The Venezuelan Economy: Media Sources Get It Wrong, Again
The bulk of the media often gets pulled along for the ride when the United States government has a serious political and public relations campaign around foreign policy. But almost nowhere is it so monolithic as with Venezuela. Even in the run-up to the Iraq War, there were a significant number of reporters and editorial writers who didn't buy the official story. But on Venezuela the media is more like a jury that has twelve people but only one brain.
Since the Venezuelan opposition decided to campaign for the September elections on the issue of Venezuela's high homicide rate, the international press has been flooded with stories on this theme - some of them highly exaggerated. This is actually quite an amazing public relations achievement for the Venezuelan opposition. Although most of the Venezuelan media, as measured by audience, is still owned by the political opposition there, the international press is not. Normally it takes some kind of news hook, even if only a milestone such as the 10,000th murder, or a political statement from the White House, for a media campaign of this magnitude to take off. But in this case all it took was a decision by the Venezuelan political opposition that homicide would be its main campaign issue, and the international press was all over it.
The "all bad news, all the time" theme was overwhelmingly dominant even during Venezuela's record economic expansion, from 2003-2008. The economy grew as never before, poverty was cut by more than half, and there were large gains in employment. Real social spending per person more than tripled, and free health care was expanded to millions of people. You will have to search very hard to find these basic facts presented in a mainstream media article, although the numbers are hardly in dispute among economists in international organizations that deal with statistics.
For example, in May the UN Commission on Latin America and the Caribbean (ECLAC)foundthat Venezuela had reduced inequality by more than any other country in Latin America from 2002-2008, ending up with the most equal income distribution in the region. This has yet to be mentioned by the major international press.
Venezuela went into recession in 2009, and you can imagine how much more press attention has since been paid to GDP growth there than when Venezuela was growing faster than any economy in the hemisphere. Then in January the government devalued its currency, and the press was forecasting a big upsurge in inflation, to as much as 60 percent for this year. "Stagflation" - recession plus rising inflation - became the new buzzword.
The "out-of-control" inflation didn't happen - in fact, inflation over the last three months, which is 21 percent at an annualized rate, is considerably lower than before the devaluation. This is yet another indicator that the economists relied upon by major media as sources have limited understanding of the actual functioning of Venezuela's economy.
Now it looks like Venezuela may have emerged from its recession in the second quarter of this year. On a seasonally adjusted annualized basis, the economy grew by 5.2 percent in the second quarter. In June, Morgan Stanley projected that the economy would shrink by 6.2 percent this year and by 1.2 percent next year. The International Monetary Fund (IMF) is projecting long-term gloom and doom for Venezuela: negative per capita GDP growth over the next five years. It is worth noting that the IMF gave the authors of "Dow 36,000" some competition for creative forecasting, with their repeated, wildly off-the-mark underestimates of the Venezuelan economy during the expansion.
All this may seem like par for the course if we compare with coverage of the world's largest economy - the United States -- where the vast majority of the media somehow missed the two biggest asset bubbles in world history - the stock market and then the housing bubble. But there were important exceptionshere, e.g. the New York Times in 2006. With Venezuela - well, you get the picture.
Of course Venezuela's continued growth is not assured - it will depend on the government making a commitment to maintaining high levels of aggregate demand, and keeping it. In that sense its immediate situation is similar to that of the United States, the Eurozone, and many other more developed economies whose economic recovery is sluggish and uncertain right now.
Venezuela has adequate foreign exchange reserves, is running a trade and current account surplus, has low levels of foreign public debt and quite a bit of foreign borrowing capacity if needed. This was demonstrated most recently in April with a $20 billion (about 6 percent of Venezuela's GDP) credit from China. As such, it is extremely unlikely to run up against a foreign exchange shortage. It can therefore use public spending and investment as much as necessary to make sure that the economy grows sufficiently to increase employment and living standards, as it did before the 2009 recession. (Our government in the United States could do the same, even more easily - but that does not appear to be in the cards right now.) This can go on for many years.
Whatever happens, we can expect complete coverage of one side of the story from the media. So keep it in mind: when you are reading the New York Times or listening to NPR on Venezuela, you are getting Fox News. If you want something more balanced, you will have to look for it on the Internet.