Venezuela continues to seek world leadership in terrible economic policy, and of course its economy is falling apart more and more rapidly. To me a remarkable corollary is that when things start to get bad the government and its press enablers push a narrative that the economy's failure is the fault of greedy hoarders and speculators. And even worse, many people fall for it.
How bad is the economic policy? According to this article from CNBC yesterday, the public sector deficit is running about 15% of gdp, inflation hit 58.5% for just the month of October (that's about 10,000% on an annual basis), and of course the state oil company has been used as a personal piggy bank by the leaders for a decade and a half. Oil production -- which is about the only source of wealth -- is barely over two-thirds of what it was in 2000, and of course oil prices have been dropping recently. Earlier this month the government decreed that prices of many goods must be cut in half, setting off a stampede of legalized looting that effectively emptied out many stores.
It's getting more and more difficult for the government to cover up the results. Official gdp numbers purport to show impressive growth over the last decade (from $83 billion in 2004 to over $300 billion today), but those numbers are highly suspect. Besides likely outright falsification, there are two huge problems: counting rapidly increasing government spending at 100 cents on the dollar, and valuing the whole enterprise at a phony "official exchange rate" of 6.3 bolivars to the dollar. The free (black) market exchange rate is more like 50, and if you just apply that conversion suddenly the gdp is valued at only about $40 billion, half of where it was 10 years ago. Admittedly that measure also has problems, and indeed the entire game of measuring gdp falls apart when free market exchange becomes illegal, since free exchange is a basic assumption behind the measurement metrics. But highly relevant is that shortages are appearing throughout the economy, including things as basic as food, and the people's time is being diverted from formerly productive activities into gaming handout programs and waiting in lines. You can't even honestly try to come up with a "purchasing power parity" measure of gdp when the goods are not available at the official prices.
So, time to blame the greedy capitalists! venezuelanalysis.com is a left-wing web site that can be reliably counted on to present the government's party line. Here is their report of President Maduro's speech on November 7 announcing the latest programs:
Venezuelan president Nicolas Maduro has announced a slew of policy reforms aimed at combating speculation and hoarding, along with the creation of new government institutions to regulate trade and oversee foreign currency exchange. “We have to make real decisions for the benefit of the economy and society, whatever the cost and whatever happens,” Maduro stated from Miraflores Palace yesterday afternoon. Describing the package of reforms as an “economic offensive”, Maduro pledged to “strike hard” at speculators and hoarders.
His support is dropping rather rapidly, but there are still remarkable numbers of people who buy this narrative. And I suppose, if you are in the midst of things in Venezuela, it's very hard to perceive the root of the problem using your own five senses. The only way really to understand the causes is to compare Venezuela to the places of competent economic policy, such as Switzerland or Singapore.
Meanwhile back here in the U.S., we of course have our own adventure in the banning of free market exchange for a large part of the economy, otherwise known as Obamacare. Its website problems have dominated the news for the past month, but those can be fixed. What cannot be fixed is the need for people to behave against their own economic self-interest to make this thing work. So, it's not going to work. Will they blame the greedy capitalists? I haven't seen that one yet, but Obama himself got things rolling about a week ago by starting to blame the evil Republicans:
“One of the problems we’ve had is one side of Capitol Hill is invested in failure,” Obama said at the Wall Street Journal’s CEO Council meeting in Washington.
I predict it's only the beginning. And remarkable numbers of people will believe it.