Clandestine capitalists

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Work hard so you can earn a living.

Buy cheap, add value, and sell for a profit.

Take a risk, and reap the rewards.

These are all basic precepts of capitalism. But they are also very widespread, because they are an integral part of human nature.

Yet in today’s Venezuela, these values are downright subversive, so much so that during this onslaught against human (not capitalist) values, opposition politicians have simply refused to defend the rights of entrepreneurs.

The only eloquent defense of these basic human rights, the only vivid response to this agression by the men with guns and their Cuban masters … comes from humble businessmen and their workers, as this grainy, semi-clandestine video shows. (HT: cacr210)

The day will come, chavistas, when you too will reap what you sow. That’s just the way the world works.

1 COMMENT

  1. According to this morning’s Reuters over 100 businessmen have already been jailed.

    http://ca.news.yahoo.com/venezuela-president-vows-no-letup-price-gouging-crackdown-010034869–sector.html

    A quote:
    “The successor to the late Hugo Chavez also said his government was preparing a law to limit Venezuelan businesses’ profits to between 15 percent and 30 percent.”

    So, I gather oil will now be sold to the Americans for, …what?,….20 dollars a barrel?

    • Dr Faustus – your final question borders on the idiotic. If you can make such a comment – trying to be clever – then you have no comprehension about what is happening at retail and wholesale level here – never mind the usury taking place.

        • The comparison is flawed. The consumer goods are being repriced in Venezuela based on a dollar at 6.3 instead of 50 or 60. Hence the prices fall in bolívres. Oil is just priced in dolalrs with no istorting influence of a black market currency.

          This is why oil will not suddenly sell at $20 but it could if there is a glut.

          Usury? Google it. I asume you know how to do that?

          • The governement is being hipocritical. They are going to jail people for having a profit margin above 30% in bolívares. Yet the government sells oil with a 600% profit margin in dollars.

            This doesn’t have a direct relation with the exchange rate. Many bussinesses have argued that they are not even registered in CADIVI and don’t import anything, they just buy in bolívares and sell in bolívares. On the other hand the government refuses to publish the list of those who DID buy cheap dollars through CADIVI or SICAD, much less investigate them

          • You do realize the flaw in your argument, right?

            Citing supply as a reason for oil to be at the price it is instead of $20, barring a glut, yet chastising people for selling at a higher price because of shortages? Hypocrisy run wild here. Think about that.

            You cannot hold one good to a supply/demand mechanism and not others. Neither the world nor human nature work like that.

            On top of that, oil is produced in Venezuela, but is sold in dollars. Everything else is produced outside of Venezuela and is purchased with dollars for import. When there are insufficient dollars available, this drives the local currency price up because the inherent cost of purchasing those goods climbs.

            Incidentally Arturo, did your daughter by her fridge? What price? Where? Was she able to find one a week after the fact?

            I love how the government complains about speculation yet the very policies of said government creates uncertainty which drives…wait for it…. speculation!

          • No distorting influence on the global market for oil, right? Except for the influence of OPEC which makes sure prices stay above a minimum level determined by them. That IS a distorting influence, my friend. And just fucking look the word “usury” in the dictionary. It does not mean what you think. Mano, eres mas cerrao que qk e’ monja! De verdad.

      • More shortages and unemployment, as I predicted. That is what is going to happen. The final act of the sad cubanization of Venezuela.

    • This has no economic logic, and I doubt it is supposed to. It looks to me to be an attack on the parallel dollar market! The big question is how much of the black market dollars goes to importing needed parts and staples, and how much is simply capital flight?

      My impression is that the regime is experiencing a type of “Massada Complex” similar to Israel’s situation during the war of attrition, when it was surrounded on all sides by enemies and it’s very existence was at stake. The psychological state was “fight to the death”, “no surrender!” Maybe even “Take as many of the enemy with you if you fall!” It ties in with the nuclear defense.

      So, I think we are seeing a new stage of the revolution. It is finally finishing the cannibalistic stage, and now is becoming suicidal and dangerous!

      Their mission is bankrupt, and they will not surrender. Their demise is certain, it’s like a wounded animal, if you get too close, it can bite you.

    • That is what I find unacceptable in this blog. An untrue statement from Mr. Nagel provokes a reaction of disgust and despair in Alberto.
      Como on guy, be reasonable!

  2. I do not believe that the affirmation that the opposition leaders have failed to defend the entrepreneurs is true:
    http://www.eluniversal.com/nacional-y-politica/131113/capriles-los-precios-justos-se-logran-con-produccion-y-trabajo
    A blanket statement as the one you used is counterproductive for Capriles because he does not know all the details of the specific circumstances of each case. Most likely, because it is also part of human nature, there will be cases of outright abuse and crime.
    So Capriles comes up with a general statement like yours and he is exposed for defending the actual criminals, which they will find.
    I wonder why many in this blog are imprudent when making accusations of the opposition.

    • Pilar,
      Capriles did not defend the rights of entrepreneurs in his very muddled response. Sorry, you’re going to need to show me another link.

      • Whenever he says he is not taking the side of the especuladores or defending them, he is falling for the tactics of the government to blame inflation and scarcity on anyone than the own disastrous fiscal, monetary and economic policies of the government. It is very easy to say that Venezuelan business men are not genetically more evil than Brazilian, Colombian or Chilean ones where inflation is one digit. There are no evil “especuladores” it need to be said.

        • Ok, remember the opposition basically has no Radio or TV station where to go. If Capriles appears saying something about this issue, and somewhere in the middle of what he says there is the sentence “there are no evil speculators”, this sentence ALONE will be repeated over and over in VTV, TeleSur, AvilaTV, etc. etc. omitting the explanation Capriles might give as to why there aren’t any speculators, so that he can be portrayed as a fascist pig who is in favor of these bastard businessmen.

          • When you don’t take a stand against the government violating basic rights and driving middle income people to bankruptcy, you are morally justifying the deeply amoral things that are happening in Venezuela. If you don’t say that the real people to blame for scarcity and inflation is the government, then many people (BTW many people in the opposition secretly believe that what the govt. arbitrarily reducing prices is doing is not bad) will see what’s happening as positive. It’s the water cooler conversation at work (Bueno chamo pero si el gobierno les dio dólares CADIVI tiene razón en estar arrechos o es que los empresarios venezolanos son una vaina seria) As long as that type of thinking permeates into our consciousness we are doomed to live a succession of Hugo Chaveces.

            There was a good piece by Milagros Socorro about how there has never been true capitalism in Venezuela and that’s the reason why the government can sell this BS with total impunit,y because not even the opposition is equipped with the tools to explain to its own base what’s happening in the country.

          • “When you don’t take a stand…”

            In order to “stand” you first need a platform where to stand. Under the current circumstances, Capriles (or any other member of the opposition) can say whatever he wants, but it is the government who will decide what people will hear.

          • Even when Capriles had more media access the “yo soy igualito que Chávez pero más organizado y menos corrupto” speech never worked with Chavistas. Venezuelans are not dumb and most them believe that if the opposition ever comes to power a “paquetazo” is coming and were very effectively convinced by their leaders that that would be disastrous. (For example in PDVSA employees grew 171% percent do you think that most of these people who get paid to do nothing thought that they would be keeping their job if Capriles won?)

          • So you are saying that there is no freedom of expression in Venezuela? You will be saying next that there was no speculation.

            Just tune into, say Unión Radio, which is nationwude and there are all sort of opinions there. And it is not chavista. The vast majority of TV stations (there are about 65 nationwide), FM stations (550 in private hands) and newspapers are in private hands.

            Jusr because Globo has stopped being a political aprty does not mean that the opposition is not Heard. Watch ANTV and you can hear the Opposition deputies making their case live and in real time.

          • He did have a platform to stand, he just used it to give weak statements. he could have used that same platform to be a bit more fierce.

          • “When you don’t take a stand…”

            It’s a lot easier to say make a stand when you are sitting comfortable behind your computer screen. If you were a father of 3 children would you go out in the streets to make a stand knowing that you could be putting your life at risk?

      • All that Capriles must say now is that he, and the MUD, does not approve of what the government is doing because it is not the solution against abuse and crime. Even in the United States, the champion capitalism, it could be a crime to raise prices without valid reason.
        So why are you asking Capriles to put a rope on his neck?

          • He is not scared of defending principle. But your blank statement is wrong. And therefore it is not a principle. There is crime in commercial transactions all the time. And there are laws to punish price gouging. And there must be some of it, or a lot of it, in what is going on in Venezuela. Now, the government is part of the problem because it created and maintains a system that feeds it.
            That is why Capriles said what he said. What Maduro did is not the solution.

          • Sorry Pilar,

            But I think that you are incurring in the same type of legislative cherry picking that PSF use to justify Chavismo´s action to defend Capriles

            Price gauging laws purport to avoid price increases during emergencies, when, precisely, the scarcity and higher demand caused by a natural disaster could provoke dramatic price increases. In this case the control is justified because the scarcity and higher demand are caused by natural disaster that is temporary

            In Venezuela the PERMANENT higher demand of goods is caused by the inflation fueled by a crazy monetary and fiscal policy of printing enormous amounts of money, the restriction on the number of goods available because of the exchange control and the lack of protection of investment that hampers production. That produces low supply and enormous demand that leads to “especulación”. But unlike price gauging laws, the condition that create the price increase are fault of the government that wants to reduce the prices.

            If anything, price gauging laws very well prove that EVERYWHERE IN THE WORLD increased demand of goods in the face of short supply result in much higher prices

          • Excellent source, thanks!

            One of the refs linked to, http://object.cato.org/sites/cato.org/files/serials/files/regulation/2011/4/regv34n1-1.pdf
            Makes it clear that DESPITE being increasingly widespread even in the usa, their application is not without controversy and in fact will lead to unintended consequences.

            The government should see price increases as a sign that supply is not matching demand (atlowerprices), not as hoarding, as many have already pointed out. Besides, since comunists are atheists wtf do they care whether people can afford their xmas presents?? Let them wait for the post-xmas sales….

          • If not Capriles, then who will speak in favor of that poor arab trader? He’s being forcefully bankrupted, his employees fear for their jobs and no politician is willing to speak up.

        • It could be a crime to raise prices??? what are you talking about? During a natural disaster maybe, but besides that, prices are who ever is selling the goods wants them to be, there are no “just” prices and it sucks that opposition politicians do not have the balls to make this point in the little media exposure they get.

          I think the only thing that is being ask of the opposition, not just Capriles is that they actually say that there is NO usura and especulación, just lack of competition because of the government.

          • When somebody gets a preferential treatment that is a crime. Like “inside trading” in the stock market. When somebody gets dollars at a privileged rate and sells the products bought with those cheap dollars at the same price or higher than those who bought the products at a higher price it is unfair competition and an abuse to the consumers.
            It is not a black and white issue.
            Any statement made by Capriles to support those practices would be morally wrong and political suicide. He has not and should not make that statement.

          • But that doesn’t make any sense Pilar. The laws you have cited had to do more price gauging during natural disasters.

            In general profit margins are not regulated. Particularly when something is the product of creative thinking or aesthetic value.

          • Pilar, the surest way to ensure continued economic decline in Venezuela, were Capriles were to come to power in a post-Maduro world, would be to ensure that prices are controlled and tampering with market mechanisms.

            Why?

            You will always have shortages. You will always have those who flout the price controls. Its the nature of price controls that directly impacts the supply of a good and inhibits market development.

            It also murders your DFI when a business calculates expected margins based off controls and elects to invest elsewhere where they can get a better ROI. This is why Venezuela has little or no DFI beyond SOE/Sister oil companies.

          • Gouging by daka (taking advantage of restricted supply at a time of high demand) is not the type of gouging that would be construed as unethical in the usa. This is strictlt a pleito with Maduro because daka received preferential treatment and screwed the government (not the consumer) over. It is at most a legal issue if the government had a priori stipulated that daka should sell at an arranged price. Evidence?

          • Pope – justify pricing anyway you want but after next week profit margins will be fixed between 15% – 30% depending on the sector with jail for being caught out.

            There are laws in Venezuela against speculation, repricing and so on. And the reason is that all sectors here act in unison as cartels – and always have done.

          • Sure. Prices will super affordable, they only problem will be nothing to buy. Regulated canned sardines cost 1,55 in Vzla, but I haven’t seen them in 4 years, regulated pasta costs 7 BsF and it’s scarcier than milk, cars have been regulated but dealerships are empty.

          • “All sectors here act in unison”…So Quico was right and chavistas do think there is major conspiracy by businessmen because they are so evil that they hate profit…..For f$#%* sake…

          • “but besides that, prices are who ever is selling the goods wants them to be”

            Only in a monopoly. In a free market, the seller has to take competition and alternatives to what he is selling in mind. He cannot just choose a price arbitrarily because people are free to buy from someone else or choose to buy something different or not buy today at all. In other words the customer and the competition have a lot of input on prices.

    • Maybe because the Venezuelan opposition is comprised of about 98%, give or take, big-government, give-away-what’s-not-yours, pan-y-circo socialists that went through 1989 with their eyes closed and still believe that model is somewhat viable if carried on by the right people.

      Just sayin’.

    • “So Capriles comes up with a general statement like yours and he is exposed for defending the actual criminals, which they will find.”

      Pilar,

      So, you are buying into the government’s rhetoric that “speculation” is evil? That is just wrong. Speculation is an inherent part of capitalism and human nature. Until the Opposition can grasp that and shout it to the heavens, they are playing the regime’s game.

          • Pilar, every one of those states has laws that apply to price gouging with regards to a market shock such as an earthquake, hurricane, or other “disaster” scenario. In general, the market prices for goods are based almost entirely upon demand.

            Show me a single scenario where the markets are regulated due to price gouging on a constant basis. You won’t be able to do so.

            Hell, they don’t even regulate, for the most part, payday loans which have anywhere from 200-600% APR rates due to fees. That’s usurious.

          • The funny thing regarding milk is that it isn’t so much the upward price that is regulated as it is the bottom through subsidies by the government.

            We have quite a bit of dairy locally and a couple of years ago, it was bottoming out at around $1.89/gallon due to so many entrants into the market place from the subsidies that it was forcing long time dairy farmers out of the business who had never run that efficiently in the first place, but had been receiving subsidies for so long that they never really had to do so.

            I remember watching on the news that the farmers were protesting by dumping hundreds of gallons of milk out into the gutters and streets as a form of protest over potentially slashed supports.

            Contrast that with New Zealand (which, I may add, has wonderfully delicious dairy products) that are ridiculously priced compared to their US counterparts even given the exchange rate. Milk is nearly double and cheese is about 2.5 times what it costs in the US because the government doesn’t provide the supports the US does. Of course, the Asian market also places a pretty high demand so there’s quite a bit of exports which ratchets the price much higher than I expected as well. I had milk sticker-shock.

        • Is there a “civil emergency” in venezuela? Has not chavismo ruled just dandily for 10+ years enjoying outrageous oil income? What gives??

    • Pilar – however you spin it the vasy majority of businesses inspected so far and by that I mean over 95% are speculating. It’s that simple and there is massive pulic support for these measures.

      • Spin? The government is as responsible as the merchants: many of them are boliburgueses. This is also an internal fight within government sponsored gangs.

        • WTF are you talking about? All thsi revolves around procing godos bough at 6.3 and selling them priced at 50+. It has nothing to do wuth goverment gangs – it has to do with the retail sector and whoever is active there – whether it be opposition if chavistas.

          I bet you have no idea of how many people have been arrested for speculation and what chvaistas have been sent to jail or are awaiting trial?

          Give us all some evidence about government sponsored gangs. I am really intrigued at this since you probably read it on Twitter.

          • The government has known this was going on all along. Maduro acted because of the election and to distract the people. What has been the impact on food? None!

          • Pilar,

            You see? As soon as you accept that “speculation” is bad/immoral, your argument breaks down. So long as you hold to libertarian economic principles, guys like Arturo cannot spin you in circles, like that.

    • Please, don’t pay attention to the criticisms of those that want to do opposition from their comfortable situation far from the reality in Venezuela. No need.

    • I have defended the opposition before for taking the popular position above of what I think they should say, but this time I must say that they got it wrong, all of the oppossition’s leader who have spoken have aknowledged that there exist especulation and that the speculators should be punish all while they ignore the root causes of the problem, they are essentially saying that the goverment is right on this, it’s strange to think that freedom have become so unpopular that no one will stand for it

  3. Chavistas are stupid. Maduro is a sad joke.
    Limiting the prices stores can charge for electronics or other commodities will create shortages and create secondary markets with higher prices. The people who bought or stole electronics from Daka will likely re-sell them at the real market price and make a profit that would have gone to the store. On net, society and the economy is not helped.

    This is the same for Cadivi. Limit the amount of dollars available and a black market appears with the market price.

    The government will never be able to regulate the price an individual Venezuelan charges to someone on the street. Everyone leaving and returning to the country will bring back some type of electronic device to sell.

      • Thanks Nicolaas,
        Many cities in the U.S. have laws against ticket scalping for sporting events. The laws typically state that the ticket cannot be sold for more than the face value printed on the ticket.

        Scalpers get around this by selling a hat or scarf for $500 (or whatever is the market price of the tickets ) and include the tickets for free.

        Electronic stores in Venezuela have to look into selling framed photos of Hugo Chavez and give away the TV for free with the photograph. How could Maduro demand low prices on any photo of his commandante presidente Hugo Chavez?

  4. lacras, parásitos. And the opposition is a joke. This should be a time of hitting the streets. This is pathetic. I would rather take my chances and receive those government lacras with some rounds of AK-47

  5. All of this will keep working for the regime, so long as each Venezuelan individually is not willing to defend the rights of other Venezuelans collectively. As long as everyone says, “Gee, that’s too bad, but I am still OK, so todo bien.” the government will continue eliminating all private enterprises, one by one, until the State is all there is. Everyone will be beholden to the government for the means to survive and will have to work where and when the government tells them to. Slaves in all but name.

    If this doesn’t send people out to the streets en masse to protest, then all is truly lost.

    • Roy – the reason why there are no opposition street protests is because Cpaariles voters are also buying fair priced goods. Everyone was being robbed – and you know it.

      Economic freedoms stop at the point when customers are being abused and that point was passed many, many months ago here.

  6. Juan: I agree with your point, partially. On Thusrsday, MUD spokesmen declared against Maduro’s economic measires on the same token as did, say, Fedecámaras or Consecomercio. http://www.unidadvenezuela.org/2013/11/comunicado-medidas-economicas-anunciadas-por-nicolas-maduro-agravaran-la-crisis-economica/

    and http://www.unidadvenezuela.org/2013/11/omar-barboza-gobierno-dirige-guerra-economica-contra-el-pueblo/

    There is, howeer, a historic emnity agains so-called especuladores, which might bias some opposition politicians, and some simply fear that it might be a risky electoral strategy. Alas, this is not an issue where unity is clear (we have three marxist parties, a number of Socialist parties, and so on…). There are, however, voices of economic reason (the platforms for the 2010 and 2012 elections show this to be the case). Sadly, there has been also a very slow reaction, in my humble opinion.

    I think this statement is clearer, but it has been a kind of scattershot: http://www.el-nacional.com/politica/aveledo-capriles-enriquez-guillermo-habilitante-henrique-ley-mud-oposicion-ramon-roberto_0_300570189.html

    and

    http://www.eluniversal.com/nacional-y-politica/131115/aveledo-la-habilitante-es-inconveniente-y-empezo-mal

    and

    http://globovision.com/articulo/subuso-en-la-asamblea

  7. From an article in the Economist: http://www.economist.com/news/americas/21589891-except-president-least-time-being-everything-must-go

    The money quote from the last paragraph: “Mr Maduro looks increasingly out of his depth. ‘If I’m bringing down the price of appliances by 1,000%, that has to have an impact on November’s inflation figure, right?’ he asked during a state-television broadcast at the weekend. ‘Or not?’ The camera panned to government ministers, none of whom moved a muscle.”

    • ‘If I’m bringing down the price of appliances by 1,000%, that has to have an impact on November’s inflation figure, right?’ he asked during a state-television broadcast at the weekend.
      The people who got discounted or free electronics will sell them on the street at an even higher price than the stores did. The answer is that inflation will increase.

      • First, you cannot reduce prices by 1000% because that means you are charging negative prices. In other words, you pay to have people accept your products. At most you can reduce prices by 100%, which means giving them away.

        Second, the prices in used goods market are irrelevant for inflation figures. So, no, that is not why inflation will rise. The reason inflation will rise is that this new law represents a huge negative shock to supply. The cost of doing business just increased big time. Merchants will not import anything unless they get dollars from the government, and we already know how efficiently CADIVI has been working recently.

        Third, this is pure demagoguery. They are obviously hoping this will help them in the coming election. The important question is, What will they do after the election? Will they continue this suicidal strategy or backtrack?

  8. I have followed the attack aginst the home appliance stores and shopkeepers in general with horror, amazement and sadness. It is the same tactics of attacks that have destroyed the petroleros, ganaderos, industriales, casas de bolsa or constructores in past years. It is a tactic that has worked very well for the communists but have destroyed the country. I wonder if the Venezuelan public understand what is going on and the effect of this on the country? I unfortunately do not think that the present opposition knows how to counter these attacks.
    Regarding the effects, take a look at this article:
    http://www.bizjournals.com/southflorida/blog/latin/2013/11/venezuelas-crackdown-on-retailers.html

    • agla – we do not want these crooks running businesses in Venezuela so they are welcome to invest in South Florida. Good luck to them but there they will not be able to charge over 1000% markups.

      Your other comments just conflicto with reality. Sincé 1999 the GDP has risen from about US$90 billion in 1999 to US$400 billion now. Check it out using Google if you don’t believe these figures. Consumer spending from US$65 billion in 1999 to US$272 billion in 2012.

      So where is the disaster? Oh, the inflation induced by speculation of 1000% in all sectors. With those sort of profit margins it is imposible to hold inflation in check.

      I also suggest you take a reality check and do some research as you do appear ratehr foolish in your fantasy comments.

      • agla – we do not want these crooks running businesses in Venezuela so they are welcome to invest in South Florida. Good luck to them but there they will not be able to charge over 1000% markups.

        Gee arturo, why don’t you think 1000 % markups work in florida, why only in venezuela? The answer is capitalism/the market weeds out the greedy and the consumer wins. Artificially trying to shape the market will always create opportunity for rogues to rip the country off..face it..you admit a capitalist market economy creates a situation where excess greed can’t survive becuase its open and free..not regulated.

        • livefree – if you knew anything about Venezuela you would not make such trite comments. Before 1989 Venezuela was virtually a closed market for imports and so local industry, although uncompetitive, had a huge market share, charging what it wanted. This created a mentality of no competition in enntrpreneurs.

          The market opened up from 1989 onwayds as CAP was forced to open it up as one element of the condicionality to receive IMF money to stave off an economic collapse.

          I’ll illustrate this with a short story which clearly illustrates the entre´reneurial mentality in Venezuela.

          Why was Fedcameras really communist?

          Because the Fedecameras members had a closed market.
          They recieved soft government loans they never paid back
          They did not pay any taxes.

          This is why crooks are not weeded out in Venezuela as each sector acts as a cartel which is completely ilegal in the US due to antitrust laws and in Europe due to antimonopoly laws.

          Here we have to regulate the market and hopefully it will be done with an iron fist. Free amrket cpaitalism is a myth as it simply benefits Banks and corporations at the expeanse of the little man.

          • Arturo,

            I do not understand your logic. You first say that those businessmen in Florida could never get 1000% margins. This lets me to think “ok, we need to be more la Florida then”. But then you go on to say that Venezuela needs to do something that is in the complete opposite direction to that.

            You go again and say the problem is that there are cartels in Venezuela while that is ilegal in the US and thats the reason they dont have that type of inflation there. I think “ok, we need to make cartels illegal in Venezuela and enforce it”. Again you go on a different direction and come up with price controls as the solution.

            We already have price control results in Venezuela. Cabilla’s prices are regulated, yet everybody I have talked to in the construction industry and when I have myself looked for them, they are either VERY hard to find or you find them at a higher price than if there were no contros. So why the hell would I want to have that for everything else?

            I too do not want to have to pay a markup of 1000% on everything I buy, but the solution you and the government are proposing is NOT going to work. Things will simply disappear or be found in the black market (ei buhoneros) for way more money than today. We already have proof of this…

          • “This is why crooks are not weeded out in Venezuela as each sector acts as a cartel which is completely illegal…”

            Because, as everyone knows, the best way to fix a cartel is to turn it into a monopoly!

          • Funny you should mention the situation before 1989. What we had before 1989 that brought us to the verge of economical collapse is precisely what we have today:

            – Currency exchange control
            – Price controls
            – Scarcity
            – Corruption
            – Black markets

            That’s what brought about the Caracazo.
            History repeats itself.

      • Consumer spending from US$65 billion in 1999 to US$272 billion in 2012.
        How much inflation has there been? How much more is $272 billion in 2012 worth than $65 billion was worth in 1999, and how do these number translate to Venezuela, which has very high inflation?

  9. Juan Nagel – you last sentence that “Chavistas will reap what they have sown” is glaringly ironic.

    The speculative capitalism inducing inflation in Venezuela is reaping what it has sown. And I am talking about NOW – not some sort of wishful thinking on your part about what might happen.

    I hope you are ready for anotehr electoral beating on December 8th. Your bussies in the opposition, by supporting the speculators and criticizing Maduro’s measures are just digging a bigger hole for themselves.

    • Arturo: obviously you are a sleepless communist. You must just love the tactics of the nazi brownshirts and as you surely should know, remember how they ended up. As to economics and statistics, I already had figured that voodoo-economics is as far as you get. Cro magnons were more versed in those subjects than you……obviously.

      • agla – those figures are from the World Bank – hardly voodoo or chavista. I sleep very well but take time to do some research and am capable of sane arguments not peppered with insults as someone who has just lost the argument and has no other recourse but to try and save face by making smartass insults.

        I wear a red shirt. I thought you might like to know that.

        BTW – did you know that Cro Magnons had bigger brains than homo sapiens but not bigger than el Comandante Chávez. 😉

        • Arturo: I suppose that you don’t think the price of oil had anything to do with it? and of course the rise in the price of oil ocurred only thanks to the infinite wisdom and hard work of el imbecil eterno-intergalactico…….and yes, the earth is flat.

        • The world bank takes statistics issued by the BCV. You might as well cite statistics issued by Wikipedia.

          If you take Venezuela’s GDP in dollars at something closer to the real rate of exchange then the purchasing power of Venezuelan consumers is dropping and has been dropping since at least 2008.

      • Shrink – I’ve been hearing and reading this bullshit from the opposition media for 14 years and the waves have not swept ashore yet.

        Be logical – price controls will not harm the economy but rather stimulate consumption which is what all you capitalists want.

      • Wow…….how similar to Venezuela!…….and the guy with the white robe and brittish accent must be Giordani…..aplausos to Getashrink.

  10. Will the new law limiting profit margins apply to the kleptocrats in power as well or can they still make off with as much public money as they want?

  11. Dear Juan K. Nagel:
    Let me expand upon your cogent picture of capitalism:

    Work hard so you can earn a living.
    Buy cheap, add value, and sell for a profit.
    Take a risk, and reap reward or failure.
    These basic precepts of capitalism are an integral part of human nature
    for the following reason.
    Even the Marxist goal of owning the fruit of one’s efforts
    rests squarely on the bedrock of ownership itself.
    Yet ownership is synonymous with capitalism, for good or ill.
    It’s an unwhackable philosophical mole.

    Warmest Regards,

    Deedle

  12. Maduro’s “Economic War” is Chavismo Irresistible Political and Military Power Vs. The Laws of Economics. Who will win… or will EVERYBODY lose?

    • Well, so long as humans remain human, the Laws of Economics are pretty much untouchable. Like other natural laws, such as gravity, they really don’t care if you believe in them or not. But, those who deny the law of gravity end up being crushed. But, Chavismo can “win”, in the only way they can define “success”. They can create the same sort of state that Cuba has and remain in power, syphoning off the wealth of Venezuela and establishing themselves as oligarchs for decades to come. They do not care that it will come at the cost of impoverishing the country.

  13. Scarcity could be the result of natural disaster or provoked.
    I have posted in the past that I believe madurismo has withheld dollars with the purpose to create a crisis.
    Nevertheless, from the Christian’s perspective, and from the law’s perspective in some places, it is wrong to profit excessively by that type of scarcity.
    That is why I believe that it is wrong to blame Capriles and the MUD for not defending speculation as Mr. Nagel wants him to do. Speculation could be morally wrong, from the Christian perspective, and also from the Muslim’s perspective. Note that the merchant in the video is a Muslim and he mentions Allah in his plea; the merchant claimed that he was not speculating because he had bought the merchandise at 60 bolivars per dollar.
    At the end Maduro is to blame and is what Capriles and the MUD had said.
    You are wrong in demanding that Capriles defends the speculation that Maduro is accusing some of doing. Some of them are wrong.

    • Pilar,

      I am sorry to say that you are operating under the same moral precepts that made it possible for Chavismo to flourish in the first place. I don’t know about a “Christian perspective”, but adjusting prices to what the market will bear is part of the capitalistic economic system. The high profits to be made from scarcity assure that such scarcity is a temporary thing. Furthermore, in a crisis situation, “price gouging” assures that the scarce goods are allocated where they are most needed. In fact, it may be the medieval religious principles that you are referring to that are at the root of such misguided economic/social policies.

    • When there is scarcity prices go up because people compete for the scarce goods. They are willing to pay more for the products they need. High prices are very important to REDUCE SCARCITY because that stimulates people and businesses to get into that market to provide those goods.

      Forcing the prices to go down only INCREMENTS SCARCITY. It is a bad thing. Furthermore controlling the prices doesn’t really reduce the price it only makes it higher because sellers will leave the market:
      – They won’t get into the controlled market because there is no benefit
      – They won’t get into the black market because is risky. People will think bad of them and called them speculators. Some people think they should be arrested even they are doing nothing wrong.
      – Only few brave people would get into the black market thus reducing scarcity. We should applaud those people.

  14. Perhaps it is the opposite for today’s Venezuela.
    The lack of humanity – what you call medieval religious principles – to Venezuela’s capitalism before Chavez might have been the cause of Chavez taken over the county. I affirm it is, I used “might” so that you might want to exercise your brain reasoning the argument.
    Nevertheless, it is a vicious circle: at the end Chavez made it worse! Have you read a book by a Peruvian, Eudocio Ravinez, “La Gran Estafa”? Chavez was an “estafador”.
    Nevertheless the situation of price gouging in the United States would not be the same thing as in Venezuela today. So you are comparing apples with bananas. In the USA people compete in a fair field, in Venezuela the field is not fair. And that people favored by the government, and with advantage, speculate is doubly immoral.

    • Pilar, there was never truly such a thing capitalism in Venezuela…

      As to price gouging, it only applies when there is no competing retailers. It has more to do with monopolistic practices of high necessity items than with having high margins, so the term and its corresponding controlling laws do not truly apply to what is going on in Venezuela right now.

      • Following your logic there are in Venezuela 2 types of retailers: the ones that get dollars at the preferential rate and the ones that buy them in the black market.
        So the there is an intrinsic distortion to the market similar to the monopolistic practice that you are talking about on what is going on in Venezuela these days. To buy in the preferential market and sell in the black market for a gigantic profit is immoral and comparable to price gouging.
        Capriles does not support that and it would be a political suicide to do it.

        • Pilar, unfortunately, the situation is not so black and white. I would think there are many retailers in between that manage different proportions of preferential rates as well as different product sources that varies the price of what they buy before selling. The more distortions there are in a market the greater the variations. Regardless, these have little to do with what is considered monopolistic practice. The reason for this is that we have many retailers competing within this distorted market. But, for the sake of argument, let’s suppose that you are right with the black and white scenario. Even then, you’d be wrong in finding similarity with monopoly:

          In a monopoly, one person, almost independent of his product costs, sets the price high. In the B&W scenario, the retailers who buy product with preferential dollars cannot set the price much higher than those who buy the product in the black market because, if they did, they would lose the sales to the black market competitors. So, not very monopolistic.

          I can see why you are looking for the similarities between monopoly, price gouging, and what’s going on in Venezuela, but I’m hoping you’re not losing sight of the differences. They are significant. I also see that you’re defending what Capriles says, but don’t forget to reply regarding what he doesn’t say or what he says that ignores some of the differences being discussed.

          Let me point out, that by pointing to the “immorality” of those who see business opportunity in the gaping policy loopholes you are helping distract from the greater immorality of the policies themselves. The preferential rates, cause of all this, are being covered by the government with money that belongs to the nation. That is, to all Venezuelans. This means that the poorest Venezuelans aren’t receiving the benefit of the monies that are being spent to provide the dollars for all these luxury imports. That the government is the one providing the money for all these imports is the real immorality.

        • This seems a problem with attributing blame. You are right in that, after receiving preferential treatment by getting cheap dollars (a subsidy), pricing at the market value seems, well, not kosher. BUT, you can argue that

          (1) there was no rule stating that you could not do so (until now!)
          (2) you are not selling something essential, like medicine, or food or essential items (toilet paper) in a region undergoing crisis (arguable of course)
          (3) even if you sell below market price, something non-perishable like a TV is very easily re-sold by the buyer at the market price, thus circumventing the whole point of the effort.

          Furthermore, the effect of the new policy will be to transfer power to a bunch of black market middlemen who will somehow mediate off-book transactions without recording sales prices. The whole market is going black!

          Markets tend toward efficiency because people (almost everyone) tend to try to maximize profits. Even Christians and chavistas, unfortunately.

        • I don’t entirely buy into the argument that the market is very good or fair at allocating scarce resources during “gouging conditions” generated by a natural disaster, but I don’t think gouging during a natural disaster can be fairly compared to what is happening in Venezuela due to hurricane Hugo. There is perhaps no “easy” way out of the current crisis, but price controls or jailing “speculators” is about the lamest and most ineffective they could have thought up to do so.

        • It wouldn’t matter if they all got their dollars at preferential rate or all at the black market rate, the final price would be exactly the same.

          Also if some of them are forced to sell the products at lower cost because they get preferential rate the end consumer still would end up paying the same price because resellers would buy most of the low price products and then resell them for a profit.

        • It is also a fallacy to think that just because something is “human nature” that it is therefore inherently ok. But the point is that trying to keep people from maximizing profits is very close to trying to make water run uphill: you can do it, but it is in many cases unnecessarily costly, especially when you can tap that potential energy to do some good.

    • But, what is immoral, is the government setting up a system, whereby the playing field is NOT leveled. If the government’s participation in the economy is limited to maintaining a sound and stable currency and adjudicating disputes, then you will not see the type of abuses that your are talking about. Of course, that is a bit idealistic, and I am not a complete purist in this regard. But, in general, in business matters, the government should just butt out.

  15. Hi Pilar
    You make a very spirited defense against speculation and high prices
    I know this sounds very, very counter intuitive but prices are not set buy the sellers but by the buyers.

    Please check this link (all in Spanish) for a simple explanation of why:
    http://goo.gl/VZg7Sw

    Don’t miss the video, specially after minute 6 when the professors says that speculators should have a statue erected in every city in every town.

    When prices are forced down it hurts everyone buyers and sellers.
    It creates scarcity, rationing, corruption, black market, violence.

    • You have understood me wrong.
      I am not making a defense of anything but of Capriles’ position.
      He stated that it was all the government’s fault. And it is.
      But for him to affirm the right to “speculate” of those that the government is parading as “ladrones y corruptos” was equivalent to political suicide. And definitely some are. The government most likely had a full story prepared of some of them to destroy Capriles and the MUD. Even in normal economic circumstances in USA or any other country there are cases of tax evasion, counterfeit money, selling of expired products, fake brands, false prescription drugs, etc., etc.
      That is one of the shortcomings of this blog: it tries to analyze the problems of Venezuela like if Venezuela were the United States or some other European country; I guess that it is because most of its bloggers are abroad. It is time to realize that Venezuela is a particular country in a particular set of circumstances that does not resemble in anyway any other country. The laws and concepts of economics, legality and morality do not apply in Venezuela today.
      To ask Capriles to do that and to criticize him for not doing as many have done is absurd.
      Please come down from those high self-righteous clouds some of you climbed on because while you dissert Venezuela is going to hell.

      • I think generally speaking one has to agree with you that Capriles has a difficult job and must choose his words carefully. But it seems that among his many jobs (beyond getting himself elected) he serves as spokesperson and “moral compass” for the opposition. The complaint is that he is willing to sacrifice a few “innocent” business people for the benefit of the many. The risk is that his base will be eroded further, both directly (they are going to jail) and because businesses will lose money as the government chases after everybody who tries to make a profit and further disrupts the economy. War is bad for the economy. economic war is close to an oxymoron.

        It’s hard to tell how effective the government will be because there is bound to be a backlash and well, there are only so many guardias nacionales to go around. Maduro is not Mugabe and chavistas also want to turn a profit. The clique might have to get rid of some cubans first I guess or perhaps the military can put some pressure on Mamaduro to soften up and be a reasonable guy.

        • “The complaint is that he is willing to sacrifice a few “innocent” business people for the benefit of the many”
          How do you come to that conclusion?
          Has he said anywhere that he approves of what the government did?
          The strongest case that I have seen of an apparently innocent person is the one about the Muslim man.
          Let us say that Capriles speaks specifically about this man. The man’s anguish, is it proof enough that he did not do something wrong? No! It could be that is a staged situation, or that the government in order to hurt Capriles fabricates a case against the man such that he ends up in a worse condition.
          The conclusions of Mr. Nagel’s post are not warranted. That is all I said.

      • I happen to agree with you about Capriles is tough for him to defend the rights of business people to charge whatever they like for THEIR products if people do not believe that they have those rights. You don’t seem to believe it yourself.
        People need to be educated about that basic principle of economy. It should be taught at high school level.

        Let’s assume the price in the market of a TV is 50,000 BsF because that’s the price with a black market dollar. Those few that get preferential dollars will get an obscene profit if they sell it at the same price. But if they sell it 5,000 BsF then those few that get it at that price will get the obscene profit whether they resell it or they keep it. Those few that find the specially priced TVs are very fortunate but is basically very unfair for everyone else. It also generates corruption since those TVs would sell as soon as they arrive, people that are in the know would have an unfair advantage to get those TVs. Just like the insider trading you mentioned before.

        Every time the government gives some people a preferential dollar is giving someone an unfair advantage over the rest of the people. Is giving money selectively. The solution is to give EVERYONE the same dollar.

        • Exactly. It is the government’s fault. Capriles said it. For Capriles to place the emphasis on the right of the seller to set the prize in the circumstances that you described,, as many on this forum want, is to play the government’s game.
          To ask Capriles to do that is self righteousness of the opposite sign!

  16. Fuck, no giving anynone anything.

    …The people that want to buy dollars must pay for them, period.
    At whatever price the market is.

    The government needs not to be giving or setting prices for it. That is liberal capitalistic thinking for you friend Amieres.

    We need to be careful when we write and when we talk, or we fall for framed discourse.

    It was sad hearing many people during the looting this week talk of “just price”. Again, there is not such “just Price’ concept. The price of an item is whatever a buyer is willing to pay for it…

    We have a very left wing minded society, with primitive market culture, and not even the oppos spokespersons are capable of call a spade a spade, much the same much of the oppo hopefuls do not challenge the petrostate model, they just want to be the ones running the show.

    Venezuela is doomed, and not for lack of hardship, but IMO for lack of having the opportunity to learn from it!!!

    • I agree with you completely. I did write give dollars when I meant sell dollars. Although, when the government sells the dollars at a preferential rate it is indeed a gift and it is wrong.

  17. Not sure that price controls are a priori unjustifiable in any circumstance , the US and other countries provide for them in certain situations where conditions thwarth the operation of market competition , i.e where one or more players has such bargaining advantage over its customers or competitors that some sort of control is needed to restore the balance .
    Same as happens tp another organically functioning system ( created by years of evolutionary pressures) , the human body, sometimes markets become dysfunctional and need the equivalent of ‘medical’ help’ to to regain its health . It doesnt do to believe that that the ocassional ills of the body or the market are always self repairing (blood transfussions are sinful , cure by prayer is the only way to go etc) . However price controls are only justified if certain conditions are met : There are precise known to all rational criteria that the market is not working as it should ( monopoly , tacit or passive cartels etc) , , an exact idea fo what has to be done which is the least intrusive to the operation of the market. a well organized and trained group of experts who have proven that they have a good idea of what needs to be done , if the market player whose operations are being intervened must have a chance of defending itself from any charges laid against it efore being intervened etc. In the past Venezuelan private business have taken advantage of Venezuela being a small protected market with heavy govt populist and clientelar policies to gouge their mostly money rich customers. Markets dont always operate as they should and thats been the case of quite a few markets in Venezuela . The problem with the currently applied price controls is that they are being done using arbitrary or non economic criteria in a very shoddy and irrational manner without giving the intervened business any chance of defending themselves . the outcome will be close to disastrous . .

    • bill bass, kinda. I think I know what you mean and agree with that, but I certainly disagree with the wording. If we look at a free and competitive market system as a measuring device, price being the markings indicating where the supply and demand curves meet, and using the analogy of a thermometer as a measuring device, temperature markings indicating the level of fever, it is *never* justifiable to control the temperature.

      Where we perhaps agree, is that under certain circumstances the thermometer is not always measuring correctly, for examples, it’s not placed correctly, or it’s broken. That is, the market is not always behaving as a free competitive market, either because of the examples you give, such as monopolies or cartels, or some other reason. But, as with a thermometer, a government should address the root of the malfunction, not the markings on the measuring device.

      Just because price controls have achieved the intended goal in the past or in a different context does not validly lead to the conclusion that they are ever a method of choice. Using an analogy I mentioned recently in another comment, just because there have been successful and efficient dictators does not mean dictatorships are systems we should ever promote.

      The problem with price controls is that they always damage market information. And having a government system with the power to *even sometimes* meddle with the market information, much the same way that having a government system that lets a ruler *even sometimes* meddle with your rights, opens a loophole to mess up the market or trample your rights. That is, it is a chavismo time-bomb.

      • “Free markets” is not a reality but an abstraction, like saying “we keep this area clean we will never have a bacteria-related disease”.
        Fact is that markets of any one country are influenced by a lot of external and internal factors that do not have to do with your “laws” of economics that you saw at university (by the way: economics is not an exact science…if we can call it a science).
        The analogy of “thermometer” is just wrong because it is not only about perception: products and services do not come out of thin air but out of extremely complex conditions that do not have to do with markets and bargaining only but with more complicated power structures.

        Every single country, including Britain and the USA, have had a lot of control of imports and prices at every single period of their history, including those periods that people who always claim Latin Americans should do what neither Britons nor US Americans ever did should do (because that’s what they were told in Economics 101 or 102).

        It is always a matter of balancing and of knowing that these economic systems are just approximations, not laws of nature.

        When you have a monopoly controlling prices of energy without any competition, you can either have the government intervene on the prices at some special circumstances and/or intervene in the “causes”, but intervention it will always be. The other possibility
        is that it does nothing. That will be the worst it can do because families, real families, not a very simplistic economic representation of supply and demand, will suffer.

        Reality is that our very complex systems called “life” are very noisy, polluted systems
        where a lot of entities use very unkosher methods out of a position of power that didn’t have to do with their competitivity but with previous sheer power.

        • Kepler,

          You send very mixed messages. Just recently you were pointing to my being too religious about these matters, and now to my being too scientific, yet accusing me of low level university economics studies. In the same comment you point to my being to unrealistic about applying abstractions to such a complex system with so many internal and external factors, then you turn around and support price controls as if all those complexities weren’t complex enough that you could ensure that they would never go the wrong way.

          All the while it seems that you are reacting so strongly, emotionally, to what I write, that you are truly not even considering my arguments. For example, I made the argument earlier that it is not convincing to point to a successful example of price controls since such an example would not prove that A) they would always work, B) that they were the alternative of highest likelihood of success and efficiency, and C) that their likelihood or success was worth the risk of possibility of failures from the loopholes it creates to allow them, in the first place. I even mentioned the example of allowing someone in power to stay indefinitely in power. You could point to a leader that was good for a nation with indefinite time in power, yet that would not prove that indefinite stays in power were the way to go as a rule. Yet, given all this, you came back with a reply that others use controls of imports and prices, which not only fails to respond to the argument, it mixes in something new, which is controlling imports, not just prices.

          So, please, calm down and realize that I am neither religious on any of these matters, nor naive to think 101 level theory has the appropriate level, nor stupid that I cannot understand if any part of my reasoning is wrong. In fact, the purpose of my putting out all my reasoning out in the open is for others to have the opportunity to point to the flaws in my logic or information so that I may correct my thinking. I welcome it. So, please, stop trying to sidestep, put down, or belittle the good hearted efforts I am sharing with you. If you’re not in it for quality and fruitful discussion, then don’t blame me for the lack of either.

          Back to the issues. Agreed, free markets are an abstraction, but so is being “good” and that doesn’t make it any less of a valid aspiration. It is because I realize that free markets are an abstraction that you see me talk about likelihoods of success of various alternatives as the only certainties. The measures in determining which is the better of several alternatives are based on these abstractions because their foundations are precisely what increases their likelihoods of success. In the specific case of free markets, even in the market examples that you mention where there were price controls, they were competing against other markets using price controls. They weren’t competing against markets without the price controls, so your examples fail to determine price control superiority. In fact, for every example of price control economy success that you can mention, I can point to the losing price control competitor econom(ies). When you analyze what made the winner win, it wasn’t an issue of control versus non control, you’ll find that it generally was an issue of efficiency. It is for this reason that in free trade agreements, the one to come out winning is usually the country with most efficient systems, whether they use price controls or not.

          If you don’t like the analogy of the thermometer, let me use one that takes into account more “reality” for you: would you claim that fudging the bookkeeping or the accounting of a nation is justified under certain economic circumstances? I say that the value of the information provided by proper bookkeeping and accounting far outweigh any possible advantage given by hiding some reality of the economy, even for a short time. Quite simply, based on the incorrect recordkeeping, faulty decisions tend to be made. That is also my claim regarding prices. Price carry information regarding a seller’s varying desired amount in exchange for a good or service. Until a sale is made, it also carries information regarding a buyer’s upper value for that good or service. The moment a sale is made, even more information is available. And when looked at from a meta perspective, the floodgates open. Any fudging with those numbers reduces the value of information from prices, thus the quality of decisions to be made regarding the economy. And though I can see, not just from your examples but from many others, advantages to tweaking prices, I would propose that there is always an alternative way of regulating those exchanges of goods or services without resorting to price controls that produces the same or better advantages.

          This brings us to your mixing in of import regulation. I have no problem with regulating business. I’m spelling it out: I have no issue with any intervention by government directed at moving any market aspect towards free, competitive and responsible behavior by the providers. I am *not* advocating doing nothing. By all this I mean setting limits, direction, incentives, and punishments, just not via pricing interference. The moment price controls happen, not only does the information contained in prices get damaged, new information corrupts players. The market players now see swaying government price control policy as a valid business factor, the consumers now see the government’s oversight as a diminishing in their own responsibility in making sound consumer choices, and government players now see opportunity in playing roles of importance in business. Though there are countless examples that you may bring up to demonstrate that these corrupt realities can still prove successful, even ignoring the many more counter examples, you haven’t shown why the basis of this corruption is more sound, economically or socially than alternatives that are more based on superior “abstracts”.

          It is because this “life” that you mention is noisy, that I humbly accept that we cannot control it. Many years ago, studies found that persons who had better control of their thumbs tended to have higher IQ. People incorrectly concluded that by doing thumb exercises they would increase their IQ. Prices are a consequence of the many complexities of economic life, like thumb ability was a consequence of the many complexities of the human brain and body. No amount of controlling of thumbs truly addresses issues with the rest of the system. It can only hurt the measuring tool by getting it to provide us with distorted values.

          As a rule of thumb, there is always a better intervention alternative to price controls.

      • You really think market laws are like laws of physics or mathematical axioms.
        You really forget to go out to real life and see what the different actors are made of…and what has happened throughout history (including the so-called Gilded Age in the US and previous similar periods in the economy of Britain).

        • thanks Kepler for the extensive explanation of your views ,as usual they are both informative and thought provoking . The boy is a prodigy of highly complex well designed processes , and yet sometimes it fails us . Just like markets which sometimes develop problems , doesnt mean we have to get miracle surgeons to give us robot like bodies , but some intervention may be needed . The problem in Venezuela is that even if such intervention is needed , we are not allowed to have ‘physicians’ but witchdoctors which only make things worse . Moreover the witchdoctors are the cause of the illness . Better to get rid of the witchdoctors and their sorceries . To attack the causes and not just the symptons. !! ,

          • Of course we need to get rid firstly of the witch doctors.
            Now, for anything of this to happen we do need to tell people – the Yubisay and José Rodríguez of this Venezuela – a little bit about simple facts of economics – not so much about the parts that might be ideological laden one way or the other but about common sense stuff. And that means, for instance, explaining why there is scarcity
            in the first place (always making examples about different parts of the world so they know things ARE working, after all) and who the main benefactors are in this current mess.

            Capriles has a hot potato now. I don’t envy him. I have said for many years now, always, that I am completely against the currency control and the price controls in Venezuela as they are now (I don’t exclude them in some special circumstances, as it has been necessary elsewhere all the time while a given better policy is implemented – see regulation of energy prices in Europe until there is some framework for new competitors to come in)

            I am afraid even telling the truth about the general facts won’t be enough. We need to collect and disseminate information about all the Chavistas who are profiting from this system. The problem is that few people will want to collect said information…for one, it is simply dangerous because such people will go for the jugular. For another, it is not only them: there are a lot of oppos at every level who are profiting from the current system (importers, perhaps people like the Capriles relatives who are also contractors for the government)

            Telling people first thing the solution is simply to liberate everything is not only not really correct or realistic…it is suicidal politically speaking.

          • Yeap. Shock therapy is definately not popular. Some argue that it’s better in the long run than gradualism, but it requires a firm hold on power that the first MUD administration won’t enjoy.

          • bill bass, I know of a USA medical doctor of Cuban background who went to Cuba to practice. He began prescribing the latest of treatments but none seemed to get the expected results. He noticed that his patients, not improving, would switch back to go see the local “witch doctor” that they used to see before he had arrived, then their health improved.

            He decided to go speak to the witch doctor and ask how that could be. What was he doing that was working? The witch doctor very slyly explained: “You’re doing all the work. You prescribe medicine, which clearly is not curing them, and it’s almost always because they don’t take it consistently because they don’t believe it will cure them, so they come to me. I explain to them that the medicine is good, just not powerful enough, so they need to take it under the moonlight or while chanting or some other small ritual. That convinces them, so they take it, religiosamente.”

        • Maybe you know about real life and what the different actors are made of, Kepler, but by the look of your proposals, based on foreign examples, one has to conclude that you don’t accept the very reality you claim to see… Clearly, chavismo is more willing to accept that reality more than you.

          If you are so keen to point out the lack of science of economics and market laws, how is it you are so sure of the superiority of your ideas? chavismo seems to be beating them handily, at least as far as staying at the helm. What good are your proposals if they cannot be brought to “life”?

          I keep putting forth a proposal that, not only is based on sound economic principles, it accepts the Venezuelan reality of the different actors involved, having a greater chance of winning. Yet you are the one accusing me of reality blindness. Yet more signs of projection.

    • “In the past Venezuelan private business have taken advantage of Venezuela being a small protected market with heavy govt populist and clientelar policies to gouge their mostly money rich customers.”

      Oh Bill!
      That statement shows that you are not understanding the law of supply and demand.
      If a market is small then the prices have to be high. Furthermore, you need to leave those prices be high in order to entice other players into that market. That is the only way to lower the prices. If the government forces the prices down, then the market will remain small because who is going to want to invest? what is the incentive? Then you get scarcity, black market, corruption. It’s inevitable. Trying to “fix” a market that “doesn’t work” only makes it worse and perpetuates the problem.

      The government should never intervene on the price side, with the possible exception of emergency situations. The price is a signal that tells investors where they should invest. The government should only make sure that there are no undue barriers (lawful or unlawful) to new competitors in those small markets, and no cartelization or monopolies are in effect.

      • That is nice when you have a product or service where competitors can jump in easily. There are some others for which this is not always the case. This depends not only on the kind of product but on the geographical conditions, among others. Take telecommunications and energy. Imagine there is a monopoly. Your hypothesis (or as you might call it, theory) is that we just need to liberate the market. In some countries that might work. In others the real conditions of electric lines, distance from sources of energy, environmental issues, mountains and so on make it particularly difficult for new comers to get in, even if prices rise: the monopolist has not only the only electric/communication lines in place, but it is extremely hard to get new ones. For one, you might not be able to place yet another line (of whatever it is) in an area, streets are not made for yet more pipes and all the rest that is needed.
        Even if this were possible, prices could initially rise for too long before any competitor can appear.

        And people – real people, not the wee figures one sees in Economy 101books, cannot
        just stop using electricity for a year or two until competitors somehow manage to appear.

        That is why there have been some regulations in the European market – in some countries as opposed to others where competition is easier for their bigger size, their space, etc-. I can tell you about the Belgian case, but I won’t spend too much time on it.
        The State intervened in the prices FIRST, so that poor people don’t freeze to death
        or spend their winters in dark. They at the same time created a series of mechanisms for comparing prices, forced the old monopolists to put up all the price information in such a way that different sites could offer to the Belgian people real life price comparisons and then forced the monopolies to reduce the cost of getting out of the contracts. And now people are getting out of the monopolists and new competitors are getting more and more shares and competition is started to increase.

        I can tell you of more examples in other areas not only here but in other places in Europe and I am sure the same applies to Canada or the USA, perhaps not with electricity but with other things (I hear in the US there is the problem of Internet, which is pricier than here and usually slower and simplistic solutions of “liberating the market” when there is a monopoly not only on the product or service but on all conditions for making said product or service a reality)

        • Those examples that you mention fall into these sentences:

          “The government should never intervene on the price side, with the possible exception of emergency situations.”

          “The government should only make sure that there are no undue barriers (lawful or unlawful) to new competitors in those small markets, and no cartelization or monopolies are in effect.”

          Emphasys added.

          Even in those special circumnstances is better to not intervene in the price side because high prices allow for more creative solutions. In the electricity examples that you mentioned many different ways generating and providing electricity even temporary ones may become available with those high prices. Meanwhile the government can subsidize directly those in need and tax temporarily or fine the monopolist.

          • Examples of electricity or heat generation/distribution:
            Generators of all sizes and types: gas, natural gas, solar, wind, geothermal.
            For one house, for an area, etc. Depending on the situation many options become available. Low prices dramatically reduce the number of possible options.

          • This
            “because high prices allow for more creative solutions. In the electricity examples that you mentioned many different ways generating and providing electricity even temporary ones may become available with those high prices. ”
            is out of the box?

            You are sounding there like Chilean Camila Vallejo.
            Reality is different.
            I don’t know what your field of work is but if it is economics, you are not one of those creating the actual technology. It’s funny that it is economists and politicians who tell us
            that “solutions will appear” and “technology will solve it” but people who are actually creating the technology are less optimistic (unless it’s the monopolists who tell you that if they can raise prices more and more, some others will one day come up with the solution before people freeze to death or starve or emigrate).

          • And the same goes for telecommunications (as the example for Internet in the US shows, as far as I could read from The Economist and as it goes in Germany for Internet), the same goes for education in many countries.
            You cannot just let people get Chilean disparities. You do not have the right to let people
            wait for decades before they get decent education. That was never the case in Britain or in the USA or anywhere else and I don’t see why we should try to yet again try that in Latin America expecting that we will be the first ones to succeed (after so many attempts where somehow the “free market” hasn’t been able to become reality and give us all good basic education)

          • If you must know I’m a Computer Engineer with a Masters in Finance. I work mostly with computerized financial systems (microeconomics) but of course I understand the basics of macroeconomic. Anyway, that has nothing to do with the argument.

            I think you are missing the point I was trying to make. Focus on theses sentences:

            ” is better to not intervene in the price side”
            “Meanwhile the government can subsidize directly those in need and tax temporarily or fine the monopolist”

            You can at the same time let the prices be high AND temporarily subsidize those that need it. That allows for the creation of solutions like the Belgian example you mentioned AND the other creative solutions, that yes some of them are out of the box (gas, solar, natural gas), but all of them need to be adapted to the specific situation. The high prices is what makes those a possibility and in many cases those possibilities may arrive before the government solution because is entrepreneurs that would bring them which tend to move faster.

          • OK. Are you selling software products for price comparisons and the like? That would be like a computer engineer supporting e-voting (because he works for an e-voting company) :-p
            I think it is relevant because you are almost stating that in every area alternative solutions will just pop up if prices are high enough. Think also about such things as medicine (AIDS, malaria and so on).

            I am all for no price restrictions for most products, but not for others. The problem here is what you define as “exceptions”…when we start counting the exceptions, we see they are quite a lot. So it is moot to talk about exceptions. They are hard to quantify. We better stick to “we should try to have no price controls but there are many cases when these are needed”.

            Take your subsidies and education. Look at the case of Chile. Apparently, it is NOT working. Why do you think that’s the case? And how many years do Chileans would need to accept their poor will catch up by using vouchers when those vouchers haven’t been able to increase quality of education?

          • “we should try to have no price controls but there are many cases when these are needed”

            I disagree. The price control is the worse option because it perpetuates the problem by eliminating the incentive for competition and tends to establish or cement a monopoly.
            Any intervention including subsidies should be temporary and only on critical or emergency circumstances. The problem with long term subsidies is that they end up distorting the market as well: they either become a de facto price control or a defacto subsidie to the company and/or a source of corruption. In the case of a long term situation then bringing in competition through incentives is the option

            I know nothing about Chilean education. Sorry, can’t argue there.

          • I didn’t say I was for permanent subsidies. I am not for them but for 2 things: pre-university education and basic health care. I have seen they work best here
            and they can work well elsewhere if the right flow of information applies.
            For other fields, you have to see case by case. What are exceptions? How can one even count cases when one is comparing things more different than apples and pears?
            Energy for winter or basic Internet versus a zillion food items: is it 1 to a zillion or do we compare by share in GDP? I don’t know and I don’t think it matters.

            I simply say things need to be considered one by one. For education I would go for absolute no control of the private school prices but for subsidized public education up to bachillerato. For the rest: preferably no price control, but there is a need to verify the consequences for each case where the life of people would be seriously affected
            (basic energy, public transportation, etc, not TV, cars or meat )

          • I personally like the idea of dual systems for specific sectors when needed. By dual I mean private and public systems for education, health, postal, security, law. Where public doesn’t necessarily mean free but lower cost. That way the systems can compete and complement each other and act as temporary fail-safe mechanisms when one or the other deteriorates.

            I don’t see that food should be subsidized or price controlled ever.

        • Kepler, we agree that the basics will not solve the complex problems, but you seem to think that just because the problem is complex that you can ignore the basics. If there are alternatives to price controls that have fewer cons and more pros, why do you insist on price controls as the go to response?

          • Ironically, if you are so against the basics, price controlling sounds like a cop out of a super basic solution…

          • I am not insisting on ANYTHING in anywhere but basic education and that with good basis: the experience of the whole world.
            I am saying there are cases where price controls are required and where simplified formulas learnt from economic classes cannot be applied because they are worse.

            I am going to specifics, you do not, you speak in utterly vague terms and think there is one solution for everything.

          • Ironic that you tout basic education then imply that it is useless to solve “real life” problems, worse even! It also seems like projection when you state that I speak vaguely while you in specifics, when I see it the other way around. You’ve been specifically told of various alternatives to price controls that fare better than price controls, yet even in this latest comment of yours you specifically state that you are not insisting on ANYTHING, yet in the very next sentence state that price controls are required.

            Let me point out que si de “real life” se trata, the uneducated poor in Venezuela would have the solution, but they are the ones supporting chavismo. You’re the one who needs to get real and realize that without winning their support, all your insinuations of better understanding of better solutions is for naught.

            As to what I think, the UCT proposal is not just one thing, though it solves many, AND it wins votes. Beat that!

  18. Kepler: aplausos. Thank you for your thoughtful and reality-based opinions.

    There are too many out there parading their theoretical knowledge without any concept of practicalities. And there are the delusionals who think they have the answer, while disdaining theoretical knowledge. Too few are in equilibrium, and fewer still have the capacity to understand basic principles.

    I agree: educating the bulk of the population on some of those basic principles would be key. But how to do that practically — at this stage of the game, with fewer communication options?

  19. Standing in line to by a refrigerator that you do not currently need, because you are betting that it will not be available later… How is that not “speculating”?

  20. I am skeptical of common people in Venezuela understanding how precisely economies work when even people with university degrees understand so little , It is desirable but really not practical to hope that ordinary people with their uneducated background will follow complex economic explanations . what they have to be taught is a humble recognition of their own limitations and a certain measure of trust in people who dedicate themselves to these matters professionally . Above all we need the ruling elite to be well grounded in economic realities , to give the economy the importance it deserves and moreover to be able to manage and handle economic policies and programs with competence and rationality . its easier to educate an elite than to educate the general population . Of course in a democracy it is the ignorant with their shoddy fantasies and passions who decide who rule . So ruling elites have to have a lot of character to resist the temptation to cater to the mass of the ignorant in order to profit politically from their support. Hayek and Arrow studied how democracy made rational economic planning impossible . This lies at the heart of the economic problems which afflict so many countries where the mayority opinion is thought to be always worthy of sanctimonious worship. In France and Japan and other places they have an elite educational system for those chosen by their merits and talents to go to the head of the most inmportant gobt bodies. That doenst make them error free but it helps them rule and guide the body social with more rationality than rulers chosen solely because of their capacity to ellicit the masses stupid adoration !!

    • “I am skeptical of common people in Venezuela understanding how precisely economies work when even people with university degrees understand so little”

      I think it is possible if everyone is taught the principles when they are young. There was a time when everyone believed the Earth was flat and the sun and the stars revolved around it. Also many believed the Earth was created about 6000 years ago in just 6 days.
      I’m sure there are still people that believe those things but they are in the minority.

      “they have to be taught is a humble recognition of their own limitations”

      That seems harder than teaching them economics.

      “its easier to educate an elite than to educate the general population ”

      You cannot educate a Chavez or a Maduro after they’re adults and like I mentioned before, even if you educate most of them some are always going to slip through the cracks. Even Chávez that had some level of education believed the human race was only 20 to 25 centuries old. The solution is to educate the majority so they don’t support idiotic measures and idiotic rulers.

      • Most people do not learn from the mistakes of others. Venezuela is about to have their face rubbed in their mistakes of the last two decades. It is going to be a hard and painful lesson. Let us hope the lesson sticks, for at least two or three generations.

    • That’s how you educate an entire population in basic economics. The announcer enunciates clearly and speaks slowly. The graphics and the video clips are well targeted to the economic principles expressed. The entire production is a 10+.

      • If only Globo had been like that back in the day. A long time ago Toro Hardy had a “show” in Globo where he explained basic financial stuff. Unfortunately it was kind of dull, but it could have used some support for improving the production stuff and making it more interesting for audiences.

        Mass media should have a moral duty (not a legal one) to educate its audience, go two steps beyond the news stories, do quality investigative journalism, etc. You don’t make a (possitive) difference in the world with shows shows like Jershey Shore or 12 corazones.

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