The roadmap

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LinI’m currently reading “The Quest for Prosperity,” a terrific book by the former Chief Economist of the World Bank, Justin Yifu Lin. It’s a highly-recommendable read for those of you looking for perspective on the problems of development in the world.

One of the things Lin does in the book is trace back the debate on how we believe countries manage to grow.

He focuses on the XXth Century. He discusses the challenge the Soviet Union posed to growth theories, the push for industrialization of the 50s and 60s, and the latest, “Washington Consensus“-type reforms. All of this leads to his assessment of where we are today, and a powerful justification for Asia-style export-oriented intervention in the economy.

Two hundred-plus years after Adam Smith gave birth to modern economics, we still haven’t figured out the key to growth. I am under no illusions: this is a serious indictment of my profession. But before we punch the first economist we bump into to, it turns out there is now an actual recipe for growth!

Back in 2008, a group of 19 economists (two of them Nobel Prize winners) got together and published “The Growth Report.” It looked at the thirteen cases of high-growth countries since World War II, and came up with a list of “do’s” and “don’ts” that high-growth countries follow.

I think it would be a useful exercise to go through the list and see where Venezuela stands.

High-growth countries generally:

  1. Exploit the world economy in a savvy way – importing ideas, technology, know how, and focusing on what the world is demanding.
  2. Provide a stable macroeconomic environment, avoiding unpredictability in fiscal and monetary policies.
  3. Have high saving and investment rates (Lin says that the idea that this is inherent to cultures is hogwash).
  4. Provide a market system to allocate resources, allowing for “creative destruction.”
  5. Have committed, credible, and capable governments.

High-growth countries generally do not:

  1. Subsidize energy.
  2. Rely on the civil service to deal with joblessness.
  3. Reduce the fiscal deficit by cutting on infrastructure.
  4. Provide open-ended protection to domestic firms.
  5. Impose price controls to stem inflation.
  6. Ban exports for long periods.
  7. Resist urbanization.
  8. Measure educational progress through infrastructure.
  9. Ignore environmental issues as an “unaffordable luxury.”
  10. Adopt a regulation of the banking system.
  11. Allow the exchange rate to appreciate excessively.

If you’re like me, then I know what you’re thinking: we are so screwed. There is probably not a single item on either of these lists that we are currently doing right.

But what does it take to right the ship? Is it impossible? Where do we start? Which are the bottlenecks?

I think analyzing the two lists for the Venezuelan case is a worthy endeavour. So, for the next few weeks, I am going to go through each item on the list individually and talk about what they mean. With your help, I want to figure out what it’s going to take to solve our problems.

I realize that many of you are not economists, so when you read “stable macroeconomic environment” it probably doesn’t mean much to you. That’s why I think it would be useful if I wrote each post separately, focusing on the real-life meaning of each item, and how (I think) we should go about solving it.

Obviously, I don’t have all the answers, but the idea is to get the conversation going, and come up with either solutions, or a fair assessment of the magnitude of the problem.

So let’s do this, folks. Let’s crank up our nerd-o-meters and think all of this through.

Is this really impossible? Is development – and the defeat of poverty – a pipe dream?

1 COMMENT

    • Jeje, well, that one is a long ways away. But yeah, I want to look at these more closely to see exactly what they mean. However, it does say it’s a no-no. “Although the Report prudently offers the caveat that some situations and circumstances may justify limited or temporary resort to some of the policies listed, it notes that the “overwhelming weight of evidence suggests that such policies involve large costs and their stated objectives – which are often admirable – are usually much better served through other means.””

      • A book published in 2008 may have come too early for the lessons to be learned in the worldwide economic meltdown of September 2008 to date. But surely letting banks take huge risks with our deposits, risks for monetary gains that will accrue to the bankers, but with the losses to be paid through bailouts, is the height of stupidity.

        And no, Ayn Rand, refusing to bail is not an option if you want to avoid mass unemployment, destruction of the savings of everyone in the country, and a general return to the Weimar Republic circa 1932.

        So to avoid bailing the banks out, you regulate them.

        • agree there, a fair regulation of the bank system is always desirable, I don’t like government messing around with my money nor do I like wannabe trillionaries to count my money as “their” assets.

      • Well it’s basically always the case that somehow politics gets involved in private enterprise, either through regulation, coercion, stimulus, subsidy or however you wanna call it.
        Just to name one example: remember that the USA’s housing-bubble was a direct result of laws which prodded the money lenders (banks/mortagers etc.) one way or another, far beyond what a normal “uncoerced” market would have supported, c.f https://en.wikipedia.org/wiki/Community_Reinvestment_Act#2008_financial_crisis .
        The banks then conveniently offloaded their funny paper to the gov’t through Fannie and Freddie (both GSE’s https://en.wikipedia.org/wiki/Government-sponsored_enterprise) et voila, ahi tienes tu crisis, ahora jódete.

    • When I studied eco and finance back in the 1970’s, we learned about the mission of corporations to serve its shareholders not only with dividends, but also through corporate “ethics” that serve the community, environment, etc. Back then, “Greed” was a negative adjective.

  1. Looking at the list it verifies that the current government is doing everything to hurt the local economy, but the businessman in sees it as opportunities that are there for the country to get back on track.

    The magnitude of the problem is enormous, however, the road map is there to improve the standards of living. I am looking forward to this discussion.

  2. I am currently an Economics student at Universidad Católica Andrés Bello and daily reader of CC. I look forward this series of posts, Venezuela is indeed an extremely interesting case of study, with a bit of dark humour it could be resumed with the baffling expression of “how could you possibly waste such an opportunity?”.

  3. Liking a lot this post… my two cents on the issue (aside for your lists, which i think summarize the problem quite comprehensively):

    – Banking sector regulation, when done wisely (NOT our case, for several reasons) can work and has been used by China, Asian Tigers, etc. The usual is some form of repression on rates, just enough to make borrowing costs for cash-strapped domestic firms low enough to compete financially with big multinationals.

    – Also, government deposit-insurance is CRUCIAL to maintain stability in developing financial markets, and lets you manage systemic risk. Also, capital controls (only if they are TEMPORARY and only for big capital movements) are necessary to avoid Tequila-1990s-style self-fulfilling crises, and work towards the Macroeconomic Stability condition.

    – There’s not enough stressing on how IMPORTANT is to have price stability (eg. persistent one-digit inflation) for development. Or, in the worst case, recognize your inflation problem and let the market adjust key prices accordingly. If you think about it, most macroeconomic problems in Venezuela have this process to blame: the over-appreciated exchange rate, the exploding black-market rate, lags on regulated prices, the critically low investment rate, the capital flight…

    • Well, we might want to look at the failures of “Supply-Side” economics where capital seemed to flow to where the “easy” profits are… became more like “monopoly capitalism”, where the consumer has no power.
      We might want to look at the role of the “wealthy” class, which Paul Krugman once said that they are like the poor unemployable, that is, a burden on the economy because they receive money and produce nothing.
      We might want to look at the role of government as umpire that keeps the playing field level when special interests let them.
      We might want to look at the role of unions that are able to amplify the common interests of workers when they stand up against the greed of powerful corporations.
      We might want to look at the role of educators who prepare future generations to be productive, creative, to respect history and the legacies they enjoy.
      We might want to look closely at the vast resources that Venezuela has, and how to develop them to support a future that creates prosperity for all to enjoy.
      We might want to import world-class scientists and engineers and teachers, and highly competent professionals by offering them a better life with our beautiful beaches, mountains, music, and festive spirit.

  4. High-growth countries generally do not: 9.Ignore environmental issues as an “unaffordable luxury.”

    Peoples’ Republic of China generally DOES follow 9.
    Exception that proves the rule?

    • Not to deviate to China, but the Chinese have progressed much faster towards an environmentally conscious society than many western states.

      They of course refuse any impositions, but in reality the have a more stringent regulation than in the US for car emissions and are investing heavily in ways to produce energy using coal and recapturing the emissions. There are still a long waaaay from attaining a decent environmental quality to developed nations, specially on the industrial sector, but they have a plan.

      • The laws on the books might well be more stringent, but it is a fantasy to think the laws applied in China are more stringent than those applied in the US, just looking at the emissions coming from tailpipes of cars in any major Chinese city makes that pretty clear (thick sooty smoke).

        The most important thing China is doing on the electricity front is building dozens of nuclear power plants. They paid Westinghouse for the AP-1000 design and are scaling it up after getting experience building twenty to thirty of them. The limited attempts are carbon capture are a proof of concept in comparison.

    • I disagree a bit with that one. I am a big environmental care fan, but most industrialized countries went ahead for decades with not taking the slightest care for the environment, until areas of the European rivers where totally devoid of life… only after they reached a certain level of comfort and population stability they started to look into that, and then for a few more decades they exported -still doing it towards China- their most polluting industries. Or does it look like Detroit, the cradle of American Industry, is a lush forest?

  5. Go ahead… Living in Mexico for a few years now, the part about the stable macroeconomic environment does not seem too difficult to grasp. The last few governments have maintained a policy of free exchange rates, interest rate stability, accumulation of foreign currency reserves, an increasingly welcoming regulatory framework for foreign investment -which has turn the country, for example, in one of the top ten auto-manufacturer nations in the world-, zealous watching of the health of the banking sector, -even sometimes at the expense of credit expansion, after to horrible crashes- and increasing openness to the world that in my opinion have contributed a lot to economic growth and job creation. Mind you, still Mexico is nowhere near where it could be in terms of economic and social development… But cautious policies have averted situations like the ones happening even in “Miracle Gro” countries like Brazil, where heavy spending and low interest credit seems to be turning now into a problem.

    Reducing the Government participation in the business sector -reducing, I said, not eliminating, so far at least- has also freed up resources for other purposes like poverty projects while at the same time reducing the number of potential nests of corruption and graft.

    Where could we start? As dumb luck will have it, Venezuela is still the country with the largest crude oil reserves in the world, so setting up a Petrobras-style scheme where you get private financing and oversight -oil is still the most profitable legal business in the world, as I understand- to continue doing what you have been doing for a long time, while at the same time getting an improved kind of oversight from the market, sounds like a fair bet…

  6. “Is this really impossible? Is development – and the defeat of poverty – a pipe dream?”

    5. “Have committed, credible, and capable governments.”

    If we cross this bridge, number 5, there is a chance, a big one. Because everything else depends on that one.

    Not totally relevant to Venezuela, but hoping somebody gives this book to Obama as well… looks like a great read. Looking forward to your future posts about it.

    Do you think Maduro and his ministers would read it? That would be a dream.

    • It’s nice to think of “committed, credible, and capable governments” … but what I really want to get at is what this means in the Venezuelan context exactly, and how you get there.

      • But, it really does start, to be truly effective, with human education/dedication/honesty/work ethic/institutions to even begin to be achievable, all of which have been missing in Venezuela since time immemorial….

  7. Didn’t Hugo, Godgiven, the Boli Bourgoise and the Cubans rob all of the dollars and the gold when the Supreme Leader kicked the bucket?

    Isnt that why we are up doo doo creek without a paddle?

    • Venezuela has become a huge credit risk. Borrowing dollars can’t keep up with the demand for imports anymore. Those who have money and those who have connections with political power are able to take advantage of the situation in ways that the rest of us cannot. Is that corruption? Of course!

  8. It seems to me that many of the policies required to put Venezuela on the road to sustainable development mean Venezuelans have to recognise what they have never accepted: that they need to make a huge, sustained, concerted effort to make Venezuela rich. After 5 centuries we need to give up the myth of El Dorado.
    A different banking system, no subsidies for petrol and stuff like that: you need to explain that on a massive scale to the people. Who is going to do it? What mechanisms can be established to do it without someone else sabotaging the efforts?

  9. I welcome Juans initiative to engage in an effort to understand the mechanics of economic growth whatever Venezuelas current situation , setting aside the politics and simply looking at how a road map might look that can help us achieve a developed country status : It was Marxs conceit that once you got rid of capitalism magically every thing would become harmonious and just . Sometimes we in this blog appear to believe that once the destructive vices of this regime are dealt with we will find ourselves in a land of justice and plenty ( thanks to our all mighty oil resources) : Juans proposed exercise may help us achieve a more realistic view of the meta political challenges the country will still have to face.!!

  10. are you sure you got this right? the venezuelan goverment have done exactly the opposite of what the growth report says and acording to the bcv we’ve always had like 9% annual growth (with the exception of the last year, because “el comandante” was ill of course), is the goverment lying to us or it’s just the oil exports, please explain this before arturo and shame get here and begin saying that all those economists are a cuerda de pendejos

  11. The Venezuelan government is about a revolution that appropriates productive resources, and then allows them to deteriorate. It has never been about economic growth. To them, “Economic Growth” is bad unless it’s produced by the “Collective”.

  12. Venezuela needs non-petroleum exports, and preferably exports of a finished variety, such that jobs will be created in the modification of a rawer material into a more finished one. In order to make such finished items competitive in international markets, the currency will have to be devalued. Imported items will become more expensive as a result.

    “Finished” items today are those with technological inputs. This will require a total reorganization and upgrading of the educational sector, with perhaps internet-sourced technology expertise being used to substantially supplement teachers’ own technical knowledge.

    Right now, a well-funded, well-staffed study of Venezuela’s economic potentialities should be undertaken, to identify a group of new export possibilities, and how government might assist them in the short and medium term. This assistance need not be heavy-handedly interventionist; but it cannot be hands-off, either. A few successful export products will generate capital for further investments and a growing economy.

    • There might not be any purpose for a study at this point! Who would want to invest in Venezuela now? Who would want to put any effort to produce anything while the economy is deteriorating and the currency is losing value? How can you produce anything when government policies could decide that you should sell your product below your costs?

  13. Call me cynical, but the legitimacy of chavismo rests on the requirement of poverty and their “empowerment” via a horizontal link to the state.

    With that said, I think it is important how we define poverty in the Venezuelan context? How do we figure out what is a necessity and what is luxury?

    Lastly, GDP growth should not be the end-all, be-all for the economy especially if it does not adequately address the issue of inequality. Egypt and Tunisia are two recent examples of countries who achieved economic growth, but experienced social upheaval that toppled their governments.

      • But Venezuela always had good gini data, going back to the days of Carlos Andres Perez. It has not improved at all under the Chavez-PSUV regime.

        Similarly, Canada, which has had a Conservative government since 2006, inherits its good gini numbers from the time of the Lester Pearson Liberal governments of the 1960s.

          • I will show the casual visitor what kind of person Shame is.
            He won’t go into this.

            Shame: you are comparing the WHOLE 14 years of Chavismo with one single year pre-Chávez: GINI when the average oil barrel was at $12 (now over $100).

            How was the GINI in Venezuela in 1970? How was it in 1975? In 1980? In 1985? In 1990?
            Oh, never mind.

          • Shame, a country may have a higher income than another, but when the income is looked at per capita, the rankings may get reversed, showing perhaps inefficiency. With GINI something similar happens. A country with a lower GINI than another may actually be spending much more per GINI decimal than the other, product perhaps of great corruption. In Venezuela’s case, a meager improvement in GINI with a multiple increase in income is unforgiveable. Touting the meager improvement given the vast resources and the flagship discourse speaks more to your dishonesty than to any true virtue of this government.

          • A drop of .1 GINI is not meager, under any definition. Just for some perspective another .1 drop like that and Venezuela is as equal as a Scandinavian country.

          • Shame: World Bank data shows that the GINI in 1992 was .42. So, an increase of .03 in 20 some odd years, 14 of them from the “Process”, and I guess you could almost claim that’s progress.

            Asserting that its never been lower than .39 is both true and false. The data is mostly incomplete. Perhaps it has, perhaps it hasn’t. The data simply isn’t there. Either way, the GINI is much better now, (and also, it was in 1992) than it was during the 1980s. However, without a full range of data, its difficult to make assertions.

            That’s like asserting that the economy is much better off now than it was in 2002. Telling a story from comparing one single data point against another is bad statistics when there are (or should be) many intervening data points to provide details.

            So…to become a Scandinavian country, do you really think Venezuela can survive another 60 years or so of the Revolution, at the current rate of gain in Gini, to gain that .1?

          • “Shame: World Bank data shows that the GINI in 1992 was .42. So, an increase of .03 in 20 some odd years, 14 of them from the “Process”, and I guess you could almost claim that’s progress.”

            Its Caldera’s fault it spiked, or maybe it was just a temporary mis-adjustment, either way what matters or what is relevant is what happened after Chavismo, more specifically after the opposition was deflated after 2003 and the drop was mostly .1

            “So…to become a Scandinavian country, do you really think Venezuela can survive another 60 years or so of the Revolution, at the current rate of gain in Gini, to gain that .1?”

            Its difficult to say I try not to make many predictions unlike this site that revels in being proven wrong. That said it is a pillar of this government to sorta force equality so who knows if we can get to Iceland’s .28 before the decade or the next is over.

          • Shame, your counter implies that the price of oil would need to get to 1000USD/barrel for the additional .1 drop that would get Venezuela to Scandinavian levels. My point once again: with that kind of income increase, a .1 drop is meager.

          • What kind of math is that? Salary equality is not reached like that (although it does help to invest in schools, jobs, nutrition, health and transportation) if that were the case Chile would be as equal as Venezuela when their copper revenues per capita are similar to ours.

          • Shame, 1) look up the GINI formula to see how cash handouts affect it directly and linearly. 2) The math is simple: price of oil went from 10 to 100 and GINI dropped .1 only. Your claim that we need one more drop of .1 to be at Scandinavian levels implies a new factor of 10 in oil taking it to 1000. Don’t shoot the messenger; it’s your logic that’s ridiculous. I stand by my statement: a .1 drop is meager in light of the 10 fold increase in oil price.

        • Jeffry: Maybe people should care more about the size of the pie than about the way its split , Cuba probably has one of the lowest Gini numbers , the US probably a much higher one and yet where would any one want to live ? The quality of life in the US is much higher than the miserly quality of life in Cuba. Its a counry’s capacity for creating wealth rather than the perfect symmetry with which it distributes it what counts the most !! I appreciate peoples curious obsession with symmetry ( as Isaiah Berlin put it ) but equality is of secondary importance to the capacity of a society to produce the wealth it needs to give its average citizen a decent life. Im also not sure that the gini number is more important for instance than the criteria thru which the amount of poverty in a society is measured and how such poverty is understood.

          • Well said, although I feel you have failed to take into consideration the HDI, after all there is more to development than mere wealth creation or wealth production, don’t think?

            Amartya sen’s theories might be far from conclusive, true, but even on this day and age they seem to have have validity.

          • Skamen : Sorry I dont know more about HDI or how its applied and measured to be able to appreciate its merits , Certainly there is more to human development than pure economic growth and prosperity , but I believe that you must start by achieving a level of economic growth which allows the maximization of human development opportunties ,

          • Skamen : putting it another way , the perfectly equal distribution of want and misery is worse than the imperfect distribution of wealth provided most of those at the bottom can recieve enough of the pie to be spared the worst effects of poverty and are given a fair opportunity at raising the quality of their life through their own efforts. Cuba is an example of how equalizing the distribution of the fruits of a failed economy does so little to allow its people a decent life . Reminds me of the Nixon Kruschev exchange in the US exhibition in Moscow ( in the early fiftees) , Krushev (rightly so ) criticizes US discrimination against its ‘black’ citizens to which Nixon answers ,” yes but our ‘coloured people’ own more cars than all soviet citizens put together.” makes you think of the paradoxes and dilemmas of making equality such a paramount issue .

  14. Great idea, Juan.
    How about including a likelihood scale, say for a short – medium range, or 5 – 10 years, from 1 to 10:
    1 = highly unlikely to happen
    10 = very likely to happen
    I’d be very pessimistic of getting many 10s, if any at all.

  15. 1 Check moving into space exploration with a nanosatellite factory in Borburata and a ULA-3 rocket to place it in LEO, Soy production almost a 900% increase. Probably be self sufficent soon. Soon to be producing SSD from scratch in a mix venture with Siragon, also this company tries to be in the cutting edge.

    2 Nope

    3 Little savings but high investment rates

    4 Venzuela still does not socialize losses, as Albamar discovered there was no safety net for failure to get HSS Discovery running. There is no safety net for owners only safety net for workers that can try to fix a failed venture.

    5 Check, hehe you will howl but the government can bull through special interests and get things done. Exiting CAN and joining MERCOSUR is most obvious.

    As for the negatives

    The currency is clearly overvalued, but nowhere near the black market rate

      • Laugh all you want, but Venezuela has made siginificant advances in space exploration, if Iran can put a monkey in space so should Venezuela, their next goal is put a man in space.

        • I think Venezuela has much more pressing problems than figuring out how to send monkeys into space, but then, the regime has always had a ludicrous way of sorting its priorities.

          • Venezuela has plans for satellites not animals. Though human spaceflight is inevitable and should be sought. Only small minded supply siders could ignore the significant advantage of being near the equator.

          • Given what DirecTv charges me for their crappy service of late, they should be building a Death Star.

          • Dude, that logic is like the logic I hear in Central America, “Oh but there’s malls everywhere, we must be developing!” Just because a regime wastes money on getting a criollo Sputnik into orbit doesn’t make the country any better off. Hell, NK has a nuclear program and it can barely feed its own people.

          • But it shows a commitment to technology which was bullet point #1 in the list, Iran also has a space program and they are the most advanced country in their region. I am glad there is no desire to pursue nuclear energy, its dangerous and damaging to the environment.

        • I don’t know if you are trolling us or what, but I definitely dislike your kind of chavists the most, those who actually believe that venezuela is about to become a world power, we are not even near to be a contender in the world economy, apart from oil, what we produce is a joke, do you really think that venezuela has a serious space program?, what we did was to buy a couple of satellites from the chinese, look realistically at the current state of our roads, schools, universities, economy, power generation and industry and dare to say that we are in great shape, but then you are likely to say that we are the ones brainwashed and separated from reality

          • You are an extremist, I recommend you leave the comforts of your daily blogs, I am not talking about Aporrea either.

            Venezuela invests in rail, check. No country in the entire hemisphere can claim as much. Mexico, Brasil, US, Canada are a distant second.

            Secondly read what they are trying to do here

            http://www.el-nacional.com/mundo/Ingenieros-venezolanos-comenzaron-formacion-China_0_218978365.html
            http://www.notitarde.com/La-Costa/Prometen-que-fabrica-de-satelites-en-Borburata-estara-lista-para-2014/2013/06/05/195847
            http://uvero.adm.ula.ve/prensa/index.php/investigadores-de-la-ula-inician-construccion-del-cohete-simon-bolivar-con-el-apoyo-del-gobierno-nacional/

            It is inevitable, if you knew about orbital mechanics you should know that just launching from the equator you need 25% less fuel than from Cape Canaveral. Less fuel means smaller rockets means even less fuel. Polar and high angle orbits excluded

          • The Soviets, too, had a space programme, but their economy sucked. TheIr space programme was mostly for the rubes; it didn’t lead to innovative products or technologies.

          • Of course it lead to innovative products but even this is so past, the future is space you have no idea what is in store, also we are rougly 10% in size to the old Soviet Union, meaning more money per capita.

          • most people would recomend that I stop wasting my time answering you but I find this quite amusing you definitely deserve a place in the chiguire bipolar writers club, sorry I laugh but I really find the idea that venezuela is thinking about making a satellite factory when we even have to import our own toillet paper so distant from the current state of affairs in the country that I can provide no other reaction

          • You really have no clue. For a 25% fuel savings the earth would need to be spinning on its axis about one hundred times faster (just a rough guess). The actual fuel savings is more in the range of .3% to 1%.

            That you even think there would be such a magnitude of fuel savings demonstrates you have no understanding of math, science or physics. That does however make you a perfect communist.

          • that’s some good reading, it seems that brazil are way ahead of us, and I know that the french have been launching stuff from their guyana too since some years ago (http://en.wikipedia.org/wiki/Guiana_Space_Centre), good look luring that investment away from stable countries into the expropieseland, tough I’d rather have the goverment take care of more earthly matters

          • So if only two countries in the world are good at pumping oil it means nobody else can? Considering rocket technology is so sensitive nobody is investing anything outside their borders, it will all have to be indigenous research.

            BTW Brasil have yet to launch a satellite to LEO, they are not THAT far ahead, they had a terrible accident that set them back a lot.

          • Making it posted on a webpage does not make it legitimate. They can’t even get the name of Cape Canaveral correct, “Cape Kennedy.”

            Don’t get me wrong, as a booster of space exploration I encourage Brazil in their efforts, It’s also great to see that Brazil is offering Israel a optimal launch site for their satellites, thereby saving the Israeli military and scientific community some money. I’m just not impressed by “Global Security’s” article on the center.

            The 25% fuel savings is pure fantasy. I’m not sure whether they are lying or 4th grade dropouts, but the fact that you blindly quote such a obviously poor source puts your knowledge of math and science into severe doubt.

            Lets just do very easy ELEMENTARY SCHOOL level math.
            Low earth orbit: 7.8 (kilometers / second) = 17 448.1031 mph
            Earths rotation at equator: 1,000 mph (1)
            Percent orbital speed gained by launching at the equator vs. THE NORTH POLE: ~5%

            Perhaps you should stop informing yourself from articles written by conspiracy minded loons and actually try learning some basic math before you make such a fool out of yourself.

            (1) 25,000 miles. The Earth rotates in about 24 hours. Therefore, if you were to hang above the surface of the Earth at the equator without moving, you would see 25,000 miles pass by in 24 hours, at a speed of 25000/24 or just over 1000 miles per hour.

          • NorskeDiv “Globalsecurity.org are a website of conspiracy minded loons” LOL

            Your physics is deplorable, lower speeds means fewer time accelerating means less fuel need to accelerate means less mass, stop using arithmetic and start using differential equations for christ’s sake.

            As to you nitpicking “Cape Kennedy” That was their second name, it was Cape Canaveral, then Cape Kennedy after the assassination, but renamed Cape Canaveral again.

          • A while back, I read an article on this debate. So I tracked it down and voila…

            The discussion is about position and altitude. While it isn’t specific to the equator, its close enough. Unless you assume the .3% savings in moving from a polar launch to Cape Canaveral could be magnified 83 times or so moving from Canaveral to the equator.

            http://www.wired.com/wiredscience/2011/07/space-shuttle-launch-equator-vs-mountains/

            Guy writing it is an associate professor in physics, so I assume he has some background on the subject.

            Takeaway…not 25%. Not close.

            Also, I wouldn’t want to compare my space program to the Iranians. Nero fiddled as Rome burned and they are doing much the same thing. Iran suffers from a governmental Napoleon complex. So does North Korea. Do you really want to be grouped with them? If Venezuela is truly on the rise, it should leave those sort of comparisons behind.

            To have a tried and true space program, you need a pretty good aeronautics and flight culture/industry within the country. Does Venezuela produce its own planes? Is it even maintaining the ones it has? This space industry talk is for the pajaritos.

          • we have to give shame a lot of credit, the guy is a genious, he made us talk about rockets and rails, we almost forgot in this economic forum that we have a 25% inflation in the last 6 month, that the national industry is in tatters and that the goverment is almost entirely dependent on oil, classic trapo rojo, they really put some effort in the training of the comunicational guerrilas… or he is a master troll, in any case, my respects

          • Results achivied are ongoing, Rome was not built in a day. When the ports are upgraded, and rail is built Venezuela will have the best infrastructure to export to Mercosur. The only thing missing is a competitive exchange rate, Merco nations are not that cut throat with their currency though.

          • I’m using arithmetic because differential equations would obviously be too confusing for you. The 25% figure is pure fantasy, it doesn’t matter what differential equation you use for the added amount of fuel weight and the 5% would be the gain vs. launching at the north pole. We’re talking quadratic formula (actually not in the case of earth, but let’s be generous to your ceaselessness), not cubic or greater.

            http://www.wired.com/wiredscience/2011/07/space-shuttle-launch-equator-vs-mountains/

            “It is inevitable, if you knew about orbital mechanics you should know that just launching from the equator you need 25% less fuel than from Cape Canaveral.”

            How is inevitable? Lay out the equation. Put your money where you mouth is. You won’t, because you can’t, because you are wrong. You are just as clueless as the news broadcasters that said the tool bag lost from the ISS was traveling at “hundreds of miles per hour.”

          • Boy you can’t take a hint can’t you? You don’t use differential equations because it is “too hard” for me? yet you keep using freaking algebra? until you show competency in even remotely understanding that with a rocket it is not about energy to get to orbit but about the amount of fuel you need to carry. Until that clicks you will not stop digging that hole you are at.

          • Newsflash, differential equations are not needed, AT ALL in this case. There is no differential equation which will turn a 1% fuel savings into a 25% fuel savings when launching from earth. If you can’t realize that, you are too clueless to even bother arguing with.

            But just to satisfy your pedantry, here’s one:
            http://www.wired.com/images_blogs/wiredscience/2010/10/LaTeXiT-1-113.jpg
            Make appropriate substitutions, and you can calculate for yourself the difference in energy required for an equatorial vs POLAR launch. You obviously won’t do it, so the article lays it out for you:

            “Just a couple of values. The energy per kg at the equator is 3.25 x 107 J/kg compared to 3.26 x 107 J/kg at the North Pole”(1)

            This is the last post I will make on this, because you are obviously trolling all of us and not actually a Chavista, or your you are clueless beyond redemption.

            (1) Quoting from the article you are too lazy to read: http://www.wired.com/wiredscience/2010/10/why-do-we-launch-rockets-from-cape-canaveral/

          • God you are dense aren’t you? that formula is for ENERGY, which can be derived from simple algebra, but FUEL needed is entirely different formula, the more Energy you need the more fuel you need, the more fuel you need the more energy you need to get that extra fuel off the ground, not to mention the more metal storage you need for said fuel, meaning more weight meaning more energy on top of that.

            The only way to solve this is with differential equations and NASA would laugh you out the door if tell them they are only 1% inefficient at Cape Canaveral.

          • Shame, Shame, Shame has a point here. A launch site near the equator has many benefits. (here come the buts). A launch site needs to be either in a desert or on the coast proper for safety reasons. It should be easily assecible by either barge or heavy rail, an airfield suitable for heavy transports is desirable. Venezuela does have the location, but it doesn’t have the infrastructure. Fr. Guiana does. Now if the Chineese or Russians can make themselves a business case for risking billions on a developing a launch site to save a few pounds to LEO then I say bless them.

          • Really the only thing needed is the launch site once everything under construction is finished, that said from my understanding we can reach LEO for now for very small payloads with something that looks and weighs like a sounding rocket so no infrastructure needed now, but if the eventual goal is one ton satellites it probably has to be a VLS and a proper site with significant safety to prevent accidents like what happened in Brasil.

            The Chinese and Russians are not interested, Chavez has been barking up that tree for almost 14 years and nothing came to fruition, only Chinese expertise in satellite construction.

          • Venezuela’s purported space program is a typical totalitarian propaganda gimmik , the Soviets did it , they couldnt give their subjects a decent standard of living so they spent a lot of resources and effort on things that were , ‘prestigous’ , made simple people take pride in things that were showy but added little to their core quality of life ,So you had great olympic athletes , bold space exploration , great marching armies , powerful nuclear missiles,but couldnt grow enough wheat and cereals to feed the people and instead had to import them from the US and Canada . Venezuelas priorities should be on things that are bread and butter (like fixing up the financially and operationally bankrupt oil industry or ruined road infrastructure or the penurious state of public schools ) rather than armament purchases , silly useless space programs, toddying to other countries by giving them cheap or free oil or cheap finnacing . Chavez was a blustering megalomaniac who wasted State resources to gratify his gargantuan ego by misspending it on showy things that made him appear the great messianic world leader or the magnanimous redeemeer of the poor or the heoric powerful enemy of grand imaginary villains . Its just another version of we have no toilet paper but we have Patria crap.

          • The Soviet Union was far more developed country than any country in Latin America has ever been.

            Your propaganda only works for Europeans.

          • We have no toilet paper and have to go beg the China Govt for 5 billion
            US$ to steady the regimes finances until election time but we have a space program and Venezuelan satellites orbiting the glove , Remember not so long ago the dear defunct leader boasting about these things, how these programs , born out of his great vision, made Venezuela great, just as the huge purchases of military hardware. always going for the colossal , the spectacular , the grand standing announcement !! .

        • Shame, there’s a great song by Gil Scott Heron that comes to mind when you talk about Venezuelans on the moon. True then. True now. For starters: where are the priorities?

  16. The older I get, the more I find Economic Development an enigma.
    I am often criticized by peers for coming up with the super-popular “maybe they are not completly insane and from their point of view it actually makes sense” type of argument in conflicts with other groups in projects. Pero obvio ocurren muchisimas pelotudezas en las oficinas of this land of milk and honey.
    A little known fact on the economic history of my own country: There was one of those world exhibitions of the late 19th century… companies of the shortly before unified Germany participated… and were harshly criticized for the laughable quality of their offerings.
    Only 10 years after suddenly many articles appeared in English newspapers, which talked about german products as being cheaper and of better quality than the British.

    I bought the book when you mentioned it in a recent post. Possibly the first book about economics in 10 years, I actually might finish 😉 . Really interesting. He makes quite a strong case for infant industry argument, but of course for a limited period of time.
    There is an implicitly high acceptance in Northern Europe for point 4, the creative destruction thing. Much more than in early 80ties. At least thats my impression. We got used to being outcompeted by first East Asian and later to some extend even by Eastern European companies in certain fields as a part of life and that its all about to constantly look out for new areas.

  17. On A.3
    I have heard it said (a good two decades ago), that this is the reason the savings rate is/was so high in Hong Kong: no tax on personal funds in savings a/c. If true, that would indeed squash the notion that high savings rate is inherent in certain cultures.

    • Japanese people save , germans save even if they live in systems that make them feel safe , that cocoons them from the many misfortunes that threaten an ordinary life .In the US most people ( until the crisis of 2007) spent everything they had and then borrowed what they didnt have to spend on anything buyable , but americans who had felt the scourge of the depression where more careful spenders . Old spaniards who had known the miseries of the civil war or its aftermath saved , but young spaniards who had only known the good years of prosperity didnt save much . There are many factors , including cultural factors, than influence peoples saving/spending habits , Taxation of savings can be one factor but there are many others . In Venezuela probably women are more likely to save than men who will in many cases spend everything they have on whatever gives them instant gratification. In high inflation countries it is folly to save . Modern consumerism has had a big impact in making people bigger spenders borrowers than would have been the case before we developed into consumer societies. The topic is too big to address in a few sentences.

      • you mean No Taxation of savings.
        Otherwise you’re absolutely right. The topic is too large for the one comment I offered on one regional case. And yes, consumerism is too big of a pull to resist among those who’ve never really known hard times.

  18. As far as I interpret the item list at this point, my idea of an ideal government and economic structure/function seems to be compatible. I look forward to the posts extending the explanation for each of the items to confirm in more detail.

  19. Entire deregulation of banks is not a wise move, as the recent economic debacle show. There needs to be certain rules about the minimum fraction of total deposits that must stay in the bank. It should not in any circumstance go below 50%. Citibank and Bank of America went as low as 10%, the rest of which was invested in crap derivatives.

    I think you meant deregulating stuff like interest rates, if that was what you meant, then by all means, deregulate away.

  20. NorskeDiv
    “(1) Quoting from the article you are too lazy to read: http://www.wired.com/wiredscience/2010/10/why-do-we-launch-rockets-from-cape-canaveral/
    You won this discussion hands down!
    But, people, why engage this person “Shame”? He has an explanation for most everything and if not, he makes one up.
    The ONLY way to get under his skin is if EVERYBODY ignores him. His disturbed mind is incapable of rational, independant thought. It’s tempting to engage him, but it feeds him and is futile anyhow.
    Remember one of Murphy’s laws: Never argue with a fool, people may not know the difference.

        • Yes, but as per Shame’s comment below, “This site is pretty insignificant in the grand scheme of things”, which, of course, makes him even less than insignificant for taking the time to comment here….

    • You guys are so wrong it is not even funny

      Comparing Brazil to Baikonur

      “Brazil is very much interested in commercial launches from Alcantara, using both home- and foreign-built vehicles and promising good business for the parties involved, Russia included. The center’s geographic location is better than those of other countries in higher latitudes. Alcantara’s proximity to the equator, where the Earth rotates more quickly, allows the weight of payloads sent aloft to be increased by 30 percent to 40 percent.”

      http://www.space-travel.com/reports/Equator_Space_Launch_Plan_999.html

      THINK before you post, nost just kneejerk chaviiiiiiiismo like a James T Kirk.

      You cannot calculate this with simple algebra, that is a children’s equation, you not only need to use differential equations but actually model the decrease in rocket weight design because you need less fuel for identical payloads.

      • Just digging yourself in even further eh? A 5% boost in horizontal speed does not result in a 30% or 40% decrease in fuel or a 30 to 40% increase in payload. I linked the equation above for energy required, and you are so dense that you insist on exactly derived rocket fuel equations, knowing no one here is a rocket scientist. But anyone with common sense can tell you that a 1% decrease in energy required will NOT RESULT IN A 25% decrease in fuel usage!! NOTHING WORKS THAT WAY, EVER.

        All you found is an article which obviously cites the same bad source as the original.

        The only thing an equatorial launch provides such a benefit in is for a equatorial orbit, because you don’t need to change the plane of the orbit. But that’s simply a truism, you could equally say launching from cape Canaveral will result in a 25% fuel savings for satellites orbiting over north America vs. those launched from Brazil. But you didn’t say that, you stated “just launching from the equator you need 25% less fuel than from Cape Canaveral” which as if it were generally true, it’s not! You obviously are enough of a dolt to believe that the speed of the earths rotation provides a 25% fuel savings.

        • Actually, I take that back. A 1% decrease in energy required could potentially result in a 25% fuel savings if you are attempting to accelerate something to light speed.

        • “, knowing no one here is a rocket scientist. ”

          No shit, that is why I QUOTE experts on the field while you just quote news paper articles that correctly calculate energy BUT NOT fuel needed. Get it through your thick head, energy does not equal fuel needed when talking about a rocket. UNLESS the mass of the fuel and its storage tanks is 0.

          “The only thing an equatorial launch provides such a benefit in is for a equatorial orbit, because you don’t need to change the plane of the orbit. But that’s simply a truism, you could equally say launching from cape Canaveral will result in a 25% fuel savings for satellites orbiting over north America vs. those launched from Brazil. But you didn’t say that, you stated “just launching from the equator you need 25% less fuel than from Cape Canaveral” which as if it were generally true, it’s not! You obviously are enough of a dolt to believe that the speed of the earths rotation provides a 25% fuel savings.”

          I already mentioned polar orbits and the like, we are not talking about these.

          • Qué ladilla! Y casi todos los venezolanos fuera de Caracas sufren apagones diarios y al menos una vez por semana un apagón se prolonga por medio día y este pendejo sigue jorobando con que Venezuela se convertirá en una potencia espacial.

          • “I already mentioned polar orbits and the like, we are not talking about these.”

            So you honestly think that a equatorial launch will provide a 25% fuel savings when a simple low earth orbit is desired (we are indifferent to orbital plane). WOW, I don’t think I’ve met someone quite so impervious to basic logic in quite awhile. You either have a minor mental defect or are trolling us. I provided the opportunity for you to bow out of this argument with some honor intact, but you are going to continue insisting that you were never mistaken in the first place.

            OK, I have some free time so i will provide the equations and prove just how much of a tool you are (because it’s fun).

            Let’s assume we are launching a relatively small Venezuelan satellite on a single stage rocket:

            We start with the Tsiolkovsky rocket equation and assume cheaper aluminum powder and ammonium perchlorate solid booster with an exhaust velocity of 2500 m/s. For low earth orbit the needed Delta V is 9700 m/s.

            Polar launch:
            1 – e^(-9.7/4.5)= .88416118216 = 88% of the rocket must be propellant

            Equatorial Launch:
            The speed of the earth at the equator is 465m/s
            1 – e^(-9.235/4.5)= .88416118216 = 87% of the rocket must be propellant
            So the extra delta V of being at the equator must is about 1%. But what about atmospheric drag, how would that effect it?

            Delta v (drag) = 1/2 mu c_d A v / M
            = (0.5)*(10 tonnes/m^2)*(0.5)*Pi*(3.66/2 m)^2*(300 m/s)/(333.4 tonnes) = 23.7 m/s

            So atmospheric drag would require an extra 23.7m/s of delta V, Inconsequential.

            Q.E.D, you are wrong.

            By the way, the shuttle actually goes in a more north south orbital plane, so NASA could save money by launching from Canada vs. Cape Canaveral, i.e. launching the shuttle from Brazil would be a waste of fuel because you would have to null out much of your orbital velocity changing the orbital plane.

          • “Polar launch:
            1 – e^(-9.7/4.5)= .88416118216 = 88% of the rocket must be propellant

            Equatorial Launch:
            The speed of the earth at the equator is 465m/s
            1 – e^(-9.235/4.5)= .88416118216 = 87% of the ”

            You keep screwing this up with simple algebra, and you keep forgetting to substract the extra weight in a DIFFERENTIAL equation.

            Two rockets, one twice as massive as the other and each having exactly 88% of its gross weight as fuel (identical fuel) and launched from the same place DO NOT achieve the same orbit, this is so fucking idiotic.

            The Russian space program is launching some rockets in Brazil because it is up to 30% cheaper and you still think it is barely 1% in savings. Quite the Einsteins we have running the opposition these days.

            LOL France launching in the middle of nowhere (French Guiana) only to save only .3% in fuel. I say damn.

        • Not to rain on your importance but this site is pretty insignificant in the grand scheme of things, if Capriles and the opposition is going full birther he will get flayed alive in the international media.

          This article savaging him is only the beginning. When you have no power and legitimacy might as well retire in the wilderness.

          • Shame’s (chavimaduroid) delusions:

            Being flayed alive in the international media = reading one obviously biased opinion by known chavista Raúl Gallegos, on Bloomberg

          • Gotta love these tarifados who never understood first-grade logic: One of these things is not like the other.
            With that difficulty in mind, and like clockwork, say, once a week, the tarifados produce a “birther” comparison between Maduro and Obama, in order to get political mileage out of a coined term applied to one who could and did produce a birth certificate.

            Why do the tarifados stretch matters for I-can’t-produce-a-birth-certificate-not-even-for-my-civil-marriage-and-I-go-on-public-record-with-my-mates-to-tell-Venezuelans-that-I-was-born-in-three-locations-in-Caracas? Because the tarifados can’t write positive news about the state of the Venezuelan economy, nor about a dwindling crime rate. At least, not without having the international community mock tarifado efforts, by asking: Does the Venezuelan public now have toilet paper?

  21. Juan Cristobal: I bet you must feel quite silly after trying to promote a serious debate on this site, after so many years of “Blogging the Revolution” one might think that you have grown accustomed to the reality that most readers of CC can barely see beyond the dichotomy of good/evil, chavismo/opposition, us/them, etc…

    Even Rory Carroll labelled this blind antagonism as one of the main reasons that allowed Chavez to get so far ahead in monopolizing the power.

    Seriously, everyone, try to choose your battles and for Pete’s sake, try to stay on topic!
    Like many readers, I started reading this blog looking to go “beyond the clichés” but then I saw that most of the time the only thing that changed was the language of the conversation, not the topic.

    Likewise, I had high hopes for this debate, but halfway through I realized that netizens here cant seem resist the urge for a good old fashioned pissing contest. I mean, its been 14 years already, learn to live with the fact that there is a part of the country with a different opinion than yours…

    Right or wrong, it matters not, none of you are accomplishing anything by engaging with Shame.

    • @Skamen. I’m sorry that we netizens could not fulfill your aspirations for a fully developed debate, arising from a particular post on global economics. Was there at least some partial fulfillment to satisfy your needs?

      In the meantime, you might want to reflect on this barometer: Troll deviations from a debate and obviously biased opinions in international journals rise when the current government is not doing well.

      Furthermore, consider that blind antagonism did not just arise out of the blue. Polarization was a strategy of the Chacuban government, as in “conquer and divide”.

      • Agreed with you about the blind antagonism and I apologise about the last post, I admit it was a little prepotent on my behalf. Like many of you I tend to come online to vent my political frustrations, so sorry about that.

        The thing that bothers me lately is that even with Chavez gone we are still playing right in to his game.

        Sorry to say this folks, but it seems we have the government we deserve.

    • People in general are thrilled by both the spectacle and practice of conflict , of confrontation , The greeks had a fancy name for this drive , they called it the agonal spirit , its what draws us to sports , its what gives life to fictional narrative in literature and film , its what children enjoy in cartoon programs . its what fires up religious and political passions . People in this blog are no exceptions . Also it allows people to feel sattisfied with themselves , to feel heroic and saintly by fighting and scorning their opponents . Chavez who had the narcicistic spirit of a thug understood this passion for pugnacity in ordinary Venezuelans specially those whose life circumstances had bred in them all sorts of sordid resentments and exploited this passion for his political benefit . Part of his appeal is that he was the ultimate pure ideological warrior , who gave no quarter , who brooked no dialogue or understanding with his vilified opponents . he practiced not politics but war , war to the death, war for absolute and hegemonic power . This hiper histrionical agonal posture of Chavez has become part of Chavismos DNA , Hard-drive , they dont do compromise , they dont do dialogue , their proudly pure and ardent in their denial of any form of understanding with their opponents which they demonize with gusto . Any form of conciliation is ideologically corrupt. We must understand this basic fact of Chavismo mentality . to think otherwise is naive , delusional . It registers nice with our sentimental democratic beliefs , but its simply unrealistic !! Moreover when people feel they have all the cards in their hand ,( Chavistas total control of Venezuelan public institutions ) they feel they have no need to compromise or dialogue , thats its a sign of weakness , which of course being omnipotent and enamoured of Might they can never admit to . they are invincible!!.

      • Clap, clap, clap! Kudos to you, BB. What a succinct and easily understood description of Chavismo. Now, if only they could “hear” the truth.

      • To be fair the opposition plays the game to the death as well, they behave like they will jail all chavistas once in power. Like Sisi in Egypt.

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