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Economic policy could determine the political results in Venezuela

TheDemSocialist

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The opposition in Venezuela has stepped up its campaign to remove President Nicolás Maduro from office, having announced — in accordance with its numerous divisions — that it would pursue a three-pronged strategy: a constitutional amendment to shorten the president’s term of office; a recall referendum, as permitted under the constitution; and “protests.” The first tactic was struck down by Venezuela’s Supreme Court, as it would be in any country — you can’t change the legal term of a president who was already elected for a certain number of years. For the recall referendum, the process of gathering signatures is under way.The government, meanwhile, clearly needs to fix the economy if it is to regain popularity. The opposition, which has a large majority in the national legislature, has made it clear that it will not cooperate in any such efforts. On the contrary, it has acted to block the government from spending money.
But there is quite a bit that the executive branch can do to fix the economy even without the cooperation of the legislature. For some years now, I have emphasized that the exchange-rate system is the most important problem, and this is something that can be fixed rather quickly. The country currently has two official exchange rates: one at 10 bolivares fuertes (bs) per dollar (called DIPRO), and another which is currently at about 370 bs per dollar (DICOM). The latter rate is supposed to be a floating exchange rate, but this is not practical since the vast majority of the government’s dollars are given away at the official rate of 10, and so there is very little to supply the DICOM market. Then there is the black-market rate, which is currently over 1,100 bs per dollar.
This system of a fixed, overvalued exchange rate with a huge black-market premium has trapped the economy in an “inflation-depreciation” spiral. As the price of the black market dollar rises, importers who do not have access to dollars at the subsidized rate have to pay more, thus driving up inflation. As inflation rises, more people want to put their money in dollars, which pushes the black market price of the dollar up further, and the spiral continues.


Read more @: Economic policy could determine the political results in Venezuela
This is a pretty damn fair and objective look at the Venezuelan economy and what needs to happen in the country.
Some key things Venezuela needs to do to get a grasp on their economy. 1.)Unify their two exchange rates for their currency into one floating exchange rate. This would allow the govenrment more control on direct subsidies on imports which can be used for social programs and will help curtail the black market exchange rate. 2.)Needs to sell or securitize off most of its $52 billion in foreign assets. 3.)Sell some of its oil reserves it has in oil. This oil does not have to be pumped out now. 4.)Invest in more sectors other than oil. Invest in agriculture, industrial production, etc.
 

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Read more @: Economic policy could determine the political results in Venezuela
This is a pretty damn fair and objective look at the Venezuelan economy and what needs to happen in the country.
Some key things Venezuela needs to do to get a grasp on their economy. 1.)Unify their two exchange rates for their currency into one floating exchange rate. This would allow the govenrment more control on direct subsidies on imports which can be used for social programs and will help curtail the black market exchange rate. 2.)Needs to sell or securitize off most of its $52 billion in foreign assets. 3.)Sell some of its oil reserves it has in oil. This oil does not have to be pumped out now. 4.)Invest in more sectors other than oil. Invest in agriculture, industrial production, etc. [/FONT][/COLOR]

The best thing to do would be for government to get out of all private goods, give up currency pegging and stop subsidies. That would hurt badly no matter how it is done, but the pain can only be drawn out and softened a little. But they have dug themselves into a deep hole that is filling with water fast. They will have to go down one way or another, but the longer they wait the worse the population will get hurt.
 

TheDemSocialist

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The best thing to do would be for government to get out of all private goods, give up currency pegging and stop subsidies. That would hurt badly no matter how it is done, but the pain can only be drawn out and softened a little. But they have dug themselves into a deep hole that is filling with water fast. They will have to go down one way or another, but the longer they wait the worse the population will get hurt.

This is essentially what Venezuela had in the 1980-2000... And it did not turn the economy around at all. They went through massive austerity and privatizations.. Economy went into an even deeper hole.
 

joG

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This is essentially what Venezuela had in the 1980-2000... And it did not turn the economy around at all. They went through massive austerity and privatizations.. Economy went into an even deeper hole.

You would have to look at a number more factors to see what went wrong. Were they corrupt in bad ways? Have poorly structured import laws? A poor tax system? Subsidize things stupidly? Have a poor property rights structure? All sorts of things can go wrong. But one sure way to destroy the economy is exactly the socialist program Venezuela has followed.
 

TheDemSocialist

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You would have to look at a number more factors to see what went wrong. Were they corrupt in bad ways?
Venezuela has already suffered corruption. They still continue to it to this very day.
An example of this was the oil sector. When Venezuela "nationalized" its oil industry in the 70's. When it was "nationalized" they created a "state company" PDVSA which became a holding company for the nationalized subsidiaries. Multi National Corporations were replaced with a holding company, PDVSA, and Venezuelans were given leading positions in the multi national corporations and took over the leading positions of the respective new companies, and therefore still securing their interests in Venezuela's oil. And what happened? Well, essentially not much changed. All the revenue that came from the oil did not go directly to the state, some of it did, but a lot of it went back into these Multi National Corporations and the board of directors of PDVSA. I would describe this as corruption. This is why when Chavez came to power when he called for a "renationalization" of PDVSA there was a "managers strike" in 2002-2003 which caused oil production in Venezuela to crash.

"Control over the state-owned oil company, PDVSA, has been in dispute in Venezuela, perhaps ever since the company was first nationalized in 1976. When PDVSA was first nationalized, the transnational corporations’ dependencies were turned into fourteen Venezuelan companies, which corresponded with the fourteen main transnational oil companies that did business in Venezuela.[12] The entire management had years earlier already been Venezuelan and this management did not change with nationalization. For example, the former president of Shell Venezuela was the same as the new president of Maraven, the newly nationalized Shell Venezuela. Critics of the nationalization process, such as Carlos Mendoza,[13] say that the newly nationalized oil industry was nothing more than a Trojan Horse. Venezuela’s oil industry maintained an anti-statist and transnational corporatist management culture throughout its existence. The ties to the former owners of the nationalized Venezuelan companies were maintained primarily through technical assistance contracts with the former owners and through commercialization contracts, which heavily discounted the price of oil to their former owners.

The government’s lack of control over the oil industry was further institutionalized in PDVSA’s board of directors. While normally a board of directors is supposed to represent the interests of the owners vis-á-vis the management, in the case of PDVSA the board of directors, almost in their entirety, was appointed from PDVSA management, who, due to their backgrounds, tended to represent management. This is why, when Chávez appointed a board of directors who were oil experts and who did not come from PDVSA, the PDVSA management protested and joined the April 2002 work stoppage against the government. Chávez was breaking a decades-old tradition that regarded board membership as the highest promotion a PDVSA manager could receive."
The Economics, Culture, and Politics of Oil in Venezuela | venezuelanalysis.com

Have poorly structured import laws?
Drastically reduced custom duties...

A poor tax system?
Drastically reduced individual rates, especially those on the top..

Subsidize things stupidly?
Subsidies were drastically cut during this time period.

Have a poor property rights structure?
If you mean privatization of state companies..

All sorts of things can go wrong.
Well you see the thing with this was a neo-liberal reform effort implemented by Carlos Andrés Pérez (venezuela president), this was an IMF proposal which he thought would "turn around the Venezuelan economy". Mass privatization, lower tax rates, undo subsidies, etc. This is what many are promoting now to "fix Venezuela".


But one sure way to destroy the economy is exactly the socialist program Venezuela has followed.
:roll:
 

joG

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Venezuela has already suffered corruption. They still continue to it to this very day.
An example of this was the oil sector. When Venezuela "nationalized" its oil industry in the 70's. When it was "nationalized" they created a "state company" PDVSA which became a holding company for the nationalized subsidiaries. Multi National Corporations were replaced with a holding company, PDVSA, and Venezuelans were given leading positions in the multi national corporations and took over the leading positions of the respective new companies, and therefore still securing their interests in Venezuela's oil. And what happened? Well, essentially not much changed. All the revenue that came from the oil did not go directly to the state, some of it did, but a lot of it went back into these Multi National Corporations and the board of directors of PDVSA. I would describe this as corruption. This is why when Chavez came to power when he called for a "renationalization" of PDVSA there was a "managers strike" in 2002-2003 which caused oil production in Venezuela to crash.

"Control over the state-owned oil company, PDVSA, has been in dispute in Venezuela, perhaps ever since the company was first nationalized in 1976. When PDVSA was first nationalized, the transnational corporations’ dependencies were turned into fourteen Venezuelan companies, which corresponded with the fourteen main transnational oil companies that did business in Venezuela.[12] The entire management had years earlier already been Venezuelan and this management did not change with nationalization. For example, the former president of Shell Venezuela was the same as the new president of Maraven, the newly nationalized Shell Venezuela. Critics of the nationalization process, such as Carlos Mendoza,[13] say that the newly nationalized oil industry was nothing more than a Trojan Horse. Venezuela’s oil industry maintained an anti-statist and transnational corporatist management culture throughout its existence. The ties to the former owners of the nationalized Venezuelan companies were maintained primarily through technical assistance contracts with the former owners and through commercialization contracts, which heavily discounted the price of oil to their former owners.

The government’s lack of control over the oil industry was further institutionalized in PDVSA’s board of directors. While normally a board of directors is supposed to represent the interests of the owners vis-á-vis the management, in the case of PDVSA the board of directors, almost in their entirety, was appointed from PDVSA management, who, due to their backgrounds, tended to represent management. This is why, when Chávez appointed a board of directors who were oil experts and who did not come from PDVSA, the PDVSA management protested and joined the April 2002 work stoppage against the government. Chávez was breaking a decades-old tradition that regarded board membership as the highest promotion a PDVSA manager could receive."
The Economics, Culture, and Politics of Oil in Venezuela | venezuelanalysis.com


Drastically reduced custom duties...


Drastically reduced individual rates, especially those on the top..


Subsidies were drastically cut during this time period.


If you mean privatization of state companies..


Well you see the thing with this was a neo-liberal reform effort implemented by Carlos Andrés Pérez (venezuela president), this was an IMF proposal which he thought would "turn around the Venezuelan economy". Mass privatization, lower tax rates, undo subsidies, etc. This is what many are promoting now to "fix Venezuela".



:roll:

Look. I realize quite well, how these things are sold by politicians to the public. But it isn't enough detail to know that state companies were privatized or that taxes were reduced. But that might point in a hopeful direction, while actually doing any good. It can even be down right positive but take ten years to get through a worsening situation. It can be negative, if poorly done.
But yes, the individual steps would be necessarily positive, if correctly done. If correctly done.
 

TheDemSocialist

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Look. I realize quite well, how these things are sold by politicians to the public.
Oh cmon.. Now your excuse is that "politicians sold it" so nope, dont buy it?

But it isn't enough detail to know that state companies were privatized or that taxes were reduced.
I literally just explained it.

But that might point in a hopeful direction, while actually doing any good. It can even be down right positive but take ten years to get through a worsening situation. It can be negative, if poorly done.
But yes, the individual steps would be necessarily positive, if correctly done. If correctly done.
So your point is this: "Nope cant trust the explanation" of the past. But if its "correctly done" (care to explain what this means?) then walah!
 

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Oh cmon.. Now your excuse is that "politicians sold it" so nope, dont buy it?


I literally just explained it.


So your point is this: "Nope cant trust the explanation" of the past. But if its "correctly done" (care to explain what this means?) then walah!

Oh, the politicians always beat their own drums. I was commenting on those that dance to that specific rhythm. And no, you did not explain it. Like I had done before, you used a shorthand that conceals so much information, that the differences leading to success or failure are not recognizable. But the important thing is that statism and planned ecoomies almost under every set of circumstance are less beneficial to the population and will fail more or less spectacularly. That does not mean that, what you would probably term "capitalism" will always work to gain an optimum. That is dependent on many settings of the system. To be intelligent about an individual instance like the Venezuelan experience pre 2000, you would have to go into much, much more depth and detail. That is different from talking the general rule as I was.
 

TheDemSocialist

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Oh, the politicians always beat their own drums. I was commenting on those that dance to that specific rhythm. And no, you did not explain it. Like I had done before, you used a shorthand that conceals so much information, that the differences leading to success or failure are not recognizable. But the important thing is that statism and planned ecoomies almost under every set of circumstance are less beneficial to the population and will fail more or less spectacularly. That does not mean that, what you would probably term "capitalism" will always work to gain an optimum. That is dependent on many settings of the system. To be intelligent about an individual instance like the Venezuelan experience pre 2000, you would have to go into much, much more depth and detail. That is different from talking the general rule as I was.

So you dont like my answers. Then I guess you should do your own research and get back to me.
 

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So you dont like my answers. Then I guess you should do your own research and get back to me.

It isn't so much a question of disliking your answers as of having been there, having walked the walk of the theories behind them and having done the empirical side of the science for a largish number of countries, sectors and situations. There is, of course no guarantee that the future might not falsify the findings of the past and require the theories to be changed. That would, however, mean some new realization, spotting some novel piece of evidence that the last century of economists and socialist autocrats missed. That happened in Physics 115 years ago, so why not in economics. Very possible. Economics has changed ie progressed enormously in 150 years. But the basics have stayed relatively true to their origins. So spread out the disruptive technology out and we can discuss it. But just saying that the science is wrong is not really the epitome of cleverness. ;)
 
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