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EMRE DELİVELİ > Hugo Chávez’s economic legacy

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After taking control of Cuba, Fidel Castro met with his top brass to choose his ministers. When the time came to appoint the Central Bank Governor, he asked whether there was an economist among them. Only Ernesto “Che” Guevara rose, and therefore got the job.

Later, in private, Fidel asked Che: “I thought you were a médico? I thought you were looking for a comunista, not an economista.” Che answered back, and that’s how “the original comandante” became responsible for Cuba’s economy, so we should not be too hard on him. Hugo Chávez, also called comandante, in fact did have staff with training in the dismal science, but he still managed to mess up Venezuela’s economy.

The numbers speak for themselves. The country grew much less than Colombia, Chile and Peru, which have adopted free-market, business-friendly policies and recently formed the Pacific Alliance with Mexico. Investment fell, capital flight worsened, foreign investment came to a stop, and the Caracas stock exchange all but disappeared. Chávez also managed to ruin the government-owned oil company PDVSA, which used to be one the most successful state firms in the world.



But if the economy performed poorly, why was Chávez so popular? It is important to note that Venezuela is one of the most unequal countries in a continent with high levels of income inequality. In fact, the Gini coefficient does not even do justice to the country! All the Venezuelans I knew in the United States had at most two degrees of separation from each other. It seemed as though a few thousand privileged were running the country.

More importantly, despite the huge oil wealth, there was widespread poverty when Chávez came to power in 1999, with one in four Venezuelans living on less than $2 a day. The poverty headcount ratio had fallen to 13 percent in 2006. To cut a long story short, Chávez simply distributed the nation’s oil wealth to the poor by increasing government spending. External debt and inflation shot up as a result.



Chávez was not the only South American leader running populist economic policies with a nationalistic and socialist twist. Just look at those who were right in front of his coffin: Presidents Cristina Kirchner of Argentina, Evo Morales of Bolivia and Rafael Correa of Ecuador, who is an economist by training. In fact, Venezuela has dual exchange rates and price caps just like Argentina.

Unfortunately, these countries have fallen behind the liberal Pacific Alliance bloc and even Brazil. I admire Hugo for giving the disenfranchised some chance, just as I admire Evita for being the saint of the “descamisados.” But I doubt I would have voted for them, or Cristina and Evo for that matter, on account of their terrible economic policies alone.

In fact, I have yet to see a socialist regime that doesn’t mess up its economy. But it actually exists, if you don’t take the word too literally - it is called Scandinavia.

I should repeat my South American columns of the last month for the region as soon as I travel there again.

March/11/2013

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mara mcglothin

3/15/2013 4:57:42 PM

BLUE I guess you can add that to list of "evils" committed by the War mongering USA. Once again we are always responsible for the World's ills.

Blue Dotterel

3/14/2013 6:26:56 PM

Mara, Aristide, the democratically elected president of Haiti was kidnapped by the US in 2004 and flown out of Haiti to Africa. This was done after rebels armed with M-16s and M-60s of American manufacture had marched to the outskirts of Port au Prince. The US refused to protect the democratically elected gov't (not surprising). Aristide was taken to an airplane rented by the US State Department and forced to resign, then flown to the Central African Republic. Basically, a coup.

mara mcglothin

3/14/2013 3:45:11 PM

BLUE It is amusing that you would mention Haiti in one of your comments. My fifth grade teacher went and worked in Haiti every summer for 20 years, trying to educate the people, help them build homes etc, and to no avail. Brutal dictators have kept the country down, and the USA had nothing to do with it. Just look at the other half of the island to get a good view. Chavez is great if you like socialist communism. If not, then not so much!

Blue Dotterel

3/13/2013 6:25:29 PM

@Mara, " I can even throw darts at a picture of Obama if I want. " What does this have to do with Chavez? Chavez has undergone and accepted far stronger criticism from the opposition controlled Venezuelan media than any US president receives from the US corporate media. He even had to withstand a coup attempt incited by them in 2002, and allowed them to continue afterwards! As many independent observers have noted Chavez' Venezuela has a stronger more transparent democracy than the US.

Blue Dotterel

3/13/2013 6:15:56 PM

@Mara, Hitler and Napoleon started aggressive wars against others like Bush, Blair and Obama. The difference being that they attacked countries that were their approximate equal in strength; whereas, the US picks on weaker countries. Chavez has not attacked his neighbors, he has helped improve their economies and democracies, even supporting the poor in the US through oil subsidies. The US in the meantime has overthrown democracies in Haiti and Honduras. I know, the truth hurts!

Blue Dotterel

3/13/2013 6:08:41 PM

Really US Observer, and where is your evidence that Chavez even had billions in a "bank account"? What credible sources do you have? I haven't seen any but the usual right wing fanatics and propaganda sources.Nationalization is not "stealing". It is a legal process determined by independent states for the benefit of their populations. I am not a socialist, but I do not ascribe to the vacuous theory that one size political-economy fits all. I recognize the value of mixed economies.

mara mcglothin

3/13/2013 4:30:02 PM

Also BLUE Hitler and Napolean did a lot of things for their countires(public schools, arts education, etc) but that by no means makes them good men. Chavez was charismatic, no doubt about it, BUT he also preyed on the weak, not unlike Erdogan, to further his own wealth and personal goals. I don't think he was simply about Venezuela.

mara mcglothin

3/13/2013 4:28:06 PM

BLUE I am also critical of my own government, but that is not abnormal to speak out against the things you see in society that you do not believe to be correct. Nobody is perfect, but at least I can speak out with no worry of being prosecuted for it! I can even throw darts at a picture of Obama if I want. Insult might not be tasteful, but it isn't a punishable crime in the USA.

US Observer

3/12/2013 9:00:12 PM

No the Billions in his Bank account does. Not to mention he Nationalized (STOLE) businesses. So some benefited at the expense of others, is that your version of a fair society? Forget that argument though. Socialist like yourself like to use Venezuala as their example, my point was that is completely flawed since hardly any other nation has the natural resource to produce the revenue as Venezuala. Nothing is FREE as you seem think, the money has to come from somewhere.

Blue Dotterel

3/12/2013 6:23:48 PM

@Mara, semi-retired. Actually, I have many American friends and relatives. Oddly, they are often more critical of US policy than I am. I certainly do not hate the United States. I merely think it has been captured by an extensive corporate mafia. Certainly, the Gov'ts unwillingness to prosecute corporate banksters, and the protection racket it runs abroad for these criminals clearly indicates that the US has lost its way and is transforming itself into something very un-American. All to obvious.
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