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How to Fix the Mess in Venezuela

By ALEJANDRO TOLEDO

The New York Times

APRIL 21, 2015

LIMA, Peru — The recent news from Venezuela has been troubling — and also far from surprising. As the Venezuelan economy continues to struggle and inflation pushes many of the most basic everyday needs out of reach of ordinary working people, President Nicolás Maduro has responded, not with a plan, but with a crackdown. It has included arresting Antonio Ledezma, the mayor of Caracas, and other opposition figures on questionable charges — to say nothing of the jailings of peaceful protesters.

Mr. Maduro’s attempts to deflect criticism by pointing to aggression from the United States and international meddling — even if they were rooted in fact — would do nothing to solve Venezuela’s problems. If he were a serious leader, he would look first at the Venezuelan economy, which, in reality, is at least two economies, separate and far from equal.

Despite its reputation for redistribution, Venezuela has seen rising inequality. Even as ordinary Venezuelans have seen their purchasing power shrink in the face of rapidly rising inflation, the elite has relied on the growing strength of its access to dollars, a dichotomy that throws Venezuela’s ever more unequal economy into sharp relief.

Venezuela’s economic problems extend beyond inequality and poverty. Over the long term, Venezuela must follow the lead of other Latin American nations and reorient its economy away from dependence on the volatile oil export market. It must develop its other resources and capacities across a broad spectrum of more labor-intensive industries like manufacturing or agricultural processing. But that long-term problem is no reason not to attempt to tackle inequality today.

The tools for doing so vary in complexity and difficulty, but they offer an array of approaches for a government committed to the issue.

One crucial tool is the combination of tax collection and fiscal policy. Improved tax collection raises revenues without raising rates, and those revenues enable investments in health care, early childhood education, primary and secondary education, job training and agricultural education programs that offer the poor a chance to improve their lives.

Another tool is direct support, which often takes the form of increases in funding and improvements in the reach of traditional, long-established programs like pensions for the elderly and unemployment insurance.

But newer, more innovative approaches also show great promise. One is conditional cash transfers: payments made directly to poor families so long as they meet certain conditions, such as keeping their teenage children in school. While I was president of Peru, we had particular success with conditional cash transfers (known there as Juntos). A World Bank study credited Juntos with a 5 percent cut in the poverty gap in just a few years, and showed positive ancillary effects as well, including increased food consumption and more reliable use of health care services by young children and pregnant mothers.

Through these and other interventions, Latin American governments in recent years have shown that fighting inequality is possible. Between 2000 and 2011, the percentage of people living below the poverty line in Latin America was slashed to 29 percent from 42 percent, while those in extreme poverty fell to 11.5 percent from 18 percent. Ameliorating inequality isn’t easy, but it’s an essential way to help ease the political turmoil during tough economic times.

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Fixing the economy, however, is only one of the tasks facing Mr. Maduro. The second is going to be tougher: He must shed the conspiratorial mind-set and authoritarian instincts he has carried over from the regime of his predecessor, Hugo Chávez, and accept that true democracy includes dissent, and that means he won’t always get his way.

Freeing the jailed opposition leaders is the first step; acknowledging that the protesters have valid concerns and a right to express them a necessary second. Sadly, we have seen no sign that Mr. Maduro understands that, or that he is willing to change. Until he does, the international community must keep up external pressure to match the internal pressure being generated in the streets.

The reality is that fighting against inequality and fighting for democracy go hand in hand. When gains are more widely shared, the economy isn’t the only beneficiary: Democracy gets a boost, too. Democratic societies that are more economically equal tend to be notably deeper democracies, with broader participation and more widely shared power and decision making.

Improvements in one area can have salutary effects in another. As people feel that their labor is being rewarded, and that the fruits of success are more widely shared, they are more inclined to view themselves as citizens, with rights and responsibilities. Similarly, when people feel that the rule of law is strong, and that democracy is sound, they are more likely to make the investments of both capital and labor that are the foundations of long-term economic growth.

The road forward for Venezuela, as for many other nations facing similar problems, won’t be easy, and change won’t come overnight. But arrests and denial are unquestionably not the answer. Venezuela, Latin America and the world deserve better.

Alejandro Toledo, the author of “The Shared Society,” was president of Peru from 2001 to 2006.

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