Friday, November 2, 2018

Trump Says Dems Support Venezuelan "High Taxes And Open Borders"

The  average tax rate in Venezuela is 25%. The average tax rate in the US is 26%.  Sorry, Trump, this is yet another lie by Trump, but what else is new on this?

I do not know the details of Venezuelan of immigration policies, but at this point in time the issue  in Venezuela is not immigrants freely arriving and causing economic problems, but just the opposite: people leaving in massive numbers leading to crises in all the neighboring countries of Venezuela.

So, bottom line: Trump not for the first time is totally full of it on all of this.

But now it is time to deal with the political-economic problem of Venezuela, a matter that may lead to some regular readers of this blog to differ with me.

Indeed, Venezuela has turned into a political-economic disaster: extreme hyperinflation with a plunging real output, with massive outmigration, so massive that the receiving nations (Columbia, Brazil, Guayana, Ecuador), have had serious public complaints.

So GOP standard stories have now focused  on Venezuela as the supposed world model of "socialism."  Oh gag on many issues. I have from the moment Hugo Chavez came to power I never supported him, a military guy who had attempted a failed coup.  I shall not name prominent economists who now are fumbling with the current awful situation. 

As it is, indeed for most of the time Chavez ruled the Venezuelan economy performed not too badly, and indeed had had reductions in inequality, long demanded for politically.   Even now, a substantial portion of the Venezuelan population is better off than in the past due to the Chavist policies, even as the general state of the economy is horrendously collapsing under his successor Maduro, who has suppressed normal democratic processes.  And while the economy maintained a not-too-bad performance while Chavez was in power, it has  totally collapsed under Maduro, his  successor.

Of course the critics have argued that the policies that led to this  hyperinflationary collapse were due to Chavez and not his pathetic loser  successor, Maduro. This is a more complicated matter, and gets to the systemic question: has Venezuelan policy been a world avatar of "socialism"?

Chavez avoided such claims, even as he cut a deal with Cuba for them to provide doctors for oil, a deal still in place last I heard. Regarding how "socialist" he was, a lot less than many would say, and that was not how  he described  himself  or his policies  He claimed a nationalist position derived from the great liberator of South America from Spanish rule, Simon Bolivar, who indeed did come from Venezuela.  So the original Chavismo was proclaimed by him to be "Bolivarianismo," a term that has now basically disappeared, for better or worse.

So how "socialist" has Venezuela been, with its failed Bolivarianismo?  Much less than either it  s fervent supporters or its far more numerous critics have  claimed.  In terms of the most hard core definition of socialism, state ownership of the means of production, the  most important part of the economy, the oil sector, was nationalized decades ago, back when Venezuela and Saudi Arabia cooked up OPEC in 1960.  There have been nationalizations since Chavez took power, but most of the Venezuelan economy not in the oil sector actually remains privately owned, not soicialist.

Which brings us to how Chavez and Maduro really messed up the economy. Yes, they imposed some dumb price controls here and there, since totally swamped by the  hyperinflation.  Yes, there were nationalizations of some firms, even as most of the economy remains privately owned and pays lower taxes than in the US. But the real problem was/is corrupt political cronyism, with the  crucial oil sector the central problem for the economy. And the bottom line on that as that when Chavez took power he fired the competent  managers of the state-owned  oil company and installed incompetent cronies who proceeded to destroy the Venezuelan oil industry.  I saw this from Day One and never supported Chavez or Maduro.

What we dealing with here is not socialism, but corrupt incompetence.  Venezuela is not a socialist economy more than it was before Chavez came to power.  It is just a corrupt loser oil exporter that has lost it.

Barkley Rosser



2slugbaits said...

"But the real problem was/is corrupt political cronyism, with the crucial oil sector the central problem for the economy."

We could probably say very much the same about Vladimir Putin's Russia, except Trump likes Putin. Maybe Maduro's real problem is that he doesn't flatter the Yankee Caudillo enough.

Anonymous said...

Having read the essay carefully, I am not sure of the purpose. What would a brief summary be? I have no argument with the assertions, which I had recognized long ago, but what is the point?

Anonymous said...

I shall not name prominent economists who now are fumbling with the current awful situation....

[ What does this mean? Fumbling how and why? ] said...


Most of those economists are not actually fumbling, but rather are just avoiding the topic. So about a decade several prominent economists publicly supported the economic policies of the Chavez government, with indeed its economy doing not too badly on a number of measures, and quite well on a few, especially regarding an expanded social safety net. All of that is now sort of embarrassing, and some people have taken to publicly denouncing some of the better known of those for their past positions and lack of withdrawing them recently. Probably the one who has received the most attention in this regard is Joe Stiglitz, but there are others. Personally, I am not interested in getting into a big squawk about this as some folks are doing.

Anonymous said...

Most of those economists are not actually fumbling, but rather are just avoiding the topic....

[ I appreciate this explanation, and had no interest in personally criticizing any economist who failed to anticipate the direction structural changes would take after 2000. Knowing what different economists anticipated and why is however important. Joseph Stiglitz is of course as fine an economist as any in the world and knowing in particular how Stiglitz thinks is always important.

As for this administration, there is what I consider a fearsome push for government change in at least Cuba, Nicaragua and Venezuela. ]

Barkley Rosser said...

BTW, over on Angry Bear a bunch of people had fits about the fact that the corporate tax rate in Venezuela is 34%, a good deal higher than in the US. I was posting about the overall average tax rate in each country, with it being 25% in Venezuela and 26% in the US. The source for this is the Wikipedia entry on "list of nations by taxes per GDP ratio," which, indeed catches the overall average tax rates.

Eubulides said...

Arrovian models of public choice made no room for a contagion of kakistocrats. Oh darn.