Since we’ve devoted so much space at this site to the plight of Venezuela under chavismo, it’s only right for us to acknowledge – and celebrate – an extraordinary turning point in the history of that country.
We need hardly go into detail here
about the devastation wrought upon Venezuela, once one of the richest
nations in the world, by hard-core socialism. That the land with the
world’s largest oil reserves should decline into such terrible
poverty – to say nothing of the steady erosion of individual
liberty and human rights – is a classic lesson in the horrible
consequences of socialist policies.
On January 5, Juan Guaidó, a fierce
opponent of chavismo, was sworn in as President of Venezuela’s
National Assembly. Five days later, Nicolás Maduro, who had
succeeded his mentor, Hugo Chávez, as President of Venezuela, in
2013, was inaugurated for his second term after being re-elected in
what was widely considered an illegitimate election. The next day,
Guaidó led a massive rally, attended by hundreds of thousands of
Venezuelans, at which it was announced that, in accordance with the
Venezuelan Constitution, he would be assuming the presidency. On
January 15, the Washington Post ran an op-ed by Guaidó
headlined “Maduro is a usurper. It’s time to restore democracy in
“We are living in a crisis without
precedent in Venezuela,” the op-ed began. “We have a government
that has dismantled the state and kidnapped all institutions to
manipulate them at will.” Truthfully enough, Guaidó called Maduro
a dictator, but a dictator with a difference, who had “ties to drug
trafficking and guerrilla groups,” but whose nation continued to
have “a functioning, democratically elected parliament, the
National Assembly,” which enjoyed “the backing of the
international community and the majority of Venezuelans.”
On January 23, Guaidó formally
declared himself President of Venezuela. Almost immediately, he was
recognized as the country’s legitimate head of state by U.S.
President Donald Trump. By the end of day, he had been recognized as
President by the Organization of American States as well as by the
governments of Argentina, Brazil, Canada, Chile, Colombia, Costa
Rica, Ecuador, Guatemala, Honduras, Panama, Paraguay, and Peru. In
all of Latin America, only Communist Cuba and socialist Bolivia
reiterated their full support for Maduro, while Mexico’s new
left-wing leader, Andres Manuel Lopez Obrador, criticized Guaidó but
instead of totally backing Maduro called for “dialogue.”
The swiftness with which so many Latin
American governments endorsed Guaidó’s ascent to power is a
reflection of the degree to which socialism in that region has, in a
relatively short time, given way to a renewed wave of democratic
capitalism. A few years ago, for example, Cristina Fernandez, then
President of Argentina, would surely have stood behind Maduro; now,
her successor, Mauricio Macri, took to Twitter and explicitly cheered
on “all efforts toward rebuilding democracy in Venezuela and
reestablishing conditions of life worthy of all its citizens.”
Likewise, in Brazil, the new president, Jair Bolsonaro, widely known
as the Trump of Latin America, tweeted that “Brazil supports
politically and economically the transition back to democracy and
social peace in Venezuela.”
To be sure, it’s all easier said than
done. At this writing, Maduro seems determined to stay in Miraflores,
the White House of Caracas. He still enjoys the support of the
military, of the Supreme Court (which he has packed with cronies),
and of the powerful and notoriously corrupt national oil company,
PDVSA. So it will be interesting to see how things develop in the
days and weeks to come.
This week we’ve been perusing the writings of highly prolific Salon contributor Ben Norton, who in a career that is now barely three years old has established himself as a leading American champion of Islam and hard-core socialism and a major detractor of the U.S., Israel, and “neoliberalism.”
Before we say goodbye to Norton, let’s take a quick look at another frequent topic of his work – namely Latin America. Unsurprisingly, he’s heaped praise on socialist leaders – such as Nicolás Maduro in Venezuela and Cristina Kirchner in Argentina – who’ve damaged economies, arrested opponents, and suppressed civil liberties (after all, their hearts are in the right place!), while predictably demonizing “neoliberal” leaders who’ve brought their countries freedom and prosperity. Citing such far-left sources as Noam Chomsky and Glenn Greenwald, Norton has referred to the impeachment of Brazil’s leftist president, Dilma Rousseff, as a “right-wing coup.” In May, he attackedNew York Times editorial-board member Ernesto Londoño, who in a recent article had done two things of which Norton disapproved.
What two things? First, Londoño had committed the unpardonable act of “bashing Venezuela’s elected leader.” In fact, what Londoño had done was simply to criticize the human-rights violations committed by the government of President Maduro – who, as Londoño truthfully noted, had become “a petty dictator.” Second, Londoño had praised the man Norton referred to as “Argentina’s new right-wing [read: non-socialist] President Mauricio Macri,” whom Norton criticized for having “capitulated to vulture funds” and for “forcing through brutal neoliberal cuts.” In reality, Londoño, in commenting about Marci, had merely noted with obvious admiration Macri’s longstanding criticism of chavista human-rights abuses.
What about those “vulture funds” – the Kirchner crowd’s disparaging term for the U.S. hedge funds to which Argentina owned billions of dollars, but that Cristina Kirchner refused to pay a single peso, preferring instead to vilify her creditors and let her country default on its sovereign debt for the second time in fourteen years? Londoño hadn’t said a word about those funds; but Norton apparently couldn’t forgive Macri for having decided to pay his country’s debts and move beyond Cristina’s disastrous default. As for those “brutal neoliberal cuts”? Londoño hadn’t mentioned them, either. Of course, to Norton, neoliberalism is a dirty word, and budget cuts are by definition brutal. But the plain fact is that Macri – who appears to understand economics a good deal better than Norton does (and better, for that matter, than Chávez or Maduro or Kirchner or Rousseff) – is simply trying to keep Argentina from heading down the same road that has led Venezuela to utter economic ruin.
But what does Ben Norton know or care about such realities and responsibilities? Or about the long-term impact of capitalist vs. socialist economics on the everyday lives of ordinary people? Or, again, about the reality of day-to-day life in free, democratic societies vs. day-to-day life under putatively progressive autocrats or Islamic totalitarians? Again and again, he has shown that the lessons of the twentieth century are lost on him. He seems to bang away at his articles in a child’s little corner of world, sheltered from the ugly, distant realities of theocracy and despotism and clueless about how fortunate he is to be living in a free, prosperous country that he’s been taught to regard as the planet’s chief purveyor of evil. In every word that he writes, in short, Ben Norton comes across as an utter naif – which is to say that he is every bit as callow about the way the great world operates as he appears to be in his photographs.
Back in October we spent a few days pondering the Nobel Prize-winning economist Joseph E. Stiglitz, whose curious views are taken far more seriously in the corridors of power than they deserve. Stiglitz, as we pointed out, has called for a socialist U.N. superstate; so preoccupied is he with income inequality, moreover, that he views the Great Depression more fondly than he does the 1980s. Financial analyst Peter Tenebrarum has legitimately ridiculed Stiglitz’s claim that corporate tax rates have “little effect on investment,” observing that only “a life-long leftist academic and bureaucrat who has never created one iota of real wealth in his life” could ever utter such drivel.
Then there are Stiglitz’s deep and longstanding ties to the corrupt Argentinian President Néstor Kirchner (2003-7) and his wife and successor, Cristina Fernández de Kirchner (who left office in December). Stiglitz, who’s been a paid Kirchner advisor and consultant, filed an amicus curiae brief when Argentina defaulted on its debt in 2001; when it did so again in 2014, he once more took the Kirchners’ side.
Quite admirably, Argentina’s new president, Mauricio Macri, is trying to clean up the mess that his crooked predecessors created. To this end, he’s reached an agreement with his country’s major creditors that will set Argentina back on the road to fiscal responsibility and international respectability. Any sensible observer who respects the rule of law would applaud.
Not Stiglitz. In an April 1 New York Times op-ed, co-written with his protégé and frequent collaborator Martin Guzman, Stiglitz slammed Macri’s move – and Argentina’s creditors.
The very title of the op-ed was a lie: “How Hedge Funds Held Argentina for Ransom.” Ransom? When a government run by thugs – kleptocrats who’ve looted their country’s treasury – refuses to pay debts ruled legitimate by two U.S. courts, it’s not ransom. It’s the rule of law.
Let’s parse the op-ed’s first sentence. “Perhaps the most complex trial in history between a sovereign nation, Argentina, and its bondholders – including a group of United States-based hedge funds – officially came to an end yesterday when the Argentine Senate ratified a settlement.” Readers might assume, quaintly, that since this piece appeared in America’s so-called newspaper of record, there must’ve been some fact-checking. But apparently not.
First of all – and this is hardly a tiny detail – there has been no trial.
A trial generally indicates that there is some dispute over the facts of a case involving evidence that must be examined, typically by a jury. But no one ever disputed that Argentina defaulted on more than $80 billion in 2001 and refused to pay certain creditors in violation of their contractual agreements. The lawsuits over Argentina’s bonds were not disputes over these indisputable facts, but rather processes to determine the proper remedies for these violations. Furthermore, lest we be accused of being nitpicky about the terminology, it is also incorrect to say that this litigation “came to an end” last week. In fact, the litigation is ongoing, with important legal questions about Argentina’s settlement offers still pending before a U.S. Court of Appeals.
Second, the mention of hedge funds was a slick move, plainly intended to set knees jerking among anti-capitalist types for whom hedge funds are, by definition, pure evil. Never mind that there are other people – some of them citizens of Argentina – who also hold Argentinian bonds. In fact, it is precisely these small Argentinian bondholders who continue to litigate against Argentina due to the fact that Argentina has for some reason offered them less than it offered the hedge funds. (Stiglitz and Guzman would know this if they bothered to read the news sections of … the New York Times!) Thus, these small bondholders are doubly inconvenient for Stiglitz and Guzman – their existence both contradicts the pair’s erroneous declaration that the Argentinian debt saga has ended while simultaneously undermining their blatant attempt to blame the “evil” hedge funds for all of Argentina’s problems.
Third, the Argentinian Senate did not ratify a settlement. What it did was agree to lift the Kirchner-era laws that were intended to frustrate U.S. court rulings – and that led New York District Judge Thomas Griesa to hold Argentina in contempt.
The op-ed’s first sentence, then, was a minor masterpiece of misrepresentation. Perhaps we should thank Stiglitz and Guzman for making it clear from the git-go that what followed wasn’t going to be factually reliable.
“The resolution,” Stiglitz and Guzman went on to say, “was excellent news for a small group of well-connected investors, and terrible news for the rest of the world, especially countries that face their own debt crises in the future.” No: it was excellent news for the health of the international credit market, and terrible news for irresponsible governments that are inclined to pursue serial defaults.
Stiglitz and Guzman proceeded to describe Argentina as “[u]nable to pay its creditors” (a questionable contention) and to describe holdout investors as having “earned the name vulture funds.” Funny way to put it: these investors didn’t “earn” that name; it was coined by their debtor, the Argentinian government, and was taken up by Stiglitz and his ilk as a glib way of smearing creditors who’ve asked only to be paid what they’re owed. By obscuring the origins of the term “vulture funds,” of course, Stiglitz and Guzman were giving legitimacy to it – and providing themselves with a veneer of justification for repeatedly (and childishly) hurling this slur throughout their piece.
In what was perhaps the most dishonest part of their op-ed, Stiglitz and Guzman purported to sum up Griesa’s 2012 ruling. As they put it, he “threw the game in the vulture funds’ favor” by “blocking Argentina from paying” creditors who’d agreed to reduced settements “until it had paid the vultures in full.” The ruling “gave the vultures the weapon they needed: Argentina had to either pay them off or renege on the default they had negotiated, ruining the country’s credit in the future and threatening its recovery.” Omitted entirely from this tendentious summary – which makes it sound as if Griesa did something shady – is Griesa’s rock-solid legal reasoning: under the pari passu (or “equal footing”) clause in the bond agreement, Argentina was strictly forbidden from paying off some creditors while stiffing others. What Stiglitz and Guzman neatly sidestepped, in other words, is the fact that if Argentina had honored the pari passu clause, all its creditors could have been paid. The point, quite simply, is that Cristina Kirchner didn’t want to pay.
The op-ed’s mendacity continued with the claim that Macri’s deal “will carry a high price for the international financial system, encouraging other funds to hold out and making debt restructuring virtually impossible.” Nonsense. In fact, the market has already adjusted: in place of paripassu clauses, sovereign-debt agreements now include collective-action clauses. Stiglitz and Guzman would have us believe that nations like Argentina can’t protect themselves and can’t structure loans as they wish; instead of worrying about that, we should be concerned about those nations’ continued ability to default and force terms on bondholders.
“Most countries,” maintained Stiglitz and Guzman, “are intimidated by the creditors and accept what is demanded.” Intimidated? Was Cristina Kirchner intimidated when she maligned her creditors as “vultures” and basically gave Judge Griesa the finger? Our heroes then called sovereign-debt restructurings destructive – after all, they’re are often “followed by another restructuring or default within five years.” And what example did they cite? That of Greece, which underwent restructuring in 2012 and is already “in desperate need of more relief.” But the case of Greece doesn’t prove anything about restructuring; all it proves is that if a country is economically irresponsible on a colossal scale, the chickens will eventually come home to roost.
How, then, to resolve sovereign-debt conflicts? Easy: Stiglitz and Guzman touted a set of sovereign-debt “principles” that they themselves proposed to the U.N. General Assembly, which approved them overwhelmingly last September. Among those “principles”: that indebted nations should be immune from foreign courts’ verdicts and that creditors should be compelled to accept restructuring deals approved by a majority of their fellow debt holders. Predictably, the six countries that voted against the resolution were those whose citizens tend to be on the creditor end of these arrangements – Canada, Germany, Israel, Japan, Britain, and the U.S. The countries that approved the measure were, in effect, asserting their own right to dodge repayment of debts – not just debts owed to hedge funds, but debts owed to mom-and-pop investors, too. Some justice.
“Many countries have bankruptcy laws,” concluded Stiglitz and Guzman. “But there is no equivalent framework for sovereign bankruptcies….The United Nations has taken the lead to fill this vacuum, and as Argentina’s case proves, the initiative is more important than ever.” Saying this, however, doesn’t make it so. What Argentina’s case proves is that some countries, like some people, are deadbeats; if permitted to do so, they’ll default repeatedly on their debt for no other reason than that the law lets them.
None of this is new, of course – we already knew where Stiglitz stood on Argentina’s deadbeat behavior. In fact, he’s become something of a broken record on the subject. Take his hyperbolic claim in the op-ed that “[t]he resolution … [will make] debt restructuring virtually impossible.” He’s plagiarized this same claim from himself many times in commenting on various cases, at least once using virtually identical language in the same newspaper. Each time, he is proven wrong by subsequent sovereign debt restructurings that are successfully concluded via constructive, good-faith negotiations with creditors (i.e., the opposite of the coercive approach that he and Cristina Kirchner favor) – most recently in Ukraine.
So why now? Why has Stiglitz chosen this moment to repeat the same tired justifications of the Kirchners’ behavior and vilifications of Argentina’s creditors? For answers, look at the headlines surrounding the deal, and it seems clear at once: As the praise for Macri’s economic policies in general and his handling of the debt dispute in particular pours in from around the world, defenders and abettors of the Kirchners’ disastrous policies are looking worse and worse in retrospect. And, as you might expect, some have lashed out with desperate attempts to justify their actions and/or sabotage the Macri administration. Each is doing it with the tools at hand: For instance, former Kirchner Economy Minister Axel Kicillof now has a seat in Congress, so he is trying mightily to derail Macri’s settlement and keep Argentina mired in default. By contrast, Stiglitz has a standing invitation to bloviate on the op-ed pages of the Times. So bloviate he does.
But no amount of retrospective whitewashing can change the fact that the policies Stiglitz advocated as an advisor to the Kirchners were followed, and followed faithfully, with disastrous consequences for Argentina’s citizens. The Kirchners’ refusal to fully resolve the 2001 default in order to spite its creditors led directly and indirectly to the years of grinding legal battles, the punitive interest rates that Argentina was forced to pay as a result of its status as the world’s worst deadbeat, the falsified economic statistics that undermined its government’s credibility with everyone except for a handful of despots, the cozying up to said despots that further undermined its global reputation, the spiraling inflation that punished its citizens as access to dollars became scarcer and scarcer – Stiglitz was there every step of the way, cheering for Cristina in the international media. And now that she’s gone and someone more responsible is trying to clean up the mess that he helped make, Stiglitz is still there, jeering from the sidelines, and pointing the finger of blame somewhere else.
Yesterday we exulted in the November 22 victory in the Argentinian presidential elections of opposition candidate Mauricio Macri, who, promising to roll back socialist excesses and pursue an approach respectful of individual liberties and the free market, took power on December 10. But that victory, as we noted, was only the first part of a thrilling double play by the champions of liberty in South America. Let’s move now to Venezuela, where, since 1999, under the demagogic Hugo Chávez and then Nicolás Maduro, a despicable gang of stooges have impoverished the people in the name of chavismo, all thewhile shamelessly enriching themselves. On December 6, the Venezuelan electorate showed it was finally fed up with the empty promises, empty grocery-store shelves, and empty socialist rhetoric, and handed the National Assembly over to the opposition.
“Coupled with last month’s defeat of the ruling Peronist movement in Argentina’s presidential election,” wrote Juan Forero and Anatoly Kurmanaev in the Wall Street Journal, “the outcome also signaled another important loss for leftist populism in South America.”
The Journal reporters quoted an opposition deputy, Julio Borges, as saying: “I feel as if we won the World Cup while playing with our two legs tied….This has been the most abusive campaign ever, but the important thing is that we were able to use democracy to beat a system that is deeply undemocratic.” Maduro, for his part, found a way (as always) to blame his party’s failure on the U.S. “We’ve lost a battle,” he said, “but the struggle to build socialism is only beginning.” He also insisted that the victory belonged not to “the opposition” but to “a counter-revolution.”
The opposition’s triumph at the polls, it was noted, will likely mean freedom for political prisoners such as Leopoldo López, the highly accomplished – and highly popular –former mayor of one of the constituent cities of Caracas. López has been behind bars since February 2014, for no other reason than that President Maduro recognized him as a palpable threat to his own power. The election results will also enable the new legislature, which takes power on January 5, to address the problems (including an inflation rate topping 200%) that make Venezuela’s economy the world’s worst-performing, according to the International Monetary Fund. It’ll make possible desperately needed judiciary and administrative reforms.
But it won’t be easy. To pull Venezuela out of its “death spiral,” wrote Forero and Kurmanaev, the new members of the legislature will need to make “a series of painful and unpopular adjustments, rolling back more than a decade of populist and statist policies” –notably an outrageously impractical system of social-welfare programs that the country simply can’t afford (especially given the constant flow of taxpayer cash into the chavista elite’s private offshore accounts).
There are other reasons for concern, too. As Srdja Popovic and William J. Dobson warned in Slate, the opposition’s struggle to undo chavismo “is nowhere near over. Maduro and the ruling party will attempt to marginalize this victory in the weeks and months ahead…. Expect the courts to issue rulings circumscribing the powers of the legislature. Expect new edicts and orders concentrating even more power into the executive. Look for government budgets and competencies to shift. Watch out for allegations of corruption and criminal offenses against key members of the opposition.”
In short, the new powers-that-be in Argentina and Venezuela alike have their work cut out for them. It won’t be easy to turn these tragically broken systems around. But the election results send a powerful and encouraging message: namely, that the people of both countries have seen through the lies of their socialist leaders and cast a vote for individual liberty and the free market. And that, in itself, is cause for celebration.
Christmas came early for fans of freedom in South America.
It almost seems too good to be true. On November 22, in an upset election, opposition candidate Mauricio Macri beat out Daniel Scioli, whom the current head of state, the dictatorial Cristina Kirchner, had supported fully to replace her as president of Argentina. He took office on December 10.
His election, wrote Agustino Fonteveccia at Forbes, “blew new wind into the sails of South America’s second-largest economy” and “led to a flurry of optimism across the country, and particularly on Wall Street.”
Twelve years of Kirchnerism (Cristina’s eight years in power followed four years of rule by her late husband, Nestor) brought the Argentinian economy to its knees with excessive social-welfare spending, shameless government bloat, sky-high tariffs, massive corruption, and the imposition of a whole raft of destructive socialist economic ideas – all of which led, inevitably, in 2014, to the country’s second sovereign-debt default in fourteen years. Kirchner, as we’ve seen several times on this site, surrounded herself with stooges who propped up her power while enriching themselves at the expense of the Argentinian people. Macri, who has been mayor of Buenos Aires for eight years, promised to turn the country back in the direction of the free market and to fight institutional corruption.
Kirchner has called Macri a tool of corporate interests. “A country is not the same as a business,” she chided in one speech. Macri, for his part, when asked what he would change about Kirchner’s foreign policy – which has emphasized close relations with Cuba and Venezuela, said: “Everything!”
After his victory was secured, he “immediately made a call for Venezuela to be booted from South America’s continental trade union Mercosur,” citing the chavistaregime’s habit of imprisoning its critics, most famously opposition leader Leopoldo López. He’s also expressed an eagerness to strengthen ties to Mexico, Colombia, Peru, and Chile. And he’s vowed to enact “a rapid and wide-ranging burst of reforms designed to dismantle the thicket of socialist controls” put in place by the Kirchners. “We will experience the start of a new era,” promised Alfonso Prat-Gay, Macri’s choice for Minister of the Economy (and a former top official at J.P. Morgan in the U.S.). “The tyranny of authoritarian populism is over.”
During her final days in power, La Kirchner did not, shall we say, develop anything remotely resembling class. Instead of working with her successor to ensure a smooth transition for the country’s own good, she threw upso many obstacles for Macri’s incoming administration – making last-minute appointments and appropriations that will cause lasting damage not only to him but to the citizens of Argentina – that even some of her ardent supporters cried foul.
Fonteveccia, to be sure, offered cautionary words. “Not only is Macri not the freewheeling markets capitalist he suggests he is,” maintained the Forbes writer, “but the challenges his administration faces—rampant inflation, a bankrupt central bank, a fractured political system, and a stagnant economy, to name a few—suggest more pain is in the cards before Argentina can spread its wings and become a fully functioning member of the world economy and the global financial system.”
Nor, admittedly, does it help that the Kirchnerites retain a majority in both chambers of the National Congress. Then again, many observers are a good deal more optimistic than Fonteveccia. There is particular enthusiasm, not only in Buenos Aires but in Washington and on Wall Street, over the people he’s selected for his cabinet. It certainly looks more promising than the gang of useful stooges with which the Kirchners surrounded themselves.
In any event, the Argentinian vote was only the first part of a terrific one-two punch. We’ll get to that tomorrow.