Doña Petra vs. the Machine

How do you move from a kleptocratic system of control to a progressive system of support and economic institutionalization?

What would the economic platform of a genuinely progressive political movement in Venezuelan look like? It’s a question we’ve almost stopped asking, but I think it’s urgent to resurrect it. What would real social progress (supporting the vulnerable, expanding the rights of the excluded and ending the undue privileges of the few) look like? ¿Con que se come eso in Venezuela today? Who are the weak and excluded, and who are the privileged few?

Let’s think of Doña Petra and Pedro Derwins.

Doña Petra, is a lovely 70-something living in Catia. No stranger to disappointment, she’s seen Venezuela rise like a rocket, run out of fuel and fall deep into the ocean… twice. While she’s benefited from the battery of social programs implemented by Chavismo, the recent economic downturn has dragged her – and about 40% of the population – back into poverty.

She’s now much worse off than she was in 1998. Back then she at least had the strength of younger years. Doña Petra woke up today at 3 in the morning to buy chicken. She’s spending her golden years standing in never-ending lines, trying to get staples with her inflation-withering churupos.

Pedro Derwins – Fred, as his friends call him – is a carajito in his early 30’s. He was quite aware of como se bate el cobre in the Venezuela that Chávez molded. He knew better than most how to shake the revolution down for goodies. He mobilized his high school networks to set up a racketeering scheme based on shady connections with government officials to exploit exchange controls. Under “socialist” Chavismo, he has made hundreds of millions in over-invoiced imports. Fred woke up today at 1 p.m. after a wild party in Cannes, France. All his money is carefully stashed in strong currencies, somewhere far away.

A progressive agenda for Venezuela today is straightforward.

It needs to reward Doña Petra and punish Fred Derwins.

But what does that mean? Well, it means changing the “system of rewards and punishments”.

Fred Derwins is a total asshole; we all know it. The nuance here is that he’s an empowered asshole. He’s empowered by a system that rewards the well connected with massive rents for completely unproductive activities. Fred excelled at the best-paying game in town: profiting from arbitrage. It’s just that that game produces nothing of value to anyone else in society. The platform of a progressive party has to be centered on dismantling the systems that allow people like Fred to loot the nation by befriending thugs who play the role of gatekeepers to cascades of easy money.

But there can be no control where power is absolute. Progressives should aim at decoupling Venezuela’s extreme concentration of power in the executive branch. In our petroleum-dominated economy, the main goal is preventing the opportunistic, voracious and discretionary use of oil revenues. A progressive political agenda for today’s Venezuela should, most of all, be unequivocally Anti-Rentista.

All of which means that progressives should be openly against import subsidies, fuel subsidies and price controls…

Wait! Come again?

Progressives should advocate for increasing the price of dollars, energy and food? Wouldn’t that further worsen Doña Petra’s dire situation?

The kleptocracy’s narrative for implementing these systems of control has been social in nature.

“We want Doña Petra to be able to move around, so we’ll give fuel away for free”. Doña Petra doesn’t own a car, but the system allows for a 3 billion dollar fuel smuggling industry which benefits, overwhelmingly, Fred.

“We want Doña Petra to be able to buy food, so we’ll force producers to sell most basic staples below production costs”. Doña Petra woke up today at 3am to try and find food, but the system allows for a thriving bachaqueo sector made of those who can exploit the system to obtain and resell goods: the many smaller scale Freds who live on every block in the country.

“We want Doña Petra to be able to buy her medicines, so we’ll sell dollars to importers at 1/50th of their value so that lower costs trickle down to the Doñita’s pocket”. Doña Petra cannot find her medicines easily either, but even the government has recognized the misplacement of at least 25 billion dollars in overpriced imports.

The goal of these policies is clearly not social. They are the scaffolding of a system of political control for the extraction of staggering economic rents from all Venezuelans. Nevertheless, the simplicity of their stated logic is terribly powerful: “to include Doña Petra, prices need to be low”.

But come to think of it, while all these control systems force lower nominal prices of basic goods, they do not make goods any cheaper. Doña Petra ends up paying so much more in terms of her powerlessness: spending so much time and discomfort to get low quality goods without any decision power due to non-existing variety. And she pays way much more if you account for the value of the public goods and services that she won’t get due to the enriching of Fred and his thuggish friends.

Don’t get me wrong: monetary access is very important. But Doña Petra does not need nominally low prices. She needs relatively low prices. That is, prices that are low relative to her income. So what should progressives propose if they want to guarantee Doña Petra’s access to basic goods while empowering her against the racketing of cronies like Fred Derwins?  

While there would be a number of fiscal specifics to consider, progressives should find the following answer straightforward: We should do away with price caps on goods, energy and foreign currency, and substitute them for a transparent, non-politicized and direct system of cash transfers to citizens.

These transfers would guarantee Petra’s access to basic staples while prices increase, but as rewards divert away from smugglers, bachaqueros and enchufados towards productive economic agents, Doña Petra’s conditions would drastically improve: lines would disappear, and diversity reappear as competition for the Doñita’s preference and loyalty kicks in.

Perhaps less directly noticeable to her, Petra’s well-being would also be lifted as the government starts addressing the fiscal and external imbalances behind today’s crisis, and the economic downturn starts to subside.

Beyond the crisis, the progressive’s pledge to Doña Petra should be to protect her grandsons from the economic collapses that destroyed the aspirations of prosperity that she had for her sons and herself. While Fred was able to stash our money far away, Petra was forced to lose as the economy tanked. Preventing collapse means preventing politically motivated excesses in the management of economic policy.

In fact, the progressive way forward for Venezuela’s economy is its institutionalization.

Values are essential to outline a vision, but a clear assessment of history and circumstance is the key to prioritizing and sequencing interventions.

After being plundered by a small group of military kleptocrats acting in the name of social inclusion, Venezuela’s progressives need a narrative that transcends abstract positions on the size of the state, and that addresses our real inequities and the real dangers for our poor and vulnerable. Siding with Doña Petra today means empowering her by supporting her income and protecting her economy from the rapacious Pedro Derwins and his friends, old and new.

 

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I work in development economics for countries with governments that want to deal with (some of) their issues. I think I'm a fiscally-responsible progressive. I've thought a bit about the Political Economy of oil in Venezuela, and I worry about the politics of the things that need to happen. I think Rómulo Betancourt, Adolfo Suárez and George Washington were exemplary politicians. What I miss the most about Venezuela: My family, my friends, my weather, my food, my band, and teaching in my university.