Venezuela: Latin America’s inequality success story

[If you’re visiting this from the future, say 2019, please scroll down to the update at the bottom before frothing]

Hugo Chavez, Venezuela’s President, has plenty of critics, who often focus on his style (not least his interminable unscripted chat show, Alo Presidente), and in many ways he does fit into the tradition of the Latin American caudillo (the ‘strong man on horseback’). But Venezuela certainly seems to be getting something right on inequality. According to the highly reputable UN Economic Commission for Latin America and the Caribbean, it now has the most equal distribution of income in the region, and has improved rapidly since 1990. Here’s a graph from a recent ECLAC report, ‘Time for Equality: Closing Gaps, Opening Trails‘. It shows the change in the gini index of income inequality in the major Latin American economies from 1990 to 2008.

Latin America inequality 1990-2008

Any country below the line has lowered inequality over the period (with the gini index, 1 = absolute inequality, zero = total equality). Two points jump out – firstly, as I’ve reported before, most of the region has had a good couple of decades, in which a combination of good social policy and economic stability have brought down historically high levels of inequality. But the thing that surprised me is Venezuela, which has overtaken Ecuador, Paraguay and Costa Rica to become the most equal (or since this is Latin America, the least unequal) country in the region. And this in a massively oil dependent country, when natural resource dependence typically leads to high levels of inequality, because it generates few jobs, and revenues tend to go to the well connected few. Anyone (pro or anti) got any convincing explanations? [h/t Katia Maia]

And here’s a (brief) taste of Alo Presidente

Update: It’s 2018, and since this was written, things have changed horribly for the worse in Venezuela. This post now triggers an occasional rumbling of discontent, and even the odd Daily Mail rant. Which poses an interesting dilemma for a blogger. Should I take it down, as some have requested?

The piece was not uncritically pro-Chavez (and nor was I at the time) – it acknowledged that Chavez was in many ways a classic Latin American ‘caudillo’. Unsurprisingly it had nothing to say about his successor, Nicolás Maduro, who took over in 2013, after Chavez’ death. It did not endorse or indeed, even discuss the Chavez’ regime’s politics.

Instead it pointed out a surprising fact in the UN’s inequality data at the time. I’m pretty sure that progress on inequality (and certainly on poverty) will have gone massively into reverse since then, but I don’t think the ability to foresee the future should become a part of Oxfam sign-off procedures, and no-one who has commented thus far has questioned ECLAC’s data.

As I am not following Venezuela in any detail, I am not able to write an analysis of what is happening there today, but the news looks grim (as it is for Nicaragua, which I know better, having spent time there in the 1980s and 90s). Politics and the economy appear to be locked into a downward spiral with horrible consequences in terms of poverty, human rights and institutional stability.

So yes, I am now more negative about the Venezuelan government than I was in 2010. In the words of JM Keynes, ‘When the Facts Change, I Change My Mind. What Do You Do, Sir?’

But I am not about to take down the post until someone points out a factual error, rather than a lack of clairvoyance.

Hope that helps, (but doubt it will!).

Subscribe to our Newsletter

You can unsubscribe at any time by clicking the link in the footer of our emails. For information about our privacy practices, please see our Privacy Policy.

We use MailChimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to MailChimp for processing. Learn more about MailChimp's privacy practices here.

Comments

37 Responses to “Venezuela: Latin America’s inequality success story”
    • David

      Just grabbing land like Mugabe so that the land stops any kind of production. Putting polictical commissars (Commie friends) in charge of oil production managed to halve output. Taking money from oil barter deals (so money is hidden) around the world so that $4.2 billion can end up in the hands of Miss Chavez. Certainly the gap between rich and poor is far narrower as they are all now starving.

  1. Abraham

    According to the same report, Venezuela’s “Institutions that Support Small and Medium-Sized Enterprise” spend the greatest percentage of their GDP, amongst all LA countries.

    Also it has the second highest Spending on social protection

    @Andrew: The report also says that the “…provision of social services is possible almost exclusively because of the higher levels of development achieved by societies with Governments buoyed by natural-resource revenues (the Bolivarian Republic of Venezuela and Mexico).” I am no expert, but to me this also shows that the govt/leadership has strong redistributive inclinations, and that’s a pre-condition for redistribution actually happening. I suspect that inclination is partly an outcome of ideology. Of course, I have no idea where to place ‘ideology’ within strategic frameworks/PRSPs et cetra.

  2. Hi Duncan,

    One question: does Chavez really deserve the credit? The chart is from 1990 to 2008.

    OTOH, the first chart in this VoxEU article, from 2000-06 has Venezuela as a relative under-performer:
    http://www.voxeu.org/index.php?q=node/5148

    I’m struggling to square the two.

    Duncan: Well, Chavez has been in power since 1998, so you’d have to be pretty churlish not to give him some of the credit, I think. On the other hand, if the VoxEU article is right (and it looks pretty solid), that suggests that the progress mainly took place in the 90s. Tricky.

  3. Worth noting two things:

    1. P172 and 173 of the ECLAC report have further charts broken into pre 2002 and post 2002. And Venezuela looks good in those for post 2002 (i.e. Chavez deserves credit). So maybe the discrepancy between ECLAC and VoxEU is because the VOXEU chart covers two of Chavez’s worst years (00-02) and excludes two of his best (06-08)?

    2. And, of course, the Gini coefficient won’t capture the welfare impact of his health clinics either. So in terms of welfare inequality (rather than income inequality) Chavez may do better still.

  4. Paul

    Hi there and thx for the blog Duncan

    if you take a look at Venezuela Gini coeff within the period, for instance on the world bank website (data displayed until 2006), you may infer that the diminition must have happened somewhere within the 2006-2010 period. 2005: 49.5; 2006: 44.8 … and 2010: 38.9 as it seems.

    Strange strange …

    Question: how is it possible to reduce inequalities from such an amount in such a short period of time?
    My answer (as a statitician myself): mostly propaganda I am afraid.

    One could think the decrease reflects the impact of the economic slowdown and/or redistribution, but franckly this looks very very much like an old school sovietic set of home made statistics. The 2010 index can only be found on the venezuela national institute for statistics web, and in an adress from its director to explain the country’s achievements on the venezuela us embassy web (http://venezuela-us.org/2010/11/17/venezuelan-has-latin-america%E2%80%99s-best-income-distribution/).

    I agree people are free to believe in what they want, even in democratic socialism or bolivarian revolution, but I always find it strange they need figures for that.

    Best wishes and happy new year to all (yes, 2013. Chavez changed venezuela time zone by half an hour in 2007, so far he did not change the year, good for them).

    Paul

  5. Tom

    “If a country transfers huge amounts of economic value from the hard-working productive demographic to the lazy and slothful demographic, causing the Gini number to become “More Equal,” is the country better-off? Does the economy improve? Or does the previously productive and motivated demographic change its behavior and reduce its productivity so there is less to take and hence consume?”

    http://www.economist.com/blogs/graphicdetail/2013/01/daily-chart-20?fsrc=scn/fb/wl/dc/gini

    • Pete in NYC

      Well Tom, looks like it doesn’t as many in the country as starving, the economy is in ruins and the government has wiped out the Treasury. Socialism is a complete failure in Venezuela

  6. Jean-Pierre Rupp

    I am Venezuelan, living in Europe. I just started contributing to Oxfam. I didn’t know they were cosy with communist regimes. I lived in Venezuela between 2000 and 2007 and saw how the destruction of the economy and further impoverishment of the country was eagerly carried out by authorities and supporters alike, despite the warnings of more rational minds. The writing was on the wall when I left. You have to be ideologically committed to communism to see anything of value coming out of the Hugo Chávez administration.

  7. bob

    Perhaps Oxfam is willing to reconsider policies and endorsements, if it turns out that they ruined millions of people’s lives.

    Venezuela is now in an awful state. Mass riots, mass unemployment, no food on shop shelves and no medicines in hospitals. Chavez’s policies ruined millions of lives. Does Oxfam still think it’s great?

    • Duncan Green

      In the words of JM Keynes, ‘When the Facts Change, I Change My Mind. What Do You Do, Sir?’ Oh, and you may have overlooked the clear statement on this blog’s homepage ‘This personal reflection is not intended as a comprehensive statement of Oxfam’s agreed policies.’

      • David

        ‘This personal reflection is not intended as a comprehensive statement of Oxfam’s agreed policies.’

        It’s lucky they can say that because the article is errant nonsense.

        Socialism has reduced life in Venezuela to near starvation – but everyone is much more equal. However, there are still signs that some people are bucking this trend to equality, Ms Chavez, for example now sits on assets valued at $4.2 billion.

      • Adrian Turcu

        “When the Facts Change, I Change My Mind. What Do You Do, Sir?’” -I make sure I don’t let my ideological bias distort verifiable facts. Venezuela in 2010 was very bad and getting worse. It takes a committed Socialist to falsify this.

      • Amaury

        In the words of JM Keynes,”When the facts change, I change my mind. What do you do, sir?” Unfortunately, those who lead the economy in Venezuela, despite seeing the dramatic changes that have taken place in the facts, do not change their minds and continue to insist and deepen an economic model that has been shown to be a true failure, which discourages the one who produces and stimulates the vague who believes that it must be the state that must supply their needs.

  8. David

    Now everyone is far more equal in Venezuela as they all starve and the frontiers more or less closed.

    Chavez’s “sharing” has shared $4.2 billion of Venezuelan assets into the hands of his daughter – naturally much of it held in the US and Andorra.

    Socialism is wonderful. They had a wonderful adviser in Ken Livingstone.

  9. Luis Fraga Lo Curto

    This is a wonderful article to understand OXFAM’s real agenda. You don’t really care about poverty, you only care about equality, even if that meens to make everyone miserably poor.

    • Duncan Green

      OK, I realize the first rule of social media is ‘don’t feed the trolls’, but I want to make a couple of points:
      1. The post was written in 2010, using data up to 2008
      2. The data comes from the UN Economic Commission for Latin America and the Caribbean, an excellent source
      3. In 2008, according to the World Bank (another non-socialist source, I hope you’ll agree), Venezuela had GDP growth of 5.3%. The previous two years recorded 10% and 9%. https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2014&locations=VE&start=1995

      And no, I would certainly not write that post now – see my Keynes quote earlier: ‘When the Facts Change, I Change My Mind. What Do You Do, Sir?’

      • Daniel Salas

        I saw it coming not in 2010 but in 2000. It was very clear that Chavez´s policies were a failure. To figure out something so obvious, it was just necessary a few information, especially historical information like the effects of Peron´s regime in Argentina. I am not an economist. Just a reasonable human being.

      • gabriel

        En esa fechas el PIB creció por los altos precios del petróleo, fueron ingresos no productivos. Se regalaron recursos a diestra y siniestra, sin ningún tipo de mesura, se expropiaron empresas de todo tipo y tierras cultivadas, que finalmente fueron abandonadas, el sr. chavez pensó que el precio del petróleo subiría infinitamente, y no tomó las debidas previsiones. Todos aquellos que quisieron advertirlo fueron declarados traidores de la nación. ahora estamos pagando con miseria todo ese desbarajuste.

      • Moneyrunner

        Where did the UN Economic Commission for Latin America and the Caribbean get their data and why are they “an excellent source?”
        Where did the World Bank get their data and why do you assume the people that write their reports are capitalists or free-market conservative. Why should we agree that bankers are not socialists?

  10. Ronaldo

    Result of the socialism that Oxfam defends, today Venezuela is a very poor, violent and unequal country. The middle class has unlearned along with capitalism, the global socialist oligarchy took over the country and enslaved the population.

  11. David Sawatzky

    This post has aged soooooooooooo well. I think I’m going to bookmark it and send it to anyone when they claim that XYZ country has become Socialist, and everyhting is going great.

  12. marcdlf

    You are right to keep the post online and right to admit that you can change your mind.
    If the time has now shown the inefficiency of Venezuela’s wonder, it also shows that the logic which led you to draw a conclusion in 2010 is completely flawed. Because Oxfam continues to assume positions that I believe will allow for a few post-dated comments in a few year’s time

  13. Moneyrunner

    Facts are funny things, as are statistics. Your article addresses low income inequality as a metric that is assumed to be an indicator of a good economic system and good government policies. However, it’s taken in a vacuum. It’s entirely possible that Venezuelan income inequality is actually lower since the original article, giving Oxfam another opportunity to hail the benefits of the current regime. As others have noted, who provided the raw data that created the statistics that was used in your first article? In view of the nature of the current as well as the former regime, are these statistics accurate or not?
    The point of my reply is not to dispute your original article but to point out that despicable regimes often use statistics such as literacy, medical achievements or income inequality to “prove” how despots have improved the lives of the people they rule. Plus, of course as everyone knows, government statistics – even in democratic countries – are often misleading or just plain wrong and in dictatorships, they are simply lies.

  14. Francisco Matheus

    So now, nearly 10 years after your commentary, do you have anything to say? Were you wrong, were you right, or were you unashamedly unaware of the underlying dynamics of the so-called socialism of the 21st-century that have turned Venezuela in to the greatest crisis this region has seen in more than 200 years? The inequalities that you noted as disappearing in 2010 have been replaced by misery and suffering by disease and lack of the most basic life sustaining necessities: water, food, medical care, electricity and security. Thanks to organizations such as yours, that clamored wonderful achievements of Chavez, the you, the great Satans, capitalism and meritocracy have been replaced by a narcostate run with the help of Cuba, Iran and everyone’s favorite, Russia. Thanks again.

    You will probably never publicly admit the errors that your poor judgment and analysis have inflicted on this country and I see now that you are now concerned about what sanctions may do to Cuba. Could it simply be that communism cannot transform an economy into a self sustaining endeavor that helps the populace? Isn’t that why taxes exist in a society, to provide for those who cannot provide for themselves? Aren’t you helping maintain two totalitarian, repressive regimes in place with your comments and thereby continuing hunger?

  15. Francisco Matheus

    Which one in particular?, the one from February in which “Oxfam calls on all actors…” to come to negotiate so that the populace”s well-being is not further diminished (as if the people of Venezuela are free to negotiate and argue with a repressive regime that weaponizes food distribution is a means of control) or is is it the one that appeared in the Washington Post, where Ms. Scribner actually mentions the weaponization of food, medicine and other basic needs?
    For your organization to have some degree of success in its mission, IT MUST ACKNOWLEDGE ITS MISTAKES and whenever possible correct them. If this does not happen, no one will trust you, including yours truly, so do not expect me to contribute to your cause although I do contribute directly to Venezuelans are living in and outside of Venezuela, meaning, those that have become refugees elsewhere.
    In order to diminish hunger, population growth must be controlled, education must be made free to those who cannot afford it, job opportunities must be provided and, the importance of this last point cannot be emphasized enough, the countries where these refugees live in, must be somehow fixed so that people may live decent, productive and ultimately happy lives. I am not a socialist by any stretch of the imagination but I do believe in the fact that capitalism as it currently exists, must change so that we can all live in the new challenges that we are now facing, namely global warming, diminished food production, etc. I think you owe the people of Venezuela and apology for your comments of 2010. This is one of the most stupid articles I have ever read in my life and I’m sure that was written by people who never lived in Venezuela, never understood the situation as it developed, never made a serious analysis but only looked at some statistics that were slanted towards a totalitarian regime’s favor and in all likelihood reflected simply the skyrocketing price of oil at the time.

Leave a Reply

Your e-mail address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.