Power & Market

Venezuelans Must Reject Not Just Chavismo, but Also Keynesianism and Mercantilism

There is a decision that no person, nor foreign government, can make for Venezuelans: decide how Venezuela will be after Chavismo. We think and are always asserting that our fellow Venezuelans have to reject any “kind of socialism,” because if the society accepts a return to the practices and policies that were in place before the Chavez era, they will be condemned to repeat history.

The truth is that there is not a nonsocialist or nonmercantilist option in the political arena. Indeed, some self-proclaimed “classical liberal,” “right-wing,” or “conservative” options are just mercantilists, liberal socialists, or social democrats trying to disguise their real nature. This is hopeless for our relatives, friends, and anybody who still lives in Venezuela, hopes to continue living there, or who must remain and is faced with deciding whom to support. Worst of all, the only thing that is true of all those options is that to support any of them is to support the imminent repetition of the corruption, cronyism, and bad policies of the past.

Neither a quick and painless international military operation nor a long, painful, and corrupt “democratic” negotiation to overthrow Maduro will be enough if people allow Juan Guaido and his comrades to apply the socialist agenda called “Plan País.” Keeping the status quo—a central bank, a minimum wage and other laws that increase the cost of starting a business, economic controls, barriers to international trade, state ownership of the commanding heights, and a high level of fiscal independence from the government—will not solve the problem forever.

We understand that eradicating tyranny would solve, in the short run, great problems for other countries, such as a massive and increasing migration, and for Venezuela, such as access to basic goods and services. Nevertheless, these solutions would just be short lived. Many of those more than 10 million Venezuelans living in other countries would not return, and all the economic, social, and political problems would arise in the middle to long run in a scenario like this. Why? Because, as in the past, the system that Guaido and his comrades propose will collapse at any moment and a new and stronger “kind of Chavismo” will grip the country once again and jeopardize freedom and stability in the region.

The GDP per capita has been widely criticized as an index of quality of living. Notwithstanding, we will use it to support our argument that the social democratic era paved the road to harder socialism like Chavismo with its policies. The following graph shows the average income per capita of Venezuelans:


After a great and sustained period of economic growth (1950–57), Venezuelans enjoyed an average income of $8,400 (in 2011 US dollars). Immediately after the social democracy started, Venezuelans suffered a decrement in their incomes, and by 1963 they had incomes similar to 1953 levels. Nevertheless, from 1964 incomes started to increase, achieving their highest level in 1980, of around $10,500. After that year, incomes started to plummet, reaching around $6,400 in 1998, when Chavez won his first election. Strictly speaking, Venezuela passed the 1957 threshold during just fifteen of the forty years of the social democratic era. The maximum incomes represented 124 percent of the 1957 incomes, but the social democracy era closed with an average income of just 76 percent of 1957 levels, which is almost the same income that Venezuelans had in 1951. Then, Venezuelans suffered a sustained and continuous impoverishment process, one of the reasons they trusted the radical and harder socialist promises of Chavez.

From this graph, we can extract many undesirable truths. For example, not even with Maduro did the average incomes decrease as much as they did during the social democratic era. We are not saying that Chavismo has been better than social democracy (in fact, to us Chavismo is its offspring). We want to remark the unfeasibility of the “Plan País,” which is just an extension of a failed plan called “El Gran Viraje” (the great turn) that was in place from 1989 to 1993; even in that period the failure of such Keynesian policies is evident.  Chavismo and social democracy have relied on oil prices, and you can see high instability and volatility in the graph for that reason. Plan País would be funded and supported with oil and international debt. Despite the fact that poverty was increasing before Chavez, there was not the great problem of scarcity and the humanitarian crisis that we see today. People should understand that these problems are the symptoms and what we have to eliminate is the bacteria that causes them. That is socialism.

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