"All of the economic growth in Venezuela is the result of much higher oil prices." --Socialistlemur
This is simply not true. MUCH of the growth has occurred in the PRIVATE sector NOT INCLUDING OIL.
What Chavez did, and what Maduro will continue to do--and what our own FDR did when the rich looted everybody and crashed the economy--is, of course, to stimulate the private sector in every way they can, including (but not limited to) spending the Venezuelan peoples' oil profits where they SHOULD BE spent--on education, health care, help for small businesses and co-ops, land reform, pensions for the elderly, infrastructure, housing, the new Venezuelan Children's Orchestra concert hall, the new police academy, new universities and so on. This is what WORKS in a major, worldwide economic crash (for which we have Bush Jr. & brethren to thank): Keynesian economics;
spending on the poor. It is the only thing that does work. When the poorest of the poor can purchase basic necessities and the next level of poor--the poor majority--has extra cash and starts buying things they could not previously afford (appliances, cars, houses), the economy heals itself. Chavez knew this all along and revved up the economy with the new oil profits, early on--he had negotiated a much better deal for the Venezuelan people on the oil contracts--and, in spite of continued efforts by the rightwing and the U.S. to topple him, spurred economic growth to a sizzling 10%, 2003 to 2008--most of this in the PRIVATE sector NOT including oil--and then helped Venezuela climb quickly out of the Bush Junta-induced, worldwide depression, by refusing to cut spending.
Whatever troubles Maduro is having--and I'm sure that the Venezuelan chamber of commerce, the CIA and U.S. banksters are piling it on--his one sure path to success is to CONTINUE the policies of his predecessor! Fair taxation and strong regulation of banks and big business are also important, and go hand in hand with improving the incomes of the poor and empowering the poor in the political life of the country. The other path--"austerity" for the poor while the rich get richer, and excluding and ignoring the poor majority--leads to ruin, as we are seeing in so many countries, including this one.
You are a completely unreliable commenter, and your attacks on people who ARE reliable--who value facts, who do the research, who subject themselves to rigorous intellectual standards--are lazily unconscionable...
"That educator you quote is unreliable... A propaganda agent who isn't worth much."
YOU are the one who is unreliable. YOU are "a propaganda agent who isn't worth much." You attacked James Douglass the other day--one of the most brilliant men the U.S.has ever produced--with similar vague, lazy, vacant remarks. Remarks worth nothing. Remarks based on total ignorance of any subject you comment on, that I've seen.
You're not even careful about who you're talking to. I didn't quote any educator. But I can tell you one thing: your dumb attack on him gains him points with me.
Whatever they say, the opposite is true; and whatever they accuse others of doing, THEY are doing, or planning to do.
This "rule of thumb" applies to your posts, Socialistlemur.
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Read this and get educated:
Venezuela’s Economic Recovery: Is it Sustainable?
by Mark Weisbrot and Jake Johnston
September 2012
Executive Summary
For most of the past 13 years, most of the discussion of Venezuela’s economy has either assumed or concluded that it was headed for some type of collapse. During the first four years of the Chávez administration, when the government did not control the national oil company (PDVSA), there was indeed a great deal of economic instability. This culminated in the military coup of April 2002, and then an economically crippling oil strike (December 2002-February 2003). The oil strike caused an extremely severe recession, with a loss of 29 percent of GDP. However, even after the strike was over, analysts predicted a dire future and a slow, difficult recovery. International Monetary Fund (IMF) forecasts repeatedly underestimated GDP growth by a gigantic 10.6, 6.8, and 5.8 percentage points for the years 2004-2006.1 Instead, the recovery was very rapid and the economy grew at a record pace over the next five years, with real GDP nearly doubling from the end of the oil strike (first quarter 2003) through the fourth quarter of 2008.
When oil prices collapsed in the fourth quarter of 2008, many analysts concluded that Venezuela’s day of reckoning had finally come. A recession began in the first quarter of 2009, and forecasts remained dire well beyond the beginning of the recovery in the second quarter of 2010. In 2011, the Venezuelan economy defied most forecasts by growing 4.2 percent, and is up 5.6 percent for the first half of 2012.
Nonetheless, most prognoses remain gloomy. Venezuela’s current growth is generally described as unsustainable, with various negative scenarios put forth, including spiraling debt, inflation, and balance of payments crises. However, these pessimistic forecasts have been far off the mark for most of the past decade. This paper looks at the available economic data to see if Venezuela’s economic recovery could be sustained, or even accelerated. We find that Venezuela’s current economic growth is sustainable and could continue at the current pace or higher for many years.
Venezuela’s economy went into recession in the first quarter of 2009, which lasted for five quarters, until the second quarter of 2010. International oil prices had dropped precipitously in the fourth quarter of 2008, falling by 50 percent (from $118 to $58 a barrel). Although at first glance the recession appears as though it was part of an inevitable “oil boom and bust,” this was not the case. Although most of the countries in the Western Hemisphere experienced recessions during the 2008- 2009 world economic crisis and recession, many did not, and it was possible to mitigate the recession or even avoid it altogether with counter-cyclical macroeconomic policy. Venezuela was in a position to do so, since it had a low public debt (and most importantly, low foreign public debt) when oil prices began to fall, and could have borrowed and spent as much as necessary in order to keep the economy growing.
But government spending was pro-cyclical as the economy slowed and fell into recession, and then during the recession. There was a jump in spending in the second quarter of 2010, as the economy emerged from recession. In 2011, government spending boosted and consolidated the recovery.
The Venezuelan economy has now grown for nine consecutive quarters – beginning with the second quarter of 2010; and the current quarter, which ends at the end of September, and will also show positive growth. Although this recovery has gotten a boost from increased government spending, it has been relatively broad-based throughout various sectors. In 2011, utilities, construction, transportation, commerce and repairs, communications, finance and insurance, and mining all grew faster than overall GDP (4.2 percent). Manufacturing, which makes up about 14 percent of GDP, grew somewhat less, at 3.8 percent.
For 2012, the economy grew 5.6 percent in the first half of the year, as compared with the first half of 2011. Here growth was led by construction, which expanded by 22.5 percent over the first half of 2011, due to the government’s program to build housing and alleviate a national housing shortage. In 2011, there were about 147,000 houses built under this program, with two-thirds built by the public sector and one-third from the private sector. Some 200,000 are planned for this year, with over 50 percent of these having been built by September.2 These are large numbers relative to Venezuela’s population; a comparable number for Venezuela’s 2011 construction in the U.S. would be more than 1.6 million homes, or two and half times the number of houses actually built in the U.S. in that year.
Venezuela still has a relatively low debt burden. The most common measure of debt is the ratio of debt to GDP.3 By this measure, the IMF reports Venezuela’s public debt for 2011 as 45.5 percent of GDP.4 Central government debt is just 25.1 percent of GDP; the IMF number includes other public entities, most importantly PDVSA, the national oil company. This is still a relatively low level of public debt – the European Union, for example, has a debt of about 82.5 percent of GDP.
But for most purposes the interest burden of the debt is a more important measure, since countries that pay lower interest rates can obviously afford a bigger debt stock.5 It is also important to distinguish between external and internal debt. Debt owed in domestic currency can always be paid; but the same is not true for foreign debt.
Also, Venezuela’s exports are about 95 percent oil, and the oil sector is publicly owned. So the Venezuelan government receives this income in dollars. Given this situation, it is best to look at the external and domestic debt separately, and measure the burden of each debt by the appropriate yardstick.
For external public debt, the most important measure for Venezuela is its debt service relative to public sector exports, which are oil and oil products. Since the principal can be rolled over (see below), this means that interest payments as a percent of public sector export earnings are the most relevant measure.
For 2011, interest payments on the central government external debt are 3.4 percent of export earnings; they are projected to rise to 4.1 percent by 2012, decreasing thereafter. This is not a large percentage of public sector export earnings going to debt service, so there is no obvious problem regarding debt sustainability for the external debt. If the government decides to increase its spending, and borrows to do so, it will borrow mostly domestically, and so should not need to add much to the foreign public debt. Also, these projections are based on the assumption that revenues are the same as in 2011, so they are conservative; most likely revenues will increase and the interest burden will be lower.
The state oil company also borrows on its own, and its debt is almost all external; its interest payments in 2011 were 1.5 percent of export earnings, and are projected to peak at 3.1 percent in 2012. Although it is a separate entity and its debt should not simply be added to that of the central government, even if we were to add this debt service, we get a peak of 7.2 percent of export earnings in 2012, declining to 5.7 percent in 2017. So PDVSA’s debt service does not change the picture of Venezuela’s debt sustainability.
For internal public debt, the relevant measures are the debt-to-GDP ratio and interest payments as a a share of GDP. These are both very low for Venezuela: for 2011, internal public debt was just 11.4 percent of GDP, and interest payments were 1.4 percent of GDP. The government therefore has much room to borrow domestically in order to finance public investment and, if private demand were to fall again, a stimulus program.
The Venezuelan economy has had two recessions in the past thirteen years. The first was brought on by an oil strike, and the second – which could probably have been avoided with sufficient counter-cyclical policies – was during the world recession of 2009. The predictions of economic collapse, balance of payments or debt crises and other gloomy prognostications, as well as many economic forecasts along the way, have repeatedly proven wrong.
The sharp fall in inflation over the past year – while economic growth was accelerating – indicates that the government has the ability to keep inflation under control while maintaining economic growth. Venezuela’s internal debt burden is very low, and its external debt burden is modest. Even if oil prices were to crash as they did in 2008-2009, the government would have plenty of capacity to borrow in order to counter a drop in private demand. The previous economic recovery showed that private investment was forthcoming, as would be expected when the economy grows; but the government can also replace lagging private investment with public investment. Such investment in infrastructure, including water, transportation, utilities, roads, bridges, ports, communications (including Internet), hospitals, and electricity is very much needed.
With a sizeable trade surplus, Venezuela is unlikely to see any balance of payments crisis in the foreseeable future, and its currency does not need to be devalued. Even if the currency were devalued, the resulting inflation would likely be modest. The biggest devaluation during the Chávez years, in January 2010 produced no increase in the core rate of inflation, and only a temporary increase in the headline rate. Inflation has since fallen to an annual rate of 13.7 percent over the last quarter, the lowest it has been in more than four years.
While in the long run the government may want to consider other currency regimes – especially to make its manufacturing and tradable goods sectors more competitive -- there is no obvious reason that the current system could not be maintained. For all of these reasons, the current economic recovery is sustainable.
An unsustainable economic expansion is one in which there are imbalances that cannot be maintained. Examples would include the U.S. economy in 2006, or a number of other economies (e.g. Spain, U.K., Ireland) that had large real estate bubbles that would inevitably have to burst and cause a downturn. Economies with unaffordable debt service, or large current account deficits can also face inevitable adjustment – although even in these cases, including those of asset bubbles, there are generally feasible alternatives to recessions, or at least to severe or prolonged recession. But Venezuela does not face any such inevitable, sharp adjustment that would push the economy into recession.
Looking at Venezuela’s economy historically, from 1980-1998, the country’s per capita GDP actually declined by 14 percent. It was one of the worst economic performances in a region that, as a whole, experienced its worst long-term growth failure in a century.
Since 1998, the economy has had modest per capita GDP growth, and much higher growth since political stability was restored and the government got control over the oil industry. Measuring from 2004, when the economy reached it pre-recession peak, GDP per person has grown by an average of 2.5 percent annually. This growth led to a large reduction in poverty and extreme poverty, as well as numerous other gains in health care and education due to increases in social spending. And as high as Venezuela’s 22 percent annual rate of inflation has been (since 1998), it was much worse (34 percent) in the pre-Chávez years.
Venezuela has about 500 billion barrels of oil, according to the U.S. geological survey estimates, the largest in the world. Its proven reserves are about 300 billion barrels. The country is currently using about 1 billion barrels of those reserves per year. So long as political stability is maintained – and it has been since the government got control of the national oil industry in 2003 – Venezuela will have the ability, with reasonable macroeconomic policies, to maintain solid rates of economic growth.
http://www.cepr.net/documents/publications/venezuela-2012-09.pdf
(Footnotes at the original.)
(My emphasis in boldface.)
= new reply since forum marked as read
; ignore repeated Bolivarian electoral victories including recent rout of rightwingers in the governors' elections; ignore everything that makes sense (um, WHY Venezuelans have chosen Bolivarian policies time and again). Ignore reality itself.
Peace Patriot 
