Archive for June 9th, 2011

June 9, 2011

Is Hugo Chavez an idiot?

By William J. Dobson

When I was in Moscow last year, I paid a visit to Boris Nemtsov, one of the leading figures of the Russian opposition. Naturally, I had come to Nemtsov to discuss Russian politics. But the conversation quickly turned to, of all things, Venezuelan economics.
Nemtsov has no love for Vladimir Putin and his regime. The Russian government has arrested him and thrown him in prison, and it strangles the political movement he leads. But Nemtsov saw one bright side: At least he didn’t have to live under the economic policies of Hugo Chavez. “Putinism will survive if oil prices are huge. Frankly, it is the same with Hugo Chavez, but Hugo is more stupid than Putin. Chavez nationalizes industries. He establishes price controls. Putin looks cleverer. He doesn’t touch the real economy much . . . he doesn’t touch small, average businesses,” Nemtsov told me. “Economically, he looks closer to Chinese authoritarians than to Hugo. Because Hugo has no ideas about the economy at all. He is a real idiot.”
Ouch. Harsh words. But then again, Nemtsov has the numbers to prove it. Venezuela was the only country in South America to see its economy shrink last year. By many reports, it now suffers from the world’s highest inflation. In 2010, Venezuela was the only South American country to have a negative balance of foreign investment. (It dropped by $1.4 billion.) The International Labor Organization says that Venezuela was one of only five countries in the region to see job growth fall. (The others were Barbados, Jamaica, Honduras, and Trinidad and Tobago.) Power outages, rolling blackouts, and water shortages have become common as state infrastructure crumbles. And, in perhaps the most stunning achievement, the state-owned oil company has reported falling profits — even as oil prices rise.
When I mentioned these and other signs of economic decline to members of Chavez’s political party last year, they scoffed. What I didn’t understand, they said, was that Venezuelans were some of the happiest people in the world. Okay, maybe. But I didn’t meet anyone happy about the shortages of basic staples like milk, sugar and meat. And I didn’t meet anyone happy about the fact that crime has reached epidemic levels. Experts estimate that there were more than 19,000 murders in 2009. It is hard to know the precise number because the government stopped publishing the figure after it began to soar.
But fortunately all of this is about to end. Chavez just announced that he is raising the minimum wage by 25 percent. He is also going to end unemployment by creating 3 million jobs in the next eight years. And he will build 150,000 houses this year and another 200,000 in 2012.
Of course, he has made these promises before. In 2005, he was going to build 120,000 houses. A government ministry later said 21,400 were built, less than 20 percent of the promised total. In fact, over the duration of Chavez’s time in office, the government builds an average of 12,500 homes a year.
But Chavez will reach his goal. Because his real goal isn’t meeting housing targets he has failed to meet before. It is to inject enough short-term cash into people’s wallets to raise his chances for reelection in 2012. Never mind that that cash will disappear from their wallets as the minimum wage hikes fail to keep pace with inflation. Indeed, Chavez’s newly announced measures will make inflation worse. But he isn’t concerned with that. As he told a crowd this week, “I have a year and a half more in this government, then six more in the next one.” That is Chavez’s main consideration. Six more years. Because, whatever he does to Venezuela’s economy, the man is no idiot.

By William J. Dobson  |  01:32 PM ET, 05/06/2011