January 26, 2009

The Parable of the Leaves

[coming soon on Huffo...]

Quico says:
Talk about Venezuela these days and people assume the argument splits neatly between two camps: nutty Pat Robertson-style Chavez-hating right-wingers who couldn't care less about the poor at home, let alone in South America; and sane, progressive folks with the sense to balance off concerns about Hugo Chavez's autocratic streak with admiration for his government's remarkable achievements in improving the lives of poor Venezuelans.

Personally, I'm in neither camp: I'm a radical anti-Chavez progressive. (We do exist, dammit, we do!!) Fighting poverty sustainably is right at the top of my agenda. In fact, it's one of the biggest reasons I oppose the guy.

"But what sense does that even make?" my friends back in the US will say, "Chavez has cut the poverty rate in half since 2003...what kind of progressive is radically against that?"

"A progressive," I'm tempted to answer, "who's concerned with the sustainability of poverty reduction." Because in Venezuela, we have a long, sad history of big advances in the fight against poverty that turn out to have been mirages when the economy tanks.

Chavez's claims to have halved the poverty rate aren't wrong, but they're incredibly misleading. If you'll allow a little parable, Chavez right now is like a mayor who, ten months into his term of office, calls a press conference to say:
"My fellow citizens, today we come together to celebrate our victory over the leaves. Think back on what this city was like back before my administration was elected last October. Our neighborhoods were blighted with dead leaves. They were everywhere: clogging up our gutters, making our streets and sidewalks dangerously slippery, sapping the life from our community. That was the city we inherited.

"But this is a people's revolutionary government! We promised that we would get rid of the leaves...and we have. From the moment we took office, we never let up in our fight against the leaves. And the results are all around you. As we stand here in this brilliant August evening, our government has reduced the leaves-on-the-ground rate by more than 99%! The only way they're coming back is if the evil old regime ever manages to get their hands on power again somehow! No volveran!"
It can surprise no one that poverty in Venezuela is lower now than it was five years ago, for the same reason that it can surprise no one that there are fewer dead leaves on the ground in August than in October. The reason is that Venezuela is a petrostate: 93% of what we sell to the world is oil, the government owns the only oil company, and oil prices rose every single year from the turn of the century through last year. Chavez has spent his decade in office swimming in cash!

The point isn't just that we're incredibly dependent on the world oil market; the point is that, like dead leaves, the price of oil is cyclical. So far, though, we've only seen how Chavez performs in one part of the cycle. Which is what makes Chavez's poverty boast so misleading. As a rule, whenever you hear a politician comparing the situation at the top of any cycle to the situation at its bottom, you can be sure he's trying to pull the wool over your eyes.

The real question for chavismo isn't "have you managed to reduce poverty amid a dizzying oil boom?" any more than the real question for our hypothetical mayor is "are there fewer dead leaves on the ground in the summer than in the autumn?"

The real question, for both of them, is: are you ready for The Fall? Do you have enough money on hand to pay your way out of trouble when The Fall comes?

Lets put things in perspective here: Venezuela has received some $405 billion in oil revenue since Chavez took office ten years ago - a staggering sum of Free Money for a smallish South American country. And almost a quarter of that came last year alone!


Having handled these massive sums, today, the Venezuelan government has confirmed savings of less than $1 billion on hand to face up to a crisis. In Venezuela, that's less than one week's worth of government spending. (The government makes vague claims that it has other reserves, but refuses to publish the figures.)

So Chavez has spent pretty much the entire Oil Boom windfall, leaving himself - and, much more importantly, the Venezuelan people - badly exposed to The Fall. Now that the bottom has fallen out of the oil market, the government is likely to face a $40 billion shortfall in oil revenues this year alone, just as the worldwide credit crunch makes it harder and harder to borrow the difference. So it's not even September, and the leaf-clearing budget's gone already!

All of which puts a rather different hue on Chavez's boast that he has halved poverty since 2003. Because beating the leaves-on-the-ground problem is "about" clearing leaves off the ground only in the most boneheadedly superficial of ways. Scratch the surface and you can see that the real challenge is managing the leaf cycle: planning ahead so you can concentrate your leaf-clearing resources where and when you'll need them most. And the fact that these guys are actually bragging about how there are no leaves on the ground in the middle of summer, that they count that as a big achievement, only underscores how unprepared they are for The Coming Fall.