Sunday, 30 September 2018

The Venezuelan economic policy manual (satire)

For the good governance and prosperity of the Venezuelan people, we recommend policymakers adhere to the following policy framework:

*Discover oil. A lot of it. Enough that if the oil wealth is responsibly managed, all Venezuelans can live prosperously.

*Divi up the spoils in the following manner: Allow foreign oil companies a significant share of the revenue in exchange for investing all of the capital, and providing all of the operating expertise, necessary to discover, develop, and operate oil wells. Allow the state to capture the balance, and use it to finance generous social programmes. Health and education to be sure, but also entitlements such as the provision of subsidised fuel, generous social welfare and pensions, and the investment programmes (and losses) of a large number of state owned enterprises. Employee as many people in the state sector as possible, at high wages, to reduce inequality and unemployment. Widespread entitlements will ensure popular support for your regime.

*Rely almost entirely on imports to meet domestic consumptive needs.

*Steadfastly refuse to acknowledge the volatility of oil prices, and avoid saving any windfall gains during oil price booms to smooth state spending during oil price busts. Ramp up state spending proportionately with rising oil prices, and capitalise boom-time prices into entitlements.

*When an oil price bust does arrive, instead of cutting state spending, renegotiate contracts with oil companies to increase the state's revenue share. Ignore sceptics who argue that if the state share is increased too much, investment into the sector will cease and production will eventually start to decline. After all, it's our oil, and we are entitled to our fair share.

*Continue the above, iteratively, through successive oil price cycles, until the state oil company controls 100% of oil revenues/concessions.

*In subsequent oil price downturns, and/or to compensate for declining oil output, resort to heavy international borrowing, and also raid the coffers of the state oil company. Ignore warnings that the latter might deprive the state oil company of funds needed to maintain investment to support production.

*If funds are still in short supply, default on your international loans. If people then refuse to lend you more money, supplement declining state oil income by printing money. The confiscation of private businesses and large agricultural land holdings may also help supplement state income, while furthering efforts to reduce inequality.

*At this point, undesirable effects such as currency depreciation and inflation may occur. Ascribe this to a capitalist conspiracy, and focus on addressing the undesirable symptoms of problems, rather than their underlying causes. Heavy state intervention will be required at this point, including capital controls, an exchange rate peg, and widespread price controls on consumer goods, to combat currency weakness and rising inflation. Also be sure to make it illegal for companies to fire workers, so as to sustain the people's purchasing power. Such policies will all be needed to defend the people against the capitalist pigs.

*Inflation will also have some positive benefits as well. For one, it will render private saving and investing for the future a futile activity. This is desirable, as it is solely the responsibility of the state to provide for the people's needs.

*The capitalists may fight back, however. You may notice people hoarding goods; black markets emerging; as well as widespread smuggling of price-controlled goods overseas. Private companies may also refuse to produce goods at a loss, in the furtherance of their conspiracy against the people's revolution. Goods may start to disappear from shelves at this point.

*Respond by nationalising these private loss-making factories and putting them back into production. The printing presses will provide more than adequate funding to keep them operational and producing goods for the benefit of the people. In addition, at this point, it is essential the state dedicate a huge amount of resources to creating new rules that regulate, monitor and police every economic activity by every person/company, lest smuggling and other capitalist plots be allowed to flourish. Ignore warnings that this will divert a tremendous amount of the country's potential labour resources into unproductive activities.

*Foreign exchange may also become scarce at this point. Ignore people that argue that this is due to an overvalued exchange rate - capitalist propaganda must be resisted. The lack of foreign exchange may make the procurement of imports and imported components necessary for import substitution difficult, further reducing the availability of goods. Be sure to respond by banning the import of unnecessary luxuries, and encourage Venezuelans to forgo other indulgences such as eating three meals a day and using toilet paper. A compulsory diet should do Venezuelans some good anyway, and reduced dietary intake will reduce the need for toilet paper, besides.

*Sell what little foreign exchange is available to the military and other well-connected state actors at the official currency peg, as their support will be necessary to suppress popular revolts incited by the capitalists and other enemies of the people. Some may describe this as corrupt, but it is for the ultimate good of the people, and the ends justify the means. Sell some to yourself as well, and become very rich. After all, all your hard work in fighting for the people justifies rich compensation.


Venezuela is an utter humanitarian tragedy, and the worst thing about it is that it is entirely man-made. Venezuela should be one of the richest countries in the world, and yet its people are literally starving. And the problems are so easily solved. All that needs to happen is the following:

(1) The exchange rate needs to be freely floated.
(2) The country needs to stop printing money.
(3) Price controls need to be eliminated, including fuel subsidies.
(4) The oil industry needs to be restructured to increase incentives for private investment, and a state oil royalty fund needs to be set up that smooths state spending through boom and bust periods.
(5) Mass privatisations of state owned enterprises needs to occur.
(6) The labour market needs to be liberalised, and other regulations on private business activity lifted.
(7) A significant reduction in state spending, employment, and entitlements needs to be implemented.

Knowing what needs to be done, unfortunately, is the easy bit. Actually getting it done is the hard bit. Venezuela actually attempted to implement the above in the early 1990s, but mass popular socialist uprisings overthrew the government, and paved the way for Hugo Chavez to come to power, and implement his policy agenda of "21th Century Socialism" (which, it turns out, looks a lot like "20th Century Socialism"). The forces of corruption and human stupidity are both powerful and tenacious, unfortunately, and is the cause of much unnecessary suffering.