Hugo Chavez salutes during a military parade to commemorate the 20th anniversary of his failed coup attempt, on 4 February 2012. Photograph: Getty Images
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Hugo Chávez: An elected autocrat

He kept power by bullying those who dissented – and his departure leaves a dangerous vacuum.

This piece was originally published as part of a cover package in the New Statesman magazine, alongside an article by Richard Gott entitled "Man against the world".

It was visiting day at Los Teques women’s jail, a jumble of concrete ringed by guards on a hill overlooking Caracas, and the inmates were dolled up, tight jeans, heels, lipstick, bangles, to receive their menfolk and children. All lounged in the courtyard, soaking up sun, chatting and snacking.

All save one. Maria Lourdes Afiuni’s cell door was open but she stayed inside, perched on her bunk, smoking. Pale and pasty, she wore baggy jeans, a shapeless sweater, trainers and no make-up.

A portrait of the Archangel Michael slaying a dragon, a gift from a friend, adorned the wall. The dragon bore a distinct resemblance to Hugo Chávez. Afiuni smiled. The president had already sentenced her; what did she have to lose?

It was January 2011 and I had come to interview Venezuela’s best-known prisoner. Afiuni was a judge who had come to national attention 13 months earlier by releasing a highprofile banker accused of fraud.

Chávez erupted. He went on television to accuse Afiuni of having been bribed, of being a bandit, and said in earlier times she would have been shot. “We have to give this judge and the people who did this the maximum sentence . . . 30 years in prison in the name of the dignity of the country!”

A single mother in her forties, Afiuni had cancer. Inmates attacked her and threatened to “drink her blood”. An international campaign for her release was launched but on this bright January day she remained incarcerated and hunched in her cell, afraid to mix with the other inmates. “I’m here as the president’s prisoner,” she said.

There was no disputing that. Guilty or not – Afiuni vehemently protested that she was innocent – there was no chance of a free trial after Chávez’s intervention. Noam Chomsky led the international outcry, yet her fellow judges stayed silent, too intimidated to join in. “Cowards and accomplices,” she said.

Afiuni’s plight was not typical of Hugo Chávez’s rule. There were no gulags, no mass arrests, no fear of the midnight knock on the door. Chávez did not rule through terror. But when it suited him he bullied the courts into jailing those who challenged or angered him.

He was neither a tyrant nor a democratic liberator but a hybrid, an elected autocrat, and the nuances of that category often escaped his friends and critics abroad.

He relied on the ballot box for legitimacy while concentrating power and eroding freedoms, shunting Venezuela into a twilight zone where you could do what you wanted – until the president said you couldn’t.

Chávez praised Fidel Castro, Robert Mugabe, Vladimir Putin and Muammar Gaddafi as brothers but restrained the bloodshed, settling for selective intimidation and thuggery. Repression was usually a last resort – when oil revenues, charisma and political skill were not enough for him to get his way.

His domestic opponents faced mounting threats. The first weapon was humiliation. Intelligence agents passed recordings of intercepted calls to a chavista television show, The Razorblade, which would gleefully spin and broadcast them, to an accompaniment of animal noises.

The second weapon was disqualification from running for office. Leopoldo López, a potential pre - sidential rival descended from Simón Bolívar’s sister, was accused of corruption, tangled in legal knots and sidelined.

The third was emasculation. Antonio Ledezma was elected the metropolitan mayor of Caracas but became irrelevant. A red-shirted mob occupied the city hall, with police complicity, and Chávez transferred the mayor’s powers to a newly created city authority run by an apparatchik.

Those who posed more serious threats, or who just got under the president’s skin, faced jail, usually charged with corruption. Manuel Rosales, who ran against Chávez in the 2006 presidential election, and lost badly, fled to Peru. Raúl Baduel, a defence minister who turned against the president, was jailed for eight years.

Union leaders who agitated too hard for workers’ rights, such as Rubén González, were jailed for unlawful assembly. Political prisoners, to use that loaded term, seldom numbered more than a dozen at any one time. A small number that sent a loud message: Chávez owned the courts.

In the case of Afiuni there was not even any pretence about separation of powers: the president publicly ordered her jailing. This proved too much even for Chomsky, otherwise a supporter of Chávez. His intervention is one reason Afiuni was granted house arrest, where she remains today.

Craven judges gave a threadbare legal cover to punishing foes, expropriating property and violating the constitution. The chavista militias that rode around town on motorbikes lobbing tear gas at opposition targets were a circus sideshow. Judges were the real fist. Hardly a Stalinist dystopia, but not the democratic New Jerusalem Chávez’s propagandists proclaimed.

The intimidation was selective. As the Guardian’s correspondent in Caracas for six years, I never had a problem with visas, accreditation or invitations to official events. The local media, however, were squeezed. Dozens of private radio and television stations lost their licences, encouraging the rest to self-censor. The exception was Globovisión, a Fox-like cable TV channel that fulminated against Chávez.

In 2002, Globovisión and other private channels shamefully fuelled a US-backed coup that briefly ousted Chávez. Their comeuppance was merited. Yet Chávez went too far, creating a sycophantic state media empire and cowing most, though not all, private media. This enabled his personality cult and his transformation from “el presidente” to “el comandante”, a military term his followers used to stress obedience. During his marathon broadcasts, ministers would compete during fleeting cameos (it was unwise to divert the limelight too long) to show loyalty and submission.

He cemented his rule by rewarding allies. Opportunists, notably senior military officers and the tycoons known as “boligarchs”, got rich manipulating government contracts. Civilian ideologues and Cuba got power and influence. Hundreds of thousands of ordinary people got jobs in a bloated bureaucracy. And millions of the poor got social services, scholarships and handouts, notably fridges, tumble dryers and washing machines. Those who voted against him were often barred from government jobs and benefits.

Other Latin American governments knew of the abuses, that elections were free though not fair, but stayed silent. Venezuela’s hollowed economy required huge imports from its neighbours to keep shelves stocked. Why risk the bonanza? Plus Chávez offered discounted oil, called time on Yankee meddling and told the IMF to stuff itself.

As the comandante ails in a Cuban clinic, Venezuela’s one-man rule totters without the man. In the short term, that creates a dangerous vacuum. Chávez hovers like Banquo’s ghost while his appointed heir, Vice- President Nicolás Maduro, does an awkward tango with Diosdado Cabello, head of a rival chavista faction. Urgent decisions loom, not least a currency devaluation, but no one dares take them.

There are many ifs. If Chávez dies soon, expect a huge funeral and a swift election. If Maduro wins he will struggle to keep the disparate ruling coalition united and fix the warping economy. Chávez’s political genius was the revolution’s glue. Maduro is no genius and he relies on Cuban mentors, not a good augury for healthy democracy.

If the opposition stays united and wins the election it will face entrenched chavista bureaucrats, mayors and governors. Some will seek to perpetuate their movement the way the Perónists did in Argentina. Others will saltar la talanquera, a Venezuelan tradition of jumping the fence to accommodate new rulers. If oil prices stay high the transition will have a cushion.

The longer-term challenge will be the economy and rebuilding institutions – ministries, the judiciary, the armed forces, local government – which have been gutted and have become hyper-politicised. It will be messy and painful. At such times Venezuela usually clamours for a strong leader who promises short cuts. Too often, it finds one.

Rory Carroll was based in Caracas as the Guardian’s Latin America correspondent from 2006 to 2012. His book on Chávez, “Comandante: Inside the Revolutionary Court of Hugo Chávez”, will be published by Canongate in March

This article first appeared in the 28 January 2013 issue of the New Statesman, After Chavez

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt