Venezuela: Yes, There's More

In two recent posts I covered the debate about social and economic policies in Venezuela, partly to emphasize how in considering development issues it's important to understand the facts and all their nuances before lanching into ideological debates.

I linked to an article from Francisco Rodriguez, former economist to the Venezuelan national assembly, who made the intriguing argument that the Hugo Chavez government had not actually made a very high priority of addressing poverty (something generally assumed by both boosters and critics of Chavez).

I then discovered a piece by US analyst Mark Weisbrot, who critiqued Rodriguez' use of data and suggested that in fact the evidence generally pointed to increased social spending and steady progress for the Venzuelan poor.

My second post was sympathetic to Weisbrot's contention that the picture changed after a fuller review of the data. However, I then received a communication from Francisco Rodriguez himself, who pointed out that I had obviously not seen his rebuttal to Weisbrot. He noted that because Foreign Policy does not allow the use of footnotes, it hadn't been possible to make clear all the data sources he had used, which in fact drew from the work he has been doing for at least ten years.

Rodriguez says that the arguments of Weisbrot "[rely] on erroneous reading of the evidence or use of severely biased indicators that do not accurately reflect the evolution of the Venezuelan economy or the well-being of the poor".

Let's review the substance of the rebuttal to Weisbrot, under the categories I used in the previous two posts.

Spending Priorities

Rodriguez questions the relevance of Weisbot's point that the absolute level of social spending has increased during the Chavez administration. Given that Venezuela has had a huge windfall thanks to oil boom, he points out, all categories of spending are going to increase. Therefore, " if we are interested in evaluating a government’s priorities... we want to study how it has allocated it among different possible objectives". And he returns to his original point that the relative portion allocated to Venezuelan health, education, and housing is the same as it was in the 1990s.

The only big increase in government social spending is on social security, which Rodriguez argues is regressive because people in the informal economy don't have access to pensions (an important point, and akin to my convoluted argument about Peruvian labour laws in this post -- i.e. for them to be important, first you've got to have a job).

Weisbrot had also pointed to what he quoted as $13 billion social spending by the Venezuelan state oil company PDVSA. Rodriguez publishes the detailsof the PDVSA budget, showing that of this spending only about a quarter is on health, education and housing (the 'misiones'). The rest of the 'social spending' includes debt refinancing, infrastructure projects, and defense projects.

My question would be: although not as large as claimed, the social programmes funded by PDVSA are new initiatives, and therefore should they not bolster the total proportion of public spending counted as 'social'?

Inequality

In the two previous posts I described how Weibsrot and Rodriguez disagreed about whether inequality, as measured by the Gini coefficient, had gone up or down during the Chavez administration. Weisbrot had been unsure about which sources Rodriguez had used for his inequality measures and suggested that they might have been cherry picked. He cited data from the Venezuelan National Statistics Insitute to suggest that inequality has actually dropped since Chavez came to power.

In his rebuttal, Rodriguez points out that the series cited by Weisbrot excludes people whose reported income is zero (presumably the poorest of the poor). Furthermore, he provides time-series graphs using data derived directly from the Venezuelan Household Surveys. Using different methods (and including people with zero income), these all show that income inequality has dropped from a peak in 2002, but is only now back to the level it was in 1995. Latest data suggests inequality is still on a downward track, but that still excludes the zero-income groups, so the jury is out.

Poverty reduction

Weisbrot had interpreted Rodriguez as saying that many developing countries achieved a two point reduction in poverty for every point of GDP growth -- meaning Venezuela would have had to eliminate poverty entirely by 2007. Rodriguez makes clear that he was talking about the 'income elasticity of poverty reduction', a technical calculation, which, despite digging tentatively into some background reading, I can't entirely understand. Suffice to say that according to Rodriguez, given its level of economic growth, Venezuela should have seen poverty reduced to between 18--22.5 percent, rather than the 27 percent that has been achieved.

In correspondence, Francisco Rodriguez agreed that Peru was a far worse performer again (having seen poverty reduce very slowly from 54 to 43 percent in a period when its economy grew by around 40 percent) but that Chile, Mexico and Brazil are the examples commonly cited as having combined economic growth with good social progress. I'd note that each of these countries is subject to its own debate -- there are some discussions of Chile here and here.

Literacy

Rodriguez had written a paper with co-author Daniel Ortega (presumably not the Nicaraguan Sandinista leader) which cast grave doubt on whether the Chavez government's Mision Robinson literacy programme had taught 1.5 million Venezuelans to read and write. Using information from the Venezuealan Household Surveys, Rodriguez and Ortega pointed out that there were still more than a million illiterate Venezuelans in 2005, barely less than the 1.1 million before the start of the Mision Robinson programme.

Weisbrot complained that Rodriguez had used a question from the Household Survey not designed to measure literacy, and also took issue with some of the methodology in the analysis. But Rodriguez argues in his rebuttal that if we assume the Household Survey data to be accurate, there is no possible interpretation consistent with the claim that Mision Robinson enrolled and educated 1.5 million people. At most, around 40,000 people (a small fraction of the number claimed) could have been taught to read and write since 2003.

Health Indicators

Weisbrot suggested that individual indicators which Rodriguez reported as worsening (low birth-weight babies, ) could be due to measurement errors, since overall the indicators show improvement. Rodriguez counters by arguing that under a government with a strong focus on poverty we should expect to see across-the-board improvements. Instead, infant mortality has declined at the same rate as during the 90s, while some things might have got worse. He concludes by agreeing with Weisbrot that "official Venezuelan statistics are far from...ideal", pitching this as further evidence of a haphazard approach by the government to implementing and evaluating its social programmes..

Conclusions

Phew. There endeth the debate (for now at least). Why have I spent so much time on this, and how indeed do I justify including it in what is supposed to be my development studies journal (ends next week)?

I guess because in looking at development issues there are several different questions to ask. There's the question of what development is, which is a favourite in the humanities section of the academic setting and which I've flirted with in a couple of recent posts. There's the question of how this can be achieved, which is the issue that a lot of the practical and political debate focuses on. Then there's the third question, worth asking before we jump to the second or even the first: do we know what's actually going on?

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.