Paleo Economy in Venezuela

Sometimes the Venezuelan officials in charge of directing our economy (as much as Chavez lets them do so) make sure we remember how backwards their concepts and ideology are. Three items happened this week to illustrate this principle of chavismo: Paleolithic concepts on how to direct a free society (assuming that they want a free society which we know they do not want).

Giordani says we are growing too much

Giordani is the planning minister. Before I get into his comments of last week, I must remind folks that Giordani is the now the longest serving minister in Chavez cabinet, always at the planning ministry except for a brief lull of a few months in 2002 when devaluation and economical crisis forced him to withdraw for decency sake. He is the man who has presided over the devaluation of the Venezuelan currency from 550 to the US dollar to the street market value of today 3500+. Of course, he has never taken any blame on how he allowed the harsh years of 1999-2002, and he takes the credit for the boom of 2005-2006 as if oil prices had nothing to do with that. But Giordani is an old gizzard, of the social state intervention school of economy. In addition he has never amounted for anything except for a few economy books that no one has ever read except for his students forced to do so. But he became Chavez guru and inexplicably this one has let him do more than anyone else in his administration, when perhaps he should have controlled the old gizzard more than any one else. But in an emotional regime we suppose gurus are untouchable….

Well, the man had the nerve to declare that 10% is too much, that maybe the government should consider slowing down growth to 6% because otherwise this could create penuries of items, such as construction material. He said that Venezuela is second only top China in economic growth, as if that was a reason sufficient enough to justify slowing down. (short blurb in English here, more complete Spanish version here and interview here)

One does not know whether to laugh or cry at such words. I mean, if Giordani were attempting to make fun of all of us he would not have proceeded otherwise. Where should I start? That there are penuries in construction material already? That everyday there are already more empty shelves in grocery stores in spite of a 10 % growth? That Venezuelan “growth” is not a production growth but an import commercial growth fueled by high oil prices? That China growth is a real growth which is inundating us with cheap stuff, and Chinese migrants, whereas we still have to find out what is it that Venezuela could send to China except some heavy oil crude at discount rates? Can someone slap Giordani and see if he wakes up from his life lethargy before his “successes” finish off Venezuela?

But there is another reading to that. Giordani, no matter what an old fool he is, still knows that Venezuela growth will slow down this year which is a sure indicator that production will not grow. So, to look good in the future, in particular in front of his master, he is already positioning himself to pretend that the growth rate slowing is actually arranged and planned by him. We all know of course that Giordani cannot plan either growth or recession (though he could cause that last one as he has already done in the past). No matter, we can be sure that Chavez will bite it bait, hook and sink. This is probably also why Giordani again threatened local producer with another set of famous last words “if you do not invest, if you do not want to produce, other will come and take your place”. Maybe someone could ask him how come these threatening “others” have not arrived yet since it has been 5 years since the local production people have not invested in production increase preferring to invest in importation and reprocessing. Or we could ask him how come nobody is crashing at the gate to invest in agroindustry in Venezuela. But I doubt Giordani could understand this if screamed to his face.

We cannot fire folks for another year

Another funny item is that the prohibition to fire people making less than two minimal wages has been extended for another 9 month (or something like that). This really is meaningless. That interdict has lasted since 2002 and all business have learned to live with it. Jobless rate remains high (if we include “informal economy”) and real job creation is not keeping up with population growth. But this is not the point of this comment. The point is that the Labor minister has said poker faced that it will in fact benefit the employer because it will save them money from training time. One does not know what is worse: that the minister is making fun of the Venezuelan business class or if actually the minister believes such words.

In Venezuela it is in fact not too difficult to circumvent such laws: workers know very well that they will be able to negotiate good severance package and will thus “pretend” to resign from their free will. Venezuelan are mercenary enough that if you show them the money most of the time you get them to leave the job position fast. Thus the only result of such freeze measure is that employer will include in their calculation the cost of getting rid of undesirable workers and just depress salaries in general, waiting for the firing time to give the worker what s/he should have received during the contractual period. Workers in Venezuela are silly enough to think they actually con the boss. Well, they do it to a certain extent but not as much as they think as business class is quick to learn the real cost of everything here and pass it on prices to customers who in the end are the ones who pay for such misguided government policies.

No drinking for a week

To tie it all up and make sense of this post I am going to use the announcement made this week as to restricting liquor sale during the holiday. Next week is the Holy Week (Semana Santa) which is the main vacation week in Venezuela as we all get Thursday and Good Friday off. Many business close for the whole week and the beach start filling up as early as today until they get near bursting with crowds by Good Friday and Caracas is half empty.

Of course the religious aspect of the week have long gone for most Venezuelans, in particular the lent part as people simply love to be at the beach, river or lake drinking all the beer and rum they can. Driving conditions are particularly hazardous these days. So what does the government comes up? No, not an education campaign, but a restriction on liquor sales. This is really incongruous since beer and booze are on sale on the side of the roads all year round and it is very common to see people having lunch with beer and then getting back on their car to drive. So, the only folks that are really going to be published are the booze sellers and night joints because you see, liquor stores will still have a limited schedule and people will simply stock up. Go right now to Caracas western side liquor stores and see how the stocks have actually gone down more than usual and not because the party joints are buying. In fact the consequence might end up being even more drunken driving accidents as people will stock up before taking the highway and not even bother to stop drinking, drinking while they drive….

Paleolithic economical theory and the payroll litmus test

In fact it might be unfair to call the current Venezuelan policies Paleolithic. After all during these blessed times of cave men, anyone who was not in agreement could just pick up his masse and bear skin covers and move along to a new empty cave, a luxury we cannot have today. But certainly what Giordani, and the other officials mentioned above, is a very all fashioned mind set, that all can be controlled with a new decree, a new regulation, a new declaration. Without any real backbone to enforce it anyway, but enough nagging servants to create more commotion than we can bear. For example creating a special mobile brigade for the holidays that will track the road side booze joints and force to close them down, or stopping for hours on the side of the road people found out drinking would serve of enough a public example, and much more of a deterrent than just banning the sale of booze over all while letting liquor store open for only a few hours.

Unfortunately this primitive way to regulate booze, one which has failed spectacularly in the US during prohibition, is also the primitive mind frame in which Giordani plans the economy. All is in the books, his by the way. We only need to apply the recipes and all will work out at the end. If it does not work out then we will blame someone and start AGAIN THE SAME proceeding on the economy. No devaluation should scare us away when we know we are right in our economical ideas even if no one understands and even less shares your ideas.

But perhaps the more telling fact about all of these people who have survived the 8 years of chavismo ideological filtering (assuming there is an ideology besides the kneel down in front of Chavez) is that none of them has had to spend ever a sleepless night wondering how they were going to met payroll for employees. The Giordanis of the world have always been safely ensconced in some bureaucratic position with some boss, the state or private, it does not matter, who they obliged to give them their paycheck no matter how good or bad their job performance was. In other words Giordani et al. never had to make the crucial decision that most capitalist employer have to face at some point, the serious ones at least: "I need to pay my employees but I have no money this week. I need to pawn my own possessions, I need to skip on my own paycheck, until things get better, but I need to pay my employees because without them I will not be able to save the business". Not having gone through such a life marking experience is what allow the Giordanis of the world to be so ignorant of the real economy issues and take refuge and solace in books without feeling themselves responsible at all for the silly and useless decrees they keep emitting at an astounding rate.

-The end-