Explanations for the collapsing Venezuelan economy that avoid the actual cause – 7
As the level of massive, avoidable, preventable, yet fully predictable suffering expands without end, we see two new explanations for the suffering.
5/18 – Daily Mail – No electricity, no antibiotics, no beds, no soap: A devastating look inside Venezuela’s crisis-hit hospitals where 7 babies die a day, bleeding patients lie strewn on the floor, and doctors try to operate without tools. Hospitals have minimal electricity, no soap, no antibiotics, no gloves, no x-rays.
Even The Guardian is seeing horrid problems in the socialist paradise. Yes, The Guardian!
5/18 – The Guardian – Venezuelans on the food and economic crisis blighting their daily lives / Food shortages and soaring black market prices are making life a misery for people across the country – One person says that essentially every grocery store in Caracas has hundreds of people in line every day.
One woman says she has not been able to buy milk, sugar, or corn flour in about the last five months. Toilet paper, soap, and deodorant are very difficult to find as well, she said.
Article tells of supply trucks on their way to a grocery store being looted. There are 107 episodes of looting reported so far in 2016.
Article says many people are spending all their time trying to find food in the stores.
Update: 5/20 – Fortune – Coke Has Suspended All Production in Venezuela – The lack of sugar has led Coca-Cola FENSA to suspend production of all products in Venezuela. Article says this is the largest individual bottler in the world.
This follows the Polar Group, the largest beverage and food company in the country shutting down production of beer a month ago.
What caused this horrible humanitarian disaster? Here are two new explanations.
We finally know what caused all the suffering
1.It’s the fault of the political opposition
Aha! The Associated Press finally explains the cause of the economic collapse. It is the fault of the opposition political party creating a political standoff. They made this mess, not the current government.
5/19 – Associated Press at Washington Post – AP Explains: Standoff, dying economy drive Venezuelan crisis – Opening paragraph says the country is being harmed by the political standoff between the government and official opposition while the population is getting irritated with the high inflation and food shortages. The opposition is focused on stopping the president from fixing the economy by halting the forced measures the president has in mind.
You see, it is the oppositions fault!
The section called ‘how did they get here’ explains the opposition won legislative elections in December and now want to remove the president, who is countering their efforts.
The impact? If the impasse isn’t resolved, riots might break out. Since the article suggests the only unreasonable people are those trying to undo the presidential election, I can guess who will get blamed for any riots that take place.
Only indication the article acknowledges of any economic distress ever existing is that the economy is expected to shrink 8% this year and inflation is expected to hit 700%. No indication in the article of any economic distress prior to 1/1/16 other than some drop in government revenue due to fall in oil prices.
So, we now know that socialism isn’t the problem. Nationalization of much of the economy isn’t the problem. The nationalized power company’s failure to invest in either maintenance or expansion of power capacity isn’t a problem. The tight currency controls aren’t a problem. The massive economic disruptions from years of failed government policies aren’t a problem.
It’s the fault of the opposition.
2.Or it could just be some embezzlement by the distracted leaders
5/19 – Washington Post – A reporter covering economics (economics!) reports There has never been a country that should have been so rich but ended up this poor.
After I read the article the first time I had to double-check the URL to make sure I didn’t accidentally click over to a satire site or the World Socialist website. After verifying I was in fact reading an article from the Washington Post, I read the article a second time. Then read it again as I wrote this post.
Here is the core of the blame shifting. I must quote it because you wouldn’t believe me if I paraphrased it:
Venezuela is the answer to what would happen if an economically illiterate drug cartel took over a country.
Here’s how the shift goes. Two of the current president’s relatives have been arrested on charges of smuggling 800 kg of dope into the US. One of the president’s key staff is suspected of running a drug ring. Therefore I guess we should conclude the problem developed because lots of leaders are too interested in running drugs to mind the economy.
The only other reason is official embezzlement. Two sources estimate there may have been as much as $300 billion embezzled in the last decade.
I’m looking at information from Index Mundi with their information sourced to the US Energy Information Administration. Production since 2003 has been running about 2,400,000 barrels per day. That is about 876M barrels a year. When oil was at $100 a barrel that was $87.6B. Oil around $50 would be $43.8B a year.
Take a wild guess of a midpoint between those two would put annual revenues at my further wild guess of something in the range of $60B or $70B a year over the last decade.
Now go back to an article from the Wall Street Journal that I discussed previously. Apparently the official policy has been to only book the first $40 received for each barrel of oil into the official records. The difference between $40 and market price was put into an off budget rainy day account.
Article at the WSJ says there is only a few million dollars left in the rainy day account.
I will make a very wild guess that the difference between market price and $40 has been shipped off to Geneva by way of Panama City with another stop or two in offshore accounts.
The claimed $300B embezzled over 10 years would be $30B a year.
If my guesses and string of assumptions are correct that would mean that government officials have siphoned off something in the range of around one-half of oil revenues. That’s plausible.
Even with that level of embezzlement, this economics writer (economics!) says it should not have been a problem for the government merely to cut a check for some money to every poor person and everything would be just fine.
Without any curiosity at all as to how things developed, the author says grocery shelves are empty today because the government forces companies to sell products for less than it costs to buy them, thus merchants won’t buy foreign goods with scarce hard currency (which they don’t have in any event) to be sold at a huge loss.
So why doesn’t the government just take off the forced limits on sales prices? Apparently, according to the article, that would interfere with the ability of the government officials to continue stealing oil money.
I’m not making this up. Please go read the article for yourself. You might want to make sure I didn’t slip in a link to The Onion.
Completely missing from the article is any acknowledgment that socialism itself could have some link to the massive human suffering.
Neither does nationalizing most of the economy have any role to play. Neither do the harsh currency restrictions. Neither does the politically run, nationalized power company’s failure to either maintain or improve production capacity have any bearing on the massive electricity shortages.
At least the enforced price controls on what merchants can charge for their products is acknowledged as causing some little part of the problem. Of course, that part of the problem could easily go away if the government really felt like it.
So we are left with the only cause of the horrid devastation and human suffering is the simple neglect of the senior leaders.