There are those who, under a monetarist dogma, try to close the debate with a phrase: "there is no money for wages." To this statement and with the same tone of surrender they add others: "we cannot adjust wages if we do not produce." They end by saying: "we are blocked by imperialism."
They start from a wrong diagnosis. The economic blockade imposed by the US is not the main cause of the deterioration of wages, of course it influences, but it is not the determining factor. What exerts the most weight is the attack on the bolivar that they do not even incorporate in their discourse, we presume that neither in their analyzes, despite the fact that imperialism itself has confessed that it is one of the weapons of the economic war that it has used against Venezuelans. . From this wrong diagnosis they begin to get trapped in contradictions and paradoxes even in their own theories. We will show it with a simple example.
Imagine an economy where only bread is produced. Every day 10 breads are produced and consumed at a price of 1 bolivar each. Therefore, 10 bolivars are needed in that economy to be able to produce and consume that amount of bread. Suddenly, the next day, an external agent intervenes in the dynamics of the markets and attacks the bolivar, manipulates the exchange rate and with its media power says that it is no longer 1 Bs / US $ but 1.000.000 Bs / US $.
Those who produce bread, in their profit maximization logic and with the argument of "inventory replacement", incorporate this exchange rate variation, even if it is fictitious, in their cost structure and in 24 hours they mark the price of bread by fixing it in 1.000.000 bolivars each. The only ones who do not have the power to adjust to the new exchange rate are the workers, unless the state intercedes for them. Any resemblance to our reality is on purpose, even in magnitudes.
What do we do with the breads? Few will be able to demand and eat bread for 1.000.000 bolivars each. If you want to continue producing and above all consuming the 10 loaves, now you need more bolivars circulating in that economy, specifically 10.000.000 instead of 10 (it arises from multiplying the 10 loaves by 1.000.000 bolivars each). The loaves are going to be damaged. There is no one who buys them all. Bakers will bake fewer loaves.
The attack on the bolivar, which is a phenomenon external to the dynamics of the markets, resulted in an increase in the price of bread that, given a fixed salary, implied a fall in purchasing power, a decrease in the quantities demanded and produced, but above all and most importantly, a decrease in consumption by the inhabitants of that country.
As long as this situation of siege persists in that economy, the bakers, no matter how good intentions they may have, will not increase the production of bread, nor will they be exempted from all taxes, nor will they grant them countless concessions and nor will the State give them foreign currency. . What are they going to produce if no one is going to buy them?
So, we ask the monetarists: if you say that in order to increase wages you must first increase production, how do you plan to do if, in fact, production is not going to increase until the baker sees an increase in demand for his bread, for which, first it is necessary to increase the salary of those who demand it? Are they or are they not trapped in their own logic and their own theory?
The only way to solve this paradox is by increasing the amount of money that circulates in the economy in the same proportion as prices increase. Money that must be allocated to stimulate demand through, among others, household consumption, and for this it is necessary to direct it towards increasing nominal wages in the same proportion as prices, this is known as indexation .
For those who insist on the argument, also dogmatic, that an increase in “inorganic” money will generate inflation because it is not supported in the real economy and therefore in the production of goods, we must say that it is false. That increase in money will be backed by the production of the 10 loaves, no more, no less. That economy has the capacity to produce them without this being reflected in an increase in prices. Ah! With more zeros to the right? Yes, but in a situation in which the working people will be able to eat their 10 daily loaves.
Now let's see what happens in the Venezuelan economy: there has been an induced depreciation of the bolivar in the order of 234.009.360.274% since 2013 as a result of the political manipulation of the exchange rate, which has generated increases of 59.840.139.762% in prices during the same period. Salaries have only increased 5.783.132.430%. The excuse for not adjusting them in the same proportion as prices has been that "there is no money." Obviously, in the face of such a criminal attack against the bolivar there will never be enough money as we show in the example of bread. In this situation, the BCV, trapped in its own monetarist logic, instead of increasing bolivars in the same proportion as prices and the exchange rate, what it has done is to reduce it by 92% in real terms between 2013 and 2020.
What has this measure achieved in addition to making room for the dollar? It has not prevented the drop in production, which is already 70%, despite all the concessions granted to national and international capital. Much less has the real wage recovered, on the contrary, it has fallen 99% between 2013 and 2020, impacting on a 50% fall in household consumption, 30% in government spending and 88% in investment (these falls They are between 2013 and 2017, we do not have the data from 2018 but they should not have improved).
As for the other argument that those of the Friedman school say that the amount of money should not be increased because it generates inflation, we must remind them, even based on their own theory that the Venezuelan economy is producing well below installed capacity , according to Conindustria, 22%. So any increase in the quantity of money will not translate into price increases. In economic terms, we are in the elastic section of aggregate supply, far from full production capacity; any increase in aggregate demand, as a consequence of an expansive monetary policy, will imply increases in national production while the price level will remain relatively constant, ceteris paribus the aggregate supply.
In the framework of an attack on the bolivar and an economic war, the only way to increase national production is by stimulating demand by increasing the amount of money, which must be redirected necessarily and exclusively through the State to finance spending. and public investment, the wages of their workers and therefore consumption in those households, which in turn will make it possible to boost the economy as a whole which, under a multiplier effect, will also reach the private sectors. This expansive monetary policy must be accompanied by a tax reform that, in addition, allows the redistribution of wealth which, in recent years, has been exaggeratedly appropriated by the bourgeoisie, taking advantage of the hyperinflationary phenomenon.
