Mythbusting the reduction of poverty

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VENEZUELA-ELEC BARRIOS DIVIDIDOSWhen Nicolás Maduro said that he “proposed reaching zero misery levels by the year 2018”, he was sounding magnanimous to the untrained ear, but actually he was just reciclyng another clichéd promise of Hugo Chávez. As an example, goal II-2.1 of the “General Lines for the Social and Economic Development Plan for the Nation 2007-2013” was “to reduce misery to zero, and accelerate poverty reduction.”

So, how is that poverty reduction working out for you Nicolás?

We decided to check the poverty data and … guess what? The official statistics, recently published by the National Statistics Agency INE, reveal that for the 2nd Semester of 2013 the so-called “achievements” on the fight against poverty suffered major setbacks.

Between the second semester of 2012 and the second semester of 2013, the number of poor households in Venezuela increased by 416,326. During the same period, the number of households in non-extreme poverty increased by 227,240, and the number of households in extreme poverty increased by 189,086.

The figures become even more alarming when considered in terms of number of people.

Between the second semester of 2012 and the second semester of 2013, the number of poor people increased by 1,795,884. That’s almost two million more poor people in a single year – and these are official statistics we are talking about. The number of people in non-extreme poverty increased by 1,058,520, and the number of people in extreme poverty increased by 737,364. In fact, there has been practically no reduction in poverty rates since 2007.

For more facts, check our article (in Spanish) for Prodavinci.com.

Everyone knows Venezuela’s economy is ailing. As expected, this is showing up in the poverty statistics. No longer can chavistas say that chavismo has “dramatically reduced poverty.” This, like most things chavistas say, is just hogwash. Chavismo reduced poverty for a while, but poverty is now increasing.

1 COMMENT

  1. Well you don’t need to be an economist to understand that if salaries shrink and the prices of goods and services go up then you’ll end up poor.

  2. A key issue here is that the numbers are still relatively low becuase of one single policy artifact: the exchange rate. Once this is completely liberalized, poverty will increase more dramatically even though government deficit will be reduced….

    • Illegal black market rate of exchange rate already dominates ALL the imported stuff market and like 90% of the rest of the economy, that’s one factor of the increase of poverty on chavista era EVEN despite they changing the parameters to measure poverty.

      They never reduced poverty to begin with, they just started saying “hey that’s not how you measure poverty, it’s like this! And voilá, poverty away! We saved the poor people!”

      And even with their cheated numbers, they’re still registering an increase, so that means it’s much worse than they claim.

      The exchange rate will never be completely abandoned for two major reasons: One is that they use the fabled 6.3Bs/$ to keep their lie that the lowest wage is the highest in all America, the second is that it’ll finish at once the money-teat many enchufados are latched, sucking and devouring since 2003.

  3. Very good post. Now, I am Lira’s and Abadi’s fan and yet this time I would have appreciated they had worked on percentages of total population. That would help non-Venezuelans understand the scale of the Untergang.

    • Der Untergang 😉

      By the way, I am in Fort Meyers and have already talked with a number of Venezuelans not related to me in any way about the situation there. What surprises me is that most of them still want to return when the situation improves. A good number of SOS Venezuela bumper stickers and painted windshields around here as well.

  4. I don’t think they ever reduced poverty in the first place! What I think they did was to increase the Misiones so much, the poor did not need to spend that much on anything (food, healthcare, etc..). Now that they don’t have that much money to keep up… well, this happens!

    • No no, they *did* reduce poverty, precisely thanks to the Misiones. If you give people money, they will have enough income to not qualify as poor anymore. We don’t need to deny this because the actual numbers are damning enough. Now, the whole charade has caught up to them. All Chavez did was turn a huge oil boom into a huge propaganda boost via giving money away to the poor unsustainably and fecklessly.

      • Doesn’t the welfare in the US work somewhat like that (not with missions, of course)? Pardon my ignorance, perhaps I’ve been reading too much pro-Republican sources “Obama is a socialist” lately-

      • I am not an economist, but I have had the chance to listen to a few friends who are and argue about the same thing. They do cite the same arguments you Juan and Jose do, but the ones that stayed with me that have not been mentioned are (1) the way the revolution computes poverty indexes is different than the one used by previous governments. Apparently individual “income” only appears to have increased when compare to previous governments if inflation/cost of living is left out (2). The social spend was focused in programs that are not national, so “reduction of poverty” is constrained to few areas in few cities with a large population. Did I get it right?

        • “Apparently individual “income” only appears to have increased when compare to previous governments if inflation/cost of living is left out”

          Well, of course income has increased if you don’t take inflation into account.

          The monthly minimun wage was VEB 100.000 in 1998, VEB 615.000 in 2007, and VEF 4.252 in 2014 (VEB 4.252.000). That’s a meteorical rise if you don’t inflation into account.

          However, once you put it in USD, you get USD 186 in 1998, USD 150 in 2007 and USD 68 in 2014.

        • They have mainly two ways of computing poverty: through income (which everybody explained pretty well) and a new index of “satisfied needs” or something like that. Which is basically to say you have this number of needs (housing, healthcare, etc…) and they evaluate if you can satisfied those needs. So with misiones and their tampering of income figures, you basically have that there is no poverty at all. (I am exaggerating a little thou..).

      • The poverty-reduction figures the regime sent to the UN and the World Bank were not fact-checked on the ground by those institutions, and contain a high propaganda quotient. The figures, taken at face-value, would probably represent the largest short term decline in poverty in human history. By officially understating inflation, such miracle cures are possible. Similarly, imputing high value to services and goods-in-kind allows for substantial obfuscation. For example, in Cuba, almost everyone receives the same rate of pay, $20.00 per month, or $240.00 per year. Yet international organizations report per capita income as $11,000.00 a year, How does this magic work? Well, that house you share with twenty others is easily worth $700 a month, and your free medical care is another $200.00 a month, and pretty soon, you are out of poverty.

        In Venezuela’s case, a cash injection sufficient to bring 9 million people out of poverty would by itself increase inflation substantially. Regime figures certainly do not reflect this. So I suspect they are attributing high values to various in-kind programmes, as Cuba does.

        • Thank you, thank you, thank you!. Although it was evident from just looking around that the argument of poverty reduction did not fly as advertised, I never understood how the regime spun the numbers/arguments in the technical discussions (in spite of being apparently obvious for everyone else).

      • I understand and you are right. I mean, they did reduce poverty. But when that reduction comes from government subsidies and misiones, we are just basically attacking the consequences but not the causes of poverty. After you take that away they are still poor… Basically what is starting to happen now. So in the end they always stayed poor (fundamentally). It was like a mirage, an illusion! Thou obviously those subsidies reduced poverty.. hope I could explain myself.

  5. Chavismo reduced poverty for a while…

    Is this really true? Or did the flood of increased oil revenue, which chavismo had nothing to do with, reduce poverty? The Misiones provided some direct services to some of the poor; but was the net effect of the Misiones significant compared to the national boom from oil money?

    • Rich Rostrom, just because it was the most inefficient reduction of poverty ever does not take away the fact that poverty was, in fact, reduced.

      • He has a point, though, and it’s something that bugs me as well.Good things that happened while Chávez was president are implicitly attributed to him (“Chávez reduced poverty. Oil boom? What oil boom?”) while bad things just kinda happened (“The murder rate quadrupled under Chávez” vs. “Chávez quadrupled the crime rate”)

        • Santiago your comment brings up the question what would have happened in Venezuela if the boom in oil prices had ocurred while a conventional political regime had been in power ( sans Chavez) , would the poor have been better of ?, worse of ?, the same ?? , would the country as whole be better of , worse of or about the same ?? Assumming that the govt would have been a version of the old 4th Republic administrations . My guess is that we would all be better off but that for the poor something changed in the way they saw the govt as something they could identify with , which they could call their own , which gave them paternal attention such as they had never recieved in the past.

          Govt would have been as dysfunctional as ever but not directly destructive as this one has been . !!

      • People couldn’t still buy the whole basic basket, they still were poor then.
        Chavismo never reduced poverty at all.
        Those so-called “poor benefited by missions” still couldn’t afford the basic basket, nor they could pay a decent medic treatment to any chronic disease, and couldn’t get out from poverty hole.

  6. For many poverty is a disease , you can either cure it or you can treat it to reduce its symptoms . When economists talk about poverty reduction they mean not that its cured so that its victims are not likely to return to it once the treatment is stopped , they mean that a treatment (consisting of govt hand outs) allow its victims an income and thus a level of consumption which reduces povertys symptons so that while the treatment continues they can live more like normal persons .

    To many of us , treating poverty victims with govt hand outs to allow them to temporarily live better lives does not reduce poverty but only alliviate its symptoms , our perspective is different from that of most economists who see a rise of average income as the decisive indicator for determining the presence of poverty in a country. Specially when those hand outs are bound to fail some time in the future because of the destructive way in which the govt handles public resources..

    To us non economists poverty is only really reduced when the poor are capacitated to engaged in productive activities on a permanent basis in an economy that can use their capacitities so that they have the means of creating for themselves the resources they need to scape a life of poverty . Absent this capacitation , even if the poor are made to feel on a political level gloriously empowered and entitled, even if they are given hand outs in various forms that relieve their life of poverty they have not scaped poverty .!!

  7. Glad to hear more good news. The worse our economy gets, the better out chances to expel the dictatorship from power. That’s the only way now to get get the people back out in the streets and avoid Cuba #2 for decades to come.

    Capriles and the MUD makes a Tremedous, Huge mistake in talking with the “government”, dialogando”,.. Capriles’ little travels to the poverty-striken “interior” areas are just as pathetic as they are useless, brave MCM in Canada.. what can she do?

    Now that Leopoldo is in jail, the only one with enough charisma, cojones and clear vision to realize the only way out is hitting the streets, no talks or little travels con el pueblo,, no rigged “elections”, no overthrow the regime by force.

    So it’s gonna come down to how bad things get, hopefully worse, less harina pan, more poverty, sorry to say. There is nothing to “fix” here, until the Thugs are gone. 90% of the Venezuelan left in our country have no clue of what we talk about here, with fancy terms like poverty level index, etc. That’s why Chavismo took over: lack of education and poverty to begin with.

    Sadly, I reiterate this: it’s going to have to get worse before it get better. Right now bad new is good news.
    The real bad news would be ” “Mud reaches agreement with the Gobierno Bolivariano de Venezuela y los Senores presidentes Maduro y Cabello” “prometen mejor vida y aumentos para el pueblo” elecciones libres en el 2020!!, “unidad”! Then people are bribed some more, more repression, lies and empty promises, hello Cuba 2 for decades to come. While we talk from our comfortable exiles abroad about fancy economic theories..

    If the economy starts to improve slightly and doesn’t get worse, we are doomed. We need really pissed-off people back in the streets in record numbers, this macro-economy rhetoric doesn’t do a thing. How: menos harina pan. And not just Poverty, unfortunately it’s going to have to get worse than that. Statistically it might have to hit the Famine threshold level , if that’s at all possible in Vzla.

    Se acabo el queso, no hay luz? cancelados todos los vuelos? All Good news right now.

  8. There are always certain slogans that communists universally throw out and poverty reduction is one of them. They, in fact, make everyone poor eventually except the leadership. There is also the wonderful, state-of-the-art medical care provided and free education that trains people for non-existent phony jobs. There are indeed many useless diplomas hanging on walls in Cuba where people sit at desks all day and do nothing. My favorite, however, is the elimination of illiteracy because this chronic, long-term problem seems to DISAPPEAR within 24 hours of leftist takeover, as if the magic wand of Marxism has been waved over the populace. At any rate, if it’s good they did it, and if it’s bad the gringos did it.

  9. Poverty figures are always relative to the mean average income etc. The poorer the country becomes doesn’t necessarily mean that this relative poverty will increase however it does mean that REAL poverty will increase: bad for everyone.

    P.S. I think when saying ‘Chavez reduced poverty’ it needs the context of the whole region added: even with the Missions and immense oil wealth the fall in Venezuelan poverty wasn’t even higher than many regional neighbours.

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