Eleven years on, Chávez discovers Dutch Disease

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You gotta hand it to Planning Minister Jorge Giordani. It took him eleven years but in the end – we’re not sure how – he managed to get Hugo Chávez to parrot some kind of primitive understanding of Dutch Disease. In an Aló segment straight out of some Ionesco play, Chávez declared himself shocked, shocked that Venezuelan exports have been made so uncompetitive by years of currency overvaluation.

Lo único que le faltó was demanding an immediate inquiry into what kind of irresponsible nutter had allowed things to get this out of hand.

Seriously, it was comedy gold.

Of course, just to prove that you can lead an elm tree down to the water, but you can’t make it give you pears, within a couple of hours the guy had reverted to type, threatening to expropriate businesses that respond to devaluation by hiking prices.

"There’s no reason to raise the price of anything," is the way he put it. Maybe after another eleven years worth of intensive econ tutoring from Giordani & co. the penny will drop for him that if the cost of imports doesn’t rise, then devaluation does exactly nothing to re-establish domestic businesses’ competitiveness.

The scale of the guy’s ignorance on matters economic has always mesmerized me.  It’s not that he gets specific facts wrong, though he does. It’s more a generalized inability to grasp economics concepts in general. It’s the immense lacunae he displays when it comes to intuiting what connects with what in economic terms, what sort of thing causes what, and how.  When it comes to seeing the world through an economist’s eyes, the guy is a bottomless abyss of ignorance.

Not that that’s unique: from the little bit of experience I’ve had teaching econ to undergrads, it’s clear that when it comes to thinking like an economist, some people have the knack, and some people just don’t.

To be fair, that’s no sin.

We all have our lacunae. I’m sure that, to real musicians, the display of rampant musical incompetence I put on whenever I have to sing "Happy Birthday" would be a matter for morbid fascination. My singing is just…beyond bad. Embarrassing, really. Try as I might, I just can’t crack it.

Which, I suppose, is how Chávez would feel about his grasp of economics if he had the self-awareness – or the kind of candid advice – it would take for him to have an honest reckon about it.

Today’s Aló illustrates the problem: somebody – apparently Giordani – made a heroic effort to impress upon him that oil exports harm domestic production and devaluing the currency would help redress that. So far so good.

The trouble is that the whole train-of-thought behind that idea, the entire set of economic inter-relationships sustaining it, the causal chain that links up oil production, real appreciation and the loss of competitiveness by home country producers…all that is just one dense fog in the guy’s head.

He can’t see it! Not for his life! Watching him try is like watching me at a karaoke bar…an uninterrupted cringe-fest!

Which is why, within minutes of defending devaluation on anti-Dutch Disease grounds, the guy turns around and directly undercuts the argument he’s just made, without even noticing!

The notion that raising the prices of imports relative to domestic goods is the mechanism through which devaluation restores the competitiveness of home country firms is precisely the type of conceptual linkage the guy can’t seem to fathom.

None of this would matter if Chávez had the self-awareness, the humility, to understand his lacunae for what they are, and delegated economic policy making to marginally competent people.

After all, I don’t go out of my way to impose my godawful singing on tens of millions of people. You don’t have to suffer through my lacunae…but you do have to suffer through his.

 

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