Opinion

Opinion | Kenneth Rogoff

Why did Trump accept Venezuela’s money?

Alex Brandon/Associated Press/File 2017

There is a certain irony in recent news that Venezuela donated a half million dollars to Donald Trump’s presidential inauguration through Petróleos de Venezuela, the state-owned oil company. Venezuela, of course, is a serial defaulter, having done so more times than any other country over the last two centuries.

Recently, Venezuela’s despotic socialist government has been so desperate to avoid another default (which would be the country’s 11th since independence) that it mortgaged its industrial crown jewels, including the US-based refiner Citgo, to the Russians and the Chinese.

It is not exactly clear why President Nicolás Maduro of Venezuela is so desperate to avoid defaulting on the country’s foreign debt that he is starving his own people, much the way Romanian dictator Nicolae Ceausescu did in the 1980s. With such severe shortages of food and basic medicines, there is little doubt that, if and when the autocrat is finally deposed, there will be some eerily familiar horror stories.

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It is simplistic to portray the Venezuelan tragedy as an apocryphal tale of what happens when a country is taken over by left-wing populists. The right-wing governments of the 1980s and 1990s were also corrupt; and, while national income rose, income distribution was among the most unequal in the world. But it is true that Venezuela’s current horror show is very much a product of two decades of left-wing misgovernment.

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There was a time when a contribution such as the one Venezuela made to Trump was a mere pittance in a much larger aid budget. Under its previous president, the charismatic Hugo Chávez, Venezuela spread its oil money far and wide, mostly to support other populist anti-American governments in the region. Chávez even funded heating fuel for some low-income households in the United States, a program made famous in a 2006 TV ad by a former US representative from Massachusetts, Joseph P. Kennedy II.

That was back when high and rising oil prices helped to maintain Venezuela’s revenues even as economic mismanagement sent oil production into a downward spiral. Mind you, Venezuela was never nearly as rich as the United States, so its aid budget was like giving to the poor by taking from the almost poor.

Now, with oil prices having fallen dramatically since Chávez’s death, in 2013, his successor, who has all the charisma of a lifelong apparatchik, is being forced to get by without the same easy revenues. Today, Venezuela’s economy is a full-blown disaster, with the collapse in growth and near-hyperinflation causing widespread human suffering. In such circumstances, one might expect a traditional Latin American military coup. The absence of one in Venezuela is hardly a reflection of strong democratic institutions. Rather, the government gives the military a free hand in running the drug trade, making many generals and officials extremely rich – and able to buy the loyalty of key troops.

And this brings us back to the bizarre spectacle of this economically desperate country helping to fund Trump’s inauguration festivities. Like Joe Kennedy II, the Trump organizers can plead that if Venezuela wants to spend its money on making life better for its much richer northern neighbor, who are they to say no?

Well, in both cases, the United States should have said no: While the aid is transparent, the symbolism of a rich country taking money from a poor neighbor with millions of suffering people is hardly attractive. And it is particularly bizarre that even as US policy toward Mexico has greatly increased the chances of an anti-American Chávez-type character becoming president there, officials are providing positive publicity to a government that is a caricature of disastrous governance.

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Barack Obama took a principled stand in US dealings with Venezuela, imposing sanctions to rein in rogue behavior, a policy that drew broad bipartisan support. The Trump administration needs to stay the course, especially as lower oil prices have weakened the Venezuelan government’s hand. Instead of bashing Latin America, the United States needs to show it can be a steady and principled friend that will not be swayed by corrupt bribes of any type.

Kenneth Rogoff, former chief economist of the International Monetary Fund, is professor of economics and public policy at Harvard University. © 2017 Project Syndicate, www.project-syndicate.org