August 18, 2017

I know that Jeremy Corbyn would rather we didn’t, but let’s talk about Venezuela.

As the disaster – and disgrace – of the ‘bolivarian revolution’ becomes ever more apparent, one might ask what else can be said about it (apart from a sincere ‘sorry’ from you-know-who).

Well, we could hear from from one of Venezuela’s leading thinkers – the economist Ricardo Hausmann who, fortunately for him, lives and works in America. Writing for Project Syndicate he describes the sheer extent of the damage done to his country:

“The most frequently used indicator to compare recessions is GDP. According to the International Monetary Fund, Venezuela’s GDP in 2017 is 35% below 2013 levels, or 40% in per capita terms…

“Put another way, Venezuela’s economic catastrophe dwarfs any in the history of the US, Western Europe, or the rest of Latin America.”

Apologists for the Maduro regime blame Venezuela’s problem on the fall in the price of the country’s biggest export – oil; but this is no excuse:

“Countries typically cushion such negative price shocks by putting aside some money in good times and borrowing or using those savings in bad times, so that imports need not decline by as much as exports. But Venezuela could not do that, because it had used the oil boom to sextuple the foreign debt. Profligacy in good times left few assets to liquidate in bad times, and markets were unwilling to lend to an over-indebted borrower.”

Contrary to fashionable economic theory, it turns out that borrowed money isn’t free:

“Venezuela is now the world’s most indebted country. No country has a larger public external debt as a share of GDP or of exports, or faces higher debt service as a share of exports.

“But, like Romania under Nicolae Ceauşescu in the 1980s, the government decided to cut imports while remaining current on foreign-debt service, repeatedly surprising the market, which was expecting a restructuring. As a consequence, imports of goods and services per capita fell by 75% in real (inflation-adjusted) terms between 2012 and 2016, with a further decline in 2017.”

Much has been said about the huge cut to the Venezuelan minimum wage, but Hausmann really brings home what this means for ordinary people:

“Measured in the cheapest available calorie, the minimum wage declined from 52,854 calories per day to just 7,005 during the same period, a decline of 86.7% and insufficient to feed a family of five, assuming that all the income is spent to buy the cheapest calorie. With their minimum wage, Venezuelans could buy less than a fifth of the food that traditionally poorer Colombians could buy with theirs.”

In most countries, the human impact of economic mismanagement is measured in per capita income. But in Venezuela they also use bodyweight:

“Income poverty increased from 48% in 2014 to 82% in 2016, according to a survey conducted by Venezuela’s three most prestigious universities. The same study found that 74% of Venezuelans involuntarily lost an average of 8.6 kilos (19 pounds) in weight.”

In the absence of war or natural disaster, it takes a lot for a fertile country not to produce enough food to feed itself. Even when governments are corrupt and landlords are oppressive, people find of way of growing, storing and trading what they need to get by.

However, that is to reckon without socialism.

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