One of the joys of this here internet age is that we’ve got, laid out before us in easily accesible archives, the predictions of those who would either rule us or tell us what public policy should be. Mark Weisbrot being one of these over in the United States. A constant advocate of every trendy left wing idea going. Insistent that there will never be any bad effects from such actions.
This isn’t, if we’re going to be picky about it, quite what does actually happen. Our example being Weisbrot’s predictions about and analysis of the Venezuelan economy in 2013.
Sorry, Venezuela haters: this economy is not the Greece of Latin America
Well, the headline at least is right. But then that’s supplied by The Guardian, not Weisbrot. Because of course Venezuela isn’t Greece, it’s far, far, worse.
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. In 2012 Venezuela had $93.6bn in oil revenues, and total imports in the economy were $59.3bn. The current account was in surplus to the tune of $11bn, or 2.9% of GDP. Interest payments on the public foreign debt, the most important measure of public indebtedness, were just $3.7bn. This government is not going to run out of dollars.
It hasn’t exactly turned out like that, has it?
Hyperinflation is also a very remote possibility.
Do we get to start sniggering yet?
Of course Venezuela is facing serious economic problems. But they are not the kind suffered by Greece or Spain, trapped in an arrangement in which macroeconomic policy is determined by people who have objectives that conflict with the country’s economic recovery. Venezuela has sufficient reserves and foreign exchange earnings to do whatever it wants, including driving down the black market value of the dollar and eliminating most shortages.
If it weren’t for the tens of millions being both oppressed and impoverished by this economic mismanagement then yes, we should be starting to giggle by now.
Meanwhile, the poverty rate dropped by 20% in Venezuela last year – almost certainly the largest decline in poverty in the Americas for 2012, and one of the largest – if not the largest – in the world. The numbers are available on the website of the World Bank, but almost no journalists have made the arduous journey through cyberspace to find and report them. Ask them why they missed it.
I will admit that I’ve missed any piece Weisbrot has offered to explain why things didn’t quite turn out the way he predicted. This footnote is rather fun too:
The subheading on this article was amended on 15 November 2013. The original one, not supplied by the author, ended with the words “in this oil-rich country the only thing imploding is poverty”. This has now been removed
From yesterday’s Guardian, telling us of what is actually happening in that Venezuelan, Bolivarian socialist, economy:
“Food became so expensive that for months we weren’t able to eat three meals a day,” says Harry Flores, 41, who has been queuing for nine days with his family in the hope of boarding a bus to Peru……The UN estimates that 2.3 million Venezuelans have fled since 2015 with Colombian authorities predicting 2 million more could follow by 2020. That would mean some 4.3 million people – 14% of Venezuela’s population – had taken flight. ……Maduro’s “revolutionary formula” includes lopping five zeros off the old inflation-stricken currency, the bolívar, and introducing a new one, the sovereign bolívar, as well as raising the monthly minimum wage by nearly 6,000% from next month.
The hyperinflation did turn up, the currency has crashed, the place is running out of dollars to finance imports and….well, Weisbrot is looking terribly perceptive, isn’t he? The lesson of which is don’t believe people telling you that indulging in idiot socialist economic policy won’t have bad effects. For those policies always have, everywhere and everywhen they’ve been tried. Whatever the people trying to sell them to you say.