Haters Gonna Hate

Especially when they’re right

Sorry, Venezuela haters: this economy is not the Greece of Latin America
Mark Weisbrot
Predicting a Venezuelan apocalypse won’t make it happen

For more than a decade people opposed to the government of Venezuela have argued that its economy would implode. Like communists in the 1930s rooting for the final crisis of capitalism, they saw economic collapse just around the corner. How frustrating it has been for them to witness only two recessions: one directly caused by the opposition’s oil strike (December 2002-May 2003) and one brought on by the world recession (2009 and the first half of 2010). However, the government got control of the national oil company in 2003, and the whole decade’s economic performance turned out quite well, with average annual growth of real income per person of 2.7% and poverty reduced by over half, and large gains for the majority in employment, access to health care, pensions and education.

Now Venezuela is facing economic problems that are warming the cockles of the haters’ hearts. We see the bad news every day: consumer prices up 49% over the last year; a black market where the dollar fetches seven times the official rate; shortages of consumer goods from milk to toilet paper; the economy slowing; central bank reserves falling. Will those who cried wolf for so long finally see their dreams come true?

Not likely. In the opposition’s analysis Venezuela is caught in an inflation-devaluation spiral, where rising prices domestically undermine confidence in the economy and currency, causing capital flight and driving up the black market price of the dollar. This adds to inflation, as does – in their theory – money creation by the government. And its price controls, nationalisations and other interventions have caused more structural problems. Hyperinflation, rising foreign debt and a balance-of-payments crisis will mark the end of this economic experiment.

But how can a government with more than $90bn in oil revenue end up with a balance-of-payments crisis? Well, the answer is: it can’t, and won’t.

An opinion piece in The Guardian.

From 2013.

4 Responses to “Haters Gonna Hate”

1. JeffS says:

   May 25, 2016 at 12:14 am

   Oopsies!

2. nightfly says:

   May 25, 2016 at 11:12 am

   Writing op-ed means never having to admit you’re stupid.

3. aelfheld says:

   May 29, 2016 at 3:46 pm

   Guardian is gonna Guardian.

4. Michael Lonie says:

   June 3, 2016 at 12:03 am

   To write for the Guardian it helps to be stupid and shortsighted.

   “This adds to inflation, as does – in their theory – money creation by the government.”

   You never heard of monetary economics? Inflation, the secular one-way rise in prices over time (as opposed to rises and declines) is always caused by government. You never heard of Gresham’s Law? It’s running wild in Venezuela.

   “But how can a government with more than $90bn in oil revenue end up with a balance-of-payments crisis? Well, the answer is: it can’t, and won’t.”

   If the bosses steal the money it can and will. Hugo Chavez’s relics are worth over four billion (that’s thousand million for non-Americans). How much Nicki and his consiglieri are worth is anybody’s guess, although I suppose the next issue of Forbes 400 Wealthiest people in the world might give us a clue. And if they don’t maintain the oil industry’s infrastructure and find new pools of oil, that money won’t be coming in for much longer. And that is exactly what the Chavistas have been doing. Turns out that, contrary to what Lenin wrote, business is not now based on simple operations that anybody can do.