The Current Discussion:The global economy is quaking. Are we heading toward a global recession? Who's to blame?
I live in Venezuela, a Latin American neo-populist petrocracy. The prospect of a “global recession” looks a bit different from here.
For the last decade, my government's economic officials have pledged themselves to the "comprehensive, humanist, endogenous and socialist development of the nation", whatever that means.
Perhaps that gobbledygook just means that in Venezuela it is much easier to fetch a bottle of premium Scotch whisky at any low-income neighborhood's supermarket than a bottle of milk, a pound of sugar or a dozen eggs. Paradoxically, the local Audi dealership set an all-time Latin American sales record during 2007 by capturing a 22% share of the region's luxury car market.
To the average Venezuelan citizen, "petropolitics" is not just another catchy word. To say that American motorists end up paying for Venezuela's Russian Sukhoi US 28 Soviet-era jet fighters and hundreds of thousands of Kalashnikovs assault rifles is not an overstatement.
Repeated announcements of a full-fledged recession looming ahead underscore the fact that our main customer is the U.S. and that no matter how "humanist" and "endogenous" a petrostate's welfare and social policies are conceived, oil just does not create jobs.
On the contrary, oil destroys most other sectors of the economy. Its most distorting effect is pushing up the real exchange rate, lessening incentives for almost any other industrial activity. Why produce your own food, for example, if you can import it? How can any other kind of export industry be developed if the inflow of petrodollars hampers manufacturing? With all that oil wealth concentrated in the state, you can only witness how "clientele politics", voracious bureaucracy and crony capitalism pervade every corner of our society. As Tina Rosenberg wrote in "The Perils of Petrocracy" (The New York Times, 11-04-2007), "those in power distribute oil money to stay in power. Thus oil states tend to be highly corrupt.” Their "comprehensive, humanist and socialist" stance notwithstanding, I would add.
Just try to imagine how it all might turn out for Venezuelans, most especially for the poor, if our foremost customer falls deeply into a recession. I can only hope it might result in a sobering experience, though a bitter and tough one, to our spendthrift "petro-political" government."
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