Streetwise Professor

June 12, 2016

More Media Idiocy and Dishonesty on Venezuela (and Climate Change)

Filed under: Climate Change,Economics,History,Politics — The Professor @ 12:12 pm

Venezuela’s economic and social collapse brings out the most idiotic “reporting” and commentary from the mainstream media. They are desperate to explain away the catastrophic failure of an avowedly socialist polity. They are also eager to recruit the country’s crisis to advance other progressive agendas, most notably climate change.

I thought I had read peak Venezuela stupid earlier this week in an Bloomberg article. (More on that below.) But I now know that I have seen peak stupid, because nothing can be more idiotic than this from a New York Times reporter:

And there’s no way that the Venezuelan government could print that much money to keep up with inflation. So what happens – they don’t. And there’s not enough money. There’s a shortage of money, just like there’s a shortage of electricity and water. It means, you know, paying for things and doing everything in your day-to-day life has become very, very challenging.

Hilarious! Who knew that hyperinflation occurs because the there’s “a shortage of money”?

This is New York Times economics “thinking” in a nutshell: that is, 180 degrees from reality.

News for Mr. Casey, courtesy of Milton Friedman: “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

The corollary is that hyperinflation can be produced only by an extremely more rapid increase in the quantity of money.

Boy, I guess money was really short in Zimbabwe a few years ago (inflation rate 79.6 billion percent in 2008–Venezuela has some catching up to do!)

The rest of the interview with Mr. Casey proves that he is not short of economic comedy gold. John Hinderaker at Powerline has deconstructed it thoroughly, so I don’t have to. The implication is blindingly obvious: anyone who relies on the NYT for economic insight can find it only if they follow one rule: conclude the opposite of everything the Timesman (or -woman) says.

One would hope for better from Bloomberg (its Twitter handle is @business, after all), but one would be disappointed. For while the NYT tells you that hyperinflation in Venezuela is due to the lack of printing press capacity, Bloomberg tells you that the crisis is due to the “wilting away of the state.” (Wait–Marx told me that was a feature, not a bug! WTF?)

Yes, the Venezuelan state is collapsing. But it is collapsing not because of climate change or other factors beyond its control. It is collapsing because its previous hyperactivity wrecked the economy and destroyed civil society. Perhaps the adverse consequences of the drought was the death knell, but that was only possible because Chavism had already undermined society’s capacity to absorb another shock. It’s like blaming pneumonia for the death of an AIDS victim. Yeah, it’s what killed him, but it wouldn’t have killed him if his immune system hadn’t already been ravaged.

This attempt to blame Venezuela’s crisis (and Syria’s–the article is a twofer!) on climate change is beyond annoying because it fails to identify honestly the source of the state’s “lack of adaptive capacity”:

“Powerful groups, especially in corrupt states, use their power to capture resources,” says Homer-Dixon. “You get a polarization of wealth, a weakening of state capacity, and urban stress.” Although these kinds of changes are indirect effects of a drought, they are often the tipping point for social conflict. “We are seeing these things around the world now,” Homer-Dixon says. “As environmental stresses get worse, [their effects] become more common.”

Global water shortages are predicted to decrease global gross domestic product by as much as 14 percent by 2050, according to a recent report by the World Bank, which predicts that this “severe hit” will spur conflict and migration across the Middle East, Central Asia, and Africa. Even resource-rich countries previously considered to have stable economies, such as Brazil and Russia, have become more susceptible to environmental disequilibrium. Last year production of coffee, one of Brazil’s most important commodities, fell 15 percent as a result of drought. A lack of rain in Russia this fall damaged a quarter of its cereal crops. The last time the country’s harvest failed, rising global prices contributed to the Arab Spring in countries dependent on imported grain. [What? Um, there have been droughts for like forever. And steep declines in agricultural output are a historical norm. Further, Russian grain output is likely up this year. FFS. Agricultural output variability has been the norm since humans first scratched the ground with a stick. Before that, even: variability in the amount of stuff to gather predates the agricultural revolution.] Even Islamic State’s political power may soon be affected by drought. As water levels in Lake Assad in Syria plummet, Raqqa, the group’s stronghold, is facing severe shortages. Last year, Islamic State’s press officer, Abu Mosa, told Vice News that it would consider attacking Turkey to gain access to additional water resources.

Climate science has an explanation for why environmental forces can have this kind of destabilizing effect. Angel Muñoz, a postdoctoral research associate at Princeton, says, “Risk is just a multiplication of hazard by vulnerability.” Muñoz, who grew up in Venezuela and moved to the U.S. to study climate risk management, explains that a drought is a hazard, but what actually created this year’s mess was Venezuela’s lack of what he calls “adaptive capacity.” The drought was predicted months before it began—neighboring Colombia started water rationing in September 2015. Although Venezuela has far more natural resources than its neighbor, Colombia is not in such dire straits. “A society’s vulnerability is at least as important as the hazard,” Muñoz says.

As a result, when weak states [!] face environmental catastrophes like drought, “you might see the collapse of authoritarian regimes, as you did during the Arab Spring,” Homer-Dixon says. “But they’re probably going to be replaced with something just as bad, because a deeply divided society is still dealing with a materially stressed situation.”

The point is that authoritarian regimes–which invariably use their authority to control the economy and undermine private contract and markets–are brittle. That’s why they have less adaptive capacity. Some shock is the proximate cause (in the USSR, it was the decline of oil prices in 1986), but statist systems are brittle because in their mania for control they destroy the resilience of emergent orders.

Brittleness is different than weakness. The “weak state” formulation suggests a polity like Somalia or Afghanistan where the government’s writ does not extend beyond the capital, if it extends even that far. Or medieval Europe. The problem with Venezuela and Syria is that the state’s writ runs everywhere.

Regardless of the science regarding climate change, and in particular the science of attributing to climate change a particular type of event that has occurred on earth since far before recorded history, it is beyond dishonest and manipulative to ignore the real anthropogenic factor at work here: the destruction of a society’s adaptive capacity by a hyperactive state. If Venezuela is on the brink of anarchy, it is because the state was too strong, not because it was too weak.

What is particularly perverse is that climate change is being used to justify intense statist intervention on a global scale. This despite the fact that as the case of Venezuela (and other socialist paradises) demonstrates, humanity (and nature) have much to fear from a hyperactive state. The Bloomberg article is particularly dishonest because it insinuates the exact opposite.

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  1. Excellent article!! Unfortunately, the consequences of this
    hyperactivity cannot be reversed. The tipping point was reached
    some time ago and the ride down–globally–will be very rough.
    Hang on tight(ly)!

    Comment by eric — June 12, 2016 @ 11:58 pm

  2. To be charitable to Mr. Casey, perhaps he meant that people have become poor (don’t have enough money) rather than that M2 is too small. However, the official line of the New York Times is that printing money is the best way to make everyone rich, so perhaps there isn’t a difference between the two senses in their view.

    Comment by aaa — June 13, 2016 @ 5:26 am

  3. The head of the Reichsbank also mistook an output problem for a liquidity problem. Look what happened then.
    I guess the NYT employs no Germans.

    Comment by bloke in france — June 13, 2016 @ 8:29 am

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