With Chávez’s health in doubt, regional Venezuelan elections assume greater importance

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With Venezuelan president Hugo Chávez recovering from surgery, due to what may be terminal cancer, it’s easy to forget that this weekend will mark a handful of key regional races throughout Venezuela, including a gubernatorial race in Miranda state that pits Chávez’s former presidential rival against Chávez’s former vice president.zuliamiranda flagVenezuela Flag Icon

Although the attention this week has been mostly on Chávez’s health, his departure to Cuba for surgery and, perhaps above all, his speech last Saturday night indicating that his preferred successor is former foreign minister and vice president Nicolás Maduro, the results of Sunday’s races will establish the backdrop for the leading figures of both Chávez’s Partido Socialista Unido de Venezuela (PSUV, or United Socialist Party of Venezuela) and the broad opposition coalition, the Mesa de la Unidad Democrática (MUD).

Indeed, with rumors flying of complications after his surgery, the weekend’s races have counterintuitively become more important as Venezuela prepares for the possibility, at least, of a new early presidential election if Chávez resigns or dies in office.

In their own right, however, because 20% of the federal budget is (theoretically) allotted to state governments, governorships provide the MUD and other opposition candidates a platform for government, notwithstanding the centralization of Venezuela’s federal system under PSUV rule.

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The key race that everyone will be watching is the governor’s race in Miranda, where the incumbent, Henrique Capriles, recently finished his unsuccessful presidential campaign against Chávez as the MUD’s standard-bearer — although he lost by 9 points, Capriles won 45% of the vote, making him Chávez’s most successful political opponent in his 13-year reign.  Miranda state is likely Venezuela’s most developed state and its second most populous, bordering (and in some cases including) the broad Caracas metropolitan area.  Chávez actually won this state in the October presidential race by a squeaker — with 49.96% to Capriles’s 49.52%, and Capriles won the 2008 election with just over 52% of the vote.

His opponent is the somewhat humorless former vice president, Elias Jaua, and although one poll has shown Jaua with a five-point lead against Capriles, other polls have shown varying Capriles leads and it’s certainly difficult to believe Capriles is an underdog.  By all accounts, the fresh-faced Miranda governor has been a more-than-capable administrator in the past four years, bringing a dose of good government to Miranda after the corruption of his predecessor, Diosdado Cabello.  Furthemore, Jaua’s record as a colorless Chávez yes-man makes it seem like he’s less than likely to sweep to victory, although if Chávez’s health takes a serious turn for the worst between now and Sunday, Jaua may yet benefit from a vote of sympathy.

Capriles defeated Cabello, the governor from 2004 to 2008, in the prior election, and Cabello, who’s since become the leader of Venezuela’s PSUV-dominated National Assembly, would temporarily take over as president in the event that Chávez resigns or dies after he is sworn in for his next term (set to begin January 10), with a snap presidential election to follow within 30 days.  Despite Chávez’s speech anointing Maduro as his preferred successor, Cabello has long harbored presidential ambitions, he, along with Jaua (especially if Jaua wins) may try to become the PSUV’s presidential candidate in any such election instead.

Of course, in the event of such a rapid election, Capriles is very likely to lead the opposition against Maduro, Cabello or whomever the PSUV runs.  But that  could change if Capriles doesn’t win Sunday’s vote in Miranda handily — given his narrow loss to Chávez and the very short 30-day window for a new presidential election, Capriles may nonetheless still be the main opposition candidate.  But it would open the door for another candidate to emerge, likely from among the other six states where opposition governors are currently in power.

That brings us to Zulia state and with 3.8 million people, it’s Venezuela’s most populous.  Nestled in Venezuela’s far northwest bordering Colombia along the Caribbean coast, Zulia’s oil and agricultural wealth makes it, like Miranda, one of the country’s wealthiest states.  Pablo Pérez (pictured above, top), who widely lost the MUD’s presidential nomination to Capriles by a 2-to-1 margin way back in February 2012, is running for reelection in what should be an even more solid opposition win for Un Nuevo Tiempo (UNT, a New Era), the centrist party that was founded in Zulia in the late 1990s and which has controlled the governor’s office since 2000 (until 2008, under Manuel Rosales, who lost the 2006 presidential election against Chávez by a 25-point margin).  Pérez is running against the PSUV’s Francisco Arias Cárdenas, governor of Zulia from 1995 to 2000, though Pérez is heavily favored.  Capriles did better in Zulia than he did nationwide in October, winning 46.27% to just 53.34% for Chávez.  Both Chávez’s national government and Pérez’s UNT regional government have spent large sums on social programs in the state, and a win for the PSUV would be quite a staggering victory for chavismo.

If Capriles falters in Miranda, Pérez, who lies politically to the left of Capriles, could well become the next consensus opposition presidential candidate.

Continue reading With Chávez’s health in doubt, regional Venezuelan elections assume greater importance

Can Shinzō Abe boost Japan’s economy?

Over at Slate, Matthew Yglesias made the argument last week that the likely victory of former prime minister Shinzō Abe (安倍 晋三) and the return of the Liberal Democratic Party of Japan (LDP, or 自由民主党, Jiyū-Minshutō) to government after a three-year hiatus means that Japan might finally embark on a path of more expansionary monetary policy — namely, more quantitative easing and a higher inflation target. Japan

With Japan apparently headed back into a recession — its fifth in 15 years — that strategy could be the surest way to boost the Japanese economy, but it’s a little naive to believe Abe can command enough political support, even with a landslide victory in Sunday’s election, to dictate monetary policy to the Bank of Japan.

Earlier in the campaign, Abe pledged to force the Bank of Japan to purchase construction bonds directly from the Japanese government (although, as Yglesias notes, Abe has already backed down from that pledge during the campaign).  Abe needs the BOJ to buy those bonds in order to finance additional infrastructure spending, with the LDP calling for up to ¥200 trillion ($2.4 trillion) in public works over the next decade.  Public spending is an old LDP favorite, but that staggering amount of spending could well pull Japan’s economy out of recession and deflation.

Abe has also pledged to appoint a new bank governor — the term of the current Bank of Japan governor Masaaki Shirakawa (白川 方明) ends in April 2013 after five years heading the BOJ — who agrees to set an annual inflation target of 2% or even 3%.

Abe’s push for expansionary fiscal and monetary policy comes as a bit of a 180-degree turn, given that the third and final government of the Democratic Party of Japan (DPJ, or 民主党, Minshutō) under prime minister Yoshihiko Noda (野田 佳彦) recently expended its last gasp of governing willpower to double Japan’s consumption tax from 5% to 10%, which is scheduled to begin in 2014.

It seems much likelier that Abe could implement a new round of fiscal expansion than strong-arm the Bank of Japan, which has an extraordinary amount of central bank independence — derived in part from the memory of hyperinflation that resulted after World War II when politicians controlled monetary policy decisions.

Noda (pictured above, right, with Abe) has attacked Abe’s platform as a dangerous intrusion on central bank independence and he has attacked the LDP plan for additional debt-financed spending as the same old LDP  ‘baramaki’ (pork barrel) politics, especially given Japan’s debt-to-GDP ratio is already, by far, the world’s largest, at around 230%.  Greece, by the way, has only a 160% ratio.

Japan has traditionally been able to carry such a high ratio because much of that debt is held by its citizens, who collective have one of the top savings rates in the industrialized world, but with $13.64 trillion in debt already on its public books, it’s not clear whether Japan could sustain public spending that would boost its debt-to-GDP ratio to nearly 300%.

As Yglesias notes, the Bank of Japan has been criticized for nearly two decades for its policy to keep Japan’s inflation target at zero:

Back in 1999, Ben Bernanke condemned the self-induced paralysis of Japanese monetary policy made by flailing officials who claimed it was beyond their power to fix this. He called for “Rooseveltian resolve” on the part of Japan’s leaders to shake the bank out of its torpor.  Paul Krugman, too, spent the late ’90s urging Japan to aim for more inflation, arguing that mucking around with the banking system was inadequate and weird delusions of respectability were holding policymakers back.

As Yglesias also notes, Europeans and Americans promptly forgot that advice when the 2008 financial crisis exploded budget deficits:

Suddenly, criticizing the Bank of Japan went out of style. America became Japan and simultaneously forgot what America used to think about Japan.

But perhaps the lesson that Yglesias is forgetting — and the lesson that the 2008 crisis taught Europeans and Americans — is that politics matters, and that politics can intrude on what might otherwise be a clear policy path, whether it’s ‘fiscal cliff’ negotiations in the United States or the ‘kick-the-can’ politics of eurozone bailouts.

Yglesias is also forgetting that Japan has politics, too. Continue reading Can Shinzō Abe boost Japan’s economy?