Populism

We were invited to the radial show “Aprende y Emprende” (Learn and Entrepreneur) at 97.5FM Fe y Alegría Barquisimeto conducted by professors Joel Torrez and Juan Correa from UCLA (Venezuela). We talked about our non-profit & non-partisan civil association, Econintech (@econintech). Luis Birollo (@luishbc317) explained in an excellent way our purposes and objectives. After the show we received many calls from known and no-known people asking for what do we see in the Venezuela’s future that allows us to start a project like Econintech. We think there are four kind of people in Venezuela: i) who cannot or doesn’t want to go away; ii) Who is excessively optimistic that cannot see what is coming; iii) Who is excessively pessimist that thinks he/she has lost everything and there are nothing to do just survive; iv) Who understands the severe situation but has a hope that common people will learn that Venezuela’s problems are the result of the poorest economic freedoms from 1958 and that Venezuela can obtain those economic freedoms if we help. Two of the greatest evils that my country has suffered are populism and protectionism. No matter from what political party or tendency come or what firms or part of the population is targeted. In this post "I think aloud" about populism. Unfortunately, Venezuela and Latin America has a populist socio-culture up to people understands and accepts that the origin of their problems is the fictional "benefit" offered by politicians, opportunists who see the direct satisfaction of a need, or the promise of satisfying it, as the source of their beloved votes. The populist cycle is well described by great authors of economy, including Rudiger Dornbusch and Sebastian Edwards in their book of Macroeconomics; those who have lived in countries with populist regimes, like me, will notice the true of these authors’ view. At the dawn of the populist government the public policies “social and efficient” implemented seems to be in the right way. Subsidies, Governmental Importations, Price Controls, among other policies supported on the increase in the public expenses (through the public incomes and International Reserves (IR)) give to the economy a healthy air of wealth and richness. People live in a “fancy economy”. Macroeconomic indexes show a good performance (i.e. controlled inflation, increment in gdp, etc…). The problem is that those “social-efficient” policies promote the consumption and discourage investments, so the IR is diminishing faster and faster as well as the stock of capital. At this point the government has to implement more hardest populist decisions as exchange control, capital control, more subsidies (printing inorganic money), strengthen the price control, everything in the economy is now controlled, the market aberrations (black market for everything) start to appear and inflation is arising very fast. After that stage, the government has not control over inflation and scarcity; the excessive inorganic money and the need and want of people of save their money in any foreign currency because of the national is worthless is very heavy to an exchange control that does not support more pressure. The social-political floor of the government seems to be thin as a toasted cookie. Social problems (civil or army shocks) could appear at any moment. Finally, a new administration comes to the political scenario. The new decisions are not “social-populists” but orthodox, in Latin America specifically in Venezuela those “orthodox” decisions are called by the populist politicians as “liberal”, “Neo-Liberal”, “Imperialists”, “Post-Keynesianists” among others. In many cases an international institution (IMF, IADB, OAS, etc..) gives money to rebuilt the economy but some adjustments or reforms (I think Venezuela will need in a medium term a deep reform) are necessary to take. The big problem is that people will think that the new government is “worst” than the old one because of is at this moment when they will feel the real symptoms as the “heritage” of the populist regime. Venezuela is in the third stage, uncontrolled inflation and scarcity; black exchange market with, perhaps, the biggest difference between the official and the black markets that have ever exists in the world (official 6Bs=1USD; Black Market 820Bs=1USD). People is starving, there are no medicines, corn oil, coffee, chicken, milk for babies, diapers, blood pressure treatment, Parkinson, HIV, etc… Everything has to be bought in the black market with a difference of more than 2000% of the official and controlled prices. Venezuelans need a liberal politician but at this moment all politicians, you read good, ALL, are social-populists and protectionists so all of them, really, go against people. Thanks for sharing.-