Does that really reduce inequality? Examining the economic crisis in Venezuela
Photo taken from NPR News Article “Venezuela’s Economic Implosion Exacerbates Inequality”, http://www.npr.org/sections/parallels/2016/07/07/485058730/venezuelas-economic-implosion-exacerbates-inequality
Inequality and the survival of democracy are thought to be inextricably linked. And, of course, politicians hoping to stay in power can mobilize the poor by making efforts to redistribute income. Yet, the case of Venezuela seems to suggest that simply lowering the Gini coefficient without putting long-term plans into place to reduce poverty can backfire.
Both of the articles that I read for this week eerily forecasted Venezuela’s current economic crisis, though they were written 6 or 7 years ago. Fukuyama and Kaufman acknowledged Venezuela’s remarkably low Gini coefficient among Latin American countries but warned that using oil-revenue to fund such programs was a risky move. According to the World Bank Overview of Venezuela, the Gini coefficient of inequality dropped from .49 to .4 from 1998 to 2012 through these programs. Fukuyama specifically argued that though the poor were mobilized to support Chavez, his Bolivarian Missions were not “ smart policies that generate self-help incentives, but ones that increase the dependency of the poor on the state” (Fukuyama 78). Fukuyama spent a great deal of time discussing “smart” policies that would help poor families in the short-term and the long-term. He stressed that while CCTs had helped poor families in the short-term and seem to be incredibly successful, it is unclear whether or not the stipulations for receiving payments were truly breaking the cycle of poverty. The example of Venezuela should warn us that CCTs and other programs that seem to lower inequality must be evaluated for their potential effects in the future as well.
Funding has dried up for subsidized goods in Venezuela since the articles were written. The price of oil has crashed, leaving Venezuela unable to pay for the programs anymore. No information I could find indicated that Chavez’s “missions” assistance came with any conditions, like the CCTs in other Latin American countries. Yet, his programs were much more than giving impoverished families money. They encompassed health care, education, and purchasing of goods at lower prices. It seems that Fukuyama’s argument that the programs did little to help the long term issue of inequality rang true, despite the fact that they did increase quality of life for the poor. In one current events article I read, the scene described is an upscale town in Venezuela with cafes serving fancy coffees and pastries while a government-subsidized market nearby is packed with people but suffering from shortages on standard goods such as butter and flour (Navarro). The government is no longer able to support these programs and the poor are left with food shortages, energy shortages, and a reliance on the black market to receive basic goods.
Unfortunately, the problem of inequality in Latin America seems to be cyclical. The politicians see the inequality and push through programs to alleviate the poverty, but the effects of these programs only serve to increase reliance on the government.
What about the effect on democracy? It does not seem that democracy necessarily decreases inequality according to the assigned articles or the crisis in Venezuela. Chavez was able to assume a dictatorial-like-power in Venezuela because of inequality under the democracy. Now, President Maduro faces anti-government protests from the poor.
In response to protests against him, President Maduro recently expanded his executive powers, according to The New York Times (Casey). This points to a case in which inequality has contributed to an erosion of democracy. Still, this is not a perfect example. Kaufman argues that inequality does not have a strong relationship with left-voting, which still seems to hold true for Venezuela. First of all, Kaufman argues that Chavez was able to stay in power after his programs helped the poor, because they were mobilized to vote for him. Today, though democracy is crumbling, it is not at the hands of the people but rather at the hands of the leader, who is resisting the cries of his opponents.
I used these current events sources to get a better understanding of the current economic crisis in Venezuela.
The first two links are articles specifically mentioned in this blog post.
http://www.nytimes.com/2016/05/28/world/americas/venezuela-crisis-what-next.html?_r=0
http://www.nytimes.com/2016/06/21/opinion/standing-up-for-democracy-in-venezuela.html
http://www.nytimes.com/slideshow/2015/01/30/world/americas/20150130/s/20150130-slide-KA69.html
http://www.npr.org/2016/10/06/496911573/medical-shortages-lead-to-avoidable-deaths-in-venezuela
http://www.nytimes.com/2016/09/28/world/americas/venezuela-refuses-us-aid.html