April 2, 2009

The scarcity of scarcity

Juan Cristobal says: - Today's edition of El Universal carries an interview with Planning Minister Jorge Giordani, Chavez's economic pater-familias. Giordani is usually a bland, boring guy, but I found this interview fascinating because it showcases, in a nuthsell, the contradictions, twisted logic and reverse priorities of the chavista vision.

Giordani starts off by saying that the problem for the government is that "socialism has never been built on abundance, but rather on scarcity." He hints at the dilemma this poses for the government - on the one hand, its populist nature demands that it increase oil wealth at an ever-expanding pace, but on the other hand, reaching its ideological objectives hinges on the economy crashing, on feeding people's despair.

Giordani can't seem to make up his mind on whether the government actually wants prosperity or poverty.

He seems to believe that only by subjecting the population to hardship and limiting their consumption will you be able to build the socialist state where the new man is born - and the head honchos all have Mercedes Benzes. But the only way to reach that point is by giving a needle to our petro-state junkies and creating a consumption binge that keeps people's minds off of things like marching, human rights and economic freedom. Nobody knows when that point is reached.

Confused yet? Never mind the factions in the chavista movement - I can't keep the factions in Giordani's brain straight.

Not only is the minister confused, he is also wrong about socialism. Socialist experiments have come about from political processes more than economic ones, and they have usually been accompanied by just a dash of force. Scarcity begets revolutions, perhaps, sometimes, but rarely socialist ones. More often than not, socialism is brought about by blood - just ask the Hungarians or the Czechs.

He then opens up about the government's plans to use the commercial banks' reserve requirements, which are kept at BCV, to finance spending. A few weeks ago we talked about this being a real possibility. The parallel swap market agreed.

Giordani basically leaves the door open for that possibility, saying that even though financing is taken care of thanks to our greedy, capitalist banks, the government may come back for more. This puts our banking sector at a real risk of defaulting.

As Quico said before,
"Reserve requirements everywhere act as a source of financial support for the banking system, a backstop against a bank run. Chávez's hint that the revolution might be making a grab for those funds is a sure-fire way to set off a crisis of confidence in the financial system, which may be part of the reason the parallel exchange market is freaking the hell out today, even more than it had been in recent days."
Perhaps Giordani is betting that if the banking sector goes down the toilet, we'll have enough scarcity to make socialism finally viable.

Giordani then talks about how unimportant inflation is. Lucky for him - I figure he wouldn't be sleeping much if he actually cared about it. He says the government cares more about "employment," and in a curious slip of the tongue, he equates "employment" with "social policy." But inflation? Why should that be a problem? If things cost more, you simply print more money and give it to people so they can buy the more expensive stuff.

But employment is trickier. You see, in the mind of the Planning Minister, no private sector employment is worth keeping. Or, to put it in preferred Marxist terms, private sector jobs are bad for society because they put workers' surplus value in the hands of capitalists. Only government jobs are deemed worthwhile because the government is the only one that can ensure that workers are paid the value of the goods they produce. Any surplus value from the fruits of labor goes back to the government who then mercifully distributes it in the form of, you guessed it, social policy.

Funny, these guys disagree with the government being the best employer. So do these guys.

Yet, unlike money, that you can actually print, there is a limit to the number of ghost jobs you can create. The number of government jobs cannot be completely disconnected from the government's financial capabilities.

The inherent contradiction here - there's that pesky word again, contradiction - is that for Giordani to provide employment, he needs oil rents which are, at the moment, scarce. Focusing on increasing the government's payroll is bound to be frustrating for him, since it's really hard to do that in the down part of the oil cycle. Funny how when the government faces scarcity, it's a problem, but when the rest of us do, it's an invitation to revolution.

This disappointing mish-mash of ideas - from our "Planning" Minister of all people - highlights chavismo's lack of coherent vision. Is it any wonder that Venezuela is a country in chaos and turmoil when our government can't decide whether it want prosperity or poverty, employment or unemployment, healthy banks or broken ones?

Perhaps Giordani's cognitive dissonance is just the safety net of a tired old man, the silver lining to the coming failure of his actions. All their policies hinge on an external factor, the price of oil, correcting itself. If it doesn't, whatever they do will surely fail. But hey, in that case, they'll have scarcity and chaos, the perfect breeding ground for socialism.

Then we'll be able to do what we really want to do.