Oil Wars

After several years of fairly consistant blogging things are going to be quiet around here for a little while. While the blog is not being permanently closed I will be taking at least a few months off from it.

The reasons are varied but the main ones are:

1) I am simply burned out which can probably be noted from the reduced frequency in posting.

2) The day to day goings on in Venezuela just aren't important enough to require posting on for the most part. The success or failure of what is going on there will largely be decided by how its economy does and what else happens in the world. That will only be known over the time span of months and years, not days or weeks.

3) The knowledge gained from reading newspapers and the internet is very superficial. Hence, I would rather use this time to do some more in depth reading.

So as I said the blog will be quiet for a while - at least a few months, maybe longer.

However, I of course reserve the right to post at any time if events warrent it. And certainly, further down the road, as events in Venezuela and elsewhere play out posting most definitly WILL resume.

So take a break, but don't go to far.
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While I have spent much time berating Venezuela for not having a plan detailing how they should develop their economy, in a very big way I have been barking up the wrong tree. The reason being that while they don't have a very specific road map on precisely how they are going to get to where they are going they HAVE laid out now several times WHERE they WANT to go. Two examples of where they have emphasized where they want to wind up would be Greg Wilpert's excellent book, Changing Venezuela by Taking Power, and in the governments own "General Outline of the Plan for Economic and Social Development, 2007 - 20013".

But that is not all. Now we see many of these ideas and concepts spelled out even more clearly in "The Spectre of Socialism for the 21st Century Haunts Latin America" by Canadian economist Michael Lebowitz who is also affiliated with the Chavista think tank "The International Miranda Center".

In this article Dr. Lebowitz spells out what "21st Century Socialism" is not to be, what it is, and how it is being implemented in Venezuela. Unfortunately when I read this article, just as when I have read other articles of a similar nature, I can't help but think that while the goals, or maybe better said dreams, espoused are certainly laudable, there is a tremendous disconnect between the goals and what is necessary for their realization and what Venezuela's current reality is.

In fact, it struck me time and time again that Dr. Lebowitz should think that a very poor, underdeveloped, and ill educated society such as Venezuela should somehow be able to implement a very sophisticated socialistic system. It mystifies me that Dr. Lebowitz doesn't think there are any sort of preconditions for building socialism or, if he does, never asks if Venezuela meets those preconditions. In fact, he amazingly seems oblivious to what the current "objective conditions" (to use some socialistic nomenclature) are and whether, given those objective conditions, building socialism is what should be the first order of business for Venezuela.

The best way for me to illustrate this will be for us to look at some key points made by Dr. Lebowitz in his speech.

Starting pretty much at the beginning we have:

Consider what this spectre is not. It is not the belief that by struggling within capitalism for reforms that it is possible to change the nature of capitalism -- i.e., that a better capitalism, a third way, can suspend the logic of capital (except momentarily). Nor is it a focus upon electing friendly governments to preside over exploitation, oppression and exclusion -- i.e., to support barbarism with a human face. Indeed, this spectre does not accept the premise that you can challenge the logic of capital without understanding it. Very simply, the spectre of socialism for the 21st century is not yesterday’s liberal package -- social democracy.

We've heard this before - Greg Wilpert in his book also didn't think much of Social Democracy. And it does have its weaknesses - it is still capitalism, a small minority still have hugely disproportionate power by virtue of their wealth, and therefore the gains of Social Democracy are always vulnerable to being rolled back.

But be that as it may, the societies that today would be called Social Democracies have prospered (though to be fair they were pretty much all developed countries BEFORE they became Social Democracies) and they have all maintained a strong and quite robust social safety net - universal health care, universal education, extensive old age pensions, extensive work place rights and protections, etc. Taken together with a high material standard of living those countries would almost be seen as a nirvana by your average Venezuelan who most likely has none of those things, or has them only in name or as a clause in a paper constitution, not in reality.

For example, if Dr. Lebowitz were to become seriously ill while in Venezuela he can get on a plane get access to one of the best health care systems in the world, the advanced and free Canadian health care system. Your average Venezuelan has no such luck.

So again, it doesn't make sense to me to be so dismissive of a system which, if Venezuela could fully develop it, would represent a huge advance in the quality of life for most Venezuelans.

Further, this spectre is not a focus upon the industrial working class as the revolutionary subjects of socialism, a privileging whereby all other workers (including those in the growing informal sector) are seen as lesser workers, unproductive workers, indeed lumpen proletariat . Nor does it suggest that those industrial workers by virtue of the difference between their productivity with advanced means of production and their incomes (i.e., the extent of their exploitation) have a greater entitlement to the wealth of society than the poor and excluded.

This is an interesting point, and one where Dr. Lebowitz makes a very fundamental change in the most basic of socialist precepts to accommodate the Venezuelan reality that it doesn't have much in the way of an industrial working class.

Now it could be that indeed you don't need an industrial working class to bring about socialism and that there isn't anything in their outlook that predisposes them to socialism and more than street vendors are.

But there is a very important, if unspoken point, here. That is, Venezuela doesn't have an industrial working class because it is a underdeveloped country with little in the way of industry. And that certainly would seem to be an obstacle to the implementation of socialism.

The classical Marxist socialism of Marx, Engels, Lenin and even Trotsky always took advanced capitalist development and a high material standard of living as a precondition for socialism. With out the ability to produce many goods, without high levels of education, and without large amounts of leisure time that development affords how could people possibly have the time to study, understand, and control their surroundings?

The answer is they couldn't. That is why it was also thought that socialism would come to advanced capitalist countries, not to poor underdeveloped countries. And even when it did come to poorer countries it was thought it couldn't succeed there without the active collaboration of wealthier socialist countries. For example, informed decision making and true control imply high levels of understanding (ie, education), a high material standard of living, and large amounts of leisure time - things that people in countries like Venezuela simply don't have (or don't have simultaneously).

In the conception of socialism for the 21st century, socialism is not confused with the ownership of the means of production by the state such that (a) it is thought that all that is necessary for socialism is to nationalise and (b) that everything not nationalised is an affront. Indeed, this spectre does not emphasise the development of productive forces without regard for the nature of productive relations (such that gulags, dictatorship and indeed capitalism can all be justified because they develop the productive forces and thereby move you closer to socialism and communism).

Again, here the last sentence is key: "this spectre does not emphasise the development of productive forces without regard for the nature of productive relations"

Indeed, as we've seen time and time again in our analysis of the Venezuelan economy it seems not to emphasize the development of productive forces period.

Does Dr. Lebowitz really believe you can build socialism, or any sort of a better society, without a full development of productive forces??? If he does he is in uncharted territory here and should explain why he thinks the the development of productive forces don't have to be made a priority, or at least not a priority above the "productive relations".

Just as important, to the extent he does want the productive forces developed he doesn't seem to recognize that the productive relations may impact that development. If workers themselves control all production, certainly a good and worthy goal, they will quite possibly chose to maximize their consumption and keep investment in new productive forces relatively low. That may be good for them, as they already have jobs and all the benefits that come from that.

But what of the millions of unemployed and underemployed Venezuelans who don't have that? Would the workers who controlled the means of productions be willing to significantly restrict THEIR consumption so that more could be invested, the society industrialized, and their fellow Venezuelans also given productive, meaningful and well compensated employment????

That is a huge question and there is no reason to just assume it should be answered in the affirmative. And if it can't be answered in the affirmative then having relations of production were workers in already existing industries are in control could serve to retard the country's overall development by increasing consumption and reducing development.

To a certain extent this is what we already see in Venezuela where workers in PDVSA, SIDOR, CANTV and other sectors of the state certainly have a much higher standard of living than the great majority of Venezuelans and investment is too low to lift the rest of Venezuelan workers to that standard of living.

While there is much discussion and debate regarding many of the precise policies poor countries like Venezuela would have to follow in order to industrialize there is no debating that they have to have VERY HIGH levels of investment - generally something on the order of 40% of all their output has to be reinvested in industry and capital projects. This clearly is not happening in Venezuela. Ironically while Dr. Lebowitz considers the relations of production to be very important he ignores what needs to be done to develop the productive forces and what changing the relation of forces may imply for that development.

So what is 21st Century Socialism according to Lebowitz? Here are some ideas:

First of all, it is a stress upon the centrality of human development. In this respect, it is a restoration of the focus of 19th century socialists. It is the vision of a society with the goal (according to Saint-Simon) of providing to its members ``the greatest possible opportunity for the development of their faculties’’, a goal to which Louis Blanc referred as ensuring that everyone has ``the power to develop and exercise his faculties in order to really be free’’ and of a society in which, according to Friedrich Engels, ``every member of it can develop and use all his capabilities and powers in complete freedom and without thereby infringing the basic conditions of this society’’....

This is what Marx’s conception of socialism was all about -- the creation of a society which removes all obstacles to the full development of human beings. He looked ahead to that society of associated producers, where each individual is able to develop her full potential -- i.e., the ``absolute working-out of his creative potentialities’’, the ``complete working out of the human content’’, the ``development of all human powers as such the end in itself’’....

In contrast to capitalist society in which we are the means to expand the wealth of capital, Marx in his book Capital pointed to that alternative society, ``the inverse situation in which objective wealth is there to satisfy the worker’s own need for development’’

Ok, again, this all sounds VERY good. But there is a gnawing question: what if Venezuela doesn't have the "objective wealth" to allow for this???

Are we really to believe that a country that physically can't provide adequate health care for many of its citizens is going to allow for their full development?

Are we to believe that a society that doesn't have the capability to give most of its citizens a high quality education is going to allow for their full development?

Are we to believe that a society that can't adequately meet much of the populations need for transport, food, shelter, utilities, much less fulfill their desires for leisure, is supposed to allow for their full development?

Maybe, MAYBE, some of the wealthiest countries in the world, if organized differently, could do this... but Venezuela??? A country with so many unmet needs and wants? A country (not to be insulting to anyone but a spade needs to be called a spade) which in spite of its oil wealth is still largely sunk in ignorance, poverty and backwardness is really in a position to do this?

The goals and dreams expressed here are great but there seems to be an amazing, if not shocking, and unacknowledged disconnect between those goals and Venezuela's ability to realize any of those goals.

Next, Dr. Lebowitz takes issue with those (such as me!) who think the primary focus should be developing the productive forces. He does so by referencing Marx's own thinking:

This focus upon practice as essential for human development was, of course, Marx's central insight into how people change. It’s not a matter simply of spending more on education, health and social services. Remember Marx's early comment on Robert Owen’s conception that what was needed to change people was to change the circumstances in which they exist. Marx (1845) emphatically rejected the idea that we can give people a gift, that if we just change the circumstances in which they exist they will be themselves different people. You are forgetting, he pointed out, that it is human beings who change circumstances. The idea that we can create new circumstances for people and thereby change them, he insisted, in fact divides society into two parts -- one part of which is deemed superior to society. It is the same perspective that Paulo Freire (2006: 72) subsequently rejected in his Pedagogy of the Oppressed -- the concept that ``knowledge is a gift bestowed by those who consider themselves knowledgeable upon those whom they consider to know nothing’’.

......

In contrast, Marx introduced the concept of revolutionary practice -- ``the coincidence of the changing of circumstances and of human activity or self-change’’ -- the red thread that runs throughout his work. He talked, for example, of how people develop through their own struggles -- how this is the only way the working class can ``succeed in ridding itself of the muck of ages and become fitted to found society anew’’. And he told workers that they would have to go through as much as 50 years of struggles ``not only to bring about a change in society but also to change yourselves, and prepare yourselves for the exercise of political power’’.

......

How far, of course, this is from the idea that what you have to do is build up the productive forces and thereby transform the conditions in which people exist, transforming their being and their consciousness!

Certainly to an extent this is true - just building up the productive forces doesn't necessarily change peoples consciousness. To see that you just have to look at the country that has the most developed productive forces in the world.

Still, it is vital to remember than in writing all of this Marx was always writing to, and about, the working classes of the advanced industrial countries of the day - England, France, Germany, etc. Those countries has more or less fully developed productive forces and all the things that go along with that. Hence, he emphasized struggle and changing the productive relations and that makes sense for already developed countries.

But Venezuela in 2008 is a very underdeveloped country where at least 50% of the population has no productive work. It is one thing for aircraft workers at Boeing to think of how to change the company and for them to "liberate" and "fully realize" themselves by in fact taking it over and running it. That would be a revolution.

But what are the street vendors in Calle 20 in downtown Barquisimeto supposed to do?? How would they alter their productive relations? Do they even HAVE any productive relations?? What are they to "struggle" for? And against whom?? Surely the street vendors problem is NOT that they are "directed from above". They aren't (though they probably wish that they were, as at least that would mean they have a job!!).

Just to further illustrate the absurdity of Dr. Lebowitz's line of thought and how far removed it is from Venezuelan reality at one point in his article he goes on about how the wonderful Venezuelan Constitution is in recognizing the importance of "ensuring overall human development" and that "everyone has the right to the free development of his or her own personality". As a theoretical proposition I suppose this is great.

But at the present time those words aren't even worth the paper they are written on as Venezuelan society no means by which to ensure its citizens actually get any of those things.

In fact, the Venezuelan Constitution also states that their shouldn't be any discrimination based on race or sex. Yet Venezuelan employers very openly discriminate based on race, sex, age, appearance and any number of things. What does the Venezuelan state do about it? Nothing. What can Venezuelans themselves do about it? Nothing.

Why, if Venezuela has such a progressive government are people routinely discriminated against, workers regularly abused and denied their rights, and people in general so powerless? In fact, why are all those things WORSE in Venezuela, which presumably has a PROGRESSIVE government than they are in the United States which everyone would acknowledge has a right wing government?

The answer is quite simple - it is poverty and underdevelopment that lead Venezuelans to have almost no rights, in spite of all the flowery language of their constitution. In Venezuela even getting a job is quite difficult. And if you expect the employer to in any way respect your rights or even pay you what by law they are supposed to pay you then you are either one of the lucky few to have a government job or you are dreaming.

The sad reality is there is a huge "reserve army" of unemployed and underemployed (a concept that Dr. Lebowitz should have come across in his reading of Marx) people that any employer can't use to instantly replace any current employee who insists on asserting his or her rights.

How to change this? One very obvious way would be to build up the country's economy and industry so that productive and well paying jobs were abundant and unemployed or underemployed workers actually became more scarce. That way maybe Venezuelans would have SOME chance of actually being able to assert some of the rights their Constitution supposedly gives them.

But as long as Venezuela remains sunk in its current state of underdevelopment all the Marxian ideas of "free development", "development of the creative potential of every human being" and "active, conscious and joint participation" will remain nothing more than a mirage. People can't fully develop, can't participate, and can't co-manage everything when a very large segment of that population is wondering where its next meal is coming from, isn't adequately housed, isn't adequately educated, and isn't adequately employed.

Either Dr. Lebowitz should explain how people in such dire circumstances ARE going to do such things or what crash program he is recommending to help get them out of those circumstances. Yet he, like the Venezuelan government itself, does neither. This is what you call withfull thinking - in the extreme.

Of course, to be fair, Dr. Lebowitz acknowledges 21st Century Socialism might not actually succeed in the first country it is being tried in, Venezuela. He goes on to give a brief history of Venezuela and how large oil revenues have affected it in very pernicious ways:

When you talk about Venezuela , you have to begin with oil. Not only the effect of oil exports upon the hollowing-out of the economy such that local manufacturing and agriculture effectively disappeared as the result of an exchange rate which made it much cheaper to import everything rather than to produce it domestically. It’s an extreme example of what is called the ``Dutch disease’’: despite rich agricultural land, Venezuela was importing 70% of its food. So, massive migration from the countryside to live in the cities, e.g., in the hills surrounding Caracas -- 80% of the population is urban, maybe 10% engaged in agriculture. And as for industry, it was largely import processing -- processing food, assembling cars and assorted other import-related sectors. Oil production itself doesn’t generate many jobs, so we have to think about unemployment, an informal sector (about 50% of the working class) and poverty -- extreme social debt and inequality.

Now this is certainly a succinct and accurate account of the deliterious effects oil has had historically on the Venezuelan economy. Thing is, although Lebowitz presents these as historical problems this isn't just historical. Most of this is happening RIGHT NOW AS WE SPEAK. The currency is tremendously overvalued, industry has slowed to a crawl as imports boom, agriculture is going nowhere fast, and what little Venezuela does are trivial and low valued added tasks putting things together (like tractors).

So this begs a very obvious question - why is the CURRENT Venezuelan government allowing this to happen and following the very same mistaken economic policies that have been tried over and over again by Venezuelan governments???? Wouldn't it behove them to do something different? Yet Dr. Lebowitz is entirely mum on this which is quite incomprehensible given that he is a trained economist.

He then goes onto the problems of rent seeking and corruption:

And, in this orgy of rent seeking within a poverty-stricken society -- a culture of corruption and clientalism, parasitic capitalists who don’t invest, a labour aristocracy with trade union leaders who sell jobs, a party system which functions as an alternating transmission belt for elections and access to state jobs, a state which mostly does not work because it is filled with incompetent sinecurists but, when it does, is completely top-down. These are just a few characteristics worth mentioning.

Yup, that sounds like Venezuela. And Lebowitz acknowledges that little or nothing has changed in this regard:

All of this was present in Venezuela when Chavez was elected in 1998. And, you would have to be truly naïve to think that it disappeared when Chávez came to office. On the contrary, it pervades Chavism -- the corruption, the clientalism, the nature of the state, the nature of the party (including the new party – PSUV -- currently being built), the gap between the organised working class and the poor in the informal sector -- it’s all there! And, you will recognise that it is entirely contrary to everything in the concept of socialism for the 21st century.

Now while this is certainly very honest it is also quite naive as it never asks the most obvious question - why after nearly 10 years in power has nothing been done about this? Of course, it can't be eliminated, but couldn't it be reduced? It could.

But you would have to do things like prosecute people who work found to be corrupt, which they largely haven't, and you would have to make government operations more transparent which they also haven't done.

So if this corruption of Venezuelan society and 21st Century Socialism are at war for the future of the country, as Lebowitz later goes on to say, why hasn't the government, or better said, Chavez, taken serious action to fight these problems? Why does everything remain at the rhetorical level with so little concrete action if in fact this battle is so crucial to the movements future?

Further, it is worth pointing out that Chavez, through his actions, has made it all the more likely this "revolution" will be undermined and destroyed from within. How so? Simple. He and his government have proceeded to put huge sections of the activist base INSIDE the government where they are collecting nice (sometimes very nice) salaries for their services.

So the revolutionaries are now inside and at least partially control the state apperatus, isn't that a good thing? You might think so but in reality it has a very big down side.

Now those very same activists, who formerly were largely sincere, self-less and dedicated activisists, are often times bigshots who are more concerned with their salaries and newfound status than anything else. And they certainly won't stand up and criticize the ways of the government or denounce corruption if it might jeapordize their position. To a large extent that is exactly what has happened.

How can I know that - being a lowly blogger with no connection to the Venezuelan government and knowing next to no-one in the government. Simple, I can just look around at the few activists turned government employees I know and see what has happened to them - it isn't pretty. And if that is what is happening at the outer edges of things where I am (in the U.S.) I can only imagine what is happening in Caracas where there is real money and real power to be fought over.

Further, even other Chavista bloggers more in the middle of it than I am can see this corrupting process. From the long standing Lubrio blog:

Los medios del Estado tampoco funcionan bien, porque cada periodista siempre tiene la precaución de "no meterse en peos" o de "no ser muy controversial", pues entonces será degradado o despedido (y coño, los bonos del Minci son muy buenos como para perderse esa manguangua). Por lo general, funcionan más bien como agencias de promoción de los ministerios y no como interlocutores entre el pueblo y los entes públicos

Wow, I wonder how good those Information Ministry bonuses really are? Apparently they are good enough to get people to shut up and toe the line (and btw, the person who wrote that works under MINCI and should be in a position to know).

The Russian Revolution was partially underdone because so many of its revolutionaries were killed in their civil war. The Sandanista Front in Nicaragua was gravely wounded by losses of its activists in fighting with the Contras. But Chavismo could be the first political movement in history to wipe out its own activist base by putting them all on the payroll!!!! You would think that accomplishment would be worthy of mention by Dr. Lebowitz but apparently he didn't think it was (or maybe the Miranda Center's bonusses are up there with the MINCI bonusses).

As is to be expected, at the end Dr. Lebowitz poses the question of who will win, which is of course the question everyone wants the answer to.

Sadly, for me, it is all to obvious at this point. Through a combination of ineptness, lack of planning, lack of introspection, and self-corruption all combined with Venezuela's continued poverty and backwardness there is almost no chance anything will be left of this movement in ten years time.

There is a saying that the only thing that topples governments in Venezuela is the price of oil and the Chavez government will be no different given that it hasn't done anything to liberate Venezuela from that noxious dependency.

Sadly, VERY SADLY, all the accomplishments of this government will go away with it. So too will concern for poor and working class Venezuelans as any new government will likely care little for them. And saving the worst for last, a historic opportunity for development will have been lost, probably not likely to return for who knows how many generations.

Those sad realities spring not per se from the Chavez government being a leftist, or even a Marxist government, but rather from its persistence in chasing after dreams, no matter how wild and unrealizable they may be. A different government, WITH ITS HEART IN EXACTLY THE SAME PLACE, but with its feet planted firmly on the ground could do much, much better both for Venezuelans and the Left internationally. A great many leftists, and even Marxists, would recognize that for a country in Venezuela's position job number one is racing to develop the country as quickly as possible. Unfortunately for Venezuela rather than getting those pragmatists they find themselves with dreamers like Chavez and Lebowitz.

As it is, Dr. Lebowitz is likely to witness one more hearbreak for the Left as it is forced to accept that what has existed up to this point in Venezuela isn't anything even moving in the direction of socialism - it is simply a lot of improvised bullshit and empty rhetoric floating on a sea of oil.

For Venezuelans themselves things will be worse. The dreams will vanish as soon as the oil bonanza dissappears and Venezuela will be magically transported back to the hell of the 1990s, or worse. In the end they will be left with a lot of heartbreak floating on a ocean of tears.
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There is incompetence, and then there is incompetence. Of late, the Venezuelan government has been suffering a lot from the latter.

Recently the wisdom of some of the government's economic policies have been much debated on this blog. Of course, while these debates are interesting and important there is actually a limit to how far we can go with them. After all, given that there is no written plan as to what the Venezuelan government is trying to do with the economy it is hard to compare its actual policies to what it should or intends to do.

That is, no one knows what it is trying to do - apparently, it turns out, not even its Development and Planning Minister. Witness these statements by Planning Minister Haiman El-Troudi:

El ministro El Troudi también negó que el bolívar esté sobrevaluado y recalcó que su valor es el apropiado en relación con el resto de las divisas que operan en el mundo.

Finalmente, reiteró: “No está planteado, en lo absoluto, la devaluación de nuestra moneda nacional. Eso se mantiene firme y solamente a través de algunos intereses particulares es que se especula en torno a la necesidad de devaluar. No está planteado porque sencillamente, tal como lo indican nuestros estudios, el tipo de cambio seguirá en 2,15 bolívares fuertes por dólar”.

which more or less translates as:

Minister El Troudi also denied that the Bolivar is overvalued and restated that its value is appropriate in relation with the rest of the currencies that circulate in the world.

Finally, he reiterated: "It is absolutely not planned for there to be a devaluation of our national currency. It remains firm and it is only certain private interests that speculate with regard tot he need to devalue. That is not being considered simply because, as our studies indicate, the exchange rate will continue being 2.15 Bolivares Fuertes per dollar.

Now, those who have followed the discussions on the economy here know that it has been pointed out repeatedly how overvalued the Venezuelan currency is and that even economists allied with the "process" see that clearly. Some in the comments section have argued, rightly or wrongly, that overvaluation could well be an intentional policy to help make the importation of capital goods cheaper.

Ok, that is one plausible explanation ... but if that is the plan apparently the Planning Minister hasn't been let in on it yet. As a result, rather than helping to educate the Venezuelan public by telling them that the overvaluation is part of a plan to import more capital goods (if that indeed is the purpose of it) he takes the totally insane/asinine/bullshit/dishonest/clueless/head up his ass (pick one) position that the Bolivar is NOT overvalued.

I defy anyone to fly down to Venezuela, go to the Italcambio exchange house in the airport, change their money at the official rate of 2.15 BsF per dollar, pass one day spending those Bolivares, and THEN tell me the Bolivar isn't way overvalued.

WARNING: you will probably need to visit a rape counseling center after doing this little experiment because even though you might not exactly have been raped you sure will FEEL like you have been.

Anyways, it is hard for me to feel good these days about where all this is going when this is the type of people they have at the helm. And I know some have taken great umbrage at my portraying those in the government as being a bunch of inept clowns.

Ok, maybe they aren't clowns. But you do have to admit, the resemblance is striking.

Can you tell which is the Venezuelan Minister for Planning and Development?





(for the answer see the comments section)
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Now that some of the hostages held by the FARC have been liberated by the Colombian military Colombia, the FARC, and their relationship with Venezuela are all back in the news. This actually gives me a chance to write about something that has been bothering me for several weeks now but which I didn't have a chance to write about when it first happened. Further, the points I will make will likely piss off all my readers - both those who like Chavez, and those who oppose him - but it is something I think and it is important so here it goes:

Chavez has long been thought to have sympathies for the struggle carried on by the Colombia guerrilla group, the FARC. They may be ideological sympathies, or they could just be sympathies for a political tendancy that has been violently repressed and has often had no choice but to fight back through military means. Some assert that Chavez has actually aided the FARC, though that isn't really known for sure. But up until recently he clearly saw the FARC as a legitimate group, that was employing violent methods for legitimate reasons, and that it should be recognized as such.

If that is what Chavez thought, I can only say I share those thoughts. Whether I not I agree with any particular groups ideology is besides the point - all ideas and political parties should be able to operate freely and contest for political power through peaceful electoral means. When that right is denied to people they then have the right to resort to other than peaceful means to assert their political and human rights.

This is hardly a novel idea or something thought up only by a bunch of leftists. Tomorrow is the Fourth of July, the Independence day of the United States, and if you bother to read the famous document published on that day way back in 1776 you will see the very same ideas very clearly expressed.


Those who know Colombian history will know that radical leftists have long been violently repressed. This has led to the formation of groups such as the FARC which have fought to win their basic rights that are otherwise denied them.

Now, of course, any use of violence is only legitimate to the extent that you are not allowed to peacefully exercise your political rights. If circumstances change and you can peacefully engage in the political process then violence should be ceased.

In the case of the FARC they thought they had such a moment in the 1980s when the Colombian government offered them peace and encouraged them to set up a normal political party to compete for power. They did and called it the Union Patriotica.

Unfortunately, rather than being a genuine attempt at peace this largely appears to have been a trap which the Colombian government and is para-military death squads then used to massacre thousands of leftists. An entire political party was decimated with thousands of its leaders assassinated including two presidential candidates and numerous senators, congressmen, and other elected officials. Those who don't recall that history would do well to review it.

Since that time the FARC has continued with its military struggle. And the Colombian government and their paramilitary death squads have continued their murderous ways. Hundreds, even thousands, of leftists and union leaders continue to be murdered and the scorched earth policy of the Uribe government has led to Colombia having over three million displaced persons - one of the largest number of refugees in the world.

Into this situation stepped Hugo Chavez a few weeks ago. He stated that the time for armed guerrilla movements had passed and that the FARC should lay down their arms. He said they should release all their hostages unconditionally. He went on to say, and this is literally takes my breath away, that the FARC is attracting U.S. intervention to the region and are what actually gives the U.S. an excuse to intervene in Latin America. Presumably if the FARC surrendered the gringos would go away!!

Given that Chavez sometimes shoots from the hip one could think the above was somehow a mistake. But today that notion as dispelled as he just said pretty much the same thing.

Now what I have to say has actually been said by quite well by others, particularly by the person who started this thread over at Aporrea. The questions that naturally come to the fore are why does Chavez think he is in a position to tell the FARC that they should disarm and how can he possibly think that their surrendering will make things better??

Again, it may or may not be the right thing to do for the FARC to lay down arms and integrate into the peaceful political process of the country. If the conditions will allow that then that is what they should do. But unless they have reason to be certain that they won't be massacred again, just like the Union Patriotica was, then hanging onto their guns and putting up a fight, win or lose, is probably better than just committing suicide which is what laying down their arms could well amount to.

In any event, the people who are going to pay a very heavy price, in lives and blood, for a mistaken decision are the FARC and those who support them. It is literally their lives on the line - not Chavez's. And for him, from the safety of Caracas, to tell them when what risks should be acceptable to take when he can't possibly know the political situation inside Colombia better than they do, sure doesn't make it look like he has their best interests at heart.

Further, his statement that they are what attracts the U.S. to the region in the first place is so absurd it is hard to know where to begin. Sure, if you lay down and play dead maybe the bully will leave you alone. If you give up all your political ideals, stop advocating for them, and don't try to put them forth even in a peaceful way - if you do all that MAYBE they'll stop killing you and MAYBE the U.S. government will stop giving them billions of dollars to help them kill you!

Of course, if you are just willing to give up all your beliefs then what were you ever fighting for in the first place????

And if Chavez is so willing to tell others to give up their beliefs just to placate the neighborhood thug you have to wonder if he really has any true beliefs of his own.

Its a pretty open secret that Iran aids the Iraqi insurgents in their fight to liberate their country from U.S. occupation. I suppose they could tell the Iraqi insurgents "hey, if you just lay down arms and stop fighting the U.S. troops will leave" but somehow I can't imagine them doing that.

Again, either you think someone has is engaged in a legitimate fight or you don't. But if you think they are, and you see that they can't easily lay down arms without a very real possibility of just being slaughtered and having to give up their political ideals completely, then you don't call on them to surrender as Chavez has done now twice with the FARC.

Maybe Chavez is doing this because he was getting heat from the United States? So what, I thought Chavez wasn't supposed to be afraid of the "empire"? The Iranians get heat, and outright threats of military attack, all the time and I don't see them folding and giving up on their beliefs. And if he wanted to lesson the heat he could have just shut up and not said anything - you don't have to HURT the struggle of someone you think has a legitimate fight by making calls for them to surrender and undermining their morale.

Quite frankly, this smacks of self-serving opportunism on Chavez's part. Many of his opponents have long asserted that Chavez is all about Chavez. That is, that he has no true beliefs or principles and does whatever he does just to boost himself in the opinion polls and save his own skin.

I still don't know if that is true. But his self-serving flip flops with respect to the FARC sure do make it look that way. And if this is the kind of allies the FARC has, well, no wonder they're in trouble.
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A few weeks back the U.S. newscaster Tim Russert died suddenly. When I mentioned this to a friend he seemed nonplussed. Not that I care about Russert particularly but I asked my friend how he could seem so unsurprised and indifferent to the sudden death of a fairly well known persona. His reply? "He was a fat, out of shape slob. Of course he had a heart attack".

Can't argue with that one. Personally, given how fat and out of shape he was I was surprised that Russert's doctors didn't do more to avert what had to be a very obvious danger.

Thing is, just as people sometimes get flabby and out of shape so too do economies. In fact, economies should probably be looked at every so often to see if they seem to be "at risk" for a major adverse event and if so, well, maybe they should consider doing something about that.

To that end, I thought it might be helpful to look at some economic data from one particular country to see if we might be see from basic data whether the economy seems to be healthy and well balanced, or if it seems to drifting into a danger zone. Before I present the data I want to be clear that I am not out to put on the spot or embarrass any one particular country so the country whose data this is shall remain nameless:



Lets see, imports up over 120%, consumption up over 70%, manufacturing up 24%, agriculture up 8%, and non-oil exports down 3.6%.

I don't know: if you went to your doctor and your waistline, good cholesterol, and bad cholesterol numbers where this far out of whack what do you think they'd say?

And a final point, I have no idea where that country is getting all the money to have imports and consumption go through the roof while its manufacturing sector is lagging badly and it doesn't export much of any finished products - all I can say is whatever source is I wouldn't want to be around when it dries up. Things could get unpleasant, rather like having a heart attack is unpleasant.
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I hope that all the talk of inflation and some mediocre economic numbers hasn't given anyone the false notion that Venezuelans are all of the suddent getting poorer.

They aren't.

In fact, consumption is still increasing quite rapidly. According to one economic analyst consumption is expected to grow 12% this year. While lower than the 20% growth of last year it is still fairly high. The analyst expects that growth with accelerat in the second half of the year as the government has lots of money to spend (with oil at $143 a barrel "lots" is probably an understatment) and given the importance they attach to the local elections they probably will spend it.

Along these same lines we learn that sales in shopping centers are up another 15% this year. Again this squares perfectly with what you will see if you ever go to Venezuela - shopping centers are definitely their major growth industry.

Back in the 1970s some Middle Eastern countries thought they'd become the worlds banking center.

Now maybe Venezuela thinks it will become the worlds shopping center and people will come from around the world just to shop in all their really nice malls. And I do say, some of their new malls are really nice. Then again considering how expensive everthing is in Venezuela I am not so sure that will work out.

Maybe they should try to think of something else... like actually learning how to make some of the stuff they sell in those malls. That is, if they can tear themselves away from the malls long enough to do that.

Sadly, when your GNP is increasing at only 4.8% and consumption is increasing at 15% something else has to give, and that "something else" is likely investment in new industry.
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Having a comments section is great - sometimes other people manage to succintly express my ideas better than I can. So here is much of my last couple of weeks postings and comments summarized by "Eric" far better than I could ever hope to do:

Anonymous,

You keep saying that OW has reached the conclusion that the government doesn't have a plan based on no evidence. But that's not quite right.

True, the government could have a plan that it e simply hasn't made public. Certainly possible.

But what leads OW, and a lot of us here, to believe that the government doesn't have a plan is not simply that it isn't made public, but what the numbers we DO know about suggest.

As OW has pointed out, the numbers released for manufacturing are very low and the numbers regarding agriculture are ambiguous at best. Furthermore, in this most recent post, we see that the tractor production numbers are far below expected (the government said initial production would be 5000/year, yet it produced 476 tractors in 2005 and 1,652 in 2006) and production is possibly even in decline.

Since we don't see good economic results, the best conclusion we can come to in the face of no public economic plan is the fact that the government simply doesn't have one.

Now, you're conversations with government officials may give you some great inside info that suggests otherwise. But we don't have access to that information, and you're kidding yourself if you think we're going to just take your word for it.

So you might be right. But without your "inside information," any reasonable person would have to be very skeptical about the government having a coherent plan, since none of the current EVIDENCE points to it.

Thanks Eric. Without commenters such as yourself to summarize things, even I might be lost!
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It is recognized by most people that in order for Venezuela to progress it must diversify its economy and industrialize both to reduce its dependence on oil and increase the standard of living of the population.

Doing that will require huge investments, good planning, monitoring of the plans and adjusting to changed conditions, and strong execution.

In other words they need to carefully plan out what they are going to do and then closely monitor the execution of the plan and see how it measures up to initial expectations.

The development of the plan is the subject of another post but right now I'd like to look at how well they are monitoring existing initiatives. To that end we will take a look at the VenIran tractor factory that was opened in 2005 as a joint effort between Venezuela and Iran.

The factory was the revitalization of an effort actually begun during the oil boom of the 1970s but which was never completed - largely because Venezuelan farmers didn't want to be forced to purchase low quality Venezuelan made tractors.

The current iteration of this project assembles tractors from parts shipped in from Iran. It also produces several other types of farm implements. Of course, over time the idea is that more and more of the components of these products will be made in Venezuela thereby creating Venezuelan industry, jobs, and increasing its technical capacity.

In fact, the Mission Statement of the VenIran project is as follows:

VENIRAN project’s expected outcomes:

• The revitalization of Fanatracto Company
• Employment opportunity creation for 5000 persons both
in the manufacturing sector and supporting service industries
• Foreign currency revenue obtaining opportunity creation
• Assisting Venezuela in setting up an assembly line, and a
paint shop for tractor manufacturing as well as helping
the country to gradually achieve local content in parts
production whereby savings in foreign currency spending
would be made
• Transfer of technology and its localization
• Invigorating the industries affiliated with tractor manufacturing
• Generating optimum profit margins for both shareholders
• Generating value-added output that would contribute
to Venezuela’s GNP
• Exporting tractors to neighboring countries and developing
market share in the international arena

I find all of the above objectives to be excellent. Venezuela should be building up industry, gaining new technology, creating well paying value added jobs for its citizens, producing more manufactured products for its own markets instead of importing them, and exporting what it can to other countries. Further, the tractor industry SHOULD ultimately be profitable so that it is a source of wealth for Venezuela rather than being one more drain on the State coffers.

I really don't think the Mission Statement for this project could be any better. Every point on there is more than worthwhile and the project as a whole clearly deserves the support of the Venezuelan government. Venezuelans who want to see their country progress should be very happy to see these sorts of endeavours undertaken.

However, the ultimate worth of this project depends on whether or not the objectives laid out in the Mission Statement are achieved. If they are, then the investment was more than worthwhile. If they aren't, then clearly this money wasn't well spent (of course, a certain percentage of new projects will always fail, but those undertaking the projects have to push very hard so that the greatest percentage possible succeed).











So how are we to know if those goals are achieved? Simple, we have to monitor key metrics regarding the projects such has how much revenue it generates, how many tractors it makes, how many people it employs, what percentage of the content is made locally, and, not least, whether it makes a profit or loses money.

So lets see what we know about this project.

First, we can go to the company's web-site which is here. There we can find out that they are assembling kits from Iran but that within a year they were to have 30% of the parts come from local suppliers (the 30% within one year was also given here). They expected initial production to be 5,000 tractors per year.

We also learn that this year 210 tractors were exported to Bolivia for $4 million dollars. We also learn that the factory has opened new farm implement lines and by next year it intends to be making, among other things, harvesters.

Unfortunately, that is about all the information to be found there. So in search of additional information I scoured the Internet.

From the Venezuelan Information Ministry I lean that the company produced 476 tractors in 2005 and 1,652 in 2006. It also informs us that the tractors cost 50% less than models imported from the U.S. and now control 80% of the Venezuelan market. The factory had (in March 2007) 100 Venezuelan employees and 6 Iranian technicians. Also, it was said that the level of domestically made components was 11% and that exceeded the initial government quota of 5.5% (note this contradicts VenIran's own web site which said the goal was 30% domestic components within the first year though we read here it is now up to 18%).

From this article we find out that the factory has been exempted from local city taxes for three years and is looking to extend that exemption for another three years.

Looking at another article we see that the initial start up investment was $35 million dollars. From the same article, which is in an opposition media source, we supposedly learn that production is declining and far short of what it is supposed to be and that the union representing the workers is supposedly unhappy about many things including corruption and the lack of financial information.

I suppose there may be more information out there somewhere. But in a couple of hours of surfing the Internet that is what I could find.

So how does this information measure up to what we would need to see how they are doing against the Mission Statement published above? To be frank, very poorly. In fact, the paucity of information is such that we are unable to tell if this project is a smashing success or a complete failure, or anywhere in between.

We don't know what their production was for last year.

We don't know what total sales were for any year.

We don't know what how many tractors they exported and how many were purchased locally.

We don't know what the average sale price was nor how much it cost to produce each tractor.

We don't know if the company as a whole made money or lost money.

We don't know how much money the government continues to put into this company, if any.

We don't know what the quality of the tractors is and what the frequency of breakdowns has been.

I could go on and on, but I think the point is clear. The Venezuelan public is being kept in the dark about how this very important project is going and whether it is meeting its established targets or not. Why!!!!!

Further, the fact that this information is not made public of course raises another big concern - maybe this information isn't being tracked at all which would mean the Venezuelan government itself is in the dark as to how the project is doing.

Of course, it is not impossible for public entities to keep the public well informed as to how they are performing. The U.S. government owned passenger rail system, Amtrak, does. One can simply read their financial statements online. Hell, even though the government in the U.S. doesn't care about passenger rail they still even put their dreams for future projects online for all to read.

Further, its not as if entities run by the Venezuelan government don't know how to put financial statements online. Despite what the incompetents and liars at Transparency International may think PDVSA sure does.

Even the large aluminum maker, Venalum, puts financial and operational results on the Internet.

So what is up with VenIran that they can't do that? Given the importance that these types of initiatives have to Venezuela and its people there should be full transparency with regard to what the projects goals are and how well actual operations are doing with respect to those goals. Yet what we have is a black hole.

Is this any way for an important and serious development project to be run?

I certainly don't think so. And it certainly calls into question to true intentions and competence of the Venezuelan government.
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