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HERE is a conundrum: Venezuela has a manageable population of around 33 million, and is blessed with the world’s largest reserve of oil. Yet its shops are empty of basic goods like flour and milk powder, and many of its factories are idle because there is no foreign exchange to import raw material. Citizens queue for hours, clutching their ration cards, to buy whatever food is available.
Often, South America slips below our radar because of the distance and our lack of cultural affinity with the continent. And yet there are important lessons to be learned from the mistakes many of its leaders have made. Before oil was discovered, Venezuela exported traditional commodities like cocoa and coffee. But with oil wealth came the global rise and fall in prices. Generous public subsidies might have been popular with the poor, but they caused spurts of inflation. And many of the funds meant to reduce income equality ended up in the pockets of those connected to the state.
Hugo Chavez, a populist leader, chose to sell oil at reduced rates to friendly countries like Cuba that followed a similar left-wing ideology. Economic mismanagement led to unemployment and devaluation. When Chavez died in 2013, he was followed by his disciple, Nicolas Maduro, who continued Chavez’s policies, even when oil prices slumped. Now, there are daily demonstrations in the capital, Caracas, with protesters demanding Maduro’s exit.
Some 70pc want him to leave, and have gathered enough signatures to trigger the president’s recall through a referendum. And yet the Electoral Council is dragging its feet, giving rise to growing anger on the streets. Many fear a military coup is inevitable, even though Maduro — and Chavez before him — gave the army many perks and jobs.
Both Venezuelan leaders claim ideological purity as their defence: in their narrative, the economy has been deliberately sabotaged by US-led, reactionary plotters who wanted their socialist government to fall. But for those waiting in the heat for hours to buy powdered milk for their babies, the political belief of the president comes way behind the needs of their families. By basing their ‘revolution’ on the fickle global oil markets, both Chavez and Madura have led their country to disaster.
So clearly, oil is not the panacea for all economic problems. It is certainly not a substitute for decent management. While petro-dollars can allow the state to subsidise the price of cheap petrol and electricity, the dips in global oil prices can put huge pressure on the exchequer. Witness Saudi Arabia’s current deficit with the depressed market for hydrocarbons. Norway has wisely built up a wealth fund from its oil earnings that has now swelled to nearly a trillion dollars.
Brazil is another country that is caught in a downward economic spiral, despite its earlier promise. Once part of the BRICS countries (Brazil, Russia, India, China and South Africa), Brazil is suffering from increasing unemployment, with the number of jobless growing from seven million to 11 million in two years. Meanwhile, the country is wrestling with a major political crisis with its elected president Dilma Roussef facing impeachment. All this when it hosts the summer Olympics in August. Ironically, the proceedings to impeach Roussef have been mounted by many members of parliament who themselves face corruption charges. Roussef stands accused of misrepresenting the actual state of the economy in the national accounts.
Many developing countries are cursed with feudal values and political cronyism that allows the elite to skim off vast sums of public funds. Thus, money intended for development ends up in offshore accounts. The Malaysian Prime Minister, Najib Razak, has been embroiled in a major financial scandal that is now the subject of a global investigation. Close to a billion dollars have found their way into Razak’s personal account from Saudi Arabia and elsewhere. In his defence, the Malaysian PM has claimed the money was a ‘gift’. I wish I had such generous friends. One of the sources of this wealth was 1MDB, a public sector development bank. Ironically, Imran Khan recently held up the Malaysian and Singaporean governments as models of good, clean governance.
Zimbabwe was once known as the granary of East Africa, exporting significant quantities of food grain. Now, after years of mismanagement and thuggish rule, Robert Mugabe has beggared his country. At ninety, he is still clinging to power, and rumour has it that his wife is being groomed to take over from him when he finally departs this world.
But these problems of corruption and poor governance aren’t restricted to South America, Asia and Africa. Among the vast cache of files made available among the Panama Papers are the records of shell companies belonging to Russian President Vladimir Putin’s close associates and buddies. It is widely rumoured that Putin himself controls a vast fortune through several proxies.
Russia is a case study in how not to privatise state assets. After the Soviet Union imploded so spectacularly in 1991, its oil fields, mines and factories were sold for peanuts to a favoured few. These sharp-elbowed wheeler-dealers became billionaires overnight at the expense of ordinary citizens who were still dazed by the speed of events. Russian oligarchs now buy football teams and villas in London and Paris, and vast luxury yachts with the proceeds of that early fire sale. The state, meanwhile, received virtually nothing.
So what are the lessons to be drawn from this brief global survey of sleaze and mismanagement? The first is that despite all the song and dance we make in Pakistan, we don’t have a monopoly on corruption. Secondly, without a proper deterrence in place, we won’t get rid of sleaze. And thirdly, there is a direct link between political connections and corruption. None of this is new, but unless we stop talking and act, sleaze will continue to blight lives around the world.
Published in Dawn, June 6th, 2016
