Venezuela

Americans get a lot of misinformation about Venezuela. Here’s Tyler Cowen, author of prominent principles textbook, mega-blogger, in Bloomberg:

Republicans are labeling the country “socialist,” using Venezuelan problems as a weapon against more left-leaning Democrats. Commentators on the left, in contrast, are arguing that Venezuela is more of a failed petro-state with bad leadership, rather than a test of socialist ideals. Who is right?

If we look at government spending as a percentage of GDP, Venezuela seems far from socialism. In recent years government spending in Venezuela has been measured at about 40 percent of GDP …For the U.S., the corresponding figure is about 37 percent.

Yet emerging economies typically cannot afford the same government programs as wealthier countries, and they cannot run them with the same efficacy. …

Furthermore, rates of change are important. The Venezuelan figure of about 40 percent is up from about 28 percent in 2000, a very rapid increase. …

Or consider exports, which for most developing economies play an especially critical role. They bring in foreign exchange, provide contacts to foreign markets, and force parts of the economy to learn how to compete with the very best foreign companies. Yet over 90 percent of Venezuela’s exports are oil, and those resources are owned and controlled by the government.

People on the political left need to tread carefully here. Venezuela is a place the left used to be proud of:

Greg Grandin, writing in The Nation in 2013, offered a laudatory take on Chavez and suggested that Venezuela “might be the most democratic country in the Western hemisphere.” (He also argued, oddly enough, that Chavez “wasn’t authoritarian enough.”) Jeremy Corbyn, leader of the U.K.’s Labour Party, has also been a big Chavez fan, while Nobel laureate economist Joseph Stiglitz praised Venezuela’s economic policies in 2007 and declared that the risks of higher inflation were overrated.

Keep in mind that for all its faults, Venezuela used to be the richest country in Latin America. The political left has a lot of macroeconomic explaining to do on this one.