Venezuela on the brink: a journey through a country in crisis
The oil-rich South American nation should be prospering. Instead it stands on the edge of an economic and humanitarian abyss
I’ve not actually read the piece yet so I’m wondering whether he will in fact give us the correct answer. Idiot economic policy.
The increasingly secretive central bank does not reveal how much it costs to print each bill, but based on international parameters, José Manuel Puente, an economist and professor with the Institute of Higher Administration Studies, estimates that the cost of paper, ink and printing of each note is about 20% more than their face value. “They are not worth what they cost. It’s a joke. But that’s the way things are,” he said.
I actually checked with a bank note printer. They wouldn’t reveal actual prices of course, but did say that the above was about right.
The government’s tendency to subsidise many products below the cost of production is a major reason why the economy is in such a mess.
When Hugo Chávez came to power in 1999, he took this way of thinking a step further and used petrol dollars to subsidise essential products such as rice, sugar, toilet paper, sanitary towels and medicine.
It was an altruistic, populist move that allowed the poor to finally share in the nation’s oil wealth. But it also stifled incentives for producers and created a system of dependency and black-marketing that was already causing economic problems before Chávez died in 2013 and the global crude market collapsed the following year.
Well, no, that’s not quite right. Proper subsidy of something increases producer incentives. What Chavez and Maduro have done is price fixing which does kill incentives. But, you know, this is The Guardian, they might have the economic details wrong but they are at least insisting that the problem is idiot economic policy. So, Hurrah!