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  • Mathieu Provencher

Is Socialism getting sacked in South-America?


(picture from Wix's library)

Hi everyone! We’ve had a few important steps away from socialism in the past few months, at least around here. Let’s see which ones I’m thinking about and let’s try to see what that may mean.

Although Cuba (picture above) would be a great example of socialism, I will not discuss it in this article for two reasons: first, it is not in South-America; and second, the 'cut' from socialism is far from being as sudden as the ones I chose. Cuba might be moving away from it's communist influences but it's too early to know how far and how fast that will happen.

First, we had Nicolas Maduro from Venezuela. Please forgive me for starting with the most extremist of the three but I’m trying to keep this in a chronological order. Although he is still sitting on the oil throne (sorry, I had to try), Maduro’s government lost the National Assembly late last year. This seems to be an anti-Maduro reaction rather than a genuine desire to move towards free markets. However, this government has indeed engaged in extreme ‘Chavismo’ type of policies that include arbitrary subsidies with no long-term benefits, very expensive favoritism with low returns, as well as price and currency controls that practically closed down a number of industries. Nicolas Maduro’s populist policies have been accompanied with the most amazing denial propaganda I have seen since the last ‘information minister’ under Saddam Hussein… and that’s a LOT to say! His approach destroyed productivity in the country and helped stimulate a vibrant black market mentality. It seems that my predictions from last year have been verified, Venezuela’s economy is falling, scarcity is becoming unbearable and the government is going bankrupt… Maduro should have hired real Economists!

Second, the Kirchners’ grip on Argentina was finally released when her favorite candidate lost the elections in November of last year. The new president, Mauricio Macri, has pledged to undo what seems to be most of Cristina Kirchner’s past ‘accomplishments’. The government, under Cristina Kirchner, engaged in spending practices that did not lead to any long-run benefits. She seemed to follow the typical “How-To-Destroy-You-Economy 101” books on what NOT to do with government money. Argentina’s economy stagnated and even shrunk under her ‘care’, inflation rose to unsustainable levels, and the government manipulated information to pretend that everything was well. The so-called ‘populist’ policies of Cristina Kirchner gave money to less fortunate individuals but it made sure that money for everyone was worth less and less while economic opportunities, mainly for the lower and middle classes, were reduced every year… well done!

Lastly, at least for this short article, Brazil’s current president, Dilma Rousseff, seems to be getting the boot. Brazil cannot really be found in the same basket as Venezuela and Argentina when socialism is concerned but there is a clear pattern here. Note that socialist policies and a socialist government are not the same thing. To name a few, Dilma Rousseff’s government’s ‘populist’ policies include the World Cup’s overspending, mis-spending, and corruption, which lead to the building of infrastructures that no one needs today and the increase of welfare benefits as well as subsidised water and housing. These added to the mis-management of Petrobras left Brazil in a very fragile situation that low commodity prices easily broke down.

Can we thus conclude that populist ideologies are destined to fail and that socialist policies are just plain wrong? Of course NOT!!!!! As you may remember from some of my previous posts (and my classes if you ever had the displeasure of having me as a Professor), it depends!

Before we try to bring some sort of answer to that, what is socialism exactly? Marx defined socialism in a very similar way to communism. For practical purposes, they were almost synonyms for him. However, the modern use of the word socialism normally refers to a strong state involvement in the economy, more particularly aimed at transferring wealth from rich to poor… a Robin Hood type of governance if you wish.

Socialist policies can bring a lot of benefits to a country, and indeed to an economy. They can help bring more equality of opportunities between different groups, which in turn can help high-productivity individuals reach their potential even if they start at a disadvantage. These policies can also help individuals in distress that need some economic security before being able to reintegrate their employment. Socialist policies can also help mitigate negative externalities produced by some sectors of the economy.

In fact, socialism in general can help decrease the unfairness that is intrinsic to most economic systems in the world… and decreasing inequality of opportunity is one of the most important factors when trying to grow an Economy.

Socialism may indeed be having a hard time in South-America right now but that’s not because of fundamental flaws within it… it’s because of incompetents, corrupted, malign leaders that wear the hat of socialism as a propaganda strategy to gain popular support.

People are unfortunately not informed enough to understand the ramifications of such policies, which makes them easier to manipulate.

I hope you guys enjoyed!

#Macroeconomics #Socialism #Venezuela #Brazil #Argentina

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