Saturday, 5 August 2017

Just Us and Venezuela

As we approach the decade mark since the start of the great recession all countries are now in recovery, well, all but two that is: economically devastated Venezuela and yup, you guessed it, South Africa. As of, well now, along with Venezuela we are the only economy (out of more than 200!) in recession.

First off, this means that any excuses about a slow global economy for our our limited growth are null and void. Second, although they are major contributors, Zuma and the Guptas are not the sole cause.

I'm sure most people know that there is trouble in Venezuela, but probably not the extent. In 1998 Hugo Chavez and his United Socialist Party took over the government, and as with all socialist projects things were wonderful at first, with the poor suddenly having access to housing, healthcare and education amongst other things. But socialists live on borrowed time and things quickly turned south. In 2016 Venezeula's GDP dropped more that 18% and inflation rose to 500%. Today the people of the once most prosperous state in South America are starving. The shops are empty and when they do have food lines stretch for hundreds of metres outside the store and around the block. And to make matters worse, Chavez' successor, Nicolas Maduro just used a bogus election to take control of all branches of government to further oppress the people.

So now you're thinking, "But Venezuela is nothing like South Africa?" You'll be surprised at the similarities:

  • Venezuela's economy is completely oil based, so when the oil price collapsed several years ago, so did their economy. Our economy is heavily reliant on the mining sector and so when there is trouble in the mining industry, as there has been in recent years, the whole economy suffers. Fortunately, unlike Venezuela, we are not completely a one-trick-pony.
  • When oil prices were high the Venezuelan government used the money for extensive social spending. When the oil price dropped they decided to keep spending and so put themselves into a debt crisis. Our government also does an unhealthy amount of social spending and it is putting us in debt. Yes many people have a better quality of life courtesy of the government purse, but if you feed the people today with tomorrow's bread, tomorrow the people will starve.
  • The United Socialist Party of Venezuela came to and maintains power not on sound policy and economic principles, but on populist rhetoric and Robin Hood economics. That is the same way the ANC maintains power. Free housing, free electricity, grants and government handouts: people are far more likely to believe according to what pleases the ear than what is true. They don't realise that the magic well of free stuff will eventually run dry.
  • Finally, and most importantly, the power in Venezuela is too concentrated. The government does far more than it should ever need to do, even by mainstream centre-left standards today. This is the root of the crisis. In South Africa the government also does far more than it has the right to do. It can't handle all the responsibilities it has taken upon itself, but it is yet seeking more. And worse yet, power within the government is becoming more centralised, with the Zupta faction now controlling the national assembly, the NPA, the judiciary, the public protector and many other institutions. We are on dangerous ground.
I honestly don't think we will reach the point Venezuela has. Even though we are heading in the same direction we are going slower and have sharper breaks in the form of power and influential moderates, who stand up against wannabe dictators. But we can't sit back and relax. Our country is in deep trouble. Unlike Venezuela, we have diagnosed our problems (at least some of them) early. Now we must be quick to act as well.

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