David_N
DP Veteran
- Joined
- Sep 26, 2015
- Messages
- 6,562
- Reaction score
- 2,769
- Location
- The United States
- Gender
- Male
- Political Leaning
- Liberal
There are two basic storylines for what went wrong. The first, which you hear in America, is that Venezuela's government is being run by socialists, and socialism is bad. The second, which you hear from the ruling Socialist Unity Party and President Nicolas Maduro — who took over from the late Hugo Chávez — is that Venezuela is being screwed by a hazy something-or-other called "external and foreign aggressions against our country."
But as Mark Weisbrot — the co-director of the Center for Economic Policy Research, who has written extensively on Venezuela and Latin America — explained to The Week, the main reason for Venezuela's troubles is likely a lot more technocratic, and a lot more banal: Namely, their currency exchange system is a mess.
The government does run the country's oil industry, and it gets a bit over half its revenue from international oil sales. But the rest of its revenue comes from taxes, just like in America. The government employs about 20 percent of Venezuela's workforce, which is actually a smaller portion than you see in many major European countries, and is roughly the same as you'd find in France. "It's not Cuba," as Weisbrot put it.
America has a floating exchange rate. The dollar isn't pegged to anything, like another currency or the value of gold. So how much of another currency you get in exchange for a dollar "floats" up and down all the time, reacting to countless forces in the market.
Venezuela's system, by contrast, is a dysfunctional mess. The country's official exchange rate is pegged to the dollar — specifically, it's 10 bolívares for $1. So no matter what happens, whenever the government does business with anyone, it gets or gives 10 bolívares for every $1.
But there's also an enormous black market currency exchange. This is where the hyperinflation is coming from: The number of bolívares you can get for $1 on the black market has rocketed up to well over 1,000, and may go considerably higher.
This causes no end of problems. The black market inflation raises the price of imports for basic goods, which drives the government to clamp down with rationing and price controls, which causes shortages, which drives more people into the black market, which drives the black market exchange rate ever higher and feeds further inflation. It leads to rampant theft and corruption, because if you can get your hands on U.S. dollars you can make a killing in bolívares. It causes people to engage in all sorts of economically irrational behavior, like stockpiling dollars for their own sake because they're the only stable store of value; or taking real goods and commodities out of Venezuela to sell them elsewhere for U.S. dollars, so they can return to Venezuela with those dollars and make a killing.
Fixing Venezuela's problems — or at least the crucial first step — is thus relatively straightforward, Weisbrot argues: Unify the exchange system into one floating rate that everyone, including the government, uses. This would allow the government to get its fiscal house in order, and give Venezuelans a stable place to go to trade in the country's own currency.
Because of the rampant dysfunction and currency speculation in the black market, it's hard to know the "real" market value of the bolívar. But Weisbrot figures Venezuela's currency would stabilize around a few hundred bolívares for every dollar.
Once that's done, Venezuela would need to put a system of cash aid in place so its citizens can afford to buy basic necessities like food. And it would need to eliminate the rationing and price control regulations, which really do play havoc with the market.
Finally, Venezuela's government should invest in new and different industries that would allow the country to diversify away from oil. There's no reason for Venezuela to rely so heavily on imports for food — it got 24 percent of its food from abroad in 2011, the last year for which data is available — and relying on imports for basic necessities has of course interacted horribly with the currency system's problems.
Unfortunately, moving to a unified floating exchange system is unpopular with the Venezuelan public, precisely because it would involve a one-time but very big drop in the official value of the bolívar against the dollar.
Thoughts? I find myself agreeing with the author of this article.
How to fix Venezuela
ROTFLMAO
Socialism failed again, big surprise there. And then the left comes along and attempts to convince people that "it just wasn't tried the right way, we have to try again." Expecting different results no doubt. lol
ROTFLMAO
Socialism failed again, big surprise there. And then the left comes along and attempts to convince people that "it just wasn't tried the right way, we have to try again." Expecting different results no doubt. lol
Socialism fails and so does trickle down Reaganomics.
Only the middle way will work.
All political systems become corrupt and quit working eventually. Some last longer than others. Periodically the slate needs wiped clean.
I don't see how this pertains to us right now, to wipe the slate clean. Reaganomics is a recent blip in the economic trajectory having nothing to do with America's long term survival. The Founding Architects gave us a Constitution to last the ages from inspiration and protection from very advanced sources. If we screw it up we will be in very much trouble.
I don't see how this pertains to us right now, to wipe the slate clean. Reaganomics is a recent blip in the economic trajectory having nothing to do with America's long term survival. The Founding Architects gave us a Constitution to last the ages from inspiration and protection from very advanced sources. If we screw it up we will be in very much trouble.
It's not if we will be in trouble, it's when. When it happens is when the slate will be wiped clean.
You may want to research 1976 Nobel Prize Winner for Economics Milton Friedman and stop using the silly term Reaganomics. That is only if you wish your arguments to be taken seriously - your choice.
Yes, but to say that the exchange rate should be reformed and that other corrective steps should be taken is the same thing as saying that the socialist government and leadership should be removed, because they are the architects of the dysfunction and are unable to see their errors or correct them. It's part and parcel of having a bunch of leftists in power that the country should end up with hyperinflation, unable to afford imports, their industrial base in a shambles, and the country on the verge of abolishing democracy and the rule of law.
Everybody knows this program; give big tax cut to the rich and instead of spending that money on jobs they put it into some bubble.
Not until Republicans recognize and admit this fallacy and repent of it will I allow them to prosper.
Thoughts? I find myself agreeing with the author of this article.
How to fix Venezuela
Milton Friedman, look him up.
You mean the guy that backed fascist dictators around the world?
You mean the guy that backed fascist dictators around the world?
Milton Friedman, look him up.
Paul Krugman supported socialist dictators? :lamo Good one.You mean Paul Krugman, or was that just socialist dictators around the world?
Well I guess your admitting his support of fascism.Also, I didn't know that Pinochet was around the world - I thought he was just in Chile? Learn something new every day.
Oh. Here we go again. Please explain how Hugo Chavez was a "dictator"...You mean dictators like Hugo Chavez?
Thoughts? I find myself agreeing with the author of this article.
How to fix Venezuela
Not until Republicans recognize and admit this fallacy and repent of it will I allow them to prosper.
Socialism is not defined by every policy that socialist governments make. Tying the value of ones currency to that of another currency is not in any way socialist. Over regulation of markets is also not strictly socialist. Sure, most of the government in question could use replacing, but that's due to corruption not socialism. This casual ideological hackery is getting old.
Why should we repent? Reagan's tax cuts gave us 25 years of prosperity. And during that time, yes, the income and overall prosperity of the lower class did increase.
We could really use more economics like that right now.
The time may be right for cutting revenue and it may not. The time may be right for more $250 stimulus or increasing the minimum wage. I don't know. I do know that the Republicans threw a monkey wrench in the economy when they filibustered 69 times and their calculations proved correct when they won in 2010 with Obama's help for reaching out to them instead of fighting them while they were doing this.
Their calculations failed though in making him a one term President and they didn't calculate that I would take note of all this and do what I have done to them (Clinton, Trump, Sanders.)
The time for all this stimulus, highways bill and raising the minimum wage has past. With it we would have been able to afford the ACA.
I don't know what will balance the economy anymore but as long as the Republicans keep running as if they and a big tax cut are the only solution I will not support them.
Yes, well I knew we'd see at least one round of the "It wasn't really socialism, they didn't do it right" argument. If only, if only, if only someone somewhere would do socialism right then it would work great. But nobody ever does.
Screwing with the market is certainly socialist policy, centralized control of the economy is socialist. That would include controlling the exchange rate, of course. In practice this invariably leads to waste, mal-investment, erroneous valuation, all of the maladies that attempts to control the economy are heir to because nobody is smart enough to do it, but some people, socialists, are dumb enough to think they are.
No offense, but the article describes what the author believes to be the root of Venezuela's crisis. And guess what, the problems are not entirely socialist in nature. But because Venezuela is a socialist country, you assume the problem must be socialism, and then go off on the typical hollow anti-socialism rant. Like I said, it's getting old. You make a huge leap in logic that is unsupported.
"Screwing with the market" how do we define that? Regulating? Having a policy regarding one aspect of the economy or another? Or is "Screwing the market" defined simply as "What socialists do"? Controlling the exchange rate of currency is socialist? Just like basing ones entire economy on a single volatile commodity is also socialist right? You keep trying to blame a complex disaster on a single factor. It's intellectually dishonest to say the least.
Casual. Ideological. Hackery.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?