EL ESPECTADOR

Iran To Venezuela, An Ugly Mix Of Oil Wealth And Social Unrest

Donald Trump has become a convenient scapegoat for problems in countries like Venezuela and Iran, where vast oil reserves leave few excuses for pervasive economic problems.

Oil truck in Zuata, Venezuela
Oil truck in Zuata, Venezuela
Danilo Arbilla

-OpEd-

BOGOTÁ — Is it good to have oil? It might sound like a silly question.

Judging by the news we read and the images circulating, it seems like the world's oil kings and queens have it all. Yachts, mansions and landmark buildings, paintings, works of art, not to mention soccer teams — nothing seems out of reach for those with petrodollars coming out of their proverbial ears.

But is it really all that good? Because in Venezuela and Iran, we are seeing people, ordinary folk, come out onto the streets to protest over shortages, rising prices, unemployment and a deepening lack of basic goods. They say they are hungry, ready to burn and die in the streets. These are two countries with seemingly unending supplies of oil. So how is this possible? Iran has the world's second-biggest gas reserves and is fourth in terms of oil reserves. Venezuela may have the world's biggest oil reserves.

In Iran, President Hassan Rouhani says his government accepts peaceful protests and the order is not to suppress them, but the government has restricted access to social networks and at least 12 civilians were shot dead in the hours after demonstrations began.

Venezuela's case remains singular. President Nicolás Maduro has just announced, elatedly, on state television and radio a 40% rise in the minimum wage and a 30% increase in basic family allocations. Which means a 70% increase, though in reality that is a little below the rise in prices for the sole month of November, which was 81%. The accumulated inflation rate back then was 2,700%.

The self-styled Bolivarian leader has hailed his wage hikes as "good news at the start of 2018 for job protection, stability and revenues for all the country's workers."

Is it truly good news, or has Maduro simply gone gaga?

With this increase, which only benefits state workers, the overall minimum wage (including the "family basket coupons') has reached 797,510 bolivars, with which a Venezuelan could purchase around $7 at going market rates. Yes, seven, you read right, though it might be even less by the time you're reading this.

A notable detail here is that the hike's beneficiaries are state servants, notably members of the military, the core of regime supporters whose total numbers are steadily declining. Many, but probably not all of them, can also buy dollars at some state-imposed rate like 10 bolivars to the dollar, or the rate for state-sector firms, which is around 3,300 bolivars to the dollar, then sell their subsidized dollars at market rates of around 120,000 bolivars a dollar. It must be a nice little earner for those few, or many, Maduro friends and cronies able to cash in this way.

Trump has become the perfect target for so many.

How does one explain this paradoxical relation between oil wealth and dismal living in the same country? Rouhani and Maduro would converge on one point: Donald Trump. He is not to blame for everything, of course, since U.S. imperialism was already a long-time favorite target in these countries.

But Trump has become the perfect target for so many: guilty conservatives, genuine reactionaries, opportunist businessmen, fearful or complacent types, fascists of the Right and the Left, authoritarian progressives, populists and all the pusillanimous, cringing creatures scuttling their way through the recesses of political correctness. Denouncing Trump suits them all.

Knocking the Donald wins you easy applause. Some of the critics become so puffed up with righteousness they practically feel like Che Guevara fighting in the jungle.

It is true the current U.S. administration leaves much to be desired, though probably mostly for its tone, register and bad forms. But it is quite a stretch to blame Trump for hyperinflation in Venezuela and unemployment in Iran. You'd think Maduro and Rouhani are more at fault, perhaps? Put simply, people in both countries are not as stupid as leaders like these two may think.

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Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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