The Facts Strike Back for Chavez

There's nothing like a bit of cut and thrust with facts and figures to shake up your prejudices.

In a recent post I cited former economist to the Venezuelan national assembly, Francisco Rodriguez, as casting doubt on the achievements of the Hugo Chavez government, and even suggesting that his image of being oriented towards helping the poor is mostly a public relations coup.

However, I've since discovered a substantive riposte from Mark Weisbrot, economist at US progressive think tank Center for Economic and Policy Research. Weisbrot pulls apart the arguments of Rodriguez, showing how they make distinctly selective use of available data.

These are the specific claims from Rodriguez that Weisbrot disputes:

Inequality has increased under Chavez, with the Gini coefficient going from 0.44 in 200o to 0.48 in 2005

Weisbrot reveals this as cherry picking, with the two figures taken by Rodriguez from different data sources, and no good reason for these two years being chosen. In fact, when the available measures of inequality from various sources (UN Economic Commission for Latin America, the World Bank and Venezuela's National Statistics Institute) are seen over their full periods, there appears to be a decrease in inequality under Chavez. Weisbrot notes that by comparison the Gini index in the US has gone from 40.3 to 46.9 during 1980--2005, a large upward distribution of income.

Other countries have reduced poverty by two percentage points for every percentage point of GDP growth (as opposed to one point in Venezuela)

I did point out in my original post the Rodriguez hadn't named any of these countries. Weisbrot makes the point that if Venzuela had reduced poverty by two percent for every point of GDP growth, it would have completly eradicated poverty -- an implausible achievement in four years.

Chavez has not increased the proportion of government spending on health education and housing

Again, Rodriguez has been selective in his choice of indicators. Weisbrot questions why he only mentions central government spending when there have been large allocations from the National Development Fund run by PDVSA (the state oil company). And the social spending from central government has increased in absolute terms, from 8.2 percent of GDP in 1998 to 13.6 percent in 2006. Overall, social spending is now 20.9 percent of GDP, and in real per capita terms has increased by 314 percent in this period.

Certain indicators such as low birth weight, access to piped water, and number of dwellings with dirt floors have worsened under Chavez

More cherry picking. Showing the full range of social indicators, Weisbrot demonstrates that most have improved over the past few years, with a notable improvement in access to sanitation and a steady decline in infant mortality. Seen alongside the rest of the data, it's possible that the indictators cited by Rodriguez could be measurement anomalies.

There's no evidence that the Robinson literacy programme has had any effect

There's some discussion of the methodology used by Rodriguez to draw this conclusion. Weisbrot says he relies on a survey that wasn't designed to measure literacy. He concludes that there's not enough evidence either way.

Chavez's big spending and the rise in imports threatens to cause a balance of payments crisis

Weisbrot points out that while imports might be increasing, Venezuela still has a very significant balance of payments surplus of around 8% of GDP, which, if it were applied to the United States, would see a surplus f $1.1 trillion rather than their actual $739 billion deficit.

Weisbrot does accept a couple of the Rodriuguez criticisms as reasonable. For one, the exchange rate is over valued, subsidising imports and making non-oil exports too expensive. At 25 percent inflation is also too high, though Weisbrot notes that it was 40 percent when Chavez came to power, and 100 percent in 1996. Finally, there are shortages of basic foods, although Weisbrot sees no reason why Venezuela can't import plenty more, being a very long way from having a balance of payments crisis. He denies that Venezuela is in anything like the situation of previous Latin American governments (Alan Garcia's 80s regime et al) described in The Macroeconomics of Populism.

Weisbrot also argues that social progress would have been a lot better if it hadn't been for the economic crisis caused by the oil company's strike in 2003, at a time when it was controlled by the Venezuelan opposition. The statistical tables show this caused a blip in many indicators, including a temporary leap in poverty. Weisbrot concludes:

"While it is useful to discuss the imbalances in the Venezuelan economy and what might be done to correct them, there is little use in presenting such a grossly exaggerated picture of an economy as if it were on the brink of ruin, and pretending that Venezuela's poor have not benefited from the economy's most rapid economic expansion in decades, and from the government's large increases in social spending and programs."

Against the weight of evidence, it seems clear that Francisco Rodriguez has set out with a pre-formed conclusion about lack of progress under Chavez, and has set out to fit the evidence around that. The reasons may be ideological, or they may date from his personal frustrations in working with the Chavez government, disapproval of its methods, or a belief that the country is headed down the wrong track.

In any case, it's a reminder of how easy it is for basic facts and figures to be politicised. For me, with pre-existing scepticism towards Chavez based on his buffoonery, authoritarian tendencies, and clumsy attempts to interfere in other countries, it's all too easy to just accept claims like those of Rodriguez at face value.

Hugo Chavez -- Not Helping the Poor that Much?

Following on from the previous post about inequality, here's an interesting article in Foreign Policy by Francisco Rodriguez, chief economist to the Venezuelan National assembly from 2000-04. Rodriguez deconstructs the belief, prevalent among not only Hugo Chavez supporters but also his critics, that Chavez has redistributed resources to the poorest in Venezuelan society.
Certainly, there is a wide range of different opinions of Chavez and his government, which we might summarise as follows:

a) Chavez is a dictator who is buying support by redistributing the oil wealth. He will eventually make himself president for life, let all the terrorists camp out in his back yard and form some kind of nuclear alliance with Iran
b) Chavez is popular among many in Venezuela because he has used the oil price boom to establish promising though rather haphazard social programes for people who have always been marginalised. He's an annoying (though occasionally amusing) demagogue who has authoritarian tendencies and but has won his elections fair and square
c) Chavez is the reincarnation of Simon Bolivar and Che Guevara combined, a charismatic leader who is righting the wrongs of centuries and setting a model for 21st century socialism.

What supporters and opponents alike (I'm more or less category B) agree on is that Chavez has redistributed wealth and prioritised helping the poor. Yet this orthodoxy is precisely what is questioned by Francisco Rodriguez. Having worked closely with the Venezuelan adminstration, Rodriguez argues that the perception that Chavez has done a lot for the poor is mainly the product of good public relations campaigns.

Although poverty in Venezuela was reduced from 53 to 27 percent between 2003 and 2007, Rodriguez claims this is almost entirely due to rapid economic growth in the wake of the oil boom. The one percentage point reduction in poverty for every point of GDP growth is a poor return, says Rodriguez, compared with other (unnamed) developing countries which have managed two points of poverty reduction per point of GDP growth. In addition, he says:

The average share of the budget devoted to health, education, and housing under Chávez in his first eight years in office was 25.12 percent, essentially identical to the average share (25.08 percent) in the previous eight years. And it is lower today than it was in 1992, the last year in office of the "neoliberal" administration of Carlos Andrés Pérez -- the leader whom Chávez, then a lieutenant colonel in the Venezuelan army, tried to overthrow in a coup, purportedly on behalf of Venezuela's neglected poor majority.

The further statistics Rodriguez cites include:

-- the Gini coefficient (a way of measuring income inequality, the higher the worse) increased from 0.44 to 0.48 between 2000 and 2005
-- infant mortality has dropped, but at the same rate (3.3 percent per annum) as the previous nine years, and much less quickly than in Argentina, Chile and Mexico (5.2--5.5 percent per annum)
-- the percentage of underweight babies, percentage of people without access to running water, and percentage of people living in house with earthen floors all slightly increased between 1999--2006
-- the much vaunted Robinson literacy programme shows "little evidence [of having] had any statistically distinguishable effect on Venezuelan illiteracy"

The most notable policies of the Chavez administration, according to Rodriguez, have in fact been its nationalisations and expansion of state economic (rather than social) activities. These appear to be leading to a re-run of the 'macroeconomics of populism', a particularly Latin America affliction where expansionary government policies eventually lead to balance of payments problems, spiralling inflation, and a decline in real wages (Alan Garcia's 1985-90 mandate in Peru perhaps winning the prize for the most disastrous example of this cocktail).

His concluding paragraphs strike me as rather wise and, for those who've paid attention to any of my previous posts, run along similar lines to other conclusions I've favoured:

It would be foolhardy to claim that what Latin America must do to lift its population out of poverty is obvious. If there is a lesson to be learned from other countries' experiences, it is that successful development strategies are diverse and that what works in one place may not work elsewhere. Nonetheless, recent experiences in countries such as Brazil and Mexico, where programs skillfully designed to target the weakest groups in society have had a significant effect on their well-being, show that effective solutions are within the reach of pragmatic policymakers willing to implement them. It is the tenacity of these realists -- rather than the audacity of the idealists -- that holds the greatest promise for alleviating the plight of Latin America's poor.