Tuesday, June 24, 2008

Hugo Chavez has done it: Venezuela faces stagflation

Hugo Chavez hailed as a hero of the poor and much admired by some in Sri Lanka seems to have succeeded in wrecking his country. Its not quite out yet, but despite windfall oil revenues Venezuela faces near 30% inflation and declining gdp growth, for details just have a look at this.

It just shows what incompetence and mismanagement can do. It also tells you that oil is no panacea for economic ills, something that Sri Lanka seems to be pinning its hopes on. Robert Mugabe showed how much destruction one man can cause and it looks like Chavez is following hard in his footsteps.

For a highly readable and personal vignette of Venezuelan life, just read this.

Depressing stuff, if eye opening, but at least I suppose its better to examine others problems than ones own. Safer too.


TheWhacksteR said...

crazy stuff.. maybe their food imports are fuelling it. looks like chavez has over estimated the power of oil revenue alone to develop a nation.

i dont mean to be a cynic but lets face it, if it was our guys, probably NONE of those petro dollars would see the light of day as subsidies lol.

Bawa said...

hmmm.. interesting i took one look at the link u gave and i closed the window for more information on how the private sector can participate in socialism see these posts...
FYI socialism is alive in many different form, and rampant inflation is definitely cannot be a result of socialism if anything it should serve to reduce it...
maybe Chavez is a bad manager or maybe he thinks that in the present economic situation subsidies are better that letting the public bear the brunt of commodity price increases (subsidies fuel inflation)... many western/capitalist economists think so too.. i agree with you on one point though... the present SL government is hopeless when it comes to the economy not because they don't have the ability to manage it, but because they don't care!

Agni said...

Well, the people did turn around and vote against him when he tried to mess around with the constitution.

Chavez is not a genuine hero of the poor: and genuine helpers of the poor can also be capitalist: Mr Premadasa, our former president. The difference is that one is a good manager, and the other, a bumbling idiot.

Sam said...

That reminds me a good saying in Sinhalese “ලූලා නැති වලට, කනයා පන්ඩිතයා.” When there is no other capable person, stupidest turns in to heroes. People quite like Chavez not because what he have done, because his larger than life speeches. Well, and after all, compared to bush, any leader look goods now a days.

Jack Point said...

I'm not sure of the causes of Venezuela's problems, am trying to investigate why myself although something is definitely wrong somewhere.

Have a look at the second link (its also from the Economist but a more personal view - a columnists weekly diary-I know some people consider the journal too conservative but this particular link is I think fairly harmless).

Read your post on China, what is happening there is mostly capitalism, at least in my opinion. Socialism exists, but only in name. The charge that Sri Lankan garment factory owners levy is that SL has tough labour conditions and minimum pay, OT, EPF etc, Chinese workers enjoy almost no rights and work very cheap hence Sri Lankan garments find it very hard to compete with China.

The issue, to my mind at least, with nationalisation is what is in essence an agency problem. The owners (effectively the people at large) have little or no say in how things are run and do not benefit directly from the organisation concerned.

All power lies in the hands of the managers, who are supposed to act in the best interests of the owners but have no incentive to do so - and the owners being largely divorced from their agents have no way to force the agents to perform better.

Thus is born the petty bureaucrat, the scourge of the public service anywhere. For the last one year I have been trying to get a refund from customs (even did a post on it) and for problems that are not our fault we are made to run from pillar to post begging for relief.

The history of nationalisation in Sri Lanka, particularly of the tea and rubber estates is a case in point.

Output increased for a couple of years due to short-term methods, then dropped. Estates went into ruin. Worse the planters who were chased out went to Kenya and a couple of other African countries and started off again there. A nascent African tea industry became a giant and is now the principal threat to Sri Lankan tea.

There is a booklet of statistics that the JEDB (or the Tea board-I cant remember which) used to publish, you can have a look at the figures there.

I am not so familiar with paddy lands but when driving around in the Gampaha district over the last Avurudu holidays I kept trying to see if redistributed land has resulted in improved life for teh average villager. I could not get any info but if you have any will be glad to hear it.

Anyway, don't mean to offend in any way, just debating the view, cheers

Anonymous said...

Well if you want believe everything the article says fine. I hesitate when there is no author and when you look up country data at the site, it is all negative.
If you believe Economist then why not this? ;)
It is just like when China had to cull chicken due to flu every TV station aired it here in the US, everytime. But when Tyson foods culled 15000 chicken no one blinked.
Also it is where you get the news from. You hear about US buying oil from Venezuela but do you hear about what they buy US?
I like this article article, same story better said!and balanced.

Jack Point said...


the link you sent is broken-would you mind posting it again?

By the way, all correspondents at The Economist are anonymous, by tradition.

I subscribe to the magazine and have found their analysis to be generally good.