Latin America
Related: About this forumHugo Chavez's voodoo economics
Two years before his death, Hugo Chavez tried to repeal the law of supply and demand, which says that free markets set the price: the higher the demand, the higher the price. Every producer who was willing to sell at that equilibrium price would be able to do so and every consumer willing and able to pay that price could acquire the product.
Chavez despised the law because he believed it robbed the poor and unjustly profited producers. In its place, he persuaded the Venezuelan legislature to enact the 2011 Law on Fair Costs and Prices, a price-setting mechanism to ensure greater social justice. A newly created National Superintendency of Fair Costs and Prices was empowered to establish fair prices at both the wholesale and retail levels. More than 500,000 price edicts have been issued. Companies that violate these price controls are subject to fines, seizures and expropriation.
In all cases, the prices set by the government have been below market sometimes far below. This has caused production cutbacks, market shortages, massive government subsidies, runaway inflation and extraordinary government intervention. The most flagrant subsidy is for gasoline. Venezuelans pay only 4 to 6 cents per gallon for gasoline, the cheapest in the world. But it costs Petroleos de Venezuela, the government-owned oil company, close to $2 a gallon to extract, refine and distribute it. With domestic consumption now running about 600,000 barrels a day, the financial loss on subsidized oil is roughly $20 billion a year.
Worse yet, rising domestic consumption combined with declining domestic production has squeezed oil exports, depriving Venezuela of much-needed hard-currency income. When the government tried to raise gasoline prices years ago, riots erupted. Since then, the government's only lever for curbing gasoline consumption has been exhortation.
http://www.latimes.com/news/opinion/commentary/la-oe-schiller-venezuela-pricing-20130324,0,1429125.story
mother earth
(6,002 posts)We have no right to criticize Chavez if we are not willing to honestly look at our own "voodoo" economics.
Economic democracy is some place in the middle. Our attitude of American exceptionalism must change if we are going to thrive and renew our values and ideals. Sustainability and alternatives must rule the day, and most importantly, a return to rule of law and accountability. Only then, will a true economic democracy prevail.
Demeter
(85,373 posts)Or are we two sides of the same coin here?
naaman fletcher
(7,362 posts)I think our economic system is totally screwed up, in part because the banks are too big and both parties are beholden to them as they rob us blind.
Yet, that doesn't change the fact that the price controls in Venezuela are going to lead to disaster as they have in every case they have ever been tried.
msongs
(67,438 posts)demosincebirth
(12,542 posts)naaman fletcher
(7,362 posts)Just one guy with a website claimed that.
demosincebirth
(12,542 posts)naaman fletcher
(7,362 posts)sabrina 1
(62,325 posts)Trying to think of someone, here eg, the Bushes, Clintons, Reagans, Obamas and Europe, Sarkozy, Blair, Berlusconi, Merkel. Anyone at all who didn't enrich themselves after running for office in western civilization? Cheney, the Kennedys?
Do we have different rules for Latin Americans or something? THEY should remain poor while it's okay for the superior beings who run western civilization to enrich themselves while in office?
I sure hope that Latin American leaders are as entitled to make money as our own very special leaders appear to be entitled to do. Seems odd for any American or European to be concerned about Latin American leaders while rarely, if ever, do we hear any criticism of the huge amounts of money our own leaders manage to pocket AFTER being in office.
Peace Patriot
(24,010 posts)Thus--with DLC/Clinton collusion--we are where we are today, with our government pouring TRILLIONS of our tax dollars into the pockets of criminal banksters, war profiteers and the uber rich, and not just NOT helping our poor and working class--the vast majority--but threatening hugely successful collective programs such as Social Security and Medicare!
This economic JUNTA was sold to us as "trickle down" economics. Voodoo! The magical rich magically make everybody rich! Lies! Lies! And more lies!
And this article is just more of the same! The Chavez government controlled and hugely REDUCED inflation, from the previous "neo-liberal" regimes. The Chavez government furthermore produced amazing economic growth (10%!) during the 2003-2008 period--even with on-going coup attempts including the oil bosses' lockout and a USAID-funded recall election (which Chavez won, hands down)--with most of the growth in the PRIVATE sector (not including oil)--and quickly climbed out of the Bush Junta-induced worldwide depression, to over 5% economic growth since 2010.
Fair distribution of wealth produces HEALTHY ECONOMIES--not to mention healthy SOCIETIES. Hoarding at the top, deregulation, malnourished people, uneducated people, and all the ills of REAL "voodoo" economics--"trickle down"--create SICK economies--not to mention sick SOCIETIES, such as our own.
The Venezuelans are enjoying nothing more and nothing less than a "New Deal," which they have repeatedly endorsed with huge majorities in an election system that Jimmy Carter recently called "the best in the world." We need to do the same here--bring back the "New Deal"--once we un-rig our corporate-run, "TRADE SECRET" voting system!
naaman fletcher
(7,362 posts)But does that mean that because Chavez did many good things that therefore the price controls will work out ok in the long run?
Also, since we agree about everything you posted above, do you agree with the article Judi posted the other day that LA economics are suffering from a colonial mindset?
reorg
(3,317 posts)Chávez (...) took on the oil subsidy recently when he lectured Venezuelans that cheap gas can't last.
"Every time you fill up your gasoline tank, you're filling it up with the cheapest in the world; and the government is subsidizing over 90 percent of what it really costs," Chávez said in a television address. "We must begin to reduce gasoline consumption."
http://www.csmonitor.com/World/Americas/2011/0304/Hugo-Chavez-challenges-Venezuelan-birthright-to-cheap-gas
Gas prices have always been subsidised in Venezuela (as they have been in Saudi Arabia, Iran, Iraq, Libya and many other countries), when price hikes were tried it led to revolts.
The LA Times article misstates the price of gas, BTW. It doesn't cost "4 to 6 cents per gallon", that's the price per liter:
http://www.csmonitor.com/World/2012/0229/World-s-cheapest-gas-Top-10-countries/Venezuela-0.18-per-gallon-0.05-per-liter