Q1. and tighten the money supply in order to

Q1. You are elected as the President of Venezuela. Currently your country is facing a historic crisis. There is widespread unemployment in your country, inflation is off the charts, and people have come on the streets to protest due to which President NicolásMaduro resigned. To top it all your main source of revenue, oil, has been hit and its production is hitting an all-time low. They hope that the change in presidency will signal some relief. What steps will you take both economic and social to #MakeVenezuelaGreatAgain? (5 MARKS)

Answer 1:

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Outline

-On the surface it seems that focusing on creating an economy based around agriculture would be a stable and better option than anything, but that approach may be deeply flawed and non-executable as there is a heavy water shortage in Venezuela and the only water available is not hygienic, therefore not safe for consumption.

– The country of Venezuela can only get out of this economic stress if we implement our own version of “Reaganomics” with some adjustments according to the needs of our nation.

What is Reaganomics?

Reaganomics is a portmanteau for the economic policies that were implemented by Ronald Regan during his reign as the president of the United States of America during the 1980.

The four major goals of Reaganomics are reducing federal taxes, reducing government regulation, reducing government spending and tighten the money supply in order to reduce inflation. But the policies implemented in Venezuela will exclude reducing government spending for obvious reasons (welfare for the people of Venezuela).

 

Reducing Federal Taxes

By reducing federal taxes such as income tax, corporate tax etc. provides an incentive to develop the severely weak private sector. With reducing federal taxes the government of Venezuela would also provide the private sector a significant boost to establish a strong private sector which as time passes will help in reducing the inflation rate (As exports would also increase by the promotion of the private sector), the crime rate (As there will be more sources of income, people would have no need to turn to crime to get essential things such as food) and the debt will also be significant reduced as the government will also get a new river of income from these policies. Other natural resources such as diamond, gold, iron, bauxite etc. can be used for creating private businesses.

 

Reducing Government Regulation

Reducing government regulation also provides an incentive to businesses to come into function and make the private sector robust. This will provide the same benefits we get by reducing federal taxes and at the same time it will also significantly increase the GDP of Venezuela, provide employment and significantly decreasing poverty levels.

 

Tightening the Money Flow

Venezuela will also tighten its money flow (by increasing interest rates of banks etc.) which in the beginning will help in reducing inflation and slowly we would loosen the money flow to aid the Venezuelan businesses as the inflation rates would stabilize over time.

 

Total Removal of the Black Market Economy

During the presidency of Hugo Chavez, to pay for extravagantly large social programs he created CADIVI (Comisión de Administración de Divisas (Commission for the Administration of Currency Exchange)), a currency control board charged with handling foreign exchange procedures. This sets the ‘official exchange rate’, which is 10 Bolivar to 1 USD while the black market sets the Bolivian exchange rate at 124,190.13 Bolivar for 1 USD.

This inflation was usually a result of the inability to pay for policies, because of which the government was forced to print more Bolivars, causing hyperinflation.

This adversely affects the exporters of the country especially and rigorously reduces profits for a lot of businessmen and therefore removing this would provide the realistic image of the current situation and from that point the Venezuelan Bolivar can again be as strong as it was back in the glory days under Hugo Chavez.

Removing this system will open up a lot of business opportunities and overall strength the private sector.

Privatization of the Health Sector and Improving the Government Health-Care

By the funds that are received by the strengthened private sector, the government can improve its health sector and when it is self-sufficient we can privatize the health sector to further provide more revenue to the government for creating more policies benefitting the poor.

Problems Being Solved Through Reaganomics

? Hyperinflation – By restricting cash flow, promoting businesses that bring in more foreign currency and the total removal of the ‘Black Market Economy’ the Venezuelan Bolivar’s inflation can be significantly reduced.   

? Economic war- The economic war mainly exits because of the huge economic disparity, which will be reduced by the promotion of the private sector by reducing government regulations and reducing federal taxes and creating policies that support upcoming businessmen. 

? Food shortages- With the flow of income that will come through the private sector, food can be imported but as the condition of the country improves the country can also focus on the agricultural side of our nation.

? Refinancing its debt- The capital that comes through the private sector in form of taxes will slowly help in reducing the debt of the country.

? Health assistance- The government will first providing a boost to the health sector and as things will stabilize the health sector would be privatized to be an enhancement to the already strong private sector.

? Crime and poverty- As living standards go up, more people get employed and get more sources of income, the poverty level and the crime rate will significantly decrease itself.

Conclusion

The rebuilding of the Venezuelan economy will be a long and tedious task and can only be done with exceptional implementation of the policies mentioned above. Even though this solution is not perfect, it is at least a plan that can be followed by a country that is currently in shambles. But this plan paves a way for the country to follow, acts as a candle in a dark room that provides hope to millions of the citizens under my presidency.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. You are Juan Vicente Gomez, President of Venezuela 1922. The GDP of the country is low and the national reserves are depleting. Your researchers have just discovered a huge oil well. Upon drilling, oil came gushing out in a jet, rising to 40m in height taking 9 days to contain. Majority of your advisers are telling you to start setting up refineries and sell it blindly as much as you can but there are others too who are skeptical about the idea and think that doing so could do more harm than good. What steps would you do to manage your resources, maximize your profits while averting any future crisis? (5 MARKS)

Answer 2:

Outline

-One has to proceed with caution when dealing Oil on a world wide scale; it is an extremely volatile substance, not because of its ability to burn down anything that comes in its way if something is slightly hotter than usual, but because of its ability to form the geo-political state of the whole world and mainly the United States of America.

-Oil found in Venezuela can be used to its advantage only when it is utilized in an appropriate manner. The potential oil refineries should be set up as soon as possible but as the same time several regulatory policies should be implemented to limit its misuse as there is a good possibility that future leaders of this great nation can use oil to their own advantage, run the country into defects and basically throw the nation into the hands of chaos “hypothetically”.

 

 

Solution:

 

Investment in Other Industries-

-Venezuela is a resource rich country but we should use these resources responsibly. The sceptics of setting up these oil refineries have logical arguments too, but instead doing nothing with our resources we take their carefulness as a word of caution. We will also create a back-up to not make our economy only based around oil, so if one day we face a crisis we do not get crippled.

-The money we get by selling oil in the international market would be reinvested in other industries of our country. To create a back-up we shall invest in the private sector and utilize our natural resources such as diamonds, iron, gold etc. This would provide employment for the people and overall increase the GDP of our countries and at the same time create a strategic back-up if we face a crisis.

 

Creating New Friends-

-A large supply oil also provides new allies that are ready to provide support and much more for just one commodity. A global giant such as USA is always in the market for buying oil and therefore through oil we can create a strong alliance with countries such as USA.

-These alliance can be vital for support in the future if we face any crises. They can provide funds, resources and provide a platform on the international matters in exchange of commodities such as oil.

Conclusion

– Oil as a commodity can help Venezuela to get out of an economic slump and at the same time put us on the map as a profitable area but we have to advance with caution, we cannot simple be dependent on oil for our economy and if we do we are welcoming chaos. But if we follow this advice, Venezuela as a nation can live long and prosper.

 

 

 

 

 

 

 

 

3. Do you think that being natural resource rich is advantageous to countries in the present scenario when transportation costs are decreasing and the world is pushing towards globalization? Consider all the factors before answering.

(10 MARKS)

Answer 3:

Outline

-Being a resource rich country is similar to a talented archer, even though the archer can have amazing eye sight and impeccable accuracy but without a proper bow, training and equipment, that archer has a significantly lesser chance to succeed in comparison to his peers. Similarly a resource rich country can either grow to become a global super power or it can be a puppet under another super power, under which its resources are being exploited at a massive level.

-Having a resource rich land can be advantageous but only the resources are used responsibly and with an image of what the future may be.

For example we can take countries such as the USA, who took advantage of location and their immense resources and turned themselves into a global super power as time passed.

On the contrary we can look at nations such as India, which even after being exceptionally resource rich country, strategically located below the Himalayan range fell into the hands of the British power, who ruthlessly rummaged through all of India’s resources for their own gain. Same can be said about other British colonies, such as South Africa and many others.

-One can use the cases mentioned above as lessons to turn a naturally rich country into a robust economy and a global super power by taking the cases stated as a set of “Do’s” and “Don’ts'” and following the footsteps of the successful economies, that have set an example for the whole world.

Advantages

-A resource rich country has an overall control of the policies on an international level as the have significant influence over the decisions.

-The resources also provide a steady flow of income that can be used for the development of the infrastructure, creating policies that will benefit the lower class, creation of a smooth functioning Health-Care system etc.

-Another advantage would be the abundance of allies that a country would have, if it is rich in resources as several other countries would have economic interest in that country and would try to build a relation based on economic benefits for the both sides.

-A business-hub can be formed by said country to further boost its revenues as other countries would also have economic interest at said business-hubs.

Disadvantages

-The resources can be misused by the leader or the government itself

-Overdependence on one single resource or commodity can cause and economic crisis

-Other nations can take advantage of the country with an abundance of resources at an early stage of development and reap said resources and exploit the resource for their own profit.   

 

 

In Context to Venezuela  

-Venezuela as a resource rich nation did use it natural resources for its profit to an extent but what it failed to do was to maintain a democratic form of government and failing to implement regulatory policies.

Failure in Maintaining Democracy

With the presidency of Nicolas Maduro came heavy corruption. He significantly increased his powers as president and turned Venezuela into an authoritative rule. This power grab was generally motivated by Maduro’s own greed. The same greed aided with irresponsive decisions severely affected the Venezuelan economy.

Failure in Implementing Regulatory Policies

When oil refineries were set up in Venezuela, it was done without any regulatory policies, which made this industry venerable to exploitation from the very start. The lack of regulatory policies and then the employment unskilled workers was a disaster waiting to happen.

Conclusion

We can use Venezuela’s suffering as a tail of caution. At the end a country with rich natural resources can be in extreme poverty or it can be a global super power, all depends on how they use these precious and scarce resources.

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. Is water wet? (This is not related to the case study and will act as a

Tiebreaker)

Answer 4:

“I found Rome of clay; I leave it to you of marble.” Were the last words of the first Roman emperor Augustus Caesar, which may seem unrelated to the question right now, but it has a deeper meaning that may be understood as this answer unfolds.

The answer on the surface seems quite simple, but one has to look deeper into the question to full understand this and answer this question correctly. This answer has to be carefully constructed to make this answer exquisitely clear.

So is water wet? The answer is yes and no at the same time.  Here are the arguments for the both:

-Water is not wet as wetness is an experience of getting in contact with water. When there is a cup of water, we can say that the cup is wet, but water is not. When you go outside and it’s raining your clothes get wet, but water doesn’t.

By definition, being wet is to be “covered or saturated with water or another liquid.” And water cannot be covered by water and therefore it is not “wet”. Saying that water is “wet” is similar to stating that a fire is “burned”, but contrary to that fire ‘burns’ things but it cannot burn itself.

-Water is wet. If something gets “wet” when it is surrounded by a liquid such as water, then isn’t water always surrounded with more water? In a cup of water, the cup and the water both will wet at the same time as both are covered with water.

Therefore water is inherently wet from the very beginning and any surface it touches will be wet at the very same time.

 

In the context of the quote in the beginning, the question received was in the form of clay as it was raw in its own form and after the answer; it has been left in the form of marble. Now it is the opinion of the reader to decide the future of the marble, understand it and build the future according to it.

 

 

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