Chávez has passed away, and there will be a lot of reviews on his tenure, much of it biased and incorrect I'm afraid. As noted by Mark Weisbrot not long ago: "such is the state of misrepresentation of Venezuela – it is probably the most lied-about country in the world – that a journalist can say almost anything about Chávez or his government and it is unlikely to be challenged, so long as it is negative."
Growth performance, after the failed coup in 2002 and the oil strike, was reasonably good, and the recovery from the 2009, was not the best in the region, but has been steady. The average growth rate between the debt crisis in the early 1980s and the election of Chávez was around 2%, while in the post-Chavéz era it was around 2.3%. If one takes the post-crisis period, starting in 2004, with the commodity boom, growth was around 5.5% or so (see graph below). Mark provides a good analysis of the Venezuelan economy here.
More importantly, the oil boom allowed space for redistribution policies. Chávez was the central figure in what has been termed natural resource nationalism, which has been central in the rise of left of center governments in South America. One characteristic of these governments is that functional income distribution improved as a result of increasing social transfers. As noted in UNCTAD's last Trade and Development Report: "the share of wages increased significantly in Chile (during the 1990s), the Bolivarian Republic of Venezuela (since 1997) and Argentina (since 2003), although it did not return to its previous peaks" (see graph below).
Growth performance, after the failed coup in 2002 and the oil strike, was reasonably good, and the recovery from the 2009, was not the best in the region, but has been steady. The average growth rate between the debt crisis in the early 1980s and the election of Chávez was around 2%, while in the post-Chavéz era it was around 2.3%. If one takes the post-crisis period, starting in 2004, with the commodity boom, growth was around 5.5% or so (see graph below). Mark provides a good analysis of the Venezuelan economy here.
A balanced view of Chávez would probably have to admit that he did reasonably well. But you might read a lot about the end of the dictatorship, and the return of democracy. For that it's worth remembering what Mark noted (in the same piece quoted above): "here is what Jimmy Carter said about Venezuela's 'dictatorship' ...: 'As a matter of fact, of the 92 elections that we've monitored, I would say that the election process in Venezuela is the best in the world'."
You said that Venezuela moved from 2% growth since the debt crisis until Chavez to 2.3% under Chavez. Is there any Latin American country that missed the commodity boom as badly as Venezuela did? I can't think of any.
ReplyDeleteAnother question: Do you see any connection between Chavez's abject failure as a steward of Venezuela's economy and the skyrocketing civil war levels homicide rates in Caracas?
If not for Chavez, Venezuela should be producing 5 million barrels of oil/day and have a GDP per capita close to 30,000 dollars. With that output, real wages could be twice, three times higher than they are now. But Chavez chose to scare investment and run the state oil company to the ground in pursuit of vanity projects.
If that is not a disaster, I do not know how low the bar should be set.
No wrong again. The commodity boom started in 2002-3. Chávez’s government didn’t do well in those two years as a result of the coup and oil strike. From 2004 onwards growth was around 5.5%, so higher than Brazil (which was for the whole period 2003-12 just 3.6%).
DeleteSo there is no abject failure. Also, Brazil has a very high level of violent deaths per 100,000, and so does Mexico. Reasons are complicated and go beyond just economic conditions. Certainly the role of drug trafficking and cheap access to guns is relevant.
Also, be careful with referring to Latin America as a whole, a strange invention. It is clear that South America has been dependent on commodity exports, but that does not explain the poor performance of say Mexico. Central America, Mexico and the Caribbean actually export people. That is, they depend on the remittances sent by immigrants and on the exports of maquilas, both explained by the relative low levels of wages their workers receive.
On the different development strategies of South America and the Caribbean, Central America and Mexico see https://dl.dropbox.com/u/108417080/Perez-Vernengo_2010.pdf
DeleteMatias,
ReplyDeleteIt is still an abject failure. The coup and the oil strike did not come from nowhere but they were reactions to Chavez. But the oil strike is over since... 10 years ago. The commodity boom continued (as late as 2005 oil prices were still in the 40s). Venezuela if anything missed the commodity boom. Instead of increasing production when oil prices were high, they decreased production. That is as bad as one can do.
I know all about the differences in Latin America. When I say 'miss the commodity boom' I refer only to those countries specialized in commodities.
As for poor performance for Mexico, they had pretty much the same growth rate as Venezuela during the Chavez years, with significantly less volatility and LOWER unemployment.
Well 5.5% is not an abject failure in any reasonable definition of the word. Reaction to Chávez or not the fact remains that during the commodity boom Venezuela grew more than Brazil.
ReplyDeleteBe careful with the low unemployment level in Mexico. THeir measures are not very good, and there is significant disguised unemployment.
"Well 5.5% is not an abject failure in any reasonable definition of the word."
DeleteYou cannot pick and choose. He stayed in power for 14 years. The average growth rate during those years was less than any other large Latin American country. That is as abject a failure at growth as you can find. If you add that he left the country in tatters (17% deficit, I hear), destroyed institutions, high crime rate etc, it is hard to find kind words for him.
"Reaction to Chávez or not the fact remains that during the commodity boom Venezuela grew more than Brazil."
Wait, who is in charge of Brazil?
"Be careful with the low unemployment level in Mexico. THeir measures are not very good, and there is significant disguised unemployment."
That is actually incorrect. Mexico's unemployment survey has a much better coverage than the Brazilian one.
I am not a Chávez fan. From an ideological perspective, I don't think he ever was really a Marxist. As I see things, he adopted a Marxist rhetoric to justify himself.
ReplyDeleteWithin the economic sphere and from a pragmatic point of view, he did some good things, but he failed in many others.
But I don't think Chávez's legacy should be judged only by its effect on the economy. As I see things, Chávez's main achievement, and it is indeed an achievement of historical proportions, was to put an end to the reign of corruption and gangsterism inaugurated in Venezuela by the so-called Punto Fijo Agreement: the Acción Democrática (social democrat)
It is understandable that, as an economist who never lived in Venezuela (if I am not mistaken), you tend to overlook these matters. This, perhaps less understandably, appears to be the case of Anonymous, too.
But it's not a secret for anyone who had ever had the experience of living in Latin America that corruption is endemic in that part of the world. And nowhere was it worse than in Venezuela pre-Chávez.
If no other thing could be said in his favor, that one, in my opinion, would be enough to give him a place in Latin American history.
Let's hope his death doesn't mean a return to those really bad old times.
Hi Magpie:
DeleteThanks for your always well reasoned comments. I will still disagree with you about what is Chávez main legacy. I think that corruption is very hard to measure, and I’m not absolutely sure if corruption changed significantly with his rise in Venezuela. I’m even more critical of your view that corruption is particularly more pervasive in Latin America than in other parts of the world. I’ve lived my whole life between Argentina, Brazil and the US, and although corruption takes different cultural forms in those countries, it is hard to see any significant difference.
Note that in the US, for example, the one time Secretary of Defense became the CEO of a defense contractor, and his personal wealth in the process went from a few millions to more than 50 (all his fortune is traced to that position). Then he became vice-president in an election in which he actually lost (and the disputed votes where in the State governed by the brother of the candidate that robbed the election), and he was the main driving force in a war that gave a no bid contract of two billion dollars (with b) to the company that he had been just recently a CEO. Nothing illegal, but no less corrupt for that matter. Corruption is legalized as lobbying in the US, follows the ‘jeitinho’ in Brazil, and has its own characteristics in Argentina.
Further, is not even clear that corruption, as much as I personally dislike it, has a negative impact on growth. Capital accumulation by corporations is not clearly precluded by corruption, and it’s more endemic in the history of capitalism than one might think. After all the captains of industry in the US were called for some reason the Robber Barons.
But going back to Chávez, his main legacy is that he used the larger stake of the State in the oil business to reduce inequality, and to lower poverty levels. In terms of growth he was reasonably good, and in structural transformation, which would produce higher labor productivity (Smith’s division of labor), which is essential for long term sustainable increase of living standards, he didn’t do incredibly well. Note that on this last item, is that industrialization must play a role.
As I noted on my recent post on the Soviet Union, it is there, in the ability to industrialize, coming late to the process of capitalism development, and being part of the periphery, i.e. being an exporter of commodities, is what makes that a very challenging process.
Sorry for the longish reply.
Best,
Matías
"But I don't think Chávez's legacy should be judged only by its effect on the economy. As I see things, Chávez's main achievement, and it is indeed an achievement of historical proportions, was to put an end to the reign of corruption and gangsterism inaugurated in Venezuela by the so-called Punto Fijo Agreement: the Acción Democrática (social democrat) "
DeleteSeriously?! I am really curious to ask you why the heck do you think corruption was reduced during Chavez reign? If anything, every ounce of evidence points to an increase, see the symptoms: highly managed access to foreign currency, proliferation of expenditure off-the-budget, steadfast refusal to open the government accounts to outside observers. I mean, those are all actions that have costs. Venezuela pays a lot more on their debt than countries with a transparent budget. But Chavez chose to be non-transparent and run government expenditure through off-budget entities. Why? I bet one of my kidneys that it was not to smoke out corruption.
We disagree on that. He faced a coup and a strike designed to bring him down. You take that away and he did more or less like Brazil. And you look at the commodity boom and he did really well. What deficit, the fiscal in domestic currency? Not a big deal, since they finance themselves with oil, anyways. And note that the much more relevant current account is in surplus.
DeleteOver the whole period your beloved FHC and then Lula/Dilma. Note that in his early years in power Chávez was quite monetarist and concerned with inflation. Leonardo Vera had a paper in the early 2000s if I’m not wrong about that. And Lula had Marcos Lisboa as Secretary of Political Economy (which I assume you approve). In fact, Brazil grew less because overall has a more conservative fiscal stance (which you like) than Venezuela (and this case, not Argentina, Venezuela had a larger positive terms of trade shock).
Regarding unemployment, check the data on unemployment by SEADE, which even though it is limited in scope is more credible, and shows São Paulo’s open unemployment around 13% in the late 1990s (FHC’s crisis), and disguised unemployment at 20% in that period. If you were to believe Mexican unemployment rates they never had more than 5% or so. So less coverage, but way more credible the Brazilian data.
And finally, I wouldn’t bet a kidney on the notion that Chávez is more corrupt than Carlos Andrés Pérez impeached in 1993 or Rafael Caldera. Chávez was better than those guys, and Lula/Dilma better than FHC, and there is no contest between the Kirchners and Menem/de la Rúa. Get over it.
Regarding growth rates: Australia is also living a commodities boom.
ReplyDeleteHere the boom is mainly about iron ore and coal (due to the proximity with China and India, our main export markets).
In fact, pretty much the fiscal and monetary policies have been about to accommodate for the mining boom. The federal government, both main parties, are "fiscal conservatives".
Interest rates (by Australia's very monetarist RBA) have been kept higher than usually recommended by even mainstream economists, to counter the inflationary effects of investment.
Trend real GDP growth is 3.25%. And nobody here judges that an abject failure... Au contraire.
I am too sleepy to answer to all your points, but it is crazy to say that Chavez huge fiscal deficits do not have consequences.
ReplyDeleteFor one, they raise the inflation rate and Venezuela has the highest inflation rate among emerging countries in the world. That is a lot worse than having 20-30% inflation when every other country had high inflation.
Second, the high inflation kills any hope of diversification of the economy as it causes the Bolivar ridiculo to be always overvalued in real terms.
Third, the high inflation forces the government to adopt currency controls to avoid an ever looming currency crisis and that basically precludes the possibility of any Venezuelan company to become a global player or any multinational company to consider Venezuela as their Latin or Caribbean hub.
Fourth, the lack of any semblance of macroeconomic stability in Venezuela also has real direct costs. Venezuela pays much higher interest than its peers when they issue bonds. That obviously affects the country's GDP because among other things PDVSA's investment has to be constrained due to high capital cost.
That is a Godzilla in Tokyo-like disaster. I know you think differently, otherwise you would not be vouching for the similar policies adopted by Cristina and Moreno. That is sad.
The problem with almost everything you say is that the neoclassical economics that you use, which is incoherent logically, and lacks any empirical support, is that it leads to ridiculous conclusions. Then there is the problem of your ideological bias, being as your picture suggests a supporter of right wing dictators. So let's take first the economics.
DeleteFiscal deficits are not good or bad per se. The US using spending money for a fighter jet that is not used is bad, but spending on unemployment insurance is perfectly fine. So the same goes for Venezuela, transfers for the poor are fine, and poverty fell incredibly with Chavez. They can spend as much as they want and not generate inflation, since the economy is not at full employment, and the only constraint they would have is the current account, which is in surplus. Note, no lack of workers, and no problem with capital since it can be imported. The inflation actually comes from higher wages, and the eventual nominal depreciation. Real appreciation is not necessarily all bad since it actually allows for higher wages, and note that China has had brutal appreciation of the currency in real terms and higher wages too.
Going to your political views, which from the little I can see are disturbing, I should note that the worst part for me is that it seems it comes most likely (since you use a really creative nickname) from a middle class Brazilian, that got a scholarship to study abroad (from the government not the private sector) and works most likely for a bank or worse a multilateral organization at the service of the interests of developed countries and corporations. So you do not have a clue, and most likely vote against your own interests. In my case yes I do support the left of center governments, but that does NOT mean I agree with everything they do. If you had half a functioning brain you would note that I did include an important critique of Chavez in the post (lack of productivity growth, which is way more serious than the fiscal deficit problem you suggest). And I do have restrictions on the Argentine and Brazilian governments too, but they are based on fact.
I'm okay with lecturing you on your misguided economics, because it serves the purpose of showing people how wrongheaded the stuff you say is. But your politics is really difficult to deal with. So from now on if you want to comment please use your real name, and the courage of your convictions.
@Matías (March 8, 2013 at 12:24 PM)
ReplyDeleteI think we'll have to agree to disagree on this.
The best defense of Chávez's record in the corruption front comes from his detractors. The man has been called everything imagination could conceive: from worse than Bin Laden to a little Mussolini, Stalin and Hitler, at the same time! In fact, I wouldn't be surprised if people had accused him of being either the Antichrist or a werewolf.
(The link below contains a brief compilation of all the things people has said about Chávez).
You'll notice that one thing has never been said of Chávez: no one has ever said he was corrupt. To me, this is suggestive.
Compare that with the record of other Venezuelan former presidents. Or, for that matter, with Manuel Noriega, Augusto Pinochet (and his junior!). How about Fulgencio Batista and the 1980's Cocaine Coup in Bolivia?
Note that I am not saying there's no corruption in Venezuela now. Everybody and their dog knows about the "Boliburguesía".
Neither I am saying there is no corruption elsewhere: I myself have written recently about Greece and Spain, as you can check in my blog.
And in the last few weeks the talk in Australia is about the Obeid family soap opera and the recent allegations against the "best treasurer since the Big Bang", Peter Costello.
But, at least to me, in an admittedly highly idiosyncratic manner, these guys seem nothing but amateurs compared to what was the norm in Venezuela.
[1] http://fair.org/take-action/media-advisories/in-death-as-in-life-chavez-target-of-media-scorn/
As a follow up on the "best Prime Minister Australia never had":
ReplyDelete"Watchdog says it can't investigate claim on Costello", by Mark Hawthorne. March 20, 2013
http://www.smh.com.au/opinion/political-news/watchdog-says-it-cant-investigate-claim-on-costello-20130319-2gdnl.html