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Hugo Chavez: International Economic Clown
From The Daily Capitalist
If it weren't for Hugo Chávez, my favorite Latin American dictator, life would be pretty dull. The guy is a walking, talking economics lesson. He's so easy to pick on because he has the Sadim touch (you know, instead of turning things into gold like Midas, he turns things into crap).
Everything he has done has moved Venezuela backwards. The people who actually do something productive in the economy hate him. The have-nots love him because he promised them lots of free stuff. But lately his numbers are sinking: his policies don't work. He's a typical populist caudillo1 like his hero Castro. He seeks only power and disdains concepts like individual liberty, freedom of expression, and free markets.
Chávez has no idea how the world or human nature works. He has no idea how economies work. The guy is ignorant. If all you study are socialists and populists, you will be ignorant. Ignorant of classical liberal ideas such as natural law, free markets, and limited government. I'm going to guess that his idea of Austrian economic theory has something to do with Arnold Schwarzenegger.
* * * * *
In 2009 he engineered the constitution so that there are no term limits to his presidency. He's been seizing or muzzling the opposition media. He has been beefing up the military and buying lots of arms. Other than a few rows over soccer and minor border disputes, Latin America has been a pretty peaceful continent so one must conclude his army will be directed at his fellow Venezuelans. He is spreading his poisonous ideas and oil wealth around the continent.
The government claims that they have had "robust" economic growth in recent years, but that is a lie. First, foreign and local capital has been fleeing the country. Second, no one wants to invest there because they fear nationalization. Oil is about 80% of the economy (90% of exports) and it is owned and controlled by the government. They claim GDP rose substantially in the latter part of the last decade but it was all due to rising oil prices. With declining oil prices, the economy has tanked. There is very little growth from private industry.
Most of the statistics for inflation and growth are made up by the government or the World Bank or the U.N. If you track economic growth it matches perfectly with oil prices. Inflation was officially 27% in 2009, but the free (black) market rate for the bolivar is actually much lower. So, it is my guess that the fictional growth claimed by the government is much less and inflation is higher.
Chávez continues to nationalize major industries. The oil industry was nationalized in 2002 and production has declined since then for several reasons. First he fired all the engineers and skilled workers after the 2002 protest strike (about 19,000 people fired). Second he has neglected to invest in the production infrastructure and the physical plant is degrading. He just spends.
His price controls (over 400 items are controlled) have lead to shortages of primary food products as growers and processors try to evade controls. Food production is declining and it must import two-thirds of its needs. There is power and water rationing as well. People are unhappy. He's rigged politics so that he can perpetuate his power. He'll be hard to get rid of unless he's assassinated or there is a coup.
* * * * *
What do you do if you are a dictator on the slide? It's hard to just declare martial law because it's so anti-democratic and it may backfire on him and even his friends in neighboring countries may abandon him. So you just bide your time and do it in stages.
First you devalue the currency. He just devalued the bolivar by 50% (4.3 to the dollar) and he created a two-tier system so the bolivar is slightly higher for imports (2.6 per dollar) than exports. The real ("black" market) value of the bolivar, according to the Wall Street Journal, is 6.25:1.
“They put the value of the dollar at more than 6 in an arbitrary and illegal manner,” Chávez said. “We have to organize to reduce and attack that speculative, illegal dollar that hurts the Venezuelan economy so much.”
Hugo is upset that people might want to protect their own interests rather than go down with his ship.
More from the WSJ article:
Mr. Chávez, 55 years old, is gambling that the benefits of a weaker currency will offset faster inflation. ...
In Mr. Chávez's favor, a weaker currency helps narrow a growing budget shortfall by instantly giving his oil-rich government more local currency to spend per barrel of oil exported by the state petroleum company, PDVSA. That is a key consideration with congressional elections looming in September.
Mr. Chávez has watched his popularity slide amid corruption scandals, a shrinking economy, rising crime and shortages of food and electricity. Increased spending could boost Mr. Chávez's popularity.
Mr. Chávez also predicted a weaker currency would breathe life into a domestic economy that depends on imports for everything from beef and milk to cars. ...
Devaluation isn't enough to revive the domestic manufacturing base. Few investors are willing to brave Venezuela's maze of price caps, currency controls and the ever-present fear of nationalization. ...
What is more, by keeping a subsidized dollar rate for importing food, medicine and essential items, Mr. Chávez removes any incentive for Venezuelans to produce what they need most.
* * * * *
I can write the script for Venezuela.
All this spending won't do anything to help the economy. It doesn't create wealth or jobs; it only redistributes the wealth created over the years from oil production. In case you haven't seen the obvious, this is Keynesian fiscal stimulus. Give money away to those whom the government favors. Pay a supporter to dig a hole and another supporter to fill it.
Which means citizens are bailing out of the bolivar because they think it will be worthless. Another slight problem he has with human nature.
At Caracas's middle-class Sambil shopping mall, lines at cashiers reached 50-deep. Carmen Blanco, a 28-year-old accountant, waited to buy a 42-inch flat-screen television she doesn't need because she already has one at home.
"It doesn't make any sense to keep my savings," Ms. Blanco said Saturday. "I'd love to see how things work in a normal country."
Carmen is one sharp person, although I would recommend gold jewelry or just gold instead of TVs. Which shows that even with an intelligent middle class, guys like Chávez can still succeed.
Chávez's response:
Venezuelan President Hugo Chávez said that businesses have no reason to raise prices following the devaluation of the bolivar and that the government will seize any store that seeks to capitalize on the situation.
Chávez said he’ll create an anti-speculation committee after private businesses warned that prices would double and consumers rushed to buy household appliances and televisions. The government is the only authority able to dictate any such increases, he said.
“The bourgeois are already talking about how all prices are going to double and they’re closing their businesses,” Chávez said in comments on state television during his weekly “Alo Presidente” program. “People, don’t let them rob you, denounce it, and I’m capable of taking over that business.”
Goods will quickly disappear from the shelves, businesses will close, the offending "bourgeois" (shop owners) will be arrested, and life and commerce will grind to a halt. Demonstrations will break out. Counter-demonstrations will be orchestrated by Chavezistas. The military will be called in to repress the people ("create order"), martial law will be declared and never lifted, and Hugo will be the new Castro. More price controls, rationing, and a growing bureaucracy will be the order of the day. To divert attention to his failures he will blame the U.S., traitorous bourgeois elements, maybe invade Colombia, pay off his thugs, spend money, and neglect oil production. A major part of our oil supply will be jeopardized.
He'll always be looking over his shoulder for someone trying to overthrow him or kill him. He'll create a police state with local block wardens and a powerful security service. People will try to leave. Lots of people.
All this because the guy knows nothing about economics or human nature.
* * * * *
I have a suggestion how we can help Chávez along: Boycott Citgo. Yes, he owns it and they sell a lot of gasoline in the U.S. Don't go there. Don't support his repressive, ignorant, backward regime.
1 A caudillo is a charismatic military leader with populist-socialist policies which aim to redistribute wealth to the poor masses, at least in the beginning of the regime. They always end up as dictators of various stripes. They control the economy through patronage to their supporters, redistribution of capital, and they rely on the military to maintain control. They promote a personality cult which is why you see huge posters of the leader. They can be leftist or kleptocratic-oligarchic. Castro is a typical modern leftist caudillo. Of course being authoritarian, it doesn't really matter if they are "left" or "right."
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I would would work for a common goal. Starting with the removal of ignorance. Some us us are working on that project now.
Thank you, you know who you are!
If anyone is ignorant of the facts, it is you econophile. You prove it in your opening paragraph by calling Hugo Chavez a dictator. The only dictator I've seen in the world in the last nine years was George W Bush.
According to the dictionary definition of a dictator, he is: "a person exercising absolute power, esp. a ruler who has absolute, unrestricted control in a government without hereditary succession."
Last time I checked, the only thing Chavez did to change the election procedures was eliminate term limits. And that was passed by a national election, not unitary declaration like in the US. He never declared himself supreme ruler.
Nearly every major change to the nations economy and its social programs were passed by national referendum and approved by the parliment. He never once declared these things to be the law because he said so.
He remains president because the people keep re-electing him.Not because he refuses to leave office.
So what exactly is your background. Because government studies is definitely not it.
Misguided Propaganda Techniques perhaps?
Seriously, who invited the Chavez Youth to spread propaganda here?
To think within politics is a choice to be
blind in one eye or the other.
In the past, my beliefs hindered my trading.
"Rule by decree passed for Chavez"
http://news.bbc.co.uk/2/hi/americas/6277379.stm
You were saying Einstein?
You're right -- it would be best if we let U.S. oil companies run the governments of South American nations. Just like here in the states...
castro's track record, in cuba, is better than most. they've done a lot, with a little, and we haven't helped matters, with the embargo. I'm not a communist, but usually you replace things, with something better. castro came to power, fighting the american backed corruption. now the corruption here, is destroying, our country. if you can't control the corruption, does it really matter what you call the system, it feeds on
Of course you're going to oppose Chavez. He doesn't believe in American style capitalism. It ruins lives and nations. And guess what, he's absolutely right.
Free markets are NEVER free. Someone always pays the price for the excesses
of American lifestyle. A lifestyle that is wholly unsustainable and absolutely destructive. As today's market situation is proving beyond any doubt.
If free markets and capitalism are so great, then why are we falling into third world economic status right now?
Because of free markets, America is broke. Worse than broke, we're so far into debt
we'll never get out.
Social democracies such as Venezuala work because everyone has a fair shot. There is nothing you can point to prior to Chavez that proves everyone in that nation had a fair chance at being successful. If you do, than you are a liar as well as ignorant of economics.
The sole reason economies such as these have never worked is beccause they've never had a chance to prove if they do without interference from others. There is not one example of an alternative economy that didn't have disruptions, wars, military coups, or other tactics used to derail its progress purposely done by the US and/or capitalist countries. I wonder why?
Could it be that if the world saw that if it was allowed to stand on its own merits, then the capitalists would be put out of business? Of course it would, that's why there will always be wars instigated by the US.
It is fear that motivates articles like this one. Nothing more.
If socialist democracies (which is what Venezuala is) are so evil and bad for business, then let it succeed or fail onits own merits.
What are you so afraid of?
"Social democracies such as Venezuala work because everyone has a fair shot."
WTF? Are you serious? A fair shot at being shot at a fair, maybe.
It's obviously failing hard. The more the US continues to down the "social" democracy path, the more we fail.
This is perhaps the stupidest comment I've read on here.
Venezuela's economy isn't WORKING, get it? It's in a state of freefall.
WE do not have a capitalist economy...don't call FNM/FRE, the CRA, the Fed, PPT, SS, Medicare, Medicare part D, and all the rest of it a freaking capitalist economy. You call us capitalist when we poured trillions into the hands of banks that should have failed, insurers that should have failed, carmakers that should have failed, lenders that should have failed, and ON AND ON AND ON?
Engage your gd'd brain next time.
We have not had free markets for years.
good intentions? Seems like every one claims they are for the little guy.
Its every man for himself in this modern world of lies.
Your comment is based on the big lie of our time, that the present financial crisis is a result of free markets being free. They weren't. In fact, they were heavily regulated. I suggest that you do some reading on how a true free economy would function. "Capitalism: the unknown ideal" by Ayn Rand is good place to start.
Ulf
Your comment is based on the big lie of our time, that the present financial crisis is a result of free markets being free. They weren't. In fact, they were heavily regulated. I suggest that you do some reading on how a true free economy would function. "Capitalism: the unknown ideal" by Ayn Rand is good place to start.
Ulf
Your comment is based on the big lie of our time, that the present financial crisis is a result of free markets being free. They weren't. In fact, they were heavily regulated. I suggest that you do some reading on how a true free economy would function. "Capitalism: the unknown ideal" by Ayn Rand is good place to start.
Ulf
Excellent post, forget about some of the raving communist lunatic clowns that post comments...
"...he engineered the constitution so that there are no term limits..."
And how does this differ from the puppet rulers (for the MBTC) of our country, i.e. the Senior Committee Members of the Senate and the House like Barney Frank, Chris Dodd (about to replaced by his clone, without an election), the fool from W.Virginia, Robert Byrd, Ted (the dead, thank heaven)Kennedy, Orrin Hatch, Nancy Pelosi,and on and on?
Hmm?
There's either a banana boatload of "Anonymous"s here or somebody's got a bad case of multiple personality disorder.
LOL, I thought the same thing............
Guy's/Gal's number yourselves as Anon- 1-2-3-4-5, or something....LOL
Maybe, but only one of the anonymous comments was mine. Could it be due to the moderation policy on anonymous comments? They might show up all at once if they were approved all at once.
Make no mistake, Obama would like to follow the same path.
"Make no mistake, Obama would like to follow the same path."
Funny, I would swear he IS doing the same things.........just through surrogates, at his (Silent) beck and call.
Chavez is a classic populist demagogue and tyrant; most democracies have ended when enough voters believe the something for nothing promises of such populists.
"Other than a few rows over soccer and minor border disputes, Latin America has been a pretty peaceful continent..."
Dude - do you have anything but a surface-level understanding of Latin America? This writing is totally amateur compared with the rest of this site. Here are some good Google projects for you: (1) "Central America in the 80s-90s"; and (2) "South America in the 70s." Go learn something. Latin America has had almost nothing but varying levels of socio-economic violence for the last 150 years. You obviously have no idea what you're talking about, which is ironic considering the whole point of your article is that Chavez knows "nothing about economics or human nature."
Keynesian fiscal stimulus, huh. Do tell. I guess Milton Friedman would love the rest of "free" Latin America, where wealth is concentrated in the hands of a very few powerful families, who move in and out of government and business at will, fleecing the populace so that they can build bigger walls around their compounds and pay the salaries of their private army. Freedom, indeed.
¨Minor border disputes"? A comment that deserves the Nobel prize for ignorance.
Millions of indigenuous murdered in Guatemala, the Sandinasta Revolution, the uprising in San Salvador resulting in tens of thousands killed and on and on and, of course, US government support for almost all of it, for trying to and usually destroying any leader or movement in the interest of the people and actively training their militaries in torture at the School of the Americas. No wonder his life would be boring without Chavez, he doesnt know, or pretends not to know, shit about the Americas.
I thought I'd like to actually do the replacements directly in the text to clarify how hypocritical this article is:
Demonstrations will break out after the election. Counter-demonstrations will be orchestrated by the Bush campaign in Florida after election in 2000. The military will be called in to repress the people ("create order") at the Republican convention, martial law will be declared and never lifted by the "Patriot" Act, and Bush/Obama will be the new Castro. More price controls, rationing (if you don't have a job you can't buy anything), and a growing bureaucracy will be the order of the day (You have successfully created the “Department of Homeland Security" even though you already had the “Department of Defense" but seems still to lack the "Department of Unjust War") To divert attention to his failures he will blame the Terrorists, The Liberal Media, maybe invade Iraq/Iran/Yemen/Somalia, pay off Saudi Arabia/Jordan/Israel, spend money on Cash for Clunkers, and neglect oil production in Iraq. A major part of our oil supply will be jeopardized.
He'll create a police state with local block wardens and a powerful security service (already done: "Patriot" Act and "Domestic Spying" by the NSA in addition to all your private "for profit" prisons).
Well put. I marvel at the hatred in the US of Chavez .... well, considering the biased US media coverage, I guess not ... he makes a great scapegoat, deflecting anger at whats happening but poorly understood at home. I live in Latin America and I and many latinos believe that Chavez does far more for their poorer citizens that most regimes on the continent. Even if he intended to destroy their economy, he could not have done half the damage the ruling central banker financial elite are doing here in the US. And the US media coverage of the recent Honduran crisis is typical, ignoring the basic issues and the tdisappearing and torture of thousands, still going on. Fuck the neocons and all the ignorant shits sheeple in the US who refuse to inform themselves and understand whats happening. They dont read Chomsky and, if they know Gore Vidal, they dont like him because he tell it like it is, speaking of the owners of the country and coup de etat Bush backers accomplished. As Vidal says, ¨Turn the other fist.¨
I disagree. Fellows like Chavez and Obama indeed know exactly how human nature and the economy works. Only, they have also figured out how to use it to enslave the people and empower themselves.
Human nature - ensnare enough people, the powerful through bribes and favoritism, the poor through promises of free entitlements.
Economy - control it all, so the survival and livelihood of everyone is dependent on their benevolence.
Your name is amazingly accurate, SimpleSimon, as how anyone but the most simple of people, could conceivably compare Obama, the latest Wall Street representative in a long line of presidential lackeys, to the populist-elected President Chavez, who is continuing on the humanistic tradition espoused many years ago by one President John F. Kennedy, known as his Alliance for Progress, beggars belief!
Seriously, Econophile is a pathetic and sorry example of simpleton neocon rant.
TD has made this site into an evolved and intelligent econ treasure, but the likes of this American Enterprise Institute-inspired drivel (or Peterson Instititue, or Heritage Foundation, or Cato Instititute, or Manhattan Institute, or Center for a New American Security, or Rockefeller Foundation) is enough to make any educated and reasonably sophisticated thinker puke!
He is fighting the valiant fight against the psychotic and psychopathic oligarchs of Venezuela -- if only more Ameritards had the balls to do the same....those mewling sheeple.
Viva Chavez! If only we had someone of his caliber in Ameritard land!
American combat vets (at least testing in Mental Category One) admire President Chavez.
chavez's biggest failing, is he's in way over his head competence wise, and he's kind of a hokie hillbilly, which does not inspire confidence. he should have stayed in the military. unfortunately, all our leader has in his bag of tricks, is public speaking skills. shit, the world IS going to hell, in a handbasket
I don't understand your point. Are you saying Chavez's policies are good for his people?
We can agree he's not "gutless" (like many US leaders), but other than that, I don't understand what you're saying.
Keep reading the WSJ bull about Chavez. Here's an question for you---How is he able to keep winning elections? Why do the majority of people in his country support him?
Answer -- its because what he is doing is popular with voters. Thus, to answer your question, the people seem to think what he is doing is good for them, and that's what matters. We are different. Instead of being run by politicans who do what's best for voters, the USA is governed by whores in the pay of the rich.
He wins elections by:
- using virtually unlimited government money to run his campaigns,
- closing down any press or media shops that oppose him,
- firing all non-supporters from government companies (the list is growing with every government take-over) and yes, they do check to see how you voted and fire you if you supported the “wrong” guy, (amazing how people will just not vote if they are afraid to lose their job isn't it?)
- forced political rallies by government workers to hype up the voters who support them and invoke group-think,
- the middle-class and wealthy opposition members simply leave the country (one less vote),
- he basically buys or bribes votes in the lower class by giving them food stamps and money stolen from other people (via nationalizations and taxes),
- bribes them with subsidized gas prices,
- arresting opposition members (although he is not as bad as most dictators in this respect probably because the opposition is poorly organized),
- nationalizing businesses of major opposition supporters thus cutting off funding,
- and in his most recent win allowing himself to stay in office forever was achieved by announcing a special (and most importantly *surprise*) election a few months after the normally scheduled elections. Holding the special election so close after the normal election and using surprise to do so, allowed the opposition to spend all their money on the first elections while he has the bottomless pit of government spending to support his side.
- The poor masses could care less about the real issues. As long as someone is giving them something “free” they think he is great.
In terms of your comment about how you guys “do what’s best for voters” I would say that the politicians and government workers are some of the most corrupt anywhere. When a relative of the project manager I worked with down there tried to open a tourism business that needed licensing he was directly told by the government official that he needed to “participate” in the business with a 30% cut. When asked how much the government official wanted to invest, the guy said “Nothing. This is for your ‘protection’”. Although that is one example and the story is repeated in all countries I can tell you with certainty since I lived there for about a year this is business as usual.
"What is best for voters", huh? The food you have is crap. Do you want Corn Flakes or Frosted Flakes (I'm not making this up), rock hard beef, shortages of toilet paper and other essentials, etc.
Although I will say you guys have amazing women and a culture of beauty that simply must be seen as it is impossible for people who haven’t been there to comprehend. But I don’t think Chavez has anything to do with that.
We agree that Chavez pushes a populist message.
We disagree that Chavez will ensure his country remains in ruins.
Your original assertion that, "educated and reasonably sophisticated thinkers" support Chavez's policies remains unsupported.
its a silly question. Why do you suppose the majority of germans supported hitler? Must have been because he was a good guy I imagine.
"He is fighting the valiant fight against the psychotic and psychopathic oligarchs of Venezuela -- if only more Ameritards had the balls to do the same....those mewling sheeple."
Yeah, and by all accounts this "valiant fight" coming back to bite him in the ass. A nation whose GDP is almost entirely dependant on oil, and has had its currency devalued by half instantly, may end up losing up to 70% of its electric capacity if Guri Dam runs low this year. That's definitely an economic and infrastructural model we want to emulate!
It's telling that you are cheering on someone who is systematically running his country's economy into the ground and consistently resorts to the "blame somebody" tactic rather than clue in on exactly why it's becoming a basketcase. But then, I wouldn't expect anything less from someone who thinks that the world owes them a living.
yeah; and our economy is almost entirely dependent on buying/consuming worthless, needless crap. good argument.
What a bastard that Chavez dictator is... I mean really... even considered nationalizing the nations private banks... even arrested some bankers...
Something about them "stealing" the peoples money... what horseshit!
http://www.reuters.com/article/idUSTRE5B509V20091206
http://online.wsj.com/article/BT-CO-20091221-712862.html
Doom this post has to be a yank....it's such a joke on so many levels...
Get the mote out of your own fucking eyeball. You sound like some Reagan/Bushie/Obamite who wants to stick their fucking nose where it need not be. If anything, Chavez has been taking notes for the last - say 100 years - of our superior democratic-fascism.
Honestly, quit with the imperial-greater-than-thou BS; shut the fuck up; and go enlist if the way other leaders run their respective countries bothers you so much.
Looks like someone just got back from their afternoon "Political Science 101" class at the local community college.
What a pack of misinformed and insular commentary! Try getting your news from somewhere outside the USA media echo chamber.
It takes a few years for ICE CREAM LOVERS ....
To finally understand there is NO FREE ICE CREAM....
Here it is....
Which opportunity would one rather have ?
When one wakes up in the morning....
1) Having a shot at owning something....ie my own firm....or stock in the firm.....
Or
2) Never having a shot at owning wealth....and just working
for a govt. entity....
What does it take for the Chavez types of the world to understand this ????
And that there really is no free ice cream....????
.......................................
This is exactly why the US exchanges and other free exchanges need to go DEFRAGMENTED ELECTRONIC RETAIL....not mostly institutional....
And in a big big way !!!!
"...Never having a shot at owning wealth....and just working
for a govt. entity...."
AFSCME members, would be AFSCME members, and future AFSCME members; Police, Firemen and Teachers Unions, and, oh, how about the Teamsters, Autoworkers, Steel, carpenters, steamfitters,Plumbers, Welders, actors, writers, key grips, dancers,and every other trade in the world.
I'll wager that 90% of the people in the United States would rather work for the Federal Government than do anything else in their lives.
That goes double for the unemployed for over a few months.
This country turned left long ago and with the paucity of opportunity, the shipment of skilled and semi-skilled jobs out of the country, it has only gotten more like Venezuela without the opportunity yet, to grab one of those jobs for themselves, yet.
Ask the vast unwashed what they want and see if socialism or even communism seems all that abhorrent to them.
Even the billionaire Banksters who made their billions ina capitalist system, the vaunted George Soros among them, want the good parts of socialism now that the have their fortunes locked in for a hundred generations of themselves, their families, and associates.
I think by "classical liberal" ideals, the author is using the original definition of liberal (ie, how the Austrians defined it), which ironically enough is the furthest thing away from current "liberal" ideology, and lockstep with most current conservative/libertarian ideology.
Thought you were talking about Obama - Oops! - My mistake!
This Chavez bashing is so 2003. Some people do no want to live in a casino gulag, get over it.
Weird, it's like watching a BBC comedy before the US networks copy it. And it's kind of scary, by just changing a few words, how close we are to Venezuela.
Everything he has done has moved Venezuelabackwards. (Insert any US govt for he and US for Venezuela).
The people who actually do something productive in the economy hate him. (insert any US gov't official or politician for him).
The have-nots love him because he promised them lots of free stuff (insert have for have-nots).
He's been seizing or muzzling the opposition media. (eliminate opposition nuff said).
He seeks only power and disdains concepts like individual liberty, freedom of expression, and free markets. (free markets in the US anymore?)
The government claims that they have had "robust" economic growth in recent years, but that is a lie. (this is getting too easy, lying about the economy?).
Chávez continues to nationalize major industries. (much like the back door implicit guarantee of the finance industry in the US)
The words that we once used to describe the US of A are turning into nothing more than a marketing campaign that you can use to tell different football teams apart.