Venezuela and North Korea
The author is a professor of economics at Korea University.
Venezuela is going through a terrible crisis. It’s been utter chaos since President Nicolás Maduro became president in March 2013 with the death of Hugo Chávez. Chávez was in power for 14 years and was an advocate of Latin American populism. He spoke of equality and attacked the rich and elites to win favor with the people. Venezuela has the world’s largest proven petroleum reserve. The oil industry was nationalized, and welfare programs were implemented with the profits. Fortunately, the international oil price went up from $13 a barrel in 1999, when Chávez came into power, to $140 in 2012, and Venezuela was able to finance welfare spending. Yet in order to please supporters, income from oil was spent and was not invested in new industry or in growth areas.
Maduro adhered to Chávez-style populist policies, and faced a crisis as oil price plummeted. The fiscal deficit has been over 15 percent of the GDP every year since 2014. In order to make up for the deficit, money was printed. Prices of goods increased, prices were controlled, necessities were rationed and the minimum wage was raised. Companies accumulated losses, and chaos ensued. Last year, the price went up by 1,370,000 percent. Prices doubled every 18 days. The economic growth rates for the past four years have been minus 6 percent, minus 16 percent, minus 14 percent and minus 18 percent, and real GDP fell by half.
Economic policies brought severe pains to the people. Due to the shortage of food and necessities, the average weight of the citizens decreased by 11 kilograms (24 pounds). Cases of malaria and tuberculosis became more prevalent, and many people suffered from medicine shortages. More than 3 million people — 10 percent of the total population — emigrated. It is the most dramatic example in the 21st century of a country collapsing because of policy failure without a war.
Maduro was elected and inaugurated Jan. 10 after putting opposition leaders under house arrest or in prison and controlling the media. But opposition parties, the Lima Group of 14 countries in the Americas, the United States and Europe, do not recognize the president’s election. On Jan. 23, 2019, President of the National Assembly Juan Guaidó declared himself the interim president, as the constitution states that the head of the National Assembly can act as the interim president in the absence of a president. In a recent opinion poll, 82 percent of the citizens did not support Maduro. Yet Maduro has no intention of stepping down and rejected the poll. He maintains power backed by Cuba, Russia and China, as well as corrupt military authorities. He rejected all humanitarian food aid and assistance from other countries.
The United States, the biggest importer of Venezuelan oil, has banned payments to the Maduro government to exert diplomatic and economic pressure. While military intervention is considered, it cannot be put into action as there is no guarantee of success and it could spread anti-U.S. sentiment in Central and South America. Maduro warned that military intervention by the United States would fail just as it did in Vietnam.
Harvard University Prof. Ricardo Hausmann, who served as the Venezuelan Minister of Planning, lamented that the case of Venezuela shows the fate of a country where people’s economic rights are limited to discourage free investment and production, and political rights are limited so people cannot choose the government and policies they want.
The misfortune of the wealthiest country in the South America 10 years ago is connected to the North Korea story. In the early ’70s, North Korea’s per-capita income was on par with that of South Korea, but as a result of the failed socialist planned economy, the North’s per-capita income is now just 5 percent of the South’s. The North Korean people have been deprived of political rights and economic freedoms by generations of dictatorship. The elites in Pyongyang are well off, yet average citizens struggle. United Nations Special Rapporteur on Human Rights in North Korea Tomás Quintana said in January that North Korean people, especially those in non-capital regions, face poor living conditions, and the human rights situation has changed little.
Venezuela and North Korea have uncertain futures. If North Korea continues nuclear development and closes inefficient economic policies, it could face the chaos and crisis that Venezuela is currently going through. This would not only impact the North Korean people, but it would also impact those of South Korea and the North’s neighbors.
What was North Korean leader Kim Jong-un thinking as he left Hanoi, Vietnam? I hope the North Korean elites will give up nuclear weapons and pursue economic reform and opening in the true path to peace. Along with peace on the Korean Peninsula, a spring for North Korean people, to enjoy basic political and economic rights, must come.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, March 7, Page 31
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