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Economist Daniel Lahoud: “Venezuela Was Never a Free Economy”

Economist Daniel Lahoud: "Venezuela Was Never a Free Economy"

Daniel Lahoud (born 1959) is a fascinating man—an advocate for free market ideas in a country whose government has practiced socialism for as long as most of Daniel’s fellow Venezuelans can remember. In this February 2, 2022 interview with me, he provides insights into both his life and that of his country.

Professor Lahoud holds undergraduate and graduate degrees from several Venezuelan universities—in Business Economics, History and in Economics. His teaching career spans more than 30 years at Universidad Católica Andrés Bello (UCAB) in Caracas. Since 2008, he has also taught at the Universidad Central de Venezuela (UCV).

He serves as Financial and Business Advisor to multiple companies in the capital markets and has published several books and academic articles on financial matters. He maintains a blog called Temas de Finanzas.

In 2019 in Atlanta, Georgia, we at the Foundation for Economic Education (FEE.org) presented him with our Blinking Lights Award “For a Distinguished Career of Courageously Advocating for Liberty and Austrian Economics Despite Danger and Difficulties.”

Daniel Lahoud.

Reed: When and why did you decide to pursue a career as an economist and college professor?

Lahoud: I graduated as an economist in 1986. As I had been an outstanding student in monetary matters, my professor took me to work at the Central Bank. There I decided to do my postgraduate studies and as a complement to my studies, I began to teach. The experience was so enriching that I immediately understood that you really learn when you teach. Since 1988 I have not stopped teaching. I find it so fulfilling that I enjoy it regardless of the medium (classroom or distance). Today I would only see myself as a teacher and I think it would be very hard for me if I ever had to give up teaching.

Reed: Tell us about the evolution of your free-market perspective. What books, events or personalities along the way helped convince you of the merits of free-market economics?

Lahoud: I was prepared to be a traditional economist. Some of my professors were Keynesians, others were Marxists, and all of them agreed that an economics career should end in a planning ministry or in the central bank. However, my dad was a small businessman and he didn’t want me to become a professor or a government employee. He wanted me to inherit his company, so I learned to manage my dad’s small business. There was a natural conflict between what I was learning in my classes and what I was living in my family’s business, so I questioned my learning in economics school. Since I was very interested in economic theory, I’ve always read the original authors more than the textbooks. Very early on I read Smith, Keynes, even Marx in their own words. My curiosity led me to Milton Friedman, and there I felt comfortable. Friedman’s words sounded better to my ears.

But I must comment on something important. My second job, after the central bank, was at the Caracas Stock Exchange. Today I laugh a lot and I understand perfectly what F. A. Hayek once said. The fellow Austrian economist Friedrich Wieser commented to him in relation to Carl Menger that he, like me, understood that almost nothing we were taught in economics is useful in explaining the stock market.

That led me to abandon the desire to follow the expected path of the economist. That is why I earned a master’s degree in history and then a doctorate in history. Fortunately, I had the opportunity to do a master’s thesis on a Venezuelan priest named Antonio José Sucre, a man who was a supporter of interest loans in economics (contrary to the Church in those days) and at the same time a political conservative. Then for my doctorate I took on a key character among Venezuelan businessmen, Henrique Pérez Dupuy, the founder of Banco Venezolano de Crédito. It was one of the six “free banks” in Venezuela.

Dupuy was a supporter of the free market at a time when everyone saw it as “old-fashioned.” That man wrote and published 17 books of essays on the Venezuelan economy and on the international economy and its problems. He recommended reading Mises, Hazlitt, and Hayek. I took an online test with the attractive title, “How Austrian are you?” I, who had never read anything by any of the Austrian economists, discovered by that test that I was 94% Austrian, 6% monetarist, and 0% Keynesian!

That led me to reading their works. Those of Menger, Mises, Hayek, Kirzner, Rothbard and then Lachmann built all the doctrinal basis of my thinking. Today I say that my favorite books are Menger’s Principles, Mises’ Human Action and the articles in Individualism and the Economic Order, as well as Market Theory and the Price System, and Lachmann’s Capital and its Structure. I dare say that made me the classical liberal I am today. What it really did was to give me a foundation. I was someone who felt out of place by the education I received. Reading the Austrians changed that.

Reed: How has the experience of socialism under Chavez and Maduro affected your thinking?

Lahoud: Ugh! Venezuela was never a free economy. It moved between fascist-like dictatorships and Roosevelt New Deal-type democracies. So, I clearly remember my father bribing government prosecutors who came to oversee his business, and I didn’t feel that was the world I wanted to live in. Chavez and Maduro are more accidents in a society that doesn’t know that it really craves freedom. When it is finally free, this country is going to grow a lot. That is why my students ask so many good questions. Some doubt what I teach because the other professors tell them that the free market is not good; others listen to me and dream. I can see it in their eyes.

Chávez and Maduro have affected Venezuelans’ way of thinking, but today they know that their messages are a lie, that the world of high taxes and regulations of the 1960-1998 democracy is also a lie. The young people try to solve their own problems without depending on the government. Venezuela today is very different from the country where I was born and grew up in. Those young people are the ones who will bring about important changes and I hope to be there to see it.

Dictator Nicolas Maduro at a rally in Caracas, Venezuela (EFE)

Reed: Have you encountered challenges from the university or from the government because of your views?

Lahoud: Venezuela is a fairly open country. For example, I am a professor at the Central University, which for years was a university where Marxist thought was predominant. I won my position in a contest. Today the university is very decadent, but I continue to teach there. I do it to bring classical liberal thought there. They let me teach Austrian economics to the students and they let me develop liberal thought in class.

The government is always a danger because my message goes against their way of thinking. So far, I have not had any kind of threat. I hope one does not happen, but if it happens, I will see how I face it. I cannot say I am not afraid, but it is one of my risks. In the academic world I have made good friends. My colleagues say I am right wing, but I think I am a very liberal man of the center.

Reed: In the U.S., we don’t hear as much economic news today from Venezuela as we did a couple years ago. Is inflation still severe? Is the economy still declining?

Lahoud: Venezuela is in very bad shape. Few people can say that we are better off than today ten years ago. However, almost all can say that today they are better off than two years ago. Nevertheless, I do not believe that this will be permanent and sooner or later more unrest will come. Why? Because the government is now focused on raising taxes and ending the dollarization that occurred spontaneously among Venezuelans when they saw that there were no bolivar bills and that there were no answers to the high inflation. Inflation declined from 25.2% monthly in the first eight months of 2021 to 7.5% monthly in the last four. That’s still a lot because the government does not stop printing and spending. But as soon as the government gets back to big deficits, inflation will start to rise again.

Reed: Some reports suggest that the Maduro government may be reversing some of its socialist policies. Can you comment?

Lahoud: I believe that the government, like Lenin in 1921-1928, is applying a New Economic Policy (NEP) to survive but will eventually return to attempting to implement a communist system. The improvement that is being experienced is because the government placed tariffs at 0, for the first time in the history of Venezuela. Many people are importing and selling products and that together with a small recovery of the oil business is what is driving growth. But as I said before, the government has not changed. They want more taxes and they want to continue controlling.

Reed: Do you think the current rebound in oil prices will have a major, beneficial impact on the Venezuelan economy?

Lahoud: Venezuela was once a major oil producer, but since 2016 it declined so much that there was no gasoline for domestic consumption. Today they have recovered a little production to less than one million barrels per day (in 2003 it was 2.3 million). That is what has contributed to an improving the situation, but the production of a single product is not enough to take the country to a better place. In 2000 there were more than 10,000 companies, but today there are less than 2,000. A lot of investment and lower taxes are needed, and the government does not understand this.

Reed: What are the lessons the rest of the world can learn from the Venezuelan experience of the past 25 years?

Lahoud: I would go further back. The history of controls in Venezuela begins in 1935, when Juan Vicente Gómez (a dictator) died. He was the one who promoted the arrival of the oil transnationals and made us progress a lot. After his death, politicians tried to “modernize” the country but the only thing they have achieved is to impoverish it, in a never-ending race of failure. I believe that some people today understand that this is no good, but they are mixed with politicians who believe that it is possible to return to the era of civil democracy with a government that owns companies and imposes economic plans. I believe that this conflict is the legacy of these years of bad governments, some who believe that it is possible to go back in history and others who understand that this is not the best way to make the country grow.

Reed: Are you optimistic for the country’s future? Why or why not?

Lahoud: There are days when I wake up with a lot of pessimism and the only thing I think is that I should have emigrated. But there are other days when I rise above the pessimism and transform it to carry a message that a better country is possible. It is very hard to fight against a culture that leads people to think that the government must give everything and that it is better this way than by personal effort.  Many Venezuelans think this way and it hurts me a lot.

However, I hope I am not wrong, but today I see young people who want to progress, who seek to survive in informal businesses. In Venezuela they call them “emprendedores” because they say that entrepreneurs are people who are already accomplished. They do not know how wrong those who say that are. I believe in these guys. I believe that their will to progress can take them far and they can push for important changes. I hope to be there to see them and be happy with their smiles.

Venezuela does not deserve its politicians of the past. It deserves the desire for change of the young people who represent the future.

Reed: Thank you, Professor Lahoud, for your candor and for your devotion to sound economics under very difficult circumstances!

Lawrence writes a weekly op-ed for El American. He is President Emeritus of the Foundation for Economic Education (FEE) in Atlanta, Georgia; and is the author of “Real heroes: inspiring true stories of courage, character, and conviction“ and the best-seller “Was Jesus a Socialist?“ //
Lawrence escribe un artículo de opinión semanal para El American. Es presidente emérito de la Foundation for Economic Education (FEE) en Atlanta, Georgia; y es el autor de “Héroes reales: inspirando historias reales de coraje, carácter y convicción” y el best-seller “¿Fue Jesús un socialista?”

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