Giving people free money can be expensive!

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Cornbread muzzle
Cornbread muzzle

Reading Quico’s arbitrage how-to-manual, the casual reader could be forgiven for thinking that these are the exceptions in Venezuela. It’s not like that. The revolution is all about giving people free stuff to avoid their wrath.

Whether it’s housing, Haier washers, or free Cadivi dollars, whether you’re from the government or the opposition, the whole point of the revolution is to take an extraordinary, once-in-a-generation oil windfall, and simply throw it at various constituencies.

I thought about this when I heard the latest news from that insane asylum called Cadivi Headquarters: faced with planeloads of phantoms travelers wanting to use their free cash but not even bothering with the actual traveling, Cadivi will now demand that your fingerprints get scanned as you’re boarding the plane.

As you can imagine, this is expensive. It’s time-consuming for airlines, passengers, and the public in general. The technological requirements for putting this together are not negligible.

And all for what, exactly?

Cadivi gives travelers cheap dollars, money that is worth one seventh of their actual value. Why does Cadivi care whether or not the person getting the money actually goes abroad or not? Does it make any difference, from a public policy point of view, if the person is actually, physically present at the time they swipe their cards to activate their scam? And given how Venezuela is essentially bankrupt, why do you need to create a new bureaucracy to give people free stuff?

If we take peoples’ fingerprints, then journalists can’t write about how people are scamming the system. Get it? The goal here is to keep Cadivi an orderly, properly documented scam. Not just any scam, you know, but one with fingerprint machines and everything.

Populism is what the Revolution is about. Everything from Cadivi to the GMVV to Mercal is really about giving stuff to people so that they shut up and stop bitching. It’s not about delivering housing to the poor or administering the nation’s wealth – it’s about giving people free money – the illusion of gimmes – so that they don’t march down Avenida Bolívar. The dominant dogma is that giving free stuff to people is so damn essential to the Revolution’s survival, any time people abuse the system you need to create the “illusion” that the system works.

Cadivi is a non-sensical farce. The last thing it needed was more bureaucracy, more public money going into its administration. Then again, if people need to actually go overseas to activate their Cadivi cupo, it’s better to keep them there than back in Caracas, bitching about the government.

1 COMMENT

  1. All correct. It is not as we haven’t gone through this nonsense before. It used to be called RECADI in the years before Chavez and it was stupid then. But now, … can we sink any lower in this unfathomable abyss of idiocy?

    • I remember the days leading up to the end of RECADI.

      Very similar to what’s happening today with CADIVI.
      Everyone trying to jump on the gravy train before it reached the end of the line.
      I predict that we will soon see the end of the CADIVI travel giveaways.

      As far as the fingerprinting in airports this must be another fat contract for one of the enchufadas. Everyone leaving the country has a passport.
      Why not just take a copy or enter this info into a CADIVI computer once you reach the waiting area.
      I really don’t understand how fingerprinting adds to the security.

  2. Caracas Chronicles also promotes free lunches to Venezuelan citizens with your Unconditional Cash Transfer proposal of cash from oil directly to the people. Similar to Chavistas you live in a fantasy world with statements like: “There is no thing such as a free lunch”. Then you run away from the argument when you have to defend your wrong statements.

      • Nicolaas Smith,

        Juan’s post’s “free cash” is very different to UCT. Start with a country that has no oil, nor other natural resource. Its government must fulfill its duties, limited by income from taxation. The government’s incentive is to maximize its people’s success because that is what maximizes its own income from taxation, which, in turn, maximizes what it can do to maximize its people’s success, which is what keeps people voting for its stay in power. Now let’s compare the two scenarios: A) The free cash to which Juan is referring, and B) UCT to which I refer.

        A) The government now gets two incomes, oil money and taxation money. Suddenly the government’s incentive is no longer to maximize taxation money because it is so much easier and more than sufficient to maximize oil income. Whether its people fare well or badly becomes more irrelevant the more money it gets from oil. The government uses the oil money to reward submission and loyalty while punishing dissent.

        B) The government only gets a single income, taxation money, so the incentives remain as in a healthy, non oil country. The difference is that now the people have a bonus income which makes it even easier on the government since it has to worry that much less on poverty alleviation programs and can focus on maximizing its people’s success. The government does not have use of the money to reward loyalty and punish dissent.

        You see, NS, the key is in the *unconditionality*. That requirement in the UCT proposal is what does not allow the cash to be used in the faulty way to which Juan is pointing in his post.

        You were criticizing some time ago about people not considering your DI proposal as much as you think they should. The arguments you used apply to your not considering UCT as much as you should. Remember, whichever proposal is endorsed, right now we need one that not only works, but that it wins votes and that it cannot be countered. UCT is the one to best fit the bill.

        By the way, you really need to drill it in: There is no such thing as a free lunch; it comes from somewhere, and it’s paid for.

        • Extorres, I read the 2007 post “Torres in Bethlehem”: it does not explain UCT in detail. Where can I find a detailed explanation of UCT?

          (My capitalist mindset prejudice me towards the idea of UCT: l automatically think it would be fundamentally flawed because of the “crazy” cash transfer idea. Cash transfer just sounds very silly to me.) [This is just confidential between you and me, of course. 🙂 ]

          “Torres in Bethlehem” showed me that Venezuela is a freak country and you are a freak society.You are not a normal economy and not a normal society. Oil is certainly the devil´s excrement to you. I have a feeling that UCT is obviously your attempt to normalise Venezuelan society and its economy. Cash transfer just sounds fundamentally wrong. Something for nothing never works.

          Venezuela is ultimately lucky: oil resources have to come to an end some or other time in the future. Then you will spontaneously become a normal society and a normal economy. The change-over will obviously be very traumatic if you do not prepare for it. Current signs are that you are not preparing for it. The end of oil is still far away for you. The sooner the end of oil revenue the better for Venezuela. In the mean time you have the misfortune that clowns can run your country because … (I can not state the obvious).

          • You won’t find a lot of people agreeing with you, but quite simply you stated the truth. Venezuela is a freak country with a freak society. Everybody knows that, except Venezuelans, the people who against all odds succeeded in turning gold into crap.

          • Nicolaas Smith,

            The proposal you hear me describe is part of a multipart proposal with which I came up for Venezuela. I presented it publicly in Caracas for the first time back in 1996. I’ve tweaked some aspects since then, mostly as a result of the many discussions throughout which the details are sprinkled. I have yet to write a single, all encompassing version. Caracas Chronicles took several years to finally give the idea any traction with the milestone post that you already read, http://caracaschronicles.blogspot.ca/2007/07/torres-in-bethlehem.html .

            Other posts in CC touching on the proposal or a related matter:
            http://caracaschronicles.com/2013/01/28/the-bandwagon-is-getting-crowded/
            http://caracaschronicles.com/2013/01/31/the-crowded-bandwagon-cont/
            http://caracaschronicles.com/2011/03/23/the-targetting-vs-universality-debate/

            Links outside of CC that are well related:
            http://www.cgdev.org/publication/oil-cash-wont-work-here-ten-common-objections
            http://www.ted.com/talks/andrew_mcafee_what_will_future_jobs_look_like.html

            http://opinionator.blogs.nytimes.com/2013/08/28/the-benefits-of-cash-without-conditions/?_r=1
            http://elsa.berkeley.edu/~emiguel/pdfs/BostonGlobe_2010-07-16.pdf

            By the way, I think you misattribute the source of your rejection to this idea. It can’t be your capitalistic mindset for it is mainly capitalists, myself included, that support it. In fact, how capitalistic can you get when the game of Monopoly gives free cash every time you pass Go? Since the difference with that game and life is that we cannot accept people being left out of play in life, then the tweak to make Monopoly like this proposal is to give cash on each turn, not just when passing Go. This way, every player would have enough to continue playing indefinitely. Nothing going against capitalism there.

            You are correct that the freakiness is what got me to come up it the idea, but after open-mindedly analyzing it as a system, it turns out that the idea is fundamentally sound for any country. Note how the TED talk McAfee video talks about guaranteed income. That’s the growing global thinking.

            Your thinking that this proposal is about “something for nothing” is incorrect. Again, there are no free lunches. There is never a something for nothing. But even simpler than that, you have to look at the alternative. If a little money for nothing to someone is such a repulsive idea to you, what makes you think giving a boatload of money for nothing to someone is any better? All the ills that you envision from giving shares of money to all citizens are centralized when you give the total of the money to the government. But looking at the nothing, what exactly is it that we can expect from government when we give it oil money and how does that compare with what we could expect from the citizens? Well, what I would expect from the citizens is that each citizen spend the money in a way that is most beneficial to himself, at least beneficial in how each citizen perceives it. This spending would help the consumer market considerably, while retaining the incentives of a healthy, non oil nation, rather than the petrostate disaster that giving the oil money to the government achieves. Besides, next time you try to convince anyone that giving money for nothing in exchange never works, remember all the positive results cash distribution is having worldwide.

            I disagree that the sooner the oil ends the better for Venezuela. If UCT is implemented, all Venezuelans will be better off, and the longer that lasts, the better for Venezuela. Did I forget to mention UCT wins votes?

          • Extorres,

            Thank you for all the links. This is an important subject, the detail of which I am not familiar with. So, I will read them carefully.

            Smith´s division of labour immediately springs to mind when I think about how this all fits together because I have a gut feeling that in the end you and I will agree on fundamentals.

            I look forward to continuing our very enjoyable conversation.

          • Extorres,

            I have read all the articles and I have listened to all the videos you listed above. I now have a basic idea of what Unconditional Cash Transfer is. That does not make me an expert on the subject. You are the expert on UCT. I am an expert in Daily Indexing. Division of labour between you and I – as Adam Smith stated – is a basic building block of creating wealth.

            I support your idea of UCT for Venezuela. You know the details.

            Daily Indexing does not purport to deal with any political or social or socio-economic aspect of the petro-state or the state-citizen relationship or direct resource allocation or anything like that.

            Daily Indexing is simply a measurement basis during inflation and deflation for

            daily inflation-indexing [1] monetary items – monetary loans, bonds, etc. in terms of the Daily Index – and

            measuring [2] constant real value non-monetary items – e.g., salaries, wages, rents, interest, capital, reserves, trade debtors, trade creditors, taxes, taxes payable, taxes receivable, etc. in units of constant purchasing power in terms of the Daily Index and

            updating the third fundamental economic item, [3] variable real value non-monetary items (e.g. property, plant, equipment, finished goods, raw material, etc.) in terms of the Daily Index.

            It so happens that when you measure the above items as stated in a double entry accounting model, namely Capital Maintenance in Units of Constant Purchasing Power (for every debit there is a corresponding credit), you stabilise the non-monetary economy. This ONLY happens when you apply a DAILY Index, actually an index that follows ALL changes in the general price level. From about 3000% inflation per annum, you would have some days on which the price level would change more than once a day. The Index you use has to follow ALL changes in the general price level – at least daily.

            When you inflation-index ALL monetary items at least DAILY you remove the EFFECT of inflation or deflation – not actual inflation or deflation. It will be AS IF there is no inflation or deflation while you actually still have inflation or deflation. This is easy to see in capital inflation-indexed government bonds. I believe they do exist in Venezuela. These Venezuelan capital inflation-adjusted sovereign bonds are tightly held by major banks in Venezuela according to Miguel Octavio.

            Daily Indexing can be used by any political model. It would have the same stabilising effect when it is properly implemented. The sound characteristics of Daily Indexing is inextricably built into the model. Daily Indexing does nothing directly to stop inflation or deflation. It only removes the actual real EFFECT of inflation or deflation.

            Dagoberto Salazar stated in CC:

            The former paragraph takes me to one of the drawbacks of TP: inflation. An undervalued currency and a surplus in money supply will certainly spur inflation. But let’s face it: we already have one of the worst inflation rates in the world, so TP won’t make things worse.

            Daily Indexing would remove the EFFECT inflation. See above. It would be AS IF there is no inflation.
            Over the medium term the stabilising effect of DAILY INDEXING would lead to low inflation. Copying Brazil´s Real Plan would mean that Daily Indexing would kill hyperinflation OVERNIGHT at no cost. But, you have to copy the Real Plan exactly. It was implemented over 3o days from 1 June 1994 to 30 June 1994 in Brazil. Easy to copy.
            It needs ONE other essential item without which it would not be able to implement it in Venezuela: GOOD GOVERNANCE.
            Dagoberto Salazar stated:
            Then, at the end of each quarter (let’s say we are in the second quarter, or 2Q) the government will compute the total gross oil income from the previous quarter (1Q), and will divide it by the number of Venezuelans that were alive for the full quarter, and the number of days in that quarter. People that died or were born (or naturalized) during 1Q will not get their quarter share. Simple enough. Transparent enough.
            Then, the government will deposit the corresponding quarter share, in Bolivars, into each active account. The one-quarter delay will allow for updates in the database of living Venezuelans, and will keep the work manageable for a relatively small bureaucracy.
            Currently you have something like 3% inflation per month in Venezuela. A one quarter delay with nominal Historical Cost values (not measured in units of constant purchasing power in terms of a Daily Index) would mean that everyone would lose real value in their UCT receipts at an annualised rate of something like 45% per annum -your rate of hyperinflation. Under Daily Indexing the UCT values would change daily in nominal values but stay the same in real values. You need Daily Indexing.

            This applies to everything else Dagoberto stated in /day values. Under HCA they will stay nominal and lose real value at a rate of 45% per annum. Under DI they would change daily in nominal value and stay the same in real value.

            So, Extorres, I agree with UCT, but, you need to do it under Daily Indexation.
            If you would help me to get the International Accounting Standards Board to change IAS 21 Financial Reporting in Hyperinflationary Economies which Venezuelan companies have been implementing in terms of the IASB´s mistaken requirement of the monthly CPI since 2009, to REQUIRE Daily Indexing, then only the Venezuelan non-monetary economy would strongly move towards stabilisation as a result of an International Financial Reporting Standard without your government being involved. It would do nothing to hyperinflation in Venezuela over the short term.
            I described above what you have to do to stop hyperinflation overnight in Venezuela at no cost, but, with the requirement of GOOD GOVERNANCE.

          • One very, very scary aspect of the current IAS 29 – which requires the use of the MONTHLY CPI – is the fact that it had absolutely NO POSITIVE EFFECT during the eight years it was implemented at the end of Zimbabwe´s hyperinflation. The same will happen in Venezuela with a severe increase in hyperinflation. Daily Indexing has to be REQUIRED in IAS 29 to fix it. The IASB does not yet understand this. They and the people they consult have no experience of hyperinflation. It may take them another 10 to 20 years to understand it. Actual direct pressure from Venezuelan accountants or anyone in Venezuela would make a big difference.

          • Nicolaas Smith,

            Glad you’re on board with UCT. I’d like to remind you that I already told you quite a while ago that I was on board with DI. It seems to me that it would work, and that it would work well, for what it is meant to work. I had three paths of discussion:

            1) it seems to worsen the inflationary situation for those outside an accounting system.
            2) it seems to be a weak proposal for winning the upcoming election because it is A) complex to explain, B) against those outside accounting systems, and C) easy to counter with more handouts or other actions by charisma.
            3) it does not seem to be the best choice of a proposal since UCT addresses the same problems of stabilization, while addressing many others, including the roots of the many of the problems.

            Now, if you’re proposing a fourth path of discussion, UCTw/DI versus UCTw/oDI, I would stick to the latter until after the election, just because it makes UCT an easier sell on its own. I get the feeling that DI is more of a field related battle in the accounting world, than a public sphere battle.

          • You could find experiences of Conditional cash transfer that have worked in mexico…yes they have worked, and in brazil

          • Yes. The CCT trials of both Mexico and Brazil have been large, many, and very successful. I go several steps further and support UCTs for all of Venezuela’s natural resource incomes, on a buffered daily basis for all citizens.

          • Nicolaas Smith, UCT should not be the cause of greater total inflation since no new money is being created for UCT. UCT helps improve the situation for less efficient governments, whether they have DI or not. Not only does UCT make the government more efficient, it also forces the government to focus on maximizing citizen success. Because of this UCT lowers inflation as the market stabilizes to its implementation.

            UCT does not prevent the government from being inefficient with its taxation money, nor does it prevent a government from creating excess money, but that’s not UCT’s fault nor its goals, nor are either of those two things prevented with DI. I told you that UCT was only part of a multipart proposal, the other parts address aspects of government causing inflation and other problems.

        • Y dale con el bendito argumento de repartirle plata a la gente. Esta persona todavia no se ha enterado de lo pernicioso de esta estupida propuesta. No es suficiente observar lo que ha sucedido con la gente en este pais despues que este gobierno se dedicara ha hacer precisamente eso mismo durante los ultimos quince anos, aunque en cantidades miserables? Repetir lo mismo hasta el cansancio pese a que la evidencia empirica resalta ll pernicioso de la propuesta, es un signo seguro de trastorno mental.

          • the lone ranger, lo insólito es que tu comentario le da respuesta a un comentario que específicamente explica la diferencia entre repartirle dinero como “durante los ultimos quince anos” versus como se propone, lo cual nunca se ha hecho.

            Déjame preguntarte, entre las siguientes dos opciones, cual te parece menos mala:

            1) que el gobierno continúe malgastando el dinero del petróleo como lo viene haciendo, y que solo la gente enchufada tenga la opción de (mal)gastar también,

            2) que toda la gente tenga la opción de (mal)gastar el dinero del petróleo como nunca lo ha hecho, y que el gobierno solo pueda gastar lo que le regrese por vía de impuestos.

            Te hago notar que en la opción 2, el mercado se reactiva, la banca tendría que bajar intereses, y nadie podría decir que no tiene para comer. Se me olvidaba: con esta opción se ganan elecciones.

      • You are in good company ignoring me:

        1. The South African Institute of Chartered Accountants banned me in 2008 because I encouraged them to reject the stable measuring unit assumption. SAICA did not realize that all accountants, including them, actually already do that when they measure annual salaries in units of constant purchasing power.

        2. Prof. Steve Hanke deleted me from his email list when I told him that his dollarization and currency board solutions are obsolete when countries can stabilise their non-monetary economies with a free IFRS implementing capital maintenance in units of constant purchasing power in terms of a Daily Index.

        3. The International Accounting Standards Board tries to ignore me because I promote Capital Maintenance in Units of Constant Purchasing Power in terms of a Daily Index. Something they stated in April 2013 is not prescribed in IFRS. Then they realized in June 2013 that they themselves actually authorized it in 1989 in IAS 29.

        I am sure you do not realize exactly why you ignore me.

        • “Caracas Chronicles also promotes free lunches to Venezuelan citizens with your Unconditional Cash Transfer proposal of cash from oil directly to the people. Similar to Chavistas you live in a fantasy world with statements like: “There is no thing such as a free lunch”. Then you run away from the argument when you have to defend your wrong statements.”

          When I read statements like that, I let the writer know how ignorant he or she is.

          Your above statements are about two Accounting boards and some professor (whom I assume must be rather important in your opinion) rejecting your beliefs and or ignoring your take on things.

          It’s not hard to see why, given that you are so mono-thematic.

          To top it off, you enter a discussion insulting the hosts and readers, and then expect us to bow down to your superior theories on obscure accounting standards and so on.

          I mean, what do you expect?

          And by the way, I’m not losing any sleep over not realizing why I ignore you.

  3. Populism it the modern equivalent of the old roman formula “bread and circus”. The role of govt is to use public resources to foster consumerism (bread) in ordinary people and cheap ideological entertainment ( circus) that excites peoples most gross and sordid passions . it is practiced in all democracies because pols who are besotted with Power feel that by giving people freebies and ideologically histrionized entertainments they can get elected and reelected time and again . The counter of populism hasnt got a name but maybe we can give it one and call it Productivism , which seeks to use public resources to make people more productive and responsible , to foster the capitalization of peoples productive potential so they can by themselves produce the wealth and welfare they need to lead full sattisfied lives. Every modern government today faces the pull of those two opposing principles of governance , Populism and Productivism , one favours consumption the other the capacitation and capitalization of peoples talents and abilities to achieve a productive life which they can use to improve their lives. Its not that capital solely consists of machinery and goods capable of reproducing wealth , but that the greates capital a country can have are its people , moreover its productive people , people who can contribute to societies general welfare through their own work and initiative.
    Dollars if produced by a public resource such as oil , in a populist sytem are used to foster cheap consumerism , here today gone tomorrow , but very nice while its there while in a Productivist system they are used to capacitate people to become more productive , to develop their human capital potential , and ultimately to become better human beings leading better lives on a sustainable basis.

  4. Juan Cristobal,

    Estoy totalmente de acuerdo contigo. Aun así: esto se escribe en español.
    Qué dice la gigantesca mayoría de los opositores sobre esto?
    Serían capaces de decirles a María Ródriguez que los dólares que ellos usan para venir a Europa o que el gobierno usa para pagar esos televisores Haier son los dólares que no van a ir a los libros, los hospitales, las escuelas de sus hijos?

    • decirles -> decirle.
      Sigo pensando que algún partido o movimiento debe llegar al país para educar sobre la economía. No hay que ser un genio para ello, solo comprender algo de economía y tener un poquito de sentido humano para comunicarlo de manera simple a la población en general.

    • Fino argumento, Kep. No sé como se presentaría para que cayera la locha en la población entera. Quizás algo como:
      Regalos del gobierno, tales como los electrodomésticos, sacan del erario público lo que se debería invertir en escuelas para sus hijos, y en hospitales para la comunidad entera — sectores que como bien saben han sido mayormente ignorados por el gobierno actual, salvo un caso u otro, donde los enchufados necesitan promover su política para esconder el robo a la nación, nosotros pagando por ello.

      No creo que el candidato opositor se arriesgue en presentar este argumento antes de las elecciones, a menos de que lo haga como indirecta.

  5. I don’t know that I really go for this kind of FoxNews ready framing.

    What offends me isn’t giving away free stuff. Free stuff is great!

    Free health care and primary education are vital. Free money to barrio moms who get their kids to health checks and to school in the morning are a crucial and needed public policy intervention. Free money to viejitos is part of any sane welfare state social insurance package. Free rural roads and irrigation and electrification infrastructure is desperately needed to improve rural livelihoods. I’m all for free stuff.

    It’s the disconnect between means an ends, the irrationality of stuffing airlines’ pockets full of dollars while hospitals don’t have the proverbial gasa, of making gas free for soccer moms in Palo Verde while rural infrastructure in Parapara is falling apart…

    I mean, it doesn’t even rise to the level of populism. Populism is, in some primitive sense, rational. You match the ends of staying in power to the means of apportioning scarce resources to politically important constituencies. That’s not what these guys do. These guys spread cash around more or less at random, not via policy, but via the unintended-consequences of policy.

    • I agree. One key word one can always start a conversation with in Venezuela would be: PRIORIDADES.
      Is it priority to give away text books of maths and Spanish and biology to all children in public schools, for hospitals or to give dollars for travelling abroad?

      The problem is, I believe, with the fact a lot of politicians will say: we have been giving free text books for years and hospitals are for free.

      Reality is: most Venezuelans (those who haven’t lived in Montreal, Munich or Ghent)
      don’t know what’s normal in a half-functioning society.

      The government has distributed a couple of very crappy, ideology-loaden text books in some areas some times. The government sends Cuban “technicians” to distribute tablets but the last time I talked to Carmen., a friend of mine from Tocuyo who has never been abroad, she had to borrow money and give everything she and her husband had to pay for a treatment for one of her grandchildren…at a public hospital.

      Carmen’s daughter sent to my brother, probably through her prepaid mobile phone or from an Internet café in El Tocuyo, an email describing how out of touch we oppos were:
      Europeans, the email claimed, based on stuff you can see on VTV, were starving.

      This is the kind of thing non-CADIVI people hear in Venezuela all the time:
      http://sp.ria.ru/opinion_analysis/20120210/152682632.html

      And the opposition leaders have not addressed that problem because we are developing parallel conversations.

      Why don’t we go and talk about priorities for the limited amount of money the State has?
      Perhaps because a lot of people from our group have a lot to lose as well.

      • But is not even that the government wants to prioritize airlines and foreign diplomats over other sectors, is that the economic policies are so incompetent and absurd that they end up creating subsidies for these groups and the government is too crazy and incompetent too care, is not so much the populism per se, which is nothing new in Latin America, is the level of craziness and incompetence.

        • Im struck by something which Fco says , how policy decisions are taken on a kind of visceral broad brush basis , without any careful thinking about the minute , indirect consequences , and the incongruities which result from blinding following such policies .
          Remember in olden times people in a company wanting to show off how by applying certain golden rules of corporate innovation they achieved an important increase in the companys presence in a certain market but forgetting that the market was a profitless one . The govt doesnt think their policies thru nor is aware of their sometimes incoherent implications. I once heard a very high official comment ( quietly ) how their ministry always had policies which attempted to be rational and how always the policies were applied by the higher ups in a way that made nonsense of their application.

    • But you know of course there is no such thing as a free lunch. There are such things as taxation and investment. The retired presumably worked hard and are receiving their dues. The young need protection so that they will be able to take care of themselves and provide a return to society when they grow older.

      There is also insurance. Obamacare as a current “rational” example. It is insurance, not free money, and the idea is to largely pay for coverage of one group by charging another that is willing and able to make a bet that balances the budget. The identity of those groups is relatively clear. What’s wrong is when one group is abused or disproportionately favored.

      Your last paragraph is more to the point. The regulators are unfocused control freaks derrochando, painting over their irrationality with the thin veneer of sophistication granted by electronic fingerprinting.

    • There is nothing wrong with free stuff! I got a free education, and today enjoy –really, really enjoy–free snow removal on our street. Everyone has a right to public services available to all.

      I also don’t mind the delivery of benefits to people on a means-tested basis. Abandoned women with kids to raise deserve help, and if there is money floating around, I’d make sure the kids were fed and clothed. What I really hate about Chavismo is that no public or legal criteria exist as a condition for the delivery of benefits; if you are “enchufado” you get some, if not, you don’t.

      To me this seems calculated to bring every person into a relationship of utter dependency upon those in power, dependency which saps intellect and will, and ultimately leaves the polity bereft.

      • To me this seems calculated to bring every person into a relationship of utter dependency upon those in power, dependency which saps intellect and will, and ultimately leaves the polity bereft.

        For a long time I sort of agreed. But it was actually Juan C’s post on the airlines that brought home to me how incomplete this reasoning is! Really, Maduro is calculating to bring Delta, Air France, Avianca and Varig into a relationship of utter dependency?! Bollocks! They just refuse to think through the political economy implications of policy!

        • Not even Cadivi, I mean, most people who use the credit card cupo vote against the government, won’t change their vote and the govt. knows it. It just the massive stubbornness of admitting failure,

          • I don’t know, cacr210, I think it’s not quite clear that if you use your cupo means you are automatically oppo.

            What you will find, is that regardless of how they vote, many Venezuelans will keep on “gaming the system” until someone shuts the game down. Then they’ll look for the next game and do it all ove again.

            What really sucks is that over time, pre Chavez and dating back to at least RECADI days, we have excelled more at how to obtain “free” lunches and less at doing things the old fashioned way by earning them.

          • I don’t know, I think that, at least from the economics point of view, using your CADIVI cupo is the rational selfish decision anyone would make, the irrational “Venezuelan” part of the deal is the existence of the policy in the first place.
            I think a lot of moral arguments are made about the fact that middle class people uses their CADIVI cupo, but I think you can only blame that on human pragmatism and selfishness. Anywhere in the world where you sell 20’s at 10, you´ll get the same response.

        • Francisco Toro, perhaps they’re just really bad at the utter dependency thing, though that is still their intention. In the airline case, perhaps it’s just that communist let’s destroy everything from the past so that only what is born out of revolution is what can be seen so that everyone must be thankful to the revolution for all that is visible. A few generations of that and you’ve got a population thinking that the revolution really does work, since nothing points to remnants of past systems. That’s their theory, anyway; history has not shown that any population is that ignorant.

        • Policy which allocates benefits on the basis of whim or personal allegiance converts potential beneficiaries into supplicants. I accept that airlines and foreign powers have less need of those benefits than do citizens; it was really the latter I was thinking of when I used the words “utter dependency”.

      • And yet, Mr. House (or is it Dr.?) That Snow Removal is NOT free.

        You pay for it when you pay your taxes. Right?

        Whether VAT, or Income Tax, or whatever it’s called where you live, no?

        • There is no direct cost to me, or to any of my neighbours. Of course, most of us pay taxes, and some of that amount will be used for the snowplows. But if I were retired or on welfare, I’d still get the benefit, “free”.

          You can call me Jeff, Dr. Iguana Master.

        • Snow removal is usually paid for through property tax, as I understand it. If you rent, the service is probably close to free.

          It does seem to me that preferential exchange rates for travelers has a constituency at the beating heart of chavismo: namely, folks setting up their offshore nest for when the collapse comes.

          • Property taxes are pretty standardized (as far as purpose) throughout the states and are generally based on the market value of the property (note: one exception is the silly and moderately suicidal California tax laws). There are a number of taxing entities (County, Municipality, School districts, water boards – not the torturing kind, libraries, parks, arts, etc.) and every one gets a small slice, ostensibly to go to the general budget of those entities. Fees such as sales tax, licensing, traffic tickets, and others also contribute to the revenue. It is general practice for the city to submit a budget for public review and then seek comments through a series of community meetings to discuss the allocations and to give/receive feedback. Once the final budget is adopted, that’s the operational budget for the year, barring extreme circumstances which would allow the city to move funds from a contingency or general fund.

            In my case, snow removal is one done by the municipality, along with maintenance of the roads and upkeep of the local parks, police and fire department. The biggest taxing entity by far, locally, is the public school district (free education). My annual taxes are about 1.4x a monthly mortgage payment, and of that, 80% goes to the school district. I was even less thrilled when the notice for this year jumped 20% because of an increased valuation – most taxing entities have an Equalization Board so that they, by law, always receive the same revenues, barring an increase (never a decrease!), but the distribution of it across the taxed populace varies from year to year.

            Most renters think they don’t pay taxes, but that’s a fallacy. I don’t know of a single community that doesn’t tax commercially rented residences, generally at a much higher rate than residential homes (transitory population that isn’t likely to vote, and less likely to vote someone out than a homeowner). Because an individual unit of, say a 40 unit complex, is relatively small in value, the renter doesn’t realize that the unit’s taxes are generally included in the rental price. This is also a reason why lease agreements tend to be of relatively short term (6 mos. to 2 years).

            Nothing is ever free. Especially if it is brought to you by the government.

    • While I think that Quico is right on his application of Hanlon’s razor, Nagel is equally correct in pinpointing one of the effects of this crazy policy: people don’t bitch and don’t march.

  6. Of course there is such a thing as a free meal and so on in Venezuela. Most Venezuelans, although not all, have ceased the opportunity without a care for their country. However in the usual countries referred to as the measuring stick the citizens of those countries recently had to fight to provide or gain from the benefits of supported health care, education and the liberty to walk freely.
    I suspect a lot of Venezuelans living outside Venezuela in the countries where the basics are provided care little for the sacrifices of others in the country where they now roam freely.
    They are no more than locusts feeding from the historical moral development of their adopted second home. Not unlike that which has been happening in Venezuela in recent years, free meals for all.

    • I’m sorry, but I must disagree with you. I’ve been living in Argentina for the past 5 years. I’ve been paying taxes like any other argentinian for that same amount of time. And the same goes for every other venezuelan I know who lives here. I don’t know if you live outside Venezuela or not, but my experience as an inmigrant tells me that what most venezuelans who have departed to another country seeking other oportunities feel is the exact opposite of that not-caring attitude you talk about.

      And what I think you’re not getting about this post is that, even if there ARE free meals (for the people who eat them), they are not, in fact, FREE, as someone always has to pay for them. In this case, the State, which means taxpayers or oil income or whatever. I’m not saying that this is wrong, quite the contrary; but as long as we keep thinking that the free stuff we get is actually free (i.e., no one pays for them, they just, you know, grow in trees or fall of the sky), we’ll always feel entitled to ask for them while giving or doing nothing in return.

  7. It’s technically not free money, it’s not a handout and you still need a credit card to travel, it’s just cheap money, money cost less than its value, if you travel for no fraudulent purposes for the vast majority of people it’s still very expensive to go outside even at 6,30 considering the pathetic salaries in the country, one of the many distortions this system have created

    • I think you haven’t understood the system. Miguel explained it very well in his blog,
      although I think he did not consider how unfairly the pinata was being distributed.

      It’s like this: the better off can use the CADIVI dollars to actually multiply their money or, at the very least, to spend nice holidays without paying what they would have to pay for worse service in Venezuela.
      Those without credit card and with not enough initial capital get instead the chance to forget about books for their kids and decent health service for their relatives in order to finance the people travelling around or the heads of buhoneros.

  8. The govt gains nothing by riling up people against them even if they are basically opposition people, as keeping the opposition quiet (even if fundamentally dissatisfied) is also beneficial to the govt interests . they dont want agitated protests and demonstrations because people are denied the chance ot traveling abroad . also some of the people traveling are partisans of the cause so why get them angry . Their aim is not to change peoples view of things by giving them cheap dollars but to avoid giving them cause to become too frenzied in their feelings against the govt.
    Aristotles thought that what made govts weak was not the number of people who opposed it but the emotional intensity of their opposition. Being lukewarm or resignedly opposed is different from being rabidly opposed !! .

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