The worse it gets, the better


He even looks like El Monje

Writing around the time of the Russian hyperinflation (1919), Lenin had this to say…

Hundreds of thousands of ruble notes are being issued daily by our treasury. This is done, not in order to fill the coffers of the State with practically worthless paper, but with the deliberate intention of destroying the value of money as a means of payment. There is no justification for the existence of money in the Bolshevik state, where the necessities of life shall be paid for by work alone.

Experience has taught us it is impossible to root out the evils of capitalism merely by confiscation and expropriation, for however ruthlessly such measures may be applied, astute speculators and obstinate survivors of the capitalist classes will always manage to evade them and continue to corrupt the life of the community. The simplest way to exterminate the very spirit of capitalism is therefore to flood the country with notes of a high face-value without financial guarantees of any sort.

It’s hard not to go back to this kind of reasoning as we see Nelson Merentes shoved out of the largely-ceremonial-but-symbolically-loaded post of Veep for the Economy in favor of Rafael Ramirez, a paid-up-member of the looney squad.

To be clear, the specific mechanism at play in Venezuela is different from the one Lenin chose. Rather than hyper-inflation, the type of monetary insanity the radical wing of bolivarianismo has settled on is an aggressively distorted foreign exchange market that utterly destroys the competitiveness of Venezuelan private enterprise vis-à-vis the state sector, which is increasingly the only one with access to cut-rate forex.

Giordani’s message to the private sector is simple: “from now on, I’ll import at Bs.6.30 per dollar, you’ll import at Bs.40…let’s compete!”

The dynamics that result are different from what Russia experienced, but the overall shape of the reasoning isn’t miles apart:

A seven-fold gap between the official and the black market dollar rate is provoked, as the private sector is cut-off from access to foreign exchange. This is done not in order to anchor inflation or prevent capital flight, but with the deliberate intention of destroying the ability of private entrepreneurs to operate their businesses at a profit. There is no justification for the existence of a working forex system in the Bolivarian state, where the necessities of life shall be imported by the government alone.

Experience has taught us it is impossible to root out the evils of capitalism merely by confiscation and expropriation, for however ruthlessly such measures may be applied, astute speculators and obstinate survivors of the capitalist classes will always manage to evade them and continue to corrupt the life of the community. The simplest way to exterminate the very spirit of capitalism is therefore to establish a state monopoly on the use of foreign exchange, destroying the ability of the private sector to operate at a profit.

As L.V. Leon writes in ProDaVinci, there isn’t really anyone left, inside or outside of government, who fails to see the devastating effects on prices and goods-availability of the current policy mix. So when we see the wing that’s dead-set on ‘heightening the contradictions’ empowered to the detriment of the pragmatists, there’s just one conclusion left: la vaina es a propósito. 

37 thoughts on “The worse it gets, the better

  1. It’s been a propósito for a very long time. You thought it was sheer stupidity? Absolutely not. They have never been interested in governing propperly, but controlling Venezuela, which they do perfectly. They dont give a rat’s ass on protests or shortages just as long people keeps voting for them. And the oppo still asks them to “govern”…


  2. Chavez was a narcicistic megalomaniac who needed to shower himself with huge dosis of public adoration to feel comfortable , popularity was his God , what justified everything . The movement he left behind incorporated into its DNA this adoration of Popularity which obssesed the mind of its founder . Its also the basis of legitimacy in the modern world of politics , even for tyrants. The regime has shown it self very attentive of ensuring a maximum popularity but because they are so incompetent and ineffectual at running things they ve bought their popularity by ultra generous populist and clientelar policies spending every last penny they had or could borrow on giving people all kind of goodies and subsidies and…..through strambotic lies and media manipulation.
    The money is gone so they canno longer rely on the munificent hand of the Countries oil income to keep their constituency happy and the rest of the population appeased . they are stuck . They are stuck because even though they feel the need to continue buying peoples popularity with freebies and handouts and prodigal subsidies the canno longer do so. Runaway inflation and crime , constant shortages and a broken down infrastructure of public services doesnt do their popularity any good . They have to follow another strategy where media showmanship and manipulation substitute for the old system they cano longer afford .


    • Dont think that most people in the regime are hard core dogmatic leninist , most are simply heirs to Chavez extravagant way of doing and thinking politics . They desperately want o keep their popularity , thats why despite everything they still give a lot of attention to preparing for elections . They are not ideologically ruthless as Lenin was , they are Venezuelan consumerists and opportunists with a thick barnish of ideological rethorical thinking. They have bungled themselves into a situation where they have to move closer to a Leninist strategy not because they really want to , but because they are looking at their threatened survival as a regime if they dont do a few radical things . Maduro specially has eased his treatment of Private producers because he realizes that shortages hurt the regimes all important popularity . If oil prices rose to 150$ a bl they would keep doing what theyve done these last 15 years , theyve had ample opportunity to play the Leninist card before and havent done so , because despite the rethoric deep down inside they are not lenin childrens but chavez children , which mean people who want to attract popularity on the cheap , fostering mass consumerism and clientelism and extravant showmakindg


    • like you mention in your next comment, I agree that chavismo only inherited chabe’s way of doing and thinking politics but not exactly his obsession with popularity; that is, for chabe popular adoration was by itself an objective while for today’s chavistas it is only a means to an end, which in this case is to maintain the status quo wherein resources of the Venezuelan state are siphoned daily into the private fortunes of whomever has a low enough ethical threshold to play the game.


  3. Of course it is intentional but I think the reasons are not those of Lenin. Here the reasons are arbitrage and deviation of a significant amount of the petrostate to keep pumping the clientelist model and to overpower any opponent in elections.

    At the same time that wealth derived from arbitrage has allowed to finance media purchases, companies and other more vane acquisition for the boliburgueses.

    There is an honest believe that control over these things, while creating an illusion of normality, is the way to reach pseudostability. Where there are private media (in spite that they are owned by members of the official political elite) and where frequent elections occur where the financial benefits of the government party are enormous. If you don’t pay close attention, it all seems OK. It is not about good governance. It is all about elections and political campaigns.

    I guess my argument is that Lenin did this as a transition to something else. As part of a traced plan. A path. To chavistas, those that are really in power (Diosdado et al), we are where they want us to be. The revolution is complete.


  4. I do wonder how much longer can this go on. It could be six months, but it could also be six decades. I certainly hope Venezuelan oil basket drops to below $90 soon.


  5. Francisco, …

    I like the point you are making. However, I am always uncomfortable with comparisons of anything chavista to Lenin. Bear with me here for a moment:.

    On the one hand, take Lenin’s trackrecord:
    The Lenin quote comes from the period of “war communism” when the new Soviet state was occupied by armed froces from about 17 of the previously mutually warring states in WWI, Lenin always advocatd that a justification for a social revolution was attaining “a new level of social productivity.” Many things went wrong in the ensuing years, to say the least. However, in a state where, in addition to the ruinous world-war up to 1917, and the devestation of the civil war of 1918-1921 (and foreign intervention),, and where essentially the entire intellegencia of old Tsarist Russia having had left the country (emptying academic institutions), NEVERTHELESS, Russia rapidly passed through its Industrial Revolution (which had taken place in N. America and Western Europe over a century before) in record time. In less than another 17 years it was out-producing Nazi Germany, and went on to defeat about 4/5 (?) of the entire German war machine.

    Now, take a look at “21st Century Socialism”: …
    Well, what can I say! Populist/clientalist rentismo certainly fails to “pay for the necessities of life with WORK”! (emphasis added) And, then there is the fact that the “new level of social productivity” of chavista “socialism” can’t even pump oil out of the ground fast enough to float the state.

    The “Magical State”: that has been and remains Venezuela [per Fernando Coronel] in both popular and elite outlook (pre- and post-Chavez) is quite different from the notion that “… the necessities of life shall be paid for by work alone” (as in Marx’s definintion of socialism “From each according to his ability, to each according to his work!”)

    So, whatever one may think of Lenin and the early years of the USSR, I think, from a spirit of fairness, and intellectual honesty, it is rather insulting to Lenin to allow “21st Centuty Socialism” to pretend it has anything to do with Lenin’s concept or practise of socialism. (Sorry Mr. Giordiani, Ms. Marta Harnecker et al, you are rediculous and incompetent pretenders.)


    • “In less than another 17 years it was out-producing Nazi Germany, and went on to defeat about 4/5 (?) of the entire German war machine.”

      Ah,…no. Out-producing? Certainly not in food/agriculture. Almost 6 million Ukrainians died between 1933-36 from starvation. Even considering ‘industrial output’ the numbers are highly suspect. You can’t compare what the Soviets were producing at the time with the industrial products being turned out by companies like Krupp, Thyssen and MAN. Furthermore, the Soviets defeated 4/5 of the Nazi war machine by importing food, which they had none, and military equipment from the United States, which was in extremely short supply, through the ports of Archangel and Murmansk.


        • But let’s remember: 22 million Soviet citizens died in WWII, not counting what Stalin got killed. The Soviet role in the defeat of Nazi Germany was definitely huge as well, which doesn’t take away the merits of the US contribution.


    • The Holomodor, or famine that was pre-meditated by Stalin and his goons to break the will of Ukrainians and impose collectivization on its farmers, happened from 1932 to the end of 1933. One quarter of the Ukrainian population, or 7 million starved to death, according to generally accepted figures.
      That *small* detail needs to be taken into account, when discussing how the Soviet state achieved the admirable export of 1.7 million tons of grain needed by the West. (Hint: the Kremlin took over all the farms in Ukraine’s “breadbasket of Europe”.

      I suspect that this achievement of agricultural production (and oppressive censorship of the Holomodor) provided the Soviets with respect in trade with the West. Trade was further enhanced over the carving of Poland by Germany and the Soviet Union, thanks to the Ribbentrop-Molotov Pact, or German-Soviet Pact of 1939.

      Soviet respectability gained a further toehold during the Conference at Yalta and through the Potsdam Agreement, all the while, the US and the UK showered their blessings on Joseph Stalin, over a ruined Nazi Germany.

      History, like current events, is often much, much more complex than what one reads.


    • If we take out Venezuelas oil production ( which before the 2002/2003 strike was produced by less that 40.000 workers ) Venezuelas total industrial and agricultural output wouldnt allow Venezuelans to reach the living standards of Haiti !! Thats how productive Venezuelas total productive workforce is !! Russia is painted to be a really backward country before WWI but that was not really the case , Industrially it was a heavy weight , had a healthy agriculture and a rich mining and oil industry : Politicaly and socially it was backward but in many other respect they were impressive , Maybe 10 years of peace would have allowed it to achieve an economic growth to rival that of germany or other advanced european nations . Also its scientific and technical elites were among the most advanced and they had some very top class educational academies and institutions . Thats hardly the case in Venezuela . We produce beauty queens, great baseball players , fabulous musicians and some odd great talent or two, but otherwise were far behind what russia was before WWII .


  6. the worst part of this is that we are just guessing what they are thinking, for all we know diosdado could do a coup next month, we really don’t know wether they’re looneys, masterfully brilliant or just incompetent or possibly a combination of the three -Inspector Drebin Style-, believe what you want but we’re all shooting in the dark and the uncertainty kills me, hope the opposition have one or two infiltrated guys in the top circles and their seemingly absence of strategy it’s actually a delicate behind the courtains work, just wishful thinking I guess.


  7. Francisco assummes that the demotion of Merentez and his replacemente by Ramirez spells a total thriumph for Giordanis view of things . Another way of looking at it is that Maduro’s authority is so weak , so incapable of resolutely settling the conflict between the two that he has opted for giving the job to someone who is neither a Giordani follower nor a particular partisan of Merentes and who has the formal standing to occupy the Job as a way of gaining time while things somehow are sorted out. Certainly to have Giordani stall Merentez implies a surprising resilience on his part , but on the other hand Maduro is so weak that he must favour the status quo ante as the most simple to maintain , the one requiring the least effort , even if there is hell to pay later , I suspect things are less cut and dry that might appear from this surprising measure . People who lack resolution are the ones most drastic and desperate in taking wild measures to convince themselves and others that they are not weaklings . this is what I fear the most from Maduro. Also as a Child of Chavez appearances and showmanship are really all important to him , thus the request for the Assembly to hand him all out powers . That makes him look and feel strong , something he is in lot of need of. Whether he will know what to do with the powers he is given is another matter altogether.


  8. Well, at most we have a banana republic square version of what happened in Russia, for better than worse.

    It’s funny: Stalin also kept talking about the kulaki who were “hoarding”. His solution, though, was not to import massively (although there was some of that), but rather to use more terror, collectivize, etc.

    Tom is right that Lenin’s statements were made during the Civil War. Afterwards Lenin even initiated the NEP. Of course, eventually he would have seen the abolition of money, but only in the very far future. Even Stalin, who proceeded to end the NEP as soon as he could, did not consider pursuing such a thing.

    And Lenin’s people do have, to their avail, the transformation of the Russian Empire from a feudal land into something else, rising literacy levels at amazing levels. In comparison, Chavismo’s fight against illiteracy is one of the most pathetic farces: the official decrease is tiny and shows a slowing down of what was going on.
    On the other hand, Russia’s industrialization was not what Stalin others claimed.

    In any case, let’s not forget something about those times, to a large extent close to what we see in Venezuela: the Russian intelligentsija did not realise the fundamental feudal character of their country and they spent more time speaking in English (already back then) or French to the West about the horror of the Bolsheviks.

    Of course, our opposition has a much easier position. But I hope whatever happens on election day in December, oppo politicians, for a change, stay in Venezuela and go around the country to talk and listen to people talking in Spanish instead of going to New York, Miami or London or Paris to talk in English or French.


  9. Epa, yo puse esto en mi muro hace semanas, con esa interpretación (ya entonces se hablaba de “guerra económica”. Me voy a poner en huelga. :-P


  10. so no one is paying attention that maduro is surrounding himself with military “managers” putting them in government top posts and paying the rank and file more than anyone else in the country?


  11. so we’re pretending we didn’t read the WSJ article? which notes that Barclays’ analysts see Rafael Ramírez as a “pragmatic policy maker”, who is “considered among the most influential figures inside the government pushing for ‘a fully flexible alternative exchange rate market’“.


    • If you’re going to highlight an article, ap, make sure it has more than one heavy-weight quote, plus a fished-out blurb from a client note by Barclays-We-Welcome-Lehman’s-Displaced-Latam-Desk.

      And if you’re going to the trouble of commenting, make sure you use the full spectrum of that quote, rather than a snippet. Here’s the other part, if you’re pretending it doesn’t exist:

      “It seems that the lack of leadership after President Chavez’s death is forcing the government to continuously change the balance of powers, and, in our view, is a sign that the government lacks a clear economic course,” analysts for Barclays said in a client note Tuesday.


      • if you’re going to the trouble of pointing to the context, make sure the context really negates the point i was making. saying that “the government lacks a clear economic course” because two economic ministers are nudging it towards market-friendly policies is… kinda at odds with soviet comparisons, don’t you think?


        • I was merely answering the flimsy trapito you were trying to goad us into mentioning, after your artful framing of same. Maybe you need to be clearer and provide a more substantial article, the next time.


  12. Funny thing is, capitalism is alive and well in Venezuela: buhoneros (buy low, sell high, consumer price controls be damned) are 50+% of the workforce, and are virtually untouchable from this Government’s poit of view.


  13. The spirit of capitalism is alive and well in so far as ordinary people engage in microbusinesses as a way of securing a livelihood (other sources of livelihood being shut). Its a much punished capitalism however once you rise to the level of a corporate business . Just talked to a person working for a corporate sized business. Their problems are huge. Their plant is working at half capacity because, they cant get certain raw materials they need to produce many of their products, nor do they get the foreign currency they need to import those raw materials that have to be imported, There is a shortage of cardboard and plastic containers to hold their products, The manufacturing process is constantly disrupted or shut down because absentiism is 40% and when a worker who handles a process doenst appear all other workers dependent on that process simply spend their time on coffee and chitchat, The worker unions are aggresively making salary demands that if met quite simply would cause the business to shut down , Their buyers only want to recieve their deliveries piece meal and in small despatchs because they fear that if they accummulate too much inventory they will be accused of being acaparadores and have their inventories confiscated. Not having access to FOREX they cannot repatriate dividends to their offshore shareholders, their prices are regulated and kept frozen for years. This makes the management consider downsizing but the need for that is tempered by a surge in young smart employees leaving their jobs to live or study abroad. Corporate Capitalism is a persecuted activity in Venezuela , one which is beset with all the obstacles and difficulties which an ideologically poisoned govt can devise. . ,


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