Tag: hugo chavez

Venezuela Down the Drain

The situation in Venezuela is becoming grim. Hospitals are leaving infants to die. A country sitting on a lake of oil is experiencing huge power outages thanks to a drought. Their inflation is so bad they literally can’t buy paper to print the money on and India is proposing a return to the barter system where they would get drugs in exchange for oil.

It’s really bad:

In the last two years Venezuela has experienced the kind of implosion that hardly ever occurs in a middle-income country like it outside of war. Mortality rates are skyrocketing; one public service after another is collapsing; triple-digit inflation has left more than 70 percent of the population in poverty; an unmanageable crime wave keeps people locked indoors at night; shoppers have to stand in line for hours to buy food; babies die in large numbers for lack of simple, inexpensive medicines and equipment in hospitals, as do the elderly and those suffering from chronic illnesses.

This is not a visitation of fate. The collapse of oil prices is part of it (as I previously noted) and many former Chavez defenders are trying to weasel out of their previous words by citing oil prices and drought. But it’s not just that. Oil prices have fallen all over the planet. Drought and natural disaster happen all the time. Only Venezuela is imploding like this. It’s because of fundamental flaws in their system:

The real culprit is chavismo, the ruling philosophy named for Chavez and carried forward by Maduro, and its truly breathtaking propensity for mismanagement (the government plowed state money arbitrarily into foolish investments); institutional destruction (as Chavez and then Maduro became more authoritarian and crippled the country’s democratic institutions); nonsense policy-making (like price and currency controls); and plain thievery (as corruption has proliferated among unaccountable officials and their friends and families).

A case in point is the price controls, which have expanded to apply to more and more goods: food and vital medicines, yes, but also car batteries, essential medical services, deodorant, diapers, and, of course, toilet paper. The ostensible goal was to check inflation and keep goods affordable for the poor, but anyone with a basic grasp of economics could have foreseen the consequences: When prices are set below production costs, sellers can’t afford to keep the shelves stocked. Official prices are low, but it’s a mirage: The products have disappeared.

You can check out more from Reason and Hot Air. In the aftermath of this epic economic implosion, many people are digging up old articles that praised the Venezuela model. It’s important to remember just how many “wise” people though Chavez had successfully upended the free market consensus.

The situation in Venezuela isn’t funny. It’s tragic. It is the direct result of a flawed broken system that was enabled by apologists in wealthy countries who should have known better. And things are just going to get worse. They’re going to get a lot worse.

The Venezuelan Implosion

Holy shit:

Venezuela is about to earn another ignominious distinction.
Long home to the world’s highest inflation rate, the country now is set to become the site of the 57th hyperinflation event in modern recorded history, says Steve Hanke, professor of applied economics at Johns Hopkins University. While the feat may be little more than a formality in a country where Hanke calculates annual cost-of-living increases already run at 772 percent, it’s the latest sign a debt default may be closer than traders previously thought.
With Venezuela’s currency losing 32 percent of its value in the past month in the black market, according to dolartoday.com, and falling oil prices throttling the cash-starved nation’s biggest revenue source, the government may run out of money to pay its debts by year-end, according to Societe Generale SA. Derivatives traders have ratcheted up the probability of a default within one year to 63 percent, compared with 33 percent just two months ago.

“They’re very close to hyperinflation,” Hanke, who wrote a book on hyperinflation in Zimbabwe, said by phone from Baltimore. “When you have a domestic currency that is withering on the vine, it becomes more problematic servicing foreign debt.”

The currency fell so fast on Monday that it implied a monthly inflation rate of 53.98 percent. A full month of days on which the implied monthly rate was faster than 50 percent would meet his definition for hyperinflation.

This is in addition to massive shortages of basic goods, soaring crime, rapidly rising unemployment. So much for Chavismo.

Now this is the point where some well-meaning fool will tell me it’s all America’s fault or something. But the thing is, this economic collapse was predicted by everyone who knew what they were talking about. McCardle:

For about a decade, some sectors of the left hoped that Hugo Chavez represented an alternative to the neoliberal consensus on economic policy. Every time I wrote that Chavez was in fact direly mismanaging the economy, diverting investment funds that were needed to maintain oil output into social spending, I knew that I could look forward to receiving angry e-mails and comments accusing me of trying to sabotage his achievements for the benefit of my corporatist paymaster.

The problem was that the money he was using was, essentially, the nation’s seed corn. Venezuelan crude oil is relatively expensive to extract and refine and required a high level of investment just to keep production level. As long as oil prices were booming, this policy wasn’t too costly because the increase offset production losses. But this suffered from the same acceleration problem that we discussed earlier: The more production fell, the more the country needed prices to rise to offset it.

A little over a decade ago, I had a long car ride with a woman who worked in the oil industry. She said basically the same thing: that Venezuela was sitting on a lake of oil but not investing their massive revenue in sustaining or growing production. High oil prices weren’t going to last forever (Peak Oil hysterics not withstanding). Her particular field was using geological data to more accurately find undersea reserves of oil and she knew production was going to come back up and prices would fall. This would doom Venezuela because their production wasn’t going to be able to keep up: they were entirely dependent on high prices. When oil crashed, so would their economy.

Chavez was riding an asset bubble and claiming it proved his genius. Maybe if Venzuela has used their revenues to develop a thriving private sector of the economy, they could have withstood this. But they didn’t and oil was all they had. So we’re finally into the end game for Hugo Chavez’s “nobel experiment”.

I would like to think that people would learn a thing or two from the smoking crater in Caracas. But they never do. In fact, right now they’re wondering why the hell China is imploding as well. After all, Thomas Friedman’s been writing about sixteen columns a week on how superior their system is to ours. People like me have been pointing out that China has huge problems with corruption, an aging population and an economy that, while growing, had picked all the low-hanging fruit. We’ve been pointing out that China’s “explosive growth” was a result of having been dirt poor in the first place (it’s much easier to grow 10% of nothing that 10% of everything). Eventually, that engine was going to run out of steam. But, no: Very Wise People kept insisting that China had a found an alternative to the free market.

Just like Venezuela had.

And just like Japan before that.

And the Soviet Union before that.

And Germany before that.

Boy. These new economic ideas never seem to work out, do they?

Chavez Dies

I’m not going to sit here and pretend there are two sides to the man. I’m not going to say I’m sorry a man who reduced one of the most resource-rich countries in the Western Hemisphere to a running joke should be mourned. And I can’t pretend I won’t shake my head at all the gullible Americans who will be said over this.

All I will say is that I hope Venezuela can strike out for a better future.

Update: The main defense of Chavez seems to be that poverty fell. But Venezuela was one of the most corrupt crime-ridden countries in the world. Other nations have reduced poverty as dramatically without the corruption and oppression. So spare me the eulogies.

It’s easy to bring down poverty — temporarily and superficially — in a tightly-controlled kleptocracy. As long as you don’t care about the long term future, you can spend a few years enjoying the plunder before the system collapses.

Chavez, incidentally, was speculated to have a personal fortune of a couple billion.

Update: Moynihan.

By Their Friends Will You know Them.

You may have noticed — Syria is engaged in brutal crackdown on its own people.  So what is the appropriate response to this?  Well, if you’re the UN, it’s obvious, isn’t it?

The brutal crackdown by Syrian President Bashar Assad may finally be getting the attention of world leaders — but apparently not enough to stop Syria from becoming the newest member of the U.N. Human Rights Council.

And despite calling for an independent investigation into the crackdown, which has left hundreds dead, U.N. Secretary-General Ban Ki-moon apparently won’t do much about blocking Syria’s path to the human rights group.

This is nothing new, of course. The UN Human Rights Council has been littering itself with thugs, pugs, shitwits and halfwits for a long time now.

Well at least, we can rely on the leftists to … oh:

“From here we greet president Bashar al-Assad,” [Hugo] Chavez said, after witnesses reported that Syrian troops backed by tanks had rolled into the town of Daraa, the epicenter of recent anti-regime protests, killing at least 25 people.

“Terrorists are being infiltrated into Syria and producing violence and death — and once again, the guilty one is the (Syrian) president, without anyone investigating anything,” said Chavez.

He gave no further details to support his claims.

Chavez, a close Assad ally in Latin America, criticized the “imperial madness” of the international community which, according to him, seeks to attack Syria under the pretext of defending its people.

“They re starting to say: Let s see if we sanction the government, we re going to freeze their assets, we ll blockade them, throw bombs on them, in order to defend the people.

“Wow, what cynicism. But that s the empire, it s imperial madness,” he said.

These are two institutions — the UN and Chavez — that enjoy enormous popularity in varying parts of the left. And as the death tolls climbs, one is rewarding, the other actively supporting the oppressive regime. Will we seen Sean Penn break from Hugo the Horrible over this? Will we see the Democrats demand we give less power to the UN HRC?

Is there an echo in here?