Hugo Chavez: Making the Rich Poor, Making the Poor Dead, Making Himself Jefe

Hugo Chavez is seen by leftist idiots as the champion of the poor. That is because leftist idiots are easy to fool by unscrupulous and bloody dictators. Chavez fits cleanly into that mold.

The claim that Chávez has brought tangible benefits to the Venezuelan poor has indeed by now become commonplace, even among his critics. In a letter addressed to President George W. Bush on the eve of the 2006 Venezuelan presidential elections, Jesse Jackson, Cornel West, Dolores Huerta, and Tom Hayden wrote, "Since 1999, the citizens of Venezuela have repeatedly voted for a government that -- unlike others in the past -- would share their country's oil wealth with millions of poor Venezuelans." The Nobel laureate economist Joseph Stiglitz has noted, "Venezuelan President Hugo Chávez seems to have succeeded in bringing education and health services to the barrios of Caracas, which previously had seen little of the benefits of that country's rich endowment of oil." Even The Economist has written that "Chávez's brand of revolution has delivered some social gains."

One would expect such a consensus to be backed up by an impressive array of evidence. But in fact, there is remarkably little data supporting the claim that the Chávez administration has acted any differently from previous Venezuelan governments -- or, for that matter, from those of other developing and Latin American nations -- in redistributing the gains from economic growth to the poor. One oft-cited statistic is the decline in poverty from a peak of 54 percent at the height of the national strike in 2003 to 27.5 percent in the first half of 2007. Although this decline may appear impressive, it is also known that poverty reduction is strongly associated with economic growth and that Venezuela's per capita GDP grew by nearly 50 percent during the same time period -- thanks in great part to a tripling of oil prices. The real question is thus not whether poverty has fallen but whether the Chávez government has been particularly effective at converting this period of economic growth into poverty reduction. One way to evaluate this is by calculating the reduction in poverty for every percentage point increase in per capita income -- in economists' lingo, the income elasticity of poverty reduction. This calculation shows an average reduction of one percentage point in poverty for every percentage point in per capita GDP growth during this recovery, a ratio that compares unfavorably with those of many other developing countries, for which studies tend to put the figure at around two percentage points. Similarly, one would expect pro-poor growth to be accompanied by a marked decrease in income inequality. But according to the Venezuelan Central Bank, inequality has actually increased during the Chávez administration, with the Gini coefficient (a measure of economic inequality, with zero indicating perfect equality and one indicating perfect inequality) increasing from 0.44 to 0.48 between 2000 and 2005.

...Remarkably, given Chávez's rhetoric and reputation, official figures show no significant change in the priority given to social spending during his administration. The average share of the budget devoted to health, education, and housing under Chávez in his first eight years in office was 25.12 percent, essentially identical to the average share (25.08 percent) in the previous eight years. And it is lower today than it was in 1992, the last year in office of the "neoliberal" administration of Carlos Andrés Pérez -- the leader whom Chávez, then a lieutenant colonel in the Venezuelan army, tried to overthrow in a coup, purportedly on behalf of Venezuela's neglected poor majority.

In a number of recent studies, I have worked with colleagues to look more systematically at the results of Chávez's health and education misiones. Our findings confirm that Chávez has in fact done little for the poor. For example, his government often claims that the influx of Cuban doctors under the Barrio Adentro health program is responsible for a decline in infant mortality in Venezuela. In fact, a careful analysis of trends in infant and neonatal mortality shows that the rate of decline is not significantly different from that of the pre-Chávez period, nor from the rate of decline in other Latin American countries. Since 1999, the infant mortality rate in Venezuela has declined at an annual rate of 3.4 percent, essentially identical to the 3.3 percent rate at which it had declined during the previous nine-year period and lower than the rates of decline for the same period in Argentina (5.5 percent), Chile (5.3 percent), and Mexico (5.2 percent).

Even more disappointing are the results of the government's Robinson literacy program....In contrast to the government's claim, we found that there were more than one million illiterate Venezuelans by the end of 2005, barely down from the 1.1 million illiterate persons recorded in the first half of 2003, before the start of the Robinson program. Even this small reduction, moreover, is accounted for by demographic trends rather than the program itself. In a battery of statistical tests, we found little evidence that the program had had any statistically distinguishable effect on Venezuelan illiteracy. We also found numerous inconsistencies in the government's story. For example, it claims to have employed 210,410 trainers in the anti-illiteracy effort (approximately two percent of the Venezuelan labor force), but there is no evidence in the public employment data that these people were ever hired or evidence in the government budget statistics that they were ever paid.

...by late 2007, Chávez's economic model had begun to unravel. For the first time since early 2004, a majority of voters claimed that both their personal situation and the country's situation had worsened during the preceding year. Scarcities in basic foodstuffs, such as milk, black beans, and sardines, were chronic, and the difference between the official and the black-market exchange rate reached 215 percent. When the Central Bank board received its November price report indicating that monthly inflation had risen to 4.4 percent (equivalent to an annual rate of 67.7 percent), it decided to delay publication of the report until after the vote on the constitutional reform was held.

This growing economic crisis is the predictable result of the gross mismanagement of the economy by Chávez's economic team. During the past five years, the Venezuelan government has pursued strongly expansionary fiscal and economic policies, increasing real spending by 137 percent and real liquidity by 218 percent. This splurge has outstripped even the expansion in oil revenues: the Chávez administration has managed the admirable feat of running a budget deficit in the midst of an oil boom.

Such expansionary policies were appropriate during the deep recession that Venezuela faced in the aftermath of the political and economic crisis of 2002-3. But by continuing the expansion after the recession ended, the government generated an inflationary crisis. The problem has been compounded by efforts to address the resulting imbalances with an increasingly complex web of price and exchange controls coupled with routine threats of expropriation directed at producers and shopkeepers as a warning not to raise prices. Not surprisingly, the response has been a steep drop in food production and widening food scarcity.

...What is most distressing is how predictable all of this was. Indeed, Cháveznomics is far from unprecedented: the gross contours of this story follow the disastrous experiences of many Latin American countries during the 1970s and 1980s. The economists Rudiger Dornbusch and Sebastian Edwards have characterized such policies as "the macroeconomics of populism." Drawing on the economic experiences of administrations as politically diverse as Juan Perón's in Argentina, Salvador Allende's in Chile, and Alan García's in Peru, they found stark similarities in economic policies and in the resulting economic evolution. Populist macroeconomics is invariably characterized by the use of expansionary fiscal and economic policies and an overvalued currency with the intention of accelerating growth and redistribution. These policies are commonly implemented in the context of a disregard for fiscal and foreign exchange constraints and are accompanied by attempts to control inflationary pressures through price and exchange controls. The result is by now well known to Latin American economists: the emergence of production bottlenecks, the accumulation of severe fiscal and balance-of-payments problems, galloping inflation, and plummeting real wages.

Chávez's behavior is typical of such populist economic experiments. The initial successes tend to embolden policymakers, who increasingly believe that they were right in dismissing the recommendations of most economists. Rational policy formulation becomes increasingly difficult, as leaders become convinced that conventional economic constraints do not apply to them. Corrective measures only start to be taken when the economy has veered out of control. But by then it is far too late. __ForeignAffairs

Chavez is a typical populist strong-arm dictator of a certain "socialist" persuasion, whose grasp of economics is typically thin. He is so much like Robert Mugabe, Kim Jong Il, Fidel, Stalin, Mao, and Hitler, as to be blood brothers in national ruination.

Why are leftists so easily led into perdition by these miscreants? Wishful thinking accompanied by a lack of grounding in the real world of economics. In modern western civilisation, this is an all too common combination. In fact, if you graduate from university without a thorough indoctrination in inane, illogical leftist quasi-utopian delusionary thinking, you are a rare wonder.