Giordani Gets the Point, Then Lies About The Theories

April 7, 2011

Strange statements from Minister Giordani. First he admits drastically, that the capitalism system works because of individual incentives.  Yes,  capitalism simply works, but then he seems to go on to say that his problem with it is the fact that individual profit is what motivates people, not the “common” good”

He got the most important part about basic Economics right: “People respond to incentives”. Cost and benefits determine how we behave, no communal thinking, no matter how human or generous we may be.

But then Chavez’ ignorant economic guru, who never studied economics, cites studies from last century “on”, which probably means that he only read the old ones, because nowhere in modern economic theory, Marxist or Capitalist, is oligopolic pricing and speculation associated with inflation. Least of all, for the state to participate in the markets like the Chavez Government is doing.

Inflation is just a monetary phenomenon, Venezuela and Giordani’s policies are proof of that, but Giordani has not had time to study that chapter apparently (or learn it from experience). And he never will, between screwing up Venezuela’s economy and writing his books, who nobody reads, he has no time to study.

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22 Responses to “Giordani Gets the Point, Then Lies About The Theories”

  1. Kepler Says:

    Astera, Miguel,

    90% of Venezuelans don’t see they have to pay taxes in one way or the other.

    Remember that. Officially about half the “working population” are working in the “sector informal”. Most others are below the level for tax declaration in Venezuela.

    Try to look at it their way, please. They don’t know the government is stealing from them by using state resources in such a way.

    Hell, most Venezuelans do not know “estado” and “government” are two different things.
    Well, you are not politicians, it does not matter much. I wish people like the leaders of UNT, PJ etc took this into account when they decide to explain things to the general public.

  2. m_astera Says:

    Here is what I see:

    This government sells the resources of the country and keeps the money. They also tax the citizens for what they buy and sell and for the property they own.

    Then this government uses the money they have gained by selling resources and taxing trade and uses it to compete in the market against those who they have taken the money from.

    If this government wants land or buildings, factories or infrastructure, they take it away from those who have built it up, and then use the money they have taken from the same people to fund the operation of the resources they have stolen. Then they sell whatever production they manage to get at a low price that is subsidized by the very people they are competing with in the marketplace.

    There is no way that makes any sense or can possibly work.

  3. Gordo Says:

    Look! There are certain things that governments do better, and there are things business do better. Socialists who think governments do everything better are crazy. On the other hand, business can grow out of control. For example who wants to live under monopoly capitalism. And then there are governments that represent big business… these tend to form fascist regimes. Of course, you can mix religion with all this and it get’s even uglier!

  4. Bloody Mary Says:

    This is not a change of mind (forget about regret or taking notice of their dramatic failure). He is just too old and to confused that there are no reasons to be optimistic. This concerns to the new law that will limit the incomes of the economic activity…. he is only preparing us saying: there is still a little space for the private initiative but is unfair to gain too much… So we will say how much is too much for those how are still there.

  5. jeffry house Says:

    Actually, people do sacrifice for the common good all the time. Military service, for example in World War II, is an example. Economic sacrifice also occurs. Many people sacrifice a lot for their children and other family members, for example.

    The answer to Chavez isn’t Ayn Rand. That is actually a strategy which will lead to a second, and a third, Chavez.

  6. Kepler Says:

    OK, this IS the last. I finish it here definitely :-).

    VTV, ABN, their thousands of radios are going to send selected information about this to all over Venezuela and they will explain anything that happens in Venezuela because of this. And they will say: but look and behold, in Mercal you still can get it cheaper than elsewhere.

    So you have to take this into account.
    Will Borges do? Will the guys from UNT do? Will they find ways to tell people in URBAN areas such as Calabozo (> 100 000 inhabitants, thus non-rural), in URBAN areas such as Maturín (> 700 000 inhabitants, not rural as most people in Caracas and Northern Valencia believe it to be)?

    It is an extremely hard task, I know.

  7. Kepler Says:

    And last one, from my favourite US channel, lovely:

  8. Kepler Says:

    Carlos, it is not just OBAMA.
    This rather amateuristic video is almost three years old:

    The food price crisis that was blowing up back then temporarily calmed down a bit in the aftermatch of the financial crisis. As the world was tanking up back in 2009 the situation again started to become quit grim.

    The United States of America, the Europan Union and other regions have subsidized their own production not for a couple of years, but for many many many decades now.
    The idea is basic: the US and Europe say anyone can have free markets for bananas, coconuts, oil and also – wonderful – cars and complex machines for food production.
    But they want to have protection for – the list changes all the time, so I am not sure what to put here- milk, rice, meat.
    They use the money of their car and machine export to subsidize their milk and their meat and so it goes.
    Add to this the speculation frenzy with food products…

    Last year I went to my bank and saw a lot of “investment products” that were trading on maize, rice, wheat. Normal banks were indirectly or not so indirectly working with less kosher financial agents to make a lot of money out of simple speculation.

  9. Kepler Says:

    Aren’t there any journalists with a solid economic and political background in Venezuela to ask difficult questions to politicians?
    It seems almost all ask questions of the type “what are you going to do?”,
    “what are your plans?”, “is Venezuela going to become communist?”
    and stuff like that. You don’t need to go to school to ask such questions.

    Miguel,
    First of all: I agree with all you said.
    I remember as a child I went a couple of times to the “Casa del Partido Comunista de Venezuela” for the sole reason that there I could get a magazine called Sputnik, which was one of the few things in Russian one could find in pre-internet times in Venezuela.

    When Giordani talks I have the impression I am again looking at those brochures and books they had at th PCV house next to the Sputniki, publications about how capitalism could not deliver.

    On the other hand, I see a more complex problem.

    The revolts in Tunisia and Egypt were to a big extent triggered by one thing few people in the English press talk about: food prices.
    Yes, Mubarak and Ben Ali wer absolute criminals and repression was high in the agenda. Still, a key factor was (and still is) food prices.

    Here in Spiegel you see the topic “food prices”:

    http://www.spiegel.de/thema/lebensmittelpreise/
    If you care, you can MT some of the articles.

    In Egypt prices for flour have more than tripled in a year or so.
    The economic situation is completely different from that of Venezuela. Market is crappy there, but it is way way more open.
    The food price situation has been worsening dramatically in most of the Third World countries for months now.
    And that is something the Venezuelan government is likely to show in its media: riots and people claiming for lower prices in Egypt and India, Mexico and Madagascar.

    Of course, what is happening in Venezuela is mostly explained by what Chávez et alia is doing. Curiously, Chávez has now given about 20 or 30000 hectares to the Russians for bananas and he is about to give more to the Chinese.

    Heck, I am watching German brokers at the Frankfurt exchange openly saying regulation is needed to stop speculation from people outside the real food industry.

    I know prices and offer in Venezuela are influenced by other factors, I know about th overvalued Bolívar, the import restrictions, the export restrictions, the fear of expropriation, the low productivity and so much more. Still, in the propaganda war we live today, we need to take the bigger picture and also talk about the other factors, if at least to prevent the government from using foreign news to explain what is happening in Venezuela.

  10. Carlos Says:

    When government gets into business, it is a recipe for disaster. Especially when the government is printing or creating “money” to pay for its expenses. Then we know that money is no longer “money” but worth less IOU’s. So the price of everything goes up in terms of worth less “money”. It is a well known fact of the last 2000 years which politicians hope is no longer true. Think OBAMA, Chavez, Giordani, Barneke, etc., etc.
    I remember when an ounce of gold bought 20 greenbacks, now an ounce of gold buys over 1400 of them.

  11. CarlosElio Says:

    I do not buy the crap that socialism intends the common good. I will use two common examples to demonstrate the destructive power of communism.
    Family life. If you have children and you are a normal human being, you would like the best for your children. You do not have to be a special breed, a saint, or a unique individual to like the best for your kids. Now, if with the best intentions you tried to run the life of you teenage son telling him what to do, who to see, what to like, how to eat, you will ruin his life and yours. You will have a monster in your house that you created despite your best intentions.
    Religious beliefs. Take Christianity as a case study. Read I Corinthians 13, the preeminence of love. There you have a declaration from God himself about forgiveness, tolerance, love. Fast forward to the year 1600 and try to explain the inquisition, the burning of people in the name of love.

    The family case and the religious case render testimony of the futility of declarations. The bottom line is that f you start micromanaging people’s life in the name of a common good you are going to fuck up their lives. The moral of the story is that whenever someone appears in your horizon telling you, very sincerely, that they want to help you live a better life, the most rational response is to get your rifle and kill the motherfuckers.

    Whenever someone says that they want to decide for you about the good life, they are going to fuck up your life. Socialism is a pile of trash dressed up in social goodwill. Fuck them up, they are garbage.

  12. Carlos Says:

    Let’s see:
    According to government officials, a speculator is the one that buys something cheap and then sells it with a huge profit.
    Nobody really know what is “huge” and what is “reasonable profit”.
    This is usually pointing to someone selling consumer products with a new price mark up after a devaluation.
    1. Would someone sell it’s dollars at “old price” in bolivares ?
    2. Would you sell your house at original cost + a reasonable 10% profit??
    3. Would you sell your used car at 2008 cost less depreciation?
    So..why an importer must sell it’s old currency priced stock at old unmarked prices?
    Well…a lot of people that sell their dollars with 100% profit, the 2 year old used Cherokee at twice the original cost and asks for a 20 years old apartment in Caracas 10 times the original cost…these very guys are the ones that finger point as a SPECULATOR the audio, TV or PC reseller that marks prices up after a currency strong devaluation..

  13. Gordo Says:

    If people are hungry, buy up all the food you can… if your rich enough, you can make people even more hungry, and you’ll make a killing!

    I found this on http://equity-research.com/investment-vs-speculation/

    “A speculator is someone who seeks to buy and sell in order to take advantage of market price oscillations. An investor is someone who buys securities so that they provide a good income or capital gain by virtue of them being based on something of real and increasing worth.

    Alternatively, you could say that a speculator is somebody who buys something only because they think someone else will pay more for it in the near future, as opposed to an investor, who buys it because analysis confirms that the investment is of high quality and/or good value, so it is worth holding. A speculator buys things because they expect a less informed person will buy it off them later at a higher price, whereas an investor buys things because they promise both a return on capital invested, as well as a return of capital invested.”

  14. Francisco Says:

    OMG! That reminds me of this clip:

  15. loroferoz Says:

    Also, he seems NOT to grasp that speculation is something that comes naturally as an instinct to anyone that buys, then sells. Anything.

    That the greater asymmetry in favor of any party favors “speculation” by that party. That you will not get very far in speculation if someone else is happily and freely selling what you intend to speculate upon. That with a highly inflationary, unstable economy, the only game in town is “speculation” against insecure conditions and the loss of value of currency among others.

    It’s quite funny, because individual motivations and behaviors are quite complex and not wholly rational. But if you average them out you have left… the profit motive and rational self-interest of classical economists, working to level out the asymmetries, increase availability and lower prices. This is the “collective” behavior.

    Funniest of all is that some day, this mad monk will realize that the policies he and others like him championed, made Venezuelans behave in ways that are the polar opposite from the altruistic, principled Hombre Nuevo of his wet dreams. That their use of brute force creates a set of incentives, and that the end result is not some Utopian Socialism, but a corrupt kleptocracy where the people who were supposed to regulate for correct behavior behave in the worst manner of all.

  16. Roy Says:

    This post gets to the heart of the structural problem with Marxist Theory. In order for it to function, it requires individuals to sacrifice their own interests for a nebulous concept called “the common good”. Of course, in a Marxist state, the “common good” becomes defined by those in power, and that “common good” is usually determined to be whatever keeps the leaders in power and enjoying the perks of their position.

    Even Chavez acknowledged the problem with his references to the “new man”. I suppose the idea is that if the state can sufficiently indoctrinate the citizens, then they will WANT to do what ever the state decides is for the “common good”.

    It has been over 150 years since Karl Marx published “The Communist Manifesto”. There have been two major attempts to put his theories into practice and countless lesser attempts. None of them have worked. Weather it was the Soviet Union, or a hippie commune, in all cases the system became unstable and was unable to produce sufficient goods and services to satisfy the needs of the individuals. They were all unable to provide a sustainable and equitable distribution of rights and responsibilities, which led to social unrest and finally, collapse.

    The theories of Karl Marx do not work, because they assume that human beings will accept being turned into hive creatures, such as ants or bees. These creatures actually have the workers’ paradise envisioned by the Communist idealists. The individual ants and bees each toil according to their abilities and all work for the common good of the hive, sacrificing themselves when needed. The have no individual drives, and are motivated instinctively to cooperate with others.

    Which brings me to my point:

    HUMAN BEINGS ARE NOT INSECTS, MR. GIORDANI! NEITHER YOU, NOR ANY PETTY TYRANT, OR SOCIAL THEORIST CAN MAKE US INSECTS. WE ARE MEN, MR. GIORDANI. WE ARE SELF-ACTUATING, SELF-MOTIVATING INDIVIDUALS. YOU CAN NEVER CHANGE THAT!

    OK, then… Got that off my chest.

  17. Gordo Says:

    There is a difference between government “participation” and government “subsidy” programs. No one can expect private enterprise to subsidize consumers and then lose money until they are out of business! There is a HUGE difference between business and altruism.

  18. Gordo Says:

    Just a follow-up. Speculation can drive up prices! It’s happening now in the USA with food and energy prices.

  19. moctavio Says:

    He says the State has to compete to stop price gauging and speculation and stop inflation, that is not true. The State should not participate in the allocation of resources, it should regulate. And that regulation should include competition, otherwise , prices are fixed. What the Government does is regulate, fixing prices and participate, a recipe for disaster.

  20. m_astera Says:

    Free enterprise works great until the money and power junkies and psychopaths get involved and refuse to follow rules of common decency. Maybe the same is true for socialism?

  21. Gordo Says:

    I think the distinction should not be the incentives between individual profit and common good. I think more correctly, it’s the drive for power and riches versus the drive for a simple good life. If that is what he means, then I could have a good conversation with him.

  22. CARLOS CHACON Says:

    ….


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