28.10.2017

FES-sponsored think tank rises above Venezuelan deadlock to provide economic crisis solutions

Caracas (Venezuela) – "The Observatorio Económico could even go on to provide a less contentious platform for wider democratic reform" writes Michael Lange, FES Venezuela

Group of people waiting in line at public supermarket, Venezuela. Photo by iStockphoto.com / piccaya

Concrete solutions to the crisis precipitated by Venezuela’s rentier economy are hardly the focus of the country’s politicians, who are more preoccupied with party politicking between a desperately fighting opposition alliance and the autocratic government of president Nicolás Maduro. But a new think tank established with the support of the Friedrich-Ebert-Stiftung hopes to incubate more objective, specific, and practical policy recommendations based on the input of experts, academics and activists. The Observatorio Económico could even go on to provide a less contentious platform for wider democratic reform.

Once so rich, Venezuela, which propagated its "Bolivarian Socialism of the 21st century" as a counter-model to mainstream market economy models, is hooked like a junky to dwindling foreign exchange revenue, consoling its population with promises of paltry food rations.

In the wake of plunging raw material prices, Venezuela is mired in an economic-social crisis, with triple-digit inflation rates and severe bottlenecks in the supply of food and other consumer goods. Strategies for a socially just but realistic economic policy have been shunned. Influential interest groups are helping preserve a model employing price controls and exchange rates kept artificially low by the government, the original idea being to provide poorer strata of the population access to basic services and inexpensive foodstuffs. In actual practice, however, it has encouraged black market speculation and a precipitous decline in the purchasing power of wages and pensions. Once so rich, Venezuela, which propagated its "Bolivarian Socialism of the 21st century" as a counter-model to mainstream market economy models, is hooked like a junky to dwindling foreign exchange revenue, consoling its population with promises of paltry food rations.

The economic and social crisis has polarized the political debate. Proposals for solutions consistently degenerate into consolidated statements of hardline positions, impeding any compromise or the discussion of realistic political strategy. Thus, it would appear almost impossible for committed opposition politicians and adherents to the ruling Chavist ideology to engage in a constructive debate with each other.

Gross national product has plummeted by almost 40 per cent in five years, exposing the inefficiencies of government price and exchange-rate controls. This has affected wide swathes of the population from the poor in shanty towns to the upper middle classes.

This unproductive tension has been compounded by recent political development over the last years. Although Maduro’s United Socialist Party of Venezuela (Partido Socialista Unido de Venezuela, or PSUV) lost its parliamentary majority to the opposition alliance Democratic Unity Roundtable (Mesa de la Unidad Democrática, or MUD) in December 2015, the government-friendly Supreme Court stripped Parliament of much of its authority, prompting opposition protests and street clashes with security forces. In July, a Constitutional Assembly was appointed, with authority over legislation and the judiciary. In October 2017 the government even claimed the win of regional elections, questioned because of suspicion for manipulations of the turnout figures. Attempts at mediation from the international community have failed, or even added to the discord.

It is for these reasons that the FES is supporting a think tank made up of progressive economic experts in Venezuela. The aim of Observatorio Económico is to develop proposals for industrial policy, exchange rates, and fiscal policy, among others. Participants include established scholars and researchers, most of whom have some political experience and view themselves as socially engaged. Analyses are intensely focusing on the country's fatal dependence on oil exports.

External debt, inflationary monetary policy and sectoral policies, for example agriculture, which have been woefully neglected, are among the topics addressed by the progressive think tank Observatorio Económico, who analyse these in terms of their capacity for reform and compatibility with social and environmental priorities.

Venezuela's abundant wealth in natural resources has led governments from across the political spectrum down a deceptive path towards a sort of passive development policy—giving handouts to their clientele of supporters, for decades now. Gross national product has plummeted by almost 40 per cent in five years, exposing the inefficiencies of government price and exchange-rate controls. This has affected wide swathes of the population from the poor in shanty towns to the upper middle classes. The scope of topics addressed by the think tank is accordingly wide. In addition to the focal areas mentioned above, the discussion is also directing attention to the dramatic surge in external debt, inflationary monetary policy and sectoral policies, for example agriculture, which have been woefully neglected, analysing these in terms of their capacity for reform and compatibility with social and environmental priorities.

In different phases and forms of dialogue, Observatorio Económico includes stakeholders and decision-makers from multiple walks of life, making sure debate on various aspects of economic reform keeps its vigour and reaches also the broader public.

The strategy guiding the work of the Observatorio Económico is to encourage successive fertilization and to shape the debate over economic issues. Policy recommendations are first developed at internal meetings. Informal round-table discussions featuring invited guests at the offices of Friedrich-Ebert-Stiftung in Caracas are producing the first indications that this initiative is meeting with acceptance by FES partners. These meetings are referred to as tertulias, a Spanish or Latin American tradition similar to the discussion circles of salons elsewhere in Europe. In the second phase, the results are to be channelled to the political arena through respected contact partners, known as interlocutores, in order to dissolve the gridlock in this polarized conflict. Additional target groups include decision-makers in business and civil society organizations, above all the trade unions.

Events nurturing public debate can help raise awareness of the various aspects of economic reform among a broader public, while encouraging a sorely needed formation of alliances. A promising initial forum devoted to exchange-rate policy and the repercussions of the government's emergency economic policy, staged in Caracas on 28 September 2017, indicated strong public interest. The conspicuous participation of younger academics and political activists has revealed a demand for platforms of this type and a desire to get involved in processes of change in society.

"Only when political and social actors are once again able to engage in an open debate over alternatives can compromises and ways out of the economic and social desolation be found that are acceptable to the majority of the population currently in the clutches of distress."

In the midst of these averse political conditions beleaguering Venezuela, the Observatorio Económico can be viewed as a vehicle to foster democracy. The objective is to shift the debate over economic policy to a more objective footing, whereby a secondary goal is to promote that consensus-oriented proposals form part of demands of progressive and social democratic political actors in Venezuela.

The impact of this dialogue is hoped to spill over into other problem fields. The development problems plaguing the country include its dependence on exports of raw materials, international joint ventures prone to corruption and their embedding in an inconsistent economic model. This complexity has been excessively infused with ideological elements, making it necessary to open up additional channels of dialogue in search of solutions. Only when political and social actors are once again able to engage in an open debate over alternatives can compromises and ways out of the economic and social desolation be found that are acceptable to the majority of the population currently in the clutches of distress. ###

Michael Langer is the country representative of Friedrich-Ebert-Stiftung in Venezuela.

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