Is Populism beatable?
Populism has been the driving force behind both our political landscape and our economic misfortunes. This trait has marked the misguided economic policies of several administrations, with Chavismo just exacerbating the problem. Because, in essence chavismo repeats a well’worn recipe: continue to fuel the spending binge, among other insane policies, with an unprecedented oil boom backing this profligate party.
But as it happens to every crash generated by a macro-populist agenda, this party is about to end. Is it our fate to keep repeating this noxious cycle?
Regardless of whether the wicked game being played resolves itself via hyperinflation, stagflation, higher scarcity levels, a balance of payment crisis, or an explosive combination of all of the aforementioned, most economists in Venezuela are in agreement: the Titanic is sinking, even if the musicians keep playing the music until the end.
This populist-driven economic crisis requires some revisiting of the much hailed book by the late Rudi Dornbush and Sebastian Edwards, “The Macroeconomics of populism in Latin America“. In it, Dornbusch & Edwards asserted that populist regimes tend to “help the poor” by pursuing expansionary macroeconomic policies that, at some point, become unsustainable, running massive fiscal deficits and generalized controls of prices and interest rates. This yields a catastrophic result, – after the crash comes the inevitable shock therapy required for stabilizing the economy, with its effects being more onerous to the poorest, and after things have at least settled, a newborn demagogue or rabble-rouser who embodies a reincarnation of these noxious populist policies emerges.
This appalling cycle seems to be inherent to Latin America, as Roberto Laserna, a Bolivian economist, has pointed out recently here. Unfortunately, Venezuela seems to currently spearhead this costly trait. This gruesome depiction of the future begs the question: is it possible to circumvent this pattern, or is populism beatable in Venezuela?
Populism thrives in societies where the rule of law is undermined or non-existent, with sky-high economic inequalities, a weak institutional framework, and polarization among other contributing factors. In other words, Venezuela. If we suffer from all of the above, how can our politicians, economic agents, or the citizenry as a whole redress this hassle?
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