There’s been a whiff of 2002 in the air this last week. An acuteness to Venezuela’s instability that we’d grown unaccustomed to. Every day the news brings a wild new twist to the saga and each new twist renders the question of what comes next ever more urgent and anxiety-laden.

It seems more than likely that what we’re witnessing is the death throes of Bolivarian socialism – but while the final outcome is easy enough to guess, there’s a maddening cloud of uncertainty hanging over the “how”. It’s the Underpants Gnomes Theory of Regime Implosion:

  • Step 1: Intractable constitutional deadlock between the MUD-led A.N. and Miraflores/TSJ in the context of a catastrophic economic disorder.
  • Step 2: ?
  • Step 3: Transition.

What makes the situation today so precarious – so much more so than in 2002 – is the now imminent prospect of complete economic collapse. That’s an ingredient that just wasn’t in the stew 14 years ago.

It’s as though the crisis is running on two separate clocks: one political, one economic, each with its own rhythms, logics and dynamics, feeding back on one another in complex and uncertain ways.

The regime responded to its loss of the legislative branch with two actions that dramatically quickened the pace on the economic clock. The first was the plainly unconstitutional and fantastically ill-conceived reform of the Central Bank law, which strips out the last shards of BCV’s institutional autonomy and turns it into little more than Maduro’s Ministry for Debt Monetization and Unbridled Money Creation. That’s the hojilla. 

The second was the appointment of a deliriously economically ignorant sociologist who is explicitly on record claiming there is no link between money creation and inflation to lead the economics cabinet. That’s the mono.

Mono, meet hojilla.

All of this is happening in the context of an inflation rate already running at three-digits – the exact number, of course, is a secreto de estado, though 270% has been bandied about. Venezuela was already on the edge of a hyperinflationary cliff, even before the government announced the appointment of a minister who seems positively bent on pushing us over that edge, but not before empowering him with a new law that legalizes the final shove.

In short, the economic clock is ticking extremely fast now. Worse, unlike in the movies, there is no clear indicator to tell us at what time, exactly, the bomb blows. It isn’t possible, ex ante, to pinpoint when a high-inflation economy will tip over into outright hyperinflation. These are dynamically unstable processes: once all the preconditions are in place we’re reduced to talking in terms of probabilities. We know the preconditions are all in place and that the probabilities are higher than they’ve ever been before.

That still doesn’t answer the all-important question: when?

We know enough to be terrified, though, and partly as a response the political clock has been picking up pace, too. The election of a tough, confrontational National Assembly president has buried any prospect – remote as it might have been – of stable cohabitation between the competing centers of power. And increasing dread over the looming threat of hyperinflation has sapped MUD’s interest in cohabitation anyway.

For good reason. Such a cohabitation couldn’t have been stable. Given the extent of economic devastation now looming, Venezuela is squarely in Phase 3 of Dornbusch and Edwards’s Four-Phase Economics of Populism:

Phase 3.-Pervasive shortages, extreme acceleration of inflation, and an obvious foreign exchange gap lead to capital flight and demonetization of the economy. The budget deficit deteriorates violently because of a steep decline in tax collection and increasing subsidy costs. The government attempts to stabilize by cutting subsidies and by a real depreciation. Real wages fall massively, and policies become unstable. It becomes clear that the government is in a desperate situation.

Phase 4, of course, is orthodox adjustment.

Dornbusch and Edwards, by the way, don’t mince words or play cute Underpants Gnomes games with what comes between Phases 3 and 4. Reviewing episodes of runaway economic populism in Argentina, Brazil, Chile, Peru, Mexico, and Nicaragua, they conclude plainly that “the ultimate dismantling is often accompanied by major political change, including violent overthrow of the government.”


In a way, though, that’s just an elegant, ex post way of repackaging the ? in Step 2.  A strong – and strongly suppressed – instinct tells us that ‘?’ is just a polite stand-in for a peo starring guys wearing olive green. I don’t know anyone sane who welcomes it as a possibility, but I also don’t know of anyone sane able to formulate a compelling alternative.

It’s worth reminding ourselves that that’s just one possibility, though, not some preordained inevitability. In any case the exact form military involvement might take is just as maddeningly vague as the rest of Step 2.

What’s disquieting is that none of the cases Dornbusch and Edwards reviewed involved a government as militantly out of touch with reality as ours. The kind of overt militarism, eliminationist rhetoric and necrolatric cult at the center of the Venezuelan regime makes it a strange sort of beast to fight. Cornered, out of options, out of ideas and out of touch, it’s entirely reasonable to expect it to lash out.

Our job now – and, especially, Henry’s job – is to make sure the energy chavismo spends lashing out is energy spent burying itself. It won’t be easy. It’s certainly not safe. If it could be avoided, it should be avoided.

But it can’t be avoided, so it’s best to face it with determination.

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  1. “All of this is happening in the context of an inflation rate already running at three-digits – the exact number, of course, is a secreto de estado, though 270% has been bandied around”

    I seriously contend the ill-conceived notion that economic metric indicators can be a secret just because the state says so. These are widely measurable quantities, and official numbers are not necessarily more accurate, even without state secrecy

  2. Why is it that Padrino Lopez is still the Minister of Defense after his refusal to intervene in the November elections? Speculation was that he’d be out of a job by now, but has just expressed his absolute loyalty to Maduro. Were those media reports regarding the election essentially false? I ask because it is apparent that the military is the only party that will decide how ugly this situation ultimately gets.

  3. Padrino was probably bribed by Maduro when he reinstated him as minister when it was expected that he would be replaced when the gabinet was renewed , his protestations of loyalty are just his way of expressing gratitude at still being allowed to stay in the game ,

    The military (to the extent you can still say there is a unitary and not a fragile and fragmented military corp) will be reluctant to intervene unless they know that the taking over wont involve putting their necks at risk ( meaning there has to be a lot of support for them if they move) and will not have the courage to take the BURNING POTATO or TIME BOMB which is the worsening economic situation ……

  4. VTV is currently replaying a cadena from January 2006. The ex-President is discussing his various views on Bolivar’s literary contributions to mankind.

    It so happens that Bolivar wrote to Luis Brion, Admiral of the Venezuelan Navy on January 2, 1816 and suggested that:

    “I have just paid [the President] a visit… The President impressed me, as he does everyone, very favourably. His countenance reflects the kindness of character for which he is well known. I hope for much from his love of liberty and justice.”

    Two hundred years on, we have a sense that the current President’s affection for a type of liberty and type of justice compels the new majority of the AN to make use of its legislative authority to compel direct conversations about the Constitution with the leaders of Venezuela’s armed forces.


      “According to Beddow and Thibodeaux, Marx called Bolívar a “falsifier, deserter, conspirator, liar, coward, and looter” stating that Marx dismissed Bolívar as a “false liberator who merely sought to preserve the power of the old Creole nobility which he belonged”.” [From the article linked to above. The quote is quite a ways down, under the heading “Karl Marx’s description of Bolivar” but it’s there, and I think it gives an adequate notion of how diametrically opposed Bolivar would have been to “socialsim” which did not come into being until

      “The first advocates of socialism favoured social levelling in order to create a meritocratic or technocratic society based on individual talent. Count Henri de Saint-Simon is regarded as the first individual to coin the term socialism.[50] Saint-Simon was fascinated by the enormous potential of science and technology and advocated a socialist society that would eliminate the disorderly aspects of capitalism and would be based on equal opportunities.[51][unreliable source?] He advocated the creation of a society in which each person was ranked according to his or her capacities and rewarded according to his or her work.[50] The key focus of Saint-Simon’s socialism was on administrative efficiency and industrialism, and a belief that science was the key to progress.[52]” [From the article linked to. You tell me if that does not sound more like free markets and capitalism? There are several layers of lies heaped upong this to arrive at the defacto oligarchical tyranny of communism – all lying in the name of “freedom”.],_comte_de_Saint-Simon

      The above link is to one of the credited founders of socialsim. “He created a political and economic ideology known as industrialism that claimed that the needs of an industrial class, which he also referred to as the working class, needed to be recognized and fulfilled to have an effective society and an efficient economy.” But Maduro calls these folks “esqualidos.”

      • This was not Marxs socialism. Marx who was often very critical of Saint Simon spoused not a technochratic hierarchy of talents tied to a hierarchy of rewards but a system which he summarized with the dictat ‘from each according to his talents , to each according to his needs’ so that no one recieved more because he contributed more , but only enough to sattisfy his personal needs , this was precisely the system applied in Israel’s kibbutz the only living model for what Marx believed should be life in a socialist system . Strangely enough, israel, which harboured these model communist communities have always been much condemned by Communist regimes and movements !!

  5. I sure hope the políticas clock is set to the people’s clock, because the people’s clock will be set to the económics clock.

    I’ve been telling my friends to make sure they can do first aid, treat wounds, do a bit of sewing, and stock up on iodine and bandages. When I was young I was in Santa Clara, December 1958. My mother was a nurse, she had stocked up, and she was very useful helping the sick and wounded. As far as I know only one man died in our building in those days, a guerrilla who was shot in the arm.

  6. I think the most appropriate comparison is that of Russian roulette. There is one bullet in the cylinder and it will shoot someone dead for sure, we just don’t know if it will be squeeze 1 but certainly by pull 6 someone it is over. I would of chosen the Deer Hunter as a picture 🙂

    The point is that the preconditions are all in place, only the catalyst is missing. As Ignotus says, unpredictability.

  7. I agree on one essential implicit point of this article:

    Henry Ramos is the guy out front, Henry Ramos is the guy we have to stand behind firmly.
    It’s true that we have severe differences in the “hows” within the opposition, and many superlative affirmations, but the preconditions are such that we all know, in our heart of hearts, the the right “how” is the “how” that makes it there first.

    As someone quoted recently: the firstest with the mostest.

    (Another main difference between now and 2002: the oppo union then was ideological, one might even say reactionary, today it is furiously pragmatic).

  8. Zimbabwe is possible because a massive majority of the people are Shona, and support Mugabe (who is Shona) regardless of what he does.

    Cuba is possible because when Castro took power, he replaced the existing armed forces with his own troops, and then abolished the entire previous governmental system.

    Neither of these conditions exists in Venezuela.

  9. ”270%” it’s just a number. Reality overcomes people’s salary every day. Today, one classic bakery’s Canilla it’s six times its cost in July 2015, jumping from Bs.10 to Bs.60. Insane.

    • You actually mean 70… at least that’s what a “canilla” costs here in the bucolic expanses of the Venezuelan countryside. And BsF 70 is just a couple bolivars down from what the gov’t expects to be the price of an RN diapers pack. Small wonder they’re nowhere to be seen.

  10. The economic situation is scary, with oil at such low price, unless you starve the population you have no chance of meeting the financial debt payments of this year and avoid default , even then … may not be enough !!

    I sense that Padrino is giving speeches as if he saw himself becoming a Chavista successor to Maduro , is something brewing inside Chavismo to replace him with an emergency govt ( where the situation to explode ?? )

    Scarcity and inflation are becoming worse by the day …….supermarket lines are on going ..even after they run out of things to sell …people stay on the line in the hope that another lot of articles will come in later which no clear expectation that they will . Sometimes they do sometimes they don’t !!

    The bachaquero presence is now overwhelming , among them lots of people connected to supermarket employees who tell them what may come that day and give them tips of possible arrival times , once the door opens there is a bunch of burly guys ready to jump the line by force if there is no police or guardsman guarding the enthrance !! Wife got almost run over a few days a go , fortunately the bachaquero ladies accompanying her in the queue created a space around her , and helped her make it to the door before she was run over.

  11. I liked your article, Francisco. And couldn’t agree more with your reasoning. I’d just add that I’ve seen this same story explained through 3 clocks, because I separated the political one in two: one sets the institutional tempo, and the other is the political, and shows the time of the streets, which is, as you have pointed out, linked to the economic clock.


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