Crude populism

Livingstone and Chavez, stirring it:

Ken Livingstone has been criticised for a proposed deal to get cheap Venezuelan oil for London’s buses, in return for consultancy services…
The deal could subsidise Oyster travel cards for the poorest Londoners, Mr Livingstone said.

Fare’s fair, Chavez-style, or oil-for-wonks scandal?

The usual suspects aren’t happy:

But opponents on the London assembly, who want to question the mayor at City Hall today, are unconvinced. Angie Bray, the leader of London’s Tories, dismissed the scheme as a “socialist propaganda fest”.
She said: “Ken and the president of Venezuela should be ashamed of themselves for even contemplating such a proposal. I’m sure the Venezuelans who struggle below the poverty line, many of them critically so, would be shocked at the cynical siphoning off of their main asset to provide one of the world’s most prosperous cities with cheap oil.”
Mike Tuffrey, the leader of the Liberal Democrats in London, said the deal smacked of aid, not trade. “This reduces us to the status of a third-world barter economy. We should be weaning ourselves off fossil fuels, not trying to get them at subsidised prices from Venezuela.”

First, London in general may be one of the richest cities in Europe, but it also contains some of its poorest districts. Fuel poverty is a real and growing concern and, whilst I would dearly like to see a reduced dependence on fossil fuels in general, this should not simply mean debarring the poor from travelling – as the Greens also appear to suggest here.
Second, Mike Tuffrey is adopting the classic Lib Dem pose: confused opportunism. He appears to have little idea what “trade, not aid” means for resource-rich developing countries. Countries rich in natural assets have long suffered from the “resource curse”: under capitalist relations of trade, being a country with great natural wealth generally makes you poorer, not richer.
Part of the reason for this is the so-called “Dutch disease”: if I as, say, Chad (PDF), want to sell you some of my oil, I will do so for dollars on international markets. But if I want to use those dollars in Chad, I need to convert them into francs. Demand for francs pushes their price – the exchange rate – up. Rises in the exchange rate in turn squeeze other exporting sectors of the economy, like agricultural producers and manufacturers, as the prices of their goods internationally rise with the exchange rate. They will be forced to cut domestic costs – that is, wages – or face going out of business.
Unlike the classic Dutch disease, Venezuela has not recently discovered oil. But the skyrocketing price of crude in recent years has had a similar effect on the Venezuelan bolivar, creating great pressure for its appreciation.
One way to avoid this pressure is to avoid the international currency market altogether. A “barter agreement”, such as the one Tuffrey is becoming so sniffy about, is the ideal means to do this: a direct exchange of valuable UK services for valuable Venezuelan products, with no need to introduce debilitating exchange rate pressure.
Compare this to the consequences of insisting that developing countries follow the markets’ diktat. Tories and Lib Dems in London are all but demanding the immiseration of those in Caracas slums.