Paper Tigers and Minotaurs: The Politics of Venezuela's Economic Reforms

Paper Tigers and Minotaurs is an insider's account of national transition from a protected and state-controlled economy to one relying on free markets and open trade. Venezuela's experience with dismantling an entrenched economic structure and coping with the political consequences of a new system is a national story with international lessons. It is recounted from the author's perspective as a minister directly involved in the process, a scholar equipped to understand its broader implications, and a World Bank executive director we acquainted with the international record of economic reforms. With an eye for paradox and the unexpected, the author retraces his country's passage through the maze of surprises and dangers that beset managers of large-scale reform. Some of the dangers turn out to be roaring but harmless paper tigers; others, the unexpected and deadly minotaur capable of derailing the entire process of reform. Distinguishing one from the other, a none-too-simple task, emerges as an indispensable survival skill for reformers everywhere.Venezuela, a country boasting one of the oldest and more affluent democracies in Latin America offers a case study exemplifying the complex links between market reforms and political instability. After the painful economic shock that accompanied the launching of the reform program in 1989, Venezuela enjoyed some of the highest economic rates in the world. Yet, this once politically stable, country turned suddenly and traumatically unstable. Two violent army revolts, widespread political turmoil and the ouster of President Carlos Andres Perez suddenly transformed a glowing example of successful economic liberalization into a gloomy reminder of the political costs of market reforms.In rich and illuminating detail, the book analyzes this transformation and the consequences of the new policies that were meant to deal with the deepest economic crisis in Venezuela's history. The crisis was a classic and instructive example for governments everywhere that are undergoing the transition toward markets and away from state intervention. The author examines the initial impact of the reforms on the country's economy and the social situation, including the practical problems and the politics of implementing social "safety nets" to help the poor cope with the harsh burdens of economic adjustments. The book deals forthrightly with the central challenges to economic reform: the military and its reaction to reform and instability; the link between economic liberalization and corruption; the emergence of "media barons" as a political force brandishing unprecedented power; the inability of the government to communicate effectively with the people and build support for the reforms; the effects of the fierce rivalries that broke out among private economic groups; the demise of Carlos Andres Perez, once the most popular and powerful of the country's political leaders.This engrossing reconstruction and interpretation of the Venezuelan experience is filled with lessons, insights, and deeper questions for all who enter the labyrinth determined to distinguish between the paper tigers and minotaurs that confront economic and political change.