May 1 follies
Let’s look at the economic thermometer of today, Labor Day in Venezuela, a traditional populist day since I can remember when the president grants to the workers a hike in minimum wage. This time around, Maduro orders a 30% minimal wage increase. In time of crisis, the inflation at 60% is sure to gain fast a dozen points at the very least. Middle incomes cannot be adjusted at 30% so what we are going to see is a continuing pauperization of the working class AND the middle class. The rich, at least the bolibourgeois rich who do not need to follow the revolution’s charge books will become richer.
It is not a matter of being pro or con minimum wage: in Venezuela it has become unfortunately a social stabilization factor, people always bitching at how low the increase is but willing to tune down protest while they have the brief illusion that they are better off. The problem here is that the regime, or almost any government in the past for that matter, fails to combine the politically moderating effect of a wage increase with new measures that would in the long term end the need for regular artificial wage increases. This time around is no exception: the regime has finally relented and allowed for the increase in prices of basic staples like chicken and coffee, but not enough to truly compensate for inflation, not enough to allow return of investment. As such, within days of being granted price increases the productive sector is hit by a 30% increase in personnel cost, and we will be back very soon to more scarcity, less purchasing power, etc.
In case you miss my point, let me tell you that it is pandemonium in Caracas today as there is a shortage of gas. As I arrived, duly warned and having put gas leaving Maracay, I was trapped in a couple of bottle necks due to frantic people trying to get inside gas stations still operating.
The crisis is getting worse, not better, and the regime, trapped in its contradictions and own interest groups is unable to make the real decisions. So let’s increase wages. After all, the regime will pay public workers with printed Monopoly currency.
PS: I am personally for the existence of minimal wages, but not when those become an hindrance to economic development or populist tools. That is, fixing minimal wage should be taken away from the hands of the executive power.
PS 2: from reports I see the regime and the opposition called for May first rallies. The opposition won, hands down, in spite of the buses I saw on my way to Caracas.