October 3, 2006

Cocoplums and the State

Katy says: A trip to Venezuela is a homecoming. Something about waking up and seeing dilapidated American cars from the 70s and 80s roaming the streets stirs my memories, awakens my saudade. Whether it's the constant honking of horns, the sight of thousands of trees with their trunks half-painted in white, the smell of my mother's lilac bushes or eating traditional, homemade Maracaibo cocoplum jam, Venezuela is a feast for my senses. My country is a place where even in the middle of any city, you have to clean the iguana droppings from your car, the loud chirping of crickets keeps you up at night and the howling of guacharacas announces the break of day.

Venezuela is also a place where sidewalks are an afterthought, traffic lights are mere suggestions and everybody, everywhere is having car trouble. People in Caracas spend two, three, four hours in traffic every day and simply assume it as "the way things are," as if everyone living in large cities had to go through the same. The country's exhuberant nature would look a whole lot better if it didn't have to be viewed through steel bars.

The first airplane I flew in was also having mechanical problems, so the airline gave me 24 hours in Panama City to compensate. Panama City is pretty nice, with impressive skyscrapers and an attractive historic downtown that is slowly reviving. There's poverty there, but I got the feeling during my short stay that it was shrinking, and that conditions were getting better. There is a real sense in the country that tourism is the wave of the future, so they take special care in presenting a clean, safe city.

One of the things that impressed me was how we were able to drive next to the Presidential Palace, which as you can see from the picture was guarded by a few soldiers and nothing else. The turnover of the Canal and the planned expansion seemed to bring about an infectious optimism to the people I spoke to, regardless of their political leaning. I left hoping to find some of that in Venezuela.

Instead of finding hope, I landed in Venezuela finding that the aesthetic of our cities says one thing only: poverty. I had trouble trying to grasp why it is that Venezuela simply looks poorer than other places in Latin America in spite of having a similar culture, similar geographies and somewhat similar standards of living. I concluded that rentism is to blame for much of the bad aesthetics of our cities, for the feeling of chaos that suggests something is not right.

For example, driving through Venezuela you can sense the neglect in public works. Sidewalks are sort of there, sort of not. Streets are full of potholes, public works take forever to complete and the general decorum of the cities is shoddy. Graffitti is common, there is garbage everywhere and the streets belong to gangs. La Chinita Airport in Maracaibo, for example, was renewed a few years ago, yet you can still see significant cracks on walls surrounding air-conditioning vents and in ceilings. Hallways are small and crowded, and even though it presents itself as a modern airport, the guy at customs doesn't even have a computer. It would seem as though anything having to do with the State is done in bad taste, without proper care, with no concern for doing things the best possible way.

One of the reasons for this is rentism. Theorists say two of the reasons States need to exist are: to provide public goods and to intervene in markets or situations where there are negative externalities. But in Venezuela the State - the Petrostate, that is - is there to dole out the wealth, to support a rentist society.

A public good is a good that continues to satisfy other people's needs when consumed. For example, when I walk on a sidewalk, the sidewalk stays there for the next person to use. Defense and justice are public goods. These are goods that are typically not provided privately, so they are one of the reasons States exist.

Externalities occur when one person's consumption causes another person's disutility. For instance, smokers cause negative externalities because their habit not only causes harm to themselves but also take up valuable health-care resources from society, be it in the form of second-hand smoke cancer or in the form of enormous health care costs the State has to cover. The control of externalities is another reason to have a State, so that somebody can tax the smoker and provide the incentives for him or her not to smoke anymore or, if they do, to have enough funds to be able to pay the extra health-care costs their smoking causes to society.

In Venezuela, it seems that the provision of public goods and dealing with externalities are simply not a priority for the State. When crime rates soar, traffic jams sink entire cities into gridlock and lakes suffer from horrendous pollution, one would expect a normal government to care, to do something about it. But neither the current nor previous Venezuelan governments cared about this stuff. All they care about is rents - how to hand them out, how to get favors from people who recieve them, how to produce more of them. The government's entire structure is built around this notion, one of the consequences being that there is total chaos on the streets. Other places in Latin America don't seem to suffer from this.

Some entrepeneurs are beginning to get around this idea. For example, I found out about CruzSalud, a private company that sells insurance to people in the barrios. For a monthly fee of 18 to 40 thousand bolívars, customers in barrios have access to house calls, emergency care, as well as complete health-care kits should they have to go to a public hospital which includes syringes, cotton and scalpels.

A normal State would do its best to have functioning hospitals, since proper health care provides positive externalities for society as a whole. But when the State's attention is turned to creating and distributing rents, some privates see opportunities. It's too bad the CruzSalud can't figure out a way to solve Caracas's traffic problems.

Other entrepeneurs take advantage. One of the most shocking things I learned was that street vendors in highway traffic jams are now selling ice-cold beer to drivers. I confronted a friend who happens to be the President of an entrepeneurial association, asking him whether beer manufacturers didn't feel the need to control the illegal sale of their product. He simply shrugged, telling me it was the role of the State to control that and the company could do nothing about it.

Part of that may be true, but the whole argument goes against modern business ethics. Large private beer companies usually control the shelf where their product is placed on, in every supermarket they sell to. They even control things like the temperature of the refrigerators that hold their products. Surely, I told him, they can control the five or six guys selling beer in the most popular traffic jams. Selling beer in highways causes enormous negative externalities, but neither the State nor the company seem to care, since both are focusing their efforts on their rents.

So think about it the next time you walk around the streets in Venezuela and see people race by at double the speed limit or you trip on a poorly constructed sidewalk. In countries with similar income levels as Venezuela, public goods are not so poorly provided, externalities are taxed. And while you're at it, appreciate the good things around you, like the cocoplums. Luckily there are some things the State hasn't been able to screw up yet.