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How Venezuela went from a rich democracy to a collapsing dictatorship

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Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#51

Post by WalterBright »

guelo wrote: post #27
padobson wrote: post #6

I thought this paragraph was the most enlightening: Chávez was an innovator in how he spent money, but he did little to improve how Venezuela actually makes money. He paid no attention to diversifying the economy or investing in domestic production outside of the oil sector. The country relies on imports for many of its most basic goods and services, include food and medicine. You could probably put the greatest econ…

And America is showing that if you don't tax wealth enough the inequality causes instability.

I don't see evidence of historically high levels of instability in America.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#52

Post by microcolonel »

redial wrote: post #40
padobson wrote: post #35

Earlier quoted context omitted.

This sounds more like a political problem then an economic one. I won't suggest I have any idea how to alleviate the tension between market-forces and the government, and all the profiteers and rent-seekers in between. But those problems are small compared to widespread food, medicine and energy shortages.

I agree with everything you said, economically you are right, markets are the economy and you can't have a market with only one actor. But a market can turn unhealthy, at least from the point of view of a democracy. Many profit from its ever growing influence and usually the political class is not strong enough to counter its push.

> Many profit from its ever growing influence and usually the political class is not strong enough to counter its push.

And then when the political class is strong enough to counter it, it inevitably turns to tyranny because it enriches the political class in the short term.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#53

Post by pessimizer »

SilasX wrote: post #16
padobson wrote: post #6

I thought this paragraph was the most enlightening: Chávez was an innovator in how he spent money, but he did little to improve how Venezuela actually makes money. He paid no attention to diversifying the economy or investing in domestic production outside of the oil sector. The country relies on imports for many of its most basic goods and services, include food and medicine. You could probably put the greatest econ…

It was diversified ... until they slapped on price controls for everything, with its predictable effects.

Extensive price controls pre-date Chavez, although he predictably gets accused of originating them for ideological reasons.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#54

Post by pessimizer »

padobson wrote: post #20
coliveira wrote: post #11

Earlier quoted context omitted.

It is funny that people accuse the Venezuelan regime of being socialist, but then claim that the problem is that they didn't reshape the economy enough. In other words, their failure was in not planning the economy as much as their critics want! No standard capitalist regime would be able to do that anyway so you have here a clearly bogus criticism.

No standard capitalist regime would be able to do that anyway I'm not entirely sure what you're saying. If you're saying that no pro-capitalist government could have diversified Venezuela's economy, then I completely agree with you. If you're saying that nurturing a market economy in Venezuela would have failed to diversify it's economy, then I have to disagree. Markets tend to diversify on their own as entrepreneurs…

> If you're saying that nurturing a market economy in Venezuela would have failed to diversify it's economy, then I have to disagree.

Then how would you explain the lack of diversification that survived through all previous regimes before the Bolivarians?

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#55

Post by thephyber »

guelo wrote: post #45
wmccullough wrote: post #28

Earlier quoted context omitted.

Not disagreeing, just curious. How much taxation is appropriate for the wealthy? When explicitly does the label of wealthy apply?

Who knows. I'm sure there are many economics papers addressing the question. But it's somewhere before you get to the historic inequality levels of today https://fred.stlouisfed.org/series/GINIALLRF

To be fair, inequality levels were comparable in 1929, which falls outsize of the scope of that chart. Still historic by US standards, but not unprecedented.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#56

Post by matt_wulfeck »

wmccullough wrote: post #28
guelo wrote: post #27

Earlier quoted context omitted.

And America is showing that if you don't tax wealth enough the inequality causes instability.

Not disagreeing, just curious. How much taxation is appropriate for the wealthy? When explicitly does the label of wealthy apply?

Just take it all and divide it up equally. Then when enough people start to run out, take it all and divide it again.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#57

Post by matt_wulfeck »

hetman wrote: post #47
wmccullough wrote: post #28

Earlier quoted context omitted.

Not disagreeing, just curious. How much taxation is appropriate for the wealthy? When explicitly does the label of wealthy apply?

Rather than a single cut-off you just scale this gradually so there is no single wealthy/not wealthy divide but an increasing expectation to carry social responsibility as your wealth increase.

You’ve outlined our tax system as it exists today.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#58

Post by Iv »

0x27081990 wrote: post #5
legulere wrote: post #3

Venezuela is simply suffering one of the worst cases of Dutch Disease in the world. The oil prices don't keep up with the spending. With a destroyed economy there is more opportunity for a dramatic system change. This happened before in Venezuela in the 80s/90s and eventually led to Chavéz getting into power.

If their economy wasn’t centrally planned and controlled by the government, it would be more resilient

It would also be more vulnerable to the influence of the US behemoth, the oil-hungry giant that considers south-America its sphere of influence.

I don't want to appear pro-Chavez, many of his actions were despicable. But understand that "free-market" in their case means an economy controlled by USA. Chavez came into power precisely because the free-market economy before him failed to raise wages even as the GDP increased. It also failed to diversify.

Economically, Venezuela has two problems: over-reliance on oil and corruption. In 2017, we can consider it proven that neither central planning, nor free-market have succeeded alone in solving these problems. They are mostly orthogonal to the organization of the economy.

Politically, it has one problem: they don't like USA. Look at Saudi Arabia. They are centrally planned and they are extremely dependent on oil. But things go well economically. You just have to let US companies install themselves there and don't call yourself a socialist.

Why can't a free market diversify Venezuela's economy? Well when you have the world's biggest proven oil reserves (yes, more than Saudi Arabia since a few years) and an underdeveloped oil sector, where do you expect investments to flow?

You can redirect some of these investment by giving the government an amount of control over what the oil industry does, by putting quotas in place, this kind of things. But then, you are opposed by "the free world".

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#59

Post by padobson »

Iv wrote: post #46
hueving wrote: post #23

Earlier quoted context omitted.

There has never been a successful centrally planned economy. Perhaps with the assistance of massive computation and information spread via the Internet it could be conceivable. But without that it seems like every toy model a central planner uses is going to fail miserably.

To be more precise, there were successes of centrally planned economies, but all in the same circumstances: under-developed countries trying to modernize themselves. It is hard for a central planner to be an innovator, but it is easy to be a follower. USSR industrialized itself very quickly. China had some success and did not shut down its central planning but hybridized it. South-Korea's steel production is an examp…

I don't know where the dividing line is between "regulated markets" and "central planning", but I think you raise the need for some distinctions.

The space program is a great example. Could the US have beaten the USSR to the moon without private suppliers like IBM? IBM couldn't exist in a centrally planned economy, and the Apollo missions wouldn't have been successful without private suppliers like IBM.

Apollo, Manhattan, WWII and South Korea via the Korean War and post-war American influence are all great examples of successful government programs, but I don't know that any of them would have happened without US markets providing funding and infrastructure. Ford was building a Sherman tank every 90 minutes during WWII.

There's probably a tipping point where large programs like these extract so much value from the markets that fund them that those markets cease to function, which is probably why wars are often funded with debt instead of direct taxation.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#60

Post by Iv »

lend000 wrote: post #12
danharaj wrote: post #9

Earlier quoted context omitted.

This same thing happened under a more liberal capitalist government before. That's literally how Chavez got into power. The biggest difference between then and now is the severity of the oil price drop. An exacerbating factor is that the same forces that tried to coup Chavez in 2002 are of course still politically active and, rationally given their interests, using their economic connections to exacerbate the economi…

> This same thing happened under a more liberal capitalist government before. That's literally how Chavez got into power. That's not true at all. The previous government was socializing the economy, starting with nationalizing oil in 1976. From Wikipedia: "The election of Carlos Andrés Pérez in 1973 coincided with the 1973 oil crisis, in which Venezuela's income exploded as oil prices soared; oil industries were nati…

We can continue a bit with the wikipedia:

"After Pérez initiated such liberal economic policies and made Venezuelan markets more free, Venezuela's GDP went from a -8.3% decline in 1989 to growing 4.4% in 1990 and 9.2% in 1991, though wages remained low and unemployment was high among Venezuelans.

Some state that "neoliberalism" was the cause of Venezuelan economic difficulties, though overreliance on oil prices and a fractured political system without parties agreeing on policies caused much of the problems."

Though after dismissing a lot of Chavists as conspiracy-theorists, I have seen some outrageous mistranslations and downright lies about Venezuela from the anti-Chavist side, taken uncritically by western media as factual, I am now very careful about sources there. There is a very active propaganda on both sides there.

In a country with the largest oil reserves in the world and an underdevelopped oil industry, I doubt that free market forces would naturally tend to diversify the economy. On the contrary it would lead to increased investments there. I would like to remind that under Chavez, his centrally planned economy was criticized for hindering the oil sector development.

The other ranking where Venezuela is high is corruption. That is the problem you want to solve first. High corruption, under free market or centrally planned economy, is not going to lead to good outcomes.

Forget the economic model, it is the justice and democratic model that is important.

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