupulous companies have been hiking prices of electronics and other goods more than 1,000 percent. Critics say failed socialist economic policies and restricted access to foreign currency are behind Venezuela’s runaway inflation.
“Goodyear has to lower its prices even more, 15 percent is not enough, the inspectors have go there straightaway,” Maduro said in his evening address, sending officials to check local operations of the U.S.-based tire manufacturer.
Since the weekend, soldiers and inspectors have gone into 1,400 shops, taken over operations at an electronics firm and a battery-making company, and rounded up a handful of looters.
Hugo Chavez’s legacy: How his economically disastrous, politically effective ideology will haunt the country he ruined.Posted: March 6, 2013
Even before Hugo Chávez died, he had become a ghost. A strange, unfamiliar quiet had fallen on Venezuela for weeks as people waited to hear the voice of the president who had been part of their daily lives for nearly 14 years. That’s because Chávez spoke to Venezuelans constantly. In his first 11 years in office, he addressed the nation, on average, every two days. His remarks, usually improvised, typically ran more than four hours. If you add up these talks, which all radio and television stations were required to broadcast, they would amount to 54 full days.
And then there was silence. Venezuelans last heard their president on Dec. 8 when he announced that he was returning to Havana for his fourth operation to treat a recurring bout of cancer. He wouldn’t return to Venezuela until Feb. 18, slipping into a military hospital in Caracas in the middle of the night. (His advisers later admitted that his ability to speak had been impaired by a tracheal tube that had been inserted to assist his breathing.) Chávez had made the trip home, but he never truly returned. He was present but could not be seen. The eerie quiet was only broken with the announcement, delivered by Vice President Nicolás Maduro late Tuesday, that the 58-year-old president was dead.
What has Chávez bequeathed his fellow Venezuelans? The hard facts are unmistakable: The oil-rich South American country is in shambles. It has one of the world’s highest rates of inflation, largest fiscal deficits, and fastest growing debts. Despite a boom in oil prices, the country’s infrastructure is in disrepair—power outages and rolling blackouts are common—and it is more dependent on crude exports than when Chávez arrived. Venezuela is the only member of OPEC that suffers from shortages of staples such as flour, milk, and sugar. Crime and violence skyrocketed during Chávez’s years. On an average weekend, more people are killed in Caracas than in Baghdad and Kabul combined. (In 2009, there were 19,133 murders in Venezuela, more than four times the number of a decade earlier.) When the grisly statistics failed to improve, the Venezuelan government simply stopped publishing the figures…
Argentina’s top TV journalist Jorge Lanata has alleged that he was held in the basement of Caracas airport for nearly two hours while Venezuela’s secret service erased his team’s camera, computer and cellphone memories. Only then, he says, were they allowed to leave the country…
- Venezuelan President Hugo Chavez wins re-election (edition.cnn.com)
- Chavez Re-Elected as Venezuelan President, Defeating Capriles (fox2now.com)
- Update: Tanks in the streets as Venezuelan electoral council declares Hugo Chavez victory (punditfromanotherplanet.com)
- Venezuelan election day – peaceful and transparent please! (dcmontreal.wordpress.com)
Update 10:50 p.m.: According to the Associated Press, Venezuela’s electoral council has declared that Hugo Chavez beat Henriques Capriles in Sunday’s presidential election with about 54 percent of the vote, despite exit polls showing otherwise.
Venezuela Twitter users have claimed Chavez’s victory was wrought with election fraud, and that the socialist incumbent president sent tanks into the streets of his country as those exit poll reports showed him losing. A picture of the tanks surfaced on Twitter Sunday evening.
The British Guardian newspaper reported that Chavez also sent troops armed with AK-47s into Venezuela’s streets to fight against any protests in case unrest came as a result of the news…
via >> The Daily Caller
- Venezuelan Despot Hugo Chavez Rigs Election (sfcmac.wordpress.com)
- Hugo Chavez reelected, electoral council says (cbsnews.com)
- Hugo Chávez wins Venezuelan election, securing fourth term in office (guardian.co.uk)
- (One) Exit Poll Shows Hugo Chávez Losing (reason.com)
- Hugo Chavez Orders Tanks to Streets After Being Declared Winner in Election (thewesternexperience.com)
- Venezuela President Hugo Chavez wins reelection, officials say (latimesblogs.latimes.com)
- Hugo Chavez wins presidential for the third time and will rule until 2012 (guardianlv.com)
- Report: Exit Polls Indicate Hugo Chavez Lost Venezuelan Election (dailypaul.com)