Major cause of Venezuela’s current condition is simply called greed

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, June 24, 2003 By: Oscar Heck

VHeadline.com commentarist Oscar Heck writes: Opposition supporters (opposition to Chavez) find it easy to blame Chavez for the present and recent condition in Venezuela. However, most do recognize that there is also some blame to be attributed to the pre-Chavez Venezuelan leadership.

However, although I am not an economist or “expert,” it appears to me that the opposition (and most of the Venezuelan media and USA-backed opposition propaganda) has neglected a probable major “cause” for Venezuela’s condition today. The “cause” is called greed.

1981-1982 saw Canada go through perhaps the worst economic upheaval in decades. Bank interest rates went up to almost 30% and credit card rates were exorbitant. Banks went bankrupt, manufacturing companies shut their doors (many did not re-open), personal bankruptcies reached “epidemic” levels, black market business accelerated dramatically, and bartering became a common monetary unit. Company pay-checks were only cashable after the bank received the money (10-15 days later) and many people did not get paid for months. Thousands of Canadians lost their jobs and their homes. It took Canada and Canadians years to “overcome and adapt” to a “new way of life.”

Several things struck me about those years. Before the economic crisis, the maintenance people (sweeping floors, etc.) at Marine Industries (Sorel) were unionized an earned somewhere in the vicinity of Canadian $25 per hour. A pair of good dress pants cost over $50 and a good shirt over $40. A t-shirt cost at least $12-15. Today, 20 years later, after thousands of business and personal bankruptcies, one can buy a t-shirt for $4, a good pair of pants for $28 and a good shirt for $15. However, the maintenance people today will generally make between $10-12 per hour, even in a unionized environment.

While I traveled throughout Venezuela for three months during El Paro (the stoppage), I often had the impression that I was re-living the early 80s of Canada. Could it be? I suspect, yes. Any country or society will eventually pay (and pay dearly) for allowing greed to go unchecked. Canada did in the early 80s, the USA and most of the “western world” in the late 90s with the fall of Nortel and the Nasdac, then Argentina … and now Venezuela, in the early 2000s, after decades of greed, corruption and monies/wealth exiting the country. It is/was inevitable. It appears to me that opposition supporters have been too quick in blaming Chavez for Venezuela’s woes … especially since (in addition to decades of accumulation of economic stress) the opposition itself sponsored and headed up the “stoppage” which finally brought Venezuela’s economy to almost a standstill; an intentional move that brought great distress to Venezuelans, principally to the 80% … the average Venezuelan.

Opposition supporters write to me with vile language, accusing me of speaking against Venezuelans. I speak against those Venezuelans that have (either voluntarily or through ignorance) blindly participated in “typical” Venezuelan business practices that include: paying of a disproportionately low minimum wage, hoarding and speculation. The three practices named above have been effective vehicles for decades-worth of accumulation of disproportionate wealth due to untamed greed.

Traditionally, these three practices have allowed for profits in the hundreds of percentage points. Doing business in this fashion for a lengthy period of time can only ultimately lead to socio-economic division and unrest, as has been witnessed in Venezuela over the last year or so. Sooner or later, things are found out. Sooner or later inequitable practices are found out. Abuse is found out, whether intentional or through blind ignorance.

Of course, poverty (80-85% poverty) will become more noticeable and will increase, especially if the opposition continues to support the sabotage of reform laws created to try to curb speculation, hoarding and monopolizing.

In turn more poverty will create more beggars and street children.

Unemployment and inflation will rise dramatically (from some reports: 22-25% and 35-45% respectively) and the GDP will fall (apparently 10-15%), especially if encouraged by illegal lockouts and walkouts and by sabotage of the major production unit in Venezuela (PDVSA).

Crime rate will increase proportionally to poverty and unemployment. This is only normal. If a person is very poor and has little to eat and struggles to find a job but cannot find one, the person will often naturally turn to theft, for example. Other options can be prostitution, fraud and kidnapping. Excessive unchecked greed eventually creates dramatic economic landslides that in turn create rapid increases in unemployment, creating more poverty … thus increasing crime.

Governance of a society living in severe economic stress such as Venezuela at the present time is a major issue. Argentina in recent years went through something similar and changed leadership several times over a short period of time, with little short-term change or improvement. In addition, it is very difficult to govern a society if the elite of the society do everything in their power to sabotage a democratically elected government.

Oh, and the World Bank should keep their nose out of Venezuela and other Latin American countries. Competitiveness, foreign investments, etc., will be reduced dramatically as well … until the economic situation improves.

Too bad the opposition didn’t anticipate the severe and added damage that they injected into the Venezuela economy because of the attempted coup in April 2002 and the “stoppage” in December 2002-January 2003!

How about the Index of Corruption?

What is that?

How does one gauge corruption?

Is Bush corrupt?

Carmona, Shapiro, Ortega, Fernandez and Fernandez?

Oh, how about Globovision, Venevision, RCTV, Televen?

How about the acaparadores (hoarders)?

How about the US government which was apparently involved in the illegal coup against Chavez?

I'm sure they must have had to pay-off several people. Oh, but of course, if it was done “legally” through payment of a “consulting fee,” then it is not called corruption!

Oh, not only that … this weekend I spent 24 hours with a good friend of mine who has been involved in the stock-market for over 20 years. (For those who are interested, my friend is what people call an expert.)  For the last 10 years or so he has been doing criminal fraud investigation worldwide, particularly in cases involving stock market manipulation. In our discussions, I brought up the following.

Supposing that professional (upper-class Venezuelan) speculators start a food distribution company called Tehodo S.A. They can list it on the NYSE and sell futures at say 20-25% profit over a 6 month period (or much more if unchecked by the securities commission). The sale is done through the USA and into the USA under administrative firms (owned by the same Venezuelans).

Next, speculation on “Harina Pan” (the Venezuelan staple-cornmeal) is orchestrated with government connections and justices with ins into the corrupt Venezuelan government.

The profit from hoarding and speculation can be as high as 300% and the futures sold increase the proportion of profits exiting Venezuela (profits that are not being accounted for in the Venezuelan books ú which justifies the screams and yells -ú the lies -- coming from Venezuelan industry that price controls are hurting industry because they are being “forced” to sell under cost)!

Unfortunately for the opposition, it appears that it is no longer as easy to orchestrate grand speculation and hoarding scams with this present government in place!

Hummm, profits going down?

Better get rid of Chavez?

Industry will also suffer, sometime creating chaos. Most opposition supporters are all too quick to blame “industrial chaos” and “restrictions” on Chavez again.

Who “stopped” production?  Not Chavez, nor the Chavez government.

Furthermore, the “restrictions” (intended at stabilizing the economy) came into effect only after the opposition-backed “stoppage” occurred!

Agricultural production will suffer to some degree, however, in the case of Venezuela, I believe that the supposed “agricultural production decrease” is false. The large landowners and production owners are almost entirely all part of the opposition movement. Of course they will “say” that production (and distribution) is down. However, it is much more profitable to “say” such a thing, while maintaining the same production (no reason not to), then hoarding and speculating. (e.g., Earlier this year the National Guard, with appropriate court orders, invaded several hoarding operations).

Food consumption will be down as well (35% lower than in 2002?). Especially when so many opposition-supporters hoard and speculate creating 200-300% increase in prices!

The biggest crime in this is that the minimum-wage earners (which probably account for the majority of the Venezuelan labor-force) are the ones who take the brunt of it all. The mid-to-upper classes can easily still afford to “buy food.”

Car sales (new cars I assume) will definitely be lower (70% lower than in 2002, apparently). Especially if 80% of the population works only to barely survive! The decrease in car sales is mostly due to the mid-to-upper classes (those who can usually afford a car, or several) no longer “risking” to spend money on new cars (in case they have to use the money to leave Venezuela or to buy food and other more necessary items).

Car sales decrease, at least as I see it in Venezuela, is not a real measure of anything worth noting. Most of the 20% have cars and have “always” had cars … new cars; Mercedes, Jeep, BMW, 4X4, etc. Most of the 80% do not have cars. If they do, they are usually bashed old cars. Big difference.

Currency controls in Venezuela were put into effect, again, only after the opposition-led “stoppage” aimed at ridding Venezuela of Chavez. Chavez remained, faced with the daunting task of trying to implement quick “controls” over different sectors of the economy/society in order to try to stabilize it as much as possible.

Currency controls may or may not work, but, they have a better chance of being lifted if the opposition collaborated with the government in the implementation of controls aimed at bringing some much needed equilibrium into Venezuelan business sectors.

Excessive greed, as practiced by the Venezuelan “elite” and by much of the Venezuelan mid-to-upper classes would eventually lead to socio-economic distress, as we are witnessing at present. It is not because Chavez is in power.

What is happening in Venezuela at this time could have possibly been postponed for a few more years if the elected President would have been a “typical” Venezuelan politician as in the past. However, everything would have exploded much the same or even worse if the long-term effects of excessive greed were allowed to accumulate further.

Venezuela was a bomb ready to explode, as Argentina, as Canada in 1981-82, as many other countries. Excessive uncontrolled greed and parallel unchecked “business practices” such as monopoly, price-fixing, hoarding and speculation are good ingredients for socio-economic collapse and divisions in any country … even in Venezuela … and especially since the Venezuelans using such practices are mostly from the mid-to-upper classes, increasing the capacity for public (and international) recognition of an already segregated and divided society (unspoken of in the past).

Note: With respect numbers and percentages expressed through survey “results:” Surveys in Venezuela, done by supposed “professional firms” are, in my view, usually flawed in nature and therefore unreliable, especially if commissioned by the opposition. Their main flaw is based on the following: 65%+ of the Venezuelan population lives in barrios (slums) or barrio-like conditions. In Caracas it is about 75-80%. Telephone surveys in the barrios cannot be done effectively since the people who do have phones usually restrict its use to the minimum -ú payment for the phone line is based on its usage.

Effective telephone surveys on cell phones is even more difficult since it is more costly to the surveyee. However, telephone surveys to urbanization areas, where the mid-to-upper classes live in segregation, is certainly easier because the people living in those areas can afford to stay on the phone for longer periods of time.

Therefore, most “professionally done” telephone surveys will be very biased towards the opposition (mid-to-upper classes). To do effective and reliable surveys, the survey companies would have to hire reliable people to physically do the surveys not only in urbanization areas (20% of the population), but also in barrio-like geographical areas (65-80% of the population). To do this would be very costly, not to mention dangerous.

For example, if the survey firm manages to find a person who is willing to do surveys in the barrios, s/he (the hired person) will almost for sure only enter into the main “safe” area of the barrio, and no further, interviewing a minimal mix of persons, usually the small store owners around the main bus stop. The hired person could also fake the survey, thus avoiding personal danger entirely (especially for the pay he/she will get).

Now, the survey company could possibly hire a person who is from the barrio, thus reducing the risk of personal danger substantially. However, the person hired would probably be hired only if he/she had a bias in favor of the desired outcome of the survey … and in consequence, the person will probably only interview people (whom s/he knows) who have the same bias as s/he.

In all the times I have spent living in the barrios of Caracas, I never once came across a person doing personal surveys. I asked my friends from the barrio, who have been there since 1964, if they have ever been interviewed by people doing surveys. Their answer was, “never.”

So, when one hears figures such as 75% of the Venezuelan population rejecting the current Venezuelan government, one should ask oneself, “How do they get such a figure.” (The real figure is probably somewhere between 43% and 57%, based on calculations from results obtained from the “Firmazo” -ú “the signing” -ú of February 2003).

Oscar Heck oscar@vheadline.com