Friday 11 February 2011

Venezuela's Road to Serfdom

Xavier points to a useful article for understanding the current situation in Venezuela.

Does Venezuela offer the best exemplar of the mechanism Hayek proposed in the Road to Serfdom?
Competitive authoritarian regimes in which the ruling party becomes less competitive risk becoming more rather than less authoritarian. The reason is that they amass an arsenal of institutional capacity and, in the case of Chávez until 2008, enough resources to enact policies and laws that restrict the opposition. What these regimes do not readily realize is that they will soon find themselves in a trap. The government seeks to compensate for its declining hegemony over the electorate by expanding and tightening its hegemony over institutions, but this move in turn contributes to the incumbents’ decline in competitiveness. The assault on checks and balances not only alienates moderates, but also causes policy failings that fuel anti-incumbent sentiment. The 2008 and 2010 elections suggest that this negative electoral effect is stronger in regions with greater access to information and autonomous organizations—namely, densely populated and economically diversified zones. Nevertheless, precisely because incumbents control institutions, and in the case of Chávez, growing sectors of the economy, these regimes are still able to generate policies that feed clientelistic networks and thus garner enough support from some elites and counter-elites to keep the ruling party afloat.
It is hard to be too optimistic about a possible escape from this vicious, self-reinforcing trap. In 2009, Chávez acquired yet another institutional asset—the right to indefinite reelection—that seriously undermines the prospect of any alternative authorities arising from within the chavista camp. Moreover, shortly after the 2010 legislative elections, the country’s most senior military commander, General Henry Rangel Silva, declared that the armed forces would never “accept” an opposition government. When the Mesa and the secretary-general of the OAS protested what Rangel had said, Chávez responded by promoting him to a higher rank.
Just as gravely, taking advantage of his expiring megamajority in the lame-duck National Assembly, Chávez obtained passage of a December 2010 “enabling law” allowing him to rule by decree for eighteen months. His first use of his decree powers was typical in its employment of a bit of social policy to sugarcoat a large dose of autocracy: He created a social fund (to help victims of flooding) along with ten new military districts throughout the country that he will have power to rule as supreme commander of the armed forces.
Hayek's mechanism starts with a liberal regime that moves totalitarian as either the initially benevolent leaders become totalitarian because they place plan over liberty, or because they're replaced by those who have the will to get the job done. Venezuela doesn't fit exactly, but it's not bad. An inefficient and corrupt leftist planning but democratic regime, propped up by oil exports, tries to retreat from planning when oil prices collapse; Chavez gets elected by folks looking for a strongman who can make the plan work. As planning leads to worse outcomes, Chavez doubles down.

So far, Hayek supporters haven't been able to point to a single real world example that's a close analogue to the Road to Serfdom mechanism. Venezuela's looking more and more likely as a candidate.

1 comment:

  1. I'm not sure this is not really driven more by the peculiar pathologies of oil economies than by the more general pathologies of planning. But it's worth thinking about!