EspañolVenezuelan economist Hugo Faría was one of the first champions of dollarization in Latin America, even before Argentinean President Carlos Menem implemented a currency-board system that pegged the peso to the US dollar in the early 1990s, putting an end to decades of inflation.
In Venezuela, however, Faría preached in the desert. His country of birth today has the world’s highest inflation and is drowning in socialist policies that have created severe shortages. Stemming from the University of Chicago, his ideas were always controversial in a country of orthodox economists.
He is now a visiting professor at the University of Miami. Along with Venezuelan economist Leonor Filardo, he recently authored “Without Liberals There Is No Liberalism,” a paper that analyzes the cultural prejudices that turned what was Latin America’s most prosperous country until the 1960s into the region’s basket case.
Faría spoke with the PanAm Post about what the future holds for Venezuela. Far from optimistic, he says not even the current opposition is offering to make the right changes to improve the ailing economy.
Why do you think the debate about dollarization never took off in Venezuela?
[It failed] because we chose the wrong approach. We presented dollarization as a benefit to businesses and not to ordinary citizens, and the businessmen and industrialists were among the staunchest opponents. Why? Because they would have to compete, and that’s the opposite of what they wanted.
Nowadays, I advocate monetary freedom; the government should allow the free circulation of dollars and euros. We don’t need a legal tender.
Can we infer from your paper that it is impossible for liberalism to emerge in Venezuela?
Who are the liberals in Venezuela? Our political and business elites are far from it.
In the United States, you have, for instance, businessmen who are strong advocates of economic freedom. They promote free-trade agreements at home and abroad to lower tariffs, so they can export more. Who benefits? The citizens.
In Venezuela, this is unthinkable.
You mention Cedice’s efforts to promote economic freedom, but you say this is a historical wave that has no cure. Aiming for capitalism, we have only reached mercantilism…
It’s true, mercantilism is the real enemy of capitalism. Many businessmen paint themselves as efficient managers, but the only way they turn a profit is by making our lives more expensive.
The [Venezuelan] government talks about “40 years of wild neoliberalism,” but someone should tell them that they were actually 40 years of wild mercantilism.
After so many years of failed socialist policies, do you believe a liberal model in Venezuela is possible after the elections?
Let’s examine the data: for example, which candidate is promising to give back [state-run oil company] PDVSA to the people? Who among our political leaders is proposing that PDVSA hand out the dollars they get for oil exports to the citizens, so that the government can collect taxes? No one. It was the opposition’s philosophy that caused the rise of [late Venezuelan President Hugo] Chávez.
Many economists are attacking the proposal to dollarize the Venezuelan economy knowing full well that the current system is perverse. It makes the rich minority who can get dollars even richer, while impoverishing ordinary citizens.
I’m not proposing dollarization. I think it should be legal for one to earn dollars or euros. Let the currencies compete with the Central Bank and its beloved bolívar. We are falling into the abyss, and they are still defending the same policies that brought us here.
When you defend the bolívar, like it or not, you are defending Venezuela’s political and economic elites. That’s why I’m not that optimistic, because despite the catastrophe, our economic intelligentsia keep defending the indefensible: the privileges of certain people.
Your paper seems to suggest that Venezuelans are not ready for democracy…
The people are ready. It is the elites who aren’t prepared for democracy. Venezuelans are fully ready. It’s complicated, and we argue in our paper that the Venezuelan mass media is essentially mercantilist.
How do citizens find out about alternatives [to the current system]? It’s through mass media, [but they] don’t offer any alternatives to citizens. Editorials focus just on upholding civil and political liberties, not economic ones.
Radio Caracas Televisión Internacional (RCTV) was shut down because they did a good job defending political liberties. But as Juan Perón said, the most sensible part of the human body is the pocketbook, and they didn’t address the economic issues.
You quote Friedrich Hayek when you say that there is not political liberty without economic liberty.… Did democracy kill economic freedom in Venezuela?
Again, it’s not democracy but Venezuelan democrats who killed economic freedom. And that’s what I want to highlight about Radio Caracas: it was a very popular TV station that reached every home, but they focused on the political question, which is valid. However, if Hayek and Milton Friedman were right, economic freedom is what allows free speech to exist.
If the government owns the media, and the privately owned outlets are mercantilist, there is no competition of ideas. Both worldviews share a disdain for the free market; they don’t want to compete.
There was a time, in the early 1990s, when Venezuela was leading the region in implementing liberal policies. Why weren’t they very popular?
Because inflation ended the Carlos Andrés Pérez administration. In Argentina, Carlos Menem, and in Peru, Alberto Fujimori, applied the same policies and were reelected. Why? Because they brought inflation under control. Pérez didn’t garner support from his own party, because it was a socialist party, and the businessman didn’t want to compete.
The only support his administration could have found rested with the people, but they alienated Venezuelans because they failed to convey what they were doing. He didn’t get the message across that the policies would benefit ordinary citizens.
Are you pessimistic about the future for Venezuela?
Venezuela is suffering from the same economic policies that have been in place for the last 50 years, but they are now on steroids. Lenin, when he proposed the New Economic Policy, said that private property didn’t matter when you are pulling the strings of the economy. From that point of view, we have been socialists since the 1970s.
I wouldn’t say I’m optimistic or pessimistic; I just look at the evidence. The evidence suggests that the alternative to Chavismo is the opposition: Leopoldo López, Henrique Capriles, and María Corina Machado.
What are they saying? What are they proposing? One can [easily] arrive to the conclusion that we don’t want to change things. If I don’t believe Venezuela will move toward a freer economy, it’s based on what these people are proposing.