Venezuela — Corrupt As Hell, Income Inequality Rising
Chavez is known for his defenders. I’ve noticed quite often that the ones that comment here seem to think we’re all a bunch of “gringos” who want to exploit the poor and ruin Chavez’ socialist revolution. And I understand, of course… After all, I’m just a blogger. What credibility do I have on Venezuela, other than my study of the history of socialist nations?
But today, I’ve got good news. No longer do I have to rely on my own reading of the facts to call Chavez a corrupt dictator who is running his nation into the ground and offering little more than lip service to the nation’s poor. I’ve got the World Bank and The Economist to do it for me! From The Economist (subscription may be required):
Mr Chávez proclaims that “being rich is bad”. He frequently lashes out at what he calls “the oligarchy”. Strange, then, that the streets of Caracas are clogged with big new 4x4s (Hummers are especially favoured), it is hard to get a table at the best restaurants, and art dealers and whisky importers have never had it so good. A new oligarchy seems to be rising in Venezuela on the back of the “Bolivarian Revolution”, named for the country’s independence hero.
Their prosperity owes much to an oil windfall: the price of Venezuela’s main export has increased almost eightfold since 1999 and the economy has been growing at 10% a year. But government policies, too, have favoured the bankers and other intermediaries: inflation is close to 20% and the official value of the currency is twice its black-market exchange rate. So the savvy investor looks for access to cheap dollars, import opportunities and government contracts, all of which are largely conditional on political obedience. By contrast, manufacturers and farmers face price controls and risk sporadic official harassment. The result has been the rise of what is known, in obeisance to Bolívar, as the “Boli-bourgeoisie”.
This is typical socialism. When a private company makes a decision to award a contract (paying for it with their own money), they make the decision based on who they think is most likely to provide the best service at the most competitive price. When the government makes the decisions of who gets key contracts, spending taxpayer dollars with no accountability, those decisions are made based on who has the most political pull.
And are the poor being served? Only if they’re politically connected. If they’re regular hardworking non-political people, they may just starve:
Mr Chávez claims to be pursuing economic nationalism and “endogenous development”. But farmers and manufacturers struggle against cheap imports. Though local dairy products are often missing from the supermarket shelves, Gouda and Emmenthal cheeses nestle beside Irish butter. The frozen chickens at Mercal, a government chain of subsidised grocery shops, are Brazilian. The importers who supply Mercal have grown rich. But Venezuela’s ranchers are becoming extinct, threatened by expropriations, land invasions and price controls, as well as by extortion and kidnappings by criminal gangs.
After all, Chavez’ rule is that “being rich is bad”, and that businessmen are evil. But there’s a corollary to that rule. If the businessmen support Chavez, they should be rich and they’re no longer evil.
And through all of this, his socialist rule isn’t even promoting “income equality”, one of the cardinal tenets of socialism:
Thanks to economic growth and social programmes, the government claims that only 30% of Venezuelan families now live in poverty, down from 55% at the peak in 2003. But according to a new report by the central bank, income inequality has widened slightly under Mr Chávez: the Gini coefficient—a statistical measure of inequality—has gone from 0.44 in 2000 to 0.48 in 2005.
Officials stress that two-thirds of the poor have benefited directly from government social policies. As well as Mercal, these include the “missions”, which offer education and health care. Up to 2m people get a small cash stipend. But despite hefty increases in the minimum wage and price controls on basic goods, inflation is eating away at the gains.
Whether you believe that the Venezuelan govenrment’s numbers on poverty are true (and I don’t), the fact that income inequality is rising is contrary to Chavez’ goals. In fact, income inequality is even higher than here in the USA!* In Hugo Chavez’ Venezuela, the rich get richer, and the poor can’t buy groceries.
Hugo Chavez may have put the snow job on Barbara Walters, but I don’t think he can fool the World Bank:
For those with connections, however, the rewards are great. The World Bank recently ranked Venezuela as the second-worst country in the Americas for the control of corruption, above only Haiti. Others confirm this perception. “We usually ask for 10%,” a foreign diplomat reports one government official admitting. “But some get greedy and want 15-20%.”
Does anyone else find it strange that the same people who criticize BushCo for their ties to Halliburton and “Big Oil” champion a corrupt dictator like Chavez, doling out wealth and riches to those with the most political pull? ¿Quién es el diablo, ahora?
* Note that I don’t place a lot of faith in the Gini coefficient. In fact, I don’t see it as the government’s business to fix this “problem”. I just find it funny that Chavez’ socialist revolution can’t even get the number lower than what we have in the USA.