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Piketty in Washington: How to Reverse the Increasing Concentration of Wealth Print
Written by Mark Weisbrot   
Tuesday, 15 April 2014 16:21

French Economist Thomas Piketty, author of the best-selling “Capital in the Twenty-First Century,” came to Washington DC today for a series of discussions with other economists and the public. The book itself, whose author has made enormous contributions over the past 15 years analyzing the distribution of income and wealth, is very rich in historical and data-driven economic analysis and has been widely reviewed. It could very well become one of the most influential books on economics in decades. This is not a review but rather a brief commentary on some of the extraordinarily interesting discussion – not often seen in “This Town” – that Piketty’s visit inspired.

One of Piketty’s main concerns is the increasing concentration of wealth that has characterized the past few decades, in the United States and other developed economies. He describes this phenomenon in great detail but also abstractly and usefully as r > g; in other words, the more that the rate of return on capital exceeds the rate of growth of the economy, the more wealth is concentrated at the top. Piketty noted a number of times, in response to questions, that he sees – as do many Americans – the main problem with inequality reaching what he called “extreme” levels is that it makes it “impossible to have proper functioning of democratic institutions.” His principal proposal for reversing this trend is a progressive tax on wealth.

At the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, my colleague Dean Baker strongly agreed with Piketty’s proposal to tax wealth, but argued for a “Plan B,” among other reasons because Plan A may prove to be politically difficult or impossible for some time to come. Baker’s proposals were interesting in that they were designed to lower “r” while at the same time raising “g.” He went through several sectors of the economy where there are large “economic rents” that can be captured through taxation or other reforms, while at the same time increasing the overall efficiency of the economy and therefore the growth of output. The financial sector is obviously target number one, where even a small financial transactions tax could capture tens of billions of dollars of annual revenue while reducing wasteful and even harmful trading (Baker referred to Michael Lewis’ “Flash Boys” as a prime example). Then there are patents, where we in the U.S. pay $380 billion per year for drugs whose price is composed of something like 80 or 90 percent monopoly rents – about 2 percent of GDP lifted from the non-super-rich; plus the impediments to the advancement of medical science and actual harm to human health, as pharmaceutical companies hide their data, lie about their results, and promote the use of patented drugs for inappropriate purposes. (As one critic of the pharmaceutical industry put it, there are a lot more healthy people than sick people out there, so if you are a pharmaceutical company with a patented drug, you want to get some of those healthy people into your market).

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Human Rights Watch Should Stick to the Facts on Venezuela Print
Written by Mark Weisbrot   
Thursday, 10 April 2014 12:55

en español

Despite the fact that the New York Times had to run a correction on February 26 for claiming that Globovisión in Venezuela was “[t]he only television station that regularly broadcast voices critical of the government,” Daniel Wilkinson of Human Rights Watch (HRW) repeats the same error in the New York Review of Books yesterday, writing that:

Two of the four private stations voluntarily dropped their critical coverage; a third was forced off the air; and the fourth was hounded by administrative sanctions and criminal charges until the owner sold it last year to investors reportedly linked to the governments, who have dramatically curtailed its critical content.

In fact, the stations he claims have “dropped their critical coverage,” Venevisión and Televen, regularly run coverage that is critical of the government, as documented here.

Since the claim that these stations have “dropped their critical coverage” is demonstrably false, the NYRB, like the New York Times, should run a correction.

The fourth station he refers to is Globovisión. During the run-up to last April’s presidential elections, according to a Carter Center study, Globovisión gave nine times as much coverage to opposition presidential candidate Henrique Capriles as to governing party candidate Nicolás Maduro. Readers who are familiar with right-wing TV in the United States will note that this would not be possible for Fox News, for example, to get away with. So, if Globovisión “dramatically curtailed” its anti-government bias – Wilkinson offers no data -- because it was bought by someone who wanted to practice mainstream journalism, the station could still have a lot of room to trash the government.

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FiveThirtyEight Gets it Wrong on Venezuela Print
Written by Mark Weisbrot   
Friday, 04 April 2014 17:11

Nate Silver, who became famous for his use of polling data to accurately project U.S. elections, launched a new blog – FiveThirtyEight.com last month.  It’s been off to a rough start, “something between a disappointment and a disaster” as Paul Krugman wrote soon after its launch, because of some pieces that handled data rather badly. “[S]loppy and casual opining with a bit of data used, as the old saying goes, the way a drunkard uses a lamppost — for support, not illumination,” says Krugman.

I leave it to the reader to decide whether the FiveThirtyEight article on March 17 by Dorothy Kronick on Venezuela fits this description.  While it has become acceptable to publish almost anything about Venezuela, so long as it makes the government look bad, here at CEPR we apply the same standards to all products.

The thesis of the article is strange.  Correctly noting that the political polarization in Venezuela is overwhelmingly along class lines, with the upper income groups tending to support the protests and lower-income Venezuelans supporting the government, she asks  rhetorically “why the divide?” and answers: 

They disagree over a political vision for their country in part because they measure Chavismo against two different benchmarks: Chavistas compare the present to Venezuela’s pre-Chávez past, while the opposition contrasts the current economic situation with more recent developments in the rest of Latin America.

I think what she means to say is that Chavismo looks better as compared with Venezuela’s pre-Chávez era, than it does compared with the rest of Latin America. The first part is a no-brainer: per capita GDP actually fell by more than 15 percent in the 20 years prior to Chávez (1978-1998).   However there is no evidence that the two sides are making any such different comparisons.  Do voters anywhere in the world judge their government based on a comparison to its peers?  If that were the case in the U.S., for example, President Obama’s approval ratings would be very high and the Democrats would be sailing to a landslide victory in November’s congressional elections because the relevant income-level comparison for the U.S. is Europe, which has done vastly worse in the recovery from the Great Recession since 2009.     

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USAID Subversion in Latin America Not Limited to Cuba Print
Written by Dan Beeton   
Friday, 04 April 2014 15:26

En español

A new investigation by the Associated Press into a U.S. Agency for International Development (USAID) project to create a Twitter-style social media network in Cuba has received a lot of attention this week, with the news trending on the actual Twitter for much of the day yesterday when the story broke, and eliciting comment from various members of Congress and other policy makers. The “ZunZuneo” project, which AP reports was “aimed at undermining Cuba's communist government,” was overseen by USAID’s Office of Transition Initiatives (OTI). AP describes OTI as “a division that was created after the fall of the Soviet Union to promote U.S. interests in quickly changing political environments — without the usual red tape.” Its efforts to undermine the Cuban government are not unusual, however, considering the organization’s track record in other countries in the region.

As CEPR Co-Director Mark Weisbrot described in an interview with radio station KPFA’s “Letters and Politics” yesterday, USAID and OTI in particular have engaged in various efforts to undermine the democratically-elected governments of Venezuela, Bolivia, and Haiti, among others, and such “open societies” could be more likely to be impacted by such activities than Cuba. Declassified U.S. government documents show that USAID’s OTI in Venezuela played a central role in funding and working with groups and individuals following the short-lived 2002 coup d’etat against Hugo Chávez. A key contractor for USAID/OTI in that effort has been Development Alternatives, Inc. (DAI).

More recent State Department cables made public by Wikileaks reveal that USAID/OTI subversion in Venezuela extended into the Obama administration era (until 2010, when funding for OTI in Venezuela appears to have ended), and DAI continued to play an important role. A State Department cable from November 2006 explains the U.S. embassy’s strategy in Venezuela and how USAID/OTI “activities support [the] strategy”:

(S) In August of 2004, Ambassador outlined the country team's 5 point strategy to guide embassy activities in Venezuela for the period 2004 ) 2006 (specifically, from the referendum to the 2006 presidential elections). The strategy's focus is: 1) Strengthening Democratic Institutions, 2) Penetrating Chavez' Political Base, 3) Dividing Chavismo, 4) Protecting Vital US business, and 5) Isolating Chavez internationally.

Among the ways in which USAID/OTI have supported the strategy is through the funding and training of protest groups. This August 2009 cable cites the head of USAID/OTI contractor DAI’s Venezuela office Eduardo Fernandez as saying, during 2009 protests, that all the protest organizers are DAI grantees:

¶5. (S) Fernandez told DCM Caulfield that he believed the [the Scientific, Penal and Criminal Investigations Corps'] dual objective is to obtain information regarding DAI's grantees and to cut off their funding. Fernandez said that "the streets are hot," referring to growing protests against Chavez's efforts to consolidate power, and "all these people (organizing the protests) are our grantees." Fernandez has been leading non-partisan training and grant programs since 2004 for DAI in Venezuela."

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Media Distortions about Venezuela Not Just a Problem in the U.S. Print
Written by Mark Weisbrot   
Friday, 28 March 2014 14:57

I sometimes complain about U.S. media coverage of Venezuela, which is mostly one-sided and sometimes terribly inaccurate. But compared to most of the Latin American media, U.S. reporting is practically “fair and balanced.” Check out this amazing front page banner headline of Peru’s biggest newspaper, El Comercio, on Sunday, March 16 (photo below). Translation: “94 percent of Peruvians reject the Chavista model”; sub-headline: “82 percent of those interviewed consider the government of Venezuela to be a dictatorship.”

Imagine the New York Times running a headline like this. How ridiculous would they look? People would wonder: is this news in the U.S.? What percentage of the U.S. population knows or cares what the “Chavista model” is, or has an informed opinion on whether Venezuela’s democratically-elected government is actually a “dictatorship?” Not to mention that you would be hard-pressed to find a political scientist who specializes in Latin America who would accept the label 'dictatorship' for Venezuela.

Now I know what you are thinking. Peru is a bit closer to Venezuela and is part of South America. Peruvians speak the same language as Venezuelans. So, maybe there is some kind of buzz about “the Chavista model” in Peru or some great concern among the masses about the state of constitutional democracy in Venezuela.

Well, no. Peruvians are no more likely than residents of the United States to know anything about “the Chavista model” or about Venezuela in general. This “journalism” looks pretty much as irrelevant and strange in Peru as it would be if the New York Times had run the same headlines. The only qualifier I would add is that, since the media and right-wing politicians scream about Venezuela as in this headline, they are able to create a certain McCarthyist fear among some sectors. Sometimes they use this fear – without necessarily any real connection -- against political opponents (e.g. as they did successfully in defeating the current President Ollanta Humala’s first presidential bid in 2006). But that is not much different from what the Florida Cuban-American U.S. Representatives and their neocon allies are doing in the U.S. Congress right now.

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The Bolivian Transportation Sector, Regional Integration and the Environment Print
Written by Nate Singham   
Thursday, 27 March 2014 08:35

Bolivia will most likely join Brazil and Argentina (Bolivia’s largest trading partners) by becoming the sixth member of the MERCOSUR group. Since 2006, Bolivian trade with MERCOSUR has grown by 17 percent. A recent study published by Desarrollo de Negocios Internacionales found that over the last 10 years Bolivia has experienced the second highest export growth rate in South America. This is remarkable considering that on average landlocked developing countries (LLDC) trade 30 percent less [PDF] than coastal countries [1]. As a result, for most landlocked countries transportation infrastructure plays a crucial part in facilitating intraregional trade. Since 2005, industrialization has become a key aspect of Bolivian President Evo Morales’ economic policy, particularly in the area of transportation, which in 2013, accounted for 30 percent of total [PDF] public investment [2]. The chart below shows levels of public investment in transportation as a percentage of total GDP since 2005:

nate-bolivia-blog-figure

Source: International Monetary Fund and Ministerio de Economía y Finanzas Pública Estado Plurinacional de Bolivia

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The “Cubanization” of U.S. Policy Towards Venezuela Print
Written by Jake Johnston   
Wednesday, 26 March 2014 14:49

Venezuelan opposition politicians and their allies in the U.S. frequently decry Cuba’s alleged influence on the Venezuelan government. Ironically however, there seems to be an important and growing nexus between the Venezuelan opposition and the anti-Cuba lobby in the U.S. Cuban-American lawmakers recently introduced sanctions legislation targeting Venezuelan officials that appears to be designed to push U.S. policy toward Venezuela in the same direction as policy toward Cuba.

Meanwhile, the New York Times reports on the Venezuelan opposition’s ire for Cuba and the role it has played in the ongoing protests in Venezuela:

Enraged as they are by their nation’s leaders, many of the protesters who have spilled onto Venezuela’s streets have their eyes fixed on another government altogether, one they resent perhaps just as bitterly as their own: Cuba’s.

Their rancor is echoed by the Cuban opposition, which has thrown itself behind the Venezuelan protesters’ cause with gusto, sharing photos and videos of protests and police abuse on Twitter, urging Venezuelans to resist and even rapping an apology for what they call Cuba’s meddling.

The Venezuela protests have “energized” members of Cuba’s opposition, reports the Times. Orlando Luis Pardo Lazo, an anti-Castro blogger in the U.S., told the Times, “The fate of Castro-ism may be at play in Venezuela…What we were not able to topple in Cuba, we may be able to topple there.”

Yet despite near constant claims from the Venezuelan opposition that Cuba is in control of their country (for instance, when it was announced that Venezuelan congresswoman Maria Corina Machado would be investigated and possibly stripped of her position, she responded that “It’s clear to me that it was the Castro brothers who gave the order”), the Times notes that:

Such convictions are held by critics in both countries, although they offer little hard evidence to back their suspicions. And while some former Venezuelan military officers say that Cubans are involved in decision-making in the armed forces, some protesters go further, professing to see what they call “the hairy hand” of Cuba everywhere: saying they have detected Cuban “infiltrators” at street protests; seeing a Cuban hallmark in the tactics of Venezuela’s armed forces; and circulating unsubstantiated Internet reports that Cuban special forces, or Black Wasps, are operating in Venezuela.

The Times report follows a number of pieces from the Tampa Bay Tribune, which discuss the relations between anti-Castro exiles, specifically in South Florida, and the opposition in Venezuela. In early March, Paul Guzzo wrote:

From Tampa to the Senate floor in Washington, and throughout the United States, Cuban Americans who defend continued isolation of the Communist island nation are throwing their support behind Venezuelan Americans in their efforts to bring order to the South American country.

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Venezuela: When Some of the Most Important News Comes in the Form of Corrections Print
Written by Mark Weisbrot   
Wednesday, 26 March 2014 13:39

It says something about overall media coverage of a subject when some of the most important news appears in the form of corrections.  On February 26, the New York Times corrected a false statement in a news report that had incorrectly referred to Globovision as “[t]he only television station that regularly broadcast voices critical of the government.” This was false, and it was easy to show that other major television stations regularly broadcast opposition views.

Today the Times corrected an even more important false statement that appeared in an op-ed by jailed Venezuelan opposition leader Leopoldo López.  López had written that “more than 30” protesters had been killed in Venezuela in the recent protests. In fact the “more than 30” number cited by López includes all protest-related deaths, a fraction of whom appear to be protesters.  Although it has not been mentioned in major media coverage, a compilation of press reports indicates that the protesters themselves – not security forces – are responsible for about half of the deaths.  These include six national guardsmen who were shot, five additional people apparently shot while trying to remove barriers erected by protesters, and seven people who were killed apparently from crashing into protesters’ barriers (including two motorcyclists beheaded by wire strung across the road).

This correction is extremely important because most people who see the daily death toll from protests in Venezuela understandably assume that these are people killed by state agents.  Although the reporters are not intending to mislead, we can see the effect of this reporting in that López himself, and whoever edited, placed, or provided other assistance with the op-ed for him also were very much mistaken.  The net result of this widespread false impression is to greatly strengthen the opposition strategy, supported by many politicians and pundits in the U.S., to portray Venezuela as a violent, repressive, and illegitimate government. 

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Venezuela’s Black Market Dollar Plummets on News of New Exchange Rate Mechanism Print
Written by Mark Weisbrot   
Monday, 24 March 2014 12:49

While most of the news from Venezuela has been focused on protests, something that is probably more important for the future of the country has taken place. The black market value of the dollar has plummeted by one-third in the past three weeks, on news that the government is introducing a new, market-based exchange rate. According to the plan, known as SICAD 2 (Sistema Cambiario Alternativo de Divisas), Venezuelans will be able to purchase dollars legally from various vendors including private brokers and banks.

In November of last year I wrote a short piece for Folha de Sao Paulo arguing that the black market dollar price was a bubble, comparable to the real estate bubble in the U.S. in 2006 (or stock market in 1999), and that the government could burst it at any time. Some people were buying dollars because they needed them for various purposes; but also some were making what they thought was a one-way bet. They thought that the dollar was a good store of value because it would continue to rise indefinitely against the domestic currency. Much of the media promoted the idea that Venezuela was headed for hyperinflation (some even erroneously call it that), and so the domestic currency (bolivar fuerte) would continue to lose value until it collapsed.

At the time I wrote about the bubble the dollar was at about 60 bolivares fuertes, but it was already well into bubble territory; it continued to rise to 88 and has now fallen to 58.3. It’s likely to fall further as the SICAD 2 system supplies dollars that were previously being sold on the black market. And if the black market dollar falls, it will bring down inflation, since this has been the main cause (see graph below) of the sharp increase in inflation since October of 2012. There should also be some relief of shortages, since it will be easier for importers to get dollars. Since PDVSA (the state oil company) can sell dollars on this market as well, this should also reduce the government budget deficit.

Of course there are other economic problems, including the pilfering of billions of dollars in foreign exchange at the official rate through the setting up of fake companies, and smuggling subsidized food and gasoline across the Colombian border. But the exchange rate system has been the central economic imbalance, and if SICAD 2 functions as planned it could go a long way towards resolving Venezuela’s current economic problems.

vz erandbop1

 
Should the Media Report on Who is Killing Whom In Venezuela, When Death Tolls are Reported? Print
Written by Mark Weisbrot   
Sunday, 23 March 2014 19:53

Reading the daily reports on Venezuela’s protests, we find that “At least 31 people have died” (CNN) or the headline “Venezuela death toll rises to 33” (Reuters) and dozens of similar statements in television and radio reports. There is nothing inaccurate about this on its face, and no one can accuse the journalists involved of having exaggerated anything.

But let’s look at this for a moment from the perspective of the reader or listener, who is generally not an expert on Venezuela. What do they think when they read or hear these statements? If you want to find out, just ask anyone who happens to be near you when you are reading this right now: “Who is responsible for most of these deaths?” Unless they have done their own research, they will tell you that the government and/or security forces are responsible.

In fact, it appears that the majority of the deaths described in the headline “Venezuela death rises to 33” appear to have been caused by protesters. The average reader, of course, has plenty of reason to think the opposite; that it was the state security forces that were responsible for most of the deaths. In most countries where street protests take place and there is violence, the vast majority of the violence is indeed caused by police or armed forces. Even in places where protesters engage in violent acts, they will generally provoke greater violence from the state.  

So because this situation is so contrary to what people are understanding from the reports, perhaps reporters should include a simple statement that he majority of deaths appear to have been caused by protesters, not security forces. Otherwise, although it is not intentional, these reports continually reinforce the widespread belief, which is promoted by U.S. politicians and pundits who want Americans to believe it, that the government of Venezuela is violently “cracking down” on “peaceful protesters.”

 
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The Americas Blog seeks to present a more accurate perspective on economic and political developments in the Western Hemisphere than is often presented in the United States. It will provide information that is often ignored, buried, and sometimes misreported in the major U.S. media.

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