The ‘how’ and ‘why’ of the Venezuelan crisis: Is the evil intent of government behind the crisis?

A hard hitting piece by Prof Ricardo Hausmann on Venezuela crisis.

He says it does not make sense why the collapse happened as govt could have clearly avoided or made better choices. As nothing makes sense, one can say it was the evil intent of the government which is behind the crisis:

But while the “how” of the Venezuelan collapse is clear and was predicted ex ante, the “why” question is harder to answer. Why, with clearly formulated alternatives on the table, did the government choose a predictably disastrous course of action, at such high human cost?

There are three possibilities: ignorance, intention, and strategic interaction. Let’s start with the last one. In a 1991 paper, Allan Drazen and Alberto Alesina suggested that economic stabilization might be delayed because two contending groups are trapped in a war of attrition; all understand that adjustment is necessary but expect the other group to bear the brunt of the cost. By delaying, they provide information to the other group about their willingness to withstand the pain. The process continues until one group capitulates and bears the cost of adjustment, in order to benefit from the stabilization. But in a totalitarian regime such as Venezuela—and with Cuba calling the reform shots—it is hard to tell who is trapped in a war of attrition with whom.

Ignorance is a weak explanation. True, the government does not have a single cabinet member with an economics degree, and Maduro barely finished high school; but plenty of one-time Chavistas pleaded for a change of policy in a more sensible direction. If the government is ignorant, its ignorance was a deliberate choice.

That leaves intent. The government chose this course of action because it felt that it was better than the alternatives. But it is difficult to imagine courses of action with worse outcomes for millions of people than the current one. What are we missing?

The only way out of the crisis was to re-empower society with the capacity to organize market-based production to meet people’s needs. But that was anathema to the regime. Given the choice between re-empowering and starving its citizens, the regime chose the latter and bought off as many henchmen, through venal means, as it would need. Yes, the catastrophe would weaken the regime; but society would weaken even faster, assuring the regime continued control.

The Oxford English Dictionary defines “evil” as “doing or intending to do harm”. Ultimately, there is no other plausible explanation for what has happened in Venezuela.

One Response to “The ‘how’ and ‘why’ of the Venezuelan crisis: Is the evil intent of government behind the crisis?”

  1. EugenR Says:

    I wouldn’t neglect the explanation of ignorance. Unfortunately certain politicians, with no education, without capacity of conceptual thinking, overwhelmed by their own success to reach such a high position, inspite of being uneducated, coming from the unprivileged level of society, start to believe in their own divinity. Their acts and decisions are then always on the level of their own comprehension. No skills for abstract thinking, no tool to comprehend systems and concepts, all they know and are capable of is violence against those, who disapprove their position. Other phenomenon of these leaders is to surround themselves with people with same or even less capacity to comprehend the reality, beneath the surface.

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