Will Venezuela or Argentina be the first to crumble into economic crisis?

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I write tomorrow for The National Interest about the dual economic crises in Venezuela and Argentina.argentinaVenezuela Flag Icon

The similarities between the two economic crises are uncanny — inflation, capital controls, dollar shortages, overvalued currencies, shortages, etc.

But the similarities don’t stop there.  Both countries currently fee political limitations to force policy changes to avert crisis — and that limit the political capital of the leaders of both countries, Venezuelan president Nicolás Maduro and Argentine president Cristina Fernández de Kirchner, to enact reforms:

Accordingly, normal political channels seem blocked through at least the end of 2015, despite the fact that both countries should be considering massive economic policy u-turns that will require significant amounts of political goodwill neither Maduro nor Fernández de Kirchner possess. But there’s an even greater inertia lurking beyond even the routine political impasse—a kind of political dead-hand control in both countries, on both a short-term and long-term basis.

First, both Venezuela and Argentina remain tethered to the political ideologies of chavismoand kirchnerismo, even though their proponents, Chávez and Néstor Kirchner, are now dead. Those policies may have worked over the last decade to achieve certain goals, including greater social welfare and poverty reduction in Venezuela and a rapid return to economic growth and competitive exports for Argentina. But it should be clear by now that chavismoand kirchnerismo are unable to provide answers to their respective countries’ economic woes today.

Even more broadly, I argue that beyond the shortcomings of chavismo and kirchnerismo, Venezuela faces a long-term resources curse and Argentina faces the long-term legacy of protectionism and statism of peronismo, which in each case underlie the current economic crises.  What’s more, the IMF-sponsored reforms in 1989 that led to the massive Caracazo riots in Venezuela and the IMF-approved lending tied to Argentina’s 1990s ‘convertibility’ crisis that led to the 1999-2001 peso crisis have undermined orthodox economic policymaking:

What’s more, ill-conceived attempts to rupture those dominant paradigms through orthodox ‘Washington consensus’ reform processes led to economic and political disaster. In both countries, leaders experimented with neoliberalism, facilitated by the misguided zeal of the International Monetary Fund, without enacting any corresponding safety nets or shock absorbers. The resulting crises led both countries to double down on their prevailing ideologies, thereby, ironically, making economic reform today even more difficult.

In both cases, the political, historical and economic legacies have prevented the broadly moderate, business-friendly, social democratic middle courses that much of the rest of South America has embraced to wide success, including Colombia, Peru, Chile, Brazil.

What protesters in Ukraine and Thailand are getting wrong

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The political crises in both Ukraine and Thailand took a turn for the severe last week, as government police forces clashed with protesters with even greater violence.  But what do the protesters want in each country — and can the protests, even if successful, bring stability?  Ukraine Flag Iconthailand

Amnesty: the root cause of the Thai protests

In Thailand, a country of 66.8 million people, anti-government protesters took to the streets in November (pictured above, top) after Thai president Yingluck Shinawatra tried to introduce an amnesty bill that would absolve both her supporters and opposition leaders from the worst charges, including murder, that spring from the political violence that’s engulfed Thailand sporadically throughout the last decade.  The bill died in the Ratthasapha (National Assembly of Thailand, รัฐสภา) after all sides turned against it.  Yingluck’s party, the dominant Pheu Thai Party (PTP, ‘For Thais’ Party, พรรคเพื่อไทย), the third iteration of the party Yingluck’s brother, Thaksin Shinawatra, founded in 2001 when he came to power, didn’t want to absolve the sins of their adversaries.  The opposition Phak Prachathipat (Democrat Party, พรรคประชาธิปัตย์) opposed the amnesty bill because they feared it would mean the return of Thaksin from seven years in self-exile.

Though Yingluck won the July 2011 parliamentary elections on a promise to de-escalate tensions in Thailand, the amnesty has brought the country back to the familiar standoff between the pro-Thaksin ‘red shirts’ and the anti-Thaksin ‘yellow shirts.’ 

EU relations: the root cause of the Ukrainian ‘Euromaidan’ protests

In Ukraine, a country of 45.5 million people, pro-European protesters also took their grievances to the streets in late November (pictured above, bottom) after president Viktor Yanukovych pulled out of an association agreement that would have engendered closer cooperation between the European Union and Ukraine.  Initially, the protests, centered on Maidan Square in the capital city of Kiev, assumed the form of the familiar political struggle between the Europe-oriented, Ukrainian-speaking west and the Russia-oriented, Russian-speaking east, which featured prominently in the 2004 ‘orange revolution’ against fraudulent elections that powered Viktor Yushchenko to power.

Yushchenko ended his presidential term massively unpopular, with his pro-Western allies fracturing into various camps, and in the February 2010 presidential race, the pendulum swung back to the pro-Russian Yanukovych, who defeated the EU-friendly former prime minister Yuila Tymoshenko (by 2010, a Yushchenko ally-turned-foe).  For much, much more background, here’s Max Fisher’s explainer today at The Washington Post.

In both cases, the protests have transcended their original rationales, and they now threaten to topple governments in both Kiev and Bangkok. What’s more, Yingluck and Yanukovych haven’t responded incredibly well to the protests. Continue reading What protesters in Ukraine and Thailand are getting wrong