Plainly reigns but on a plane to Spain: Venezuela’s leader

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The Economist. Hello and welcome to the Intelligence from the Economist. I'm Jason Palmer.

And I'm Rosie Bloor. Every weekday we provide a fresh perspective on the events shaping your world.

Received academic wisdom has it that giant, successful firms eventually lose out to smaller, nimbler innovators, the process known as creative destruction. Our outgoing global business columnist questions the basis of that popular theory and youth clubs have been part of the fabric of British society since the 19th century, a haven for kids who are often unhappy at home or at school. But in recent years, more than a thousand of them have shut. We ask why, But first. Six weeks ago, voters in Venezuela made a clear choice of Edmundo Gonzalez as their president. But not for the first time, Venezuela's people didn't get the leader they voted for. And this time around, the danger to the actual winning candidate was clear. So over the weekend, Mr. Gonzalez fled to Spain to seek asylum. In Madrid. He thanked his supporters and spoke of the pressure, coercion and threats he'd suffered at home.

Confido que proximamentemo la lucha porlogr la libertad.

He then struck a hopeful note, saying the fight for liberty and return to democracy in Venezuela would soon start again. But history has proven that with Nicolas Maduro in power, a return to democracy is perhaps too much to hope for.

Edmundo Gonzalez is the rightful winner of Venezuela's presidential election in July.

Kinley Salmon is our Latin America correspondent.

His decision to flee is a consequence of President Maduro's brutal response after he stole the election and perhaps more immediately, of an arrest warrant issued by a judge in Venezuela just last week. It's now really clear that Maduro's regime is openly hunting down its critics.

So just to be clear here, for a start, the proof that Mr. Gonzalez is the rightful winner is very clear cut.

The evidence that Edmundo Gonzalez won this election is just Undeniable. The opposition managed to get hold of the paper receipts that voting machines right across Venezuela spit out at the end of the day of voting. They got 25,000 of them. That's four fifths of the total number of machines. And they published those results online. You can go online, anyone can, and look at every single printout. And these show that Edmundo Gonzalez won with a thumping 67% of the vote to just 30% for Nicolas Maduro. The regime has tried in many ways to make its kind of claim of victory look legitimate. It asked the Supreme Court, for example, to validate it, but it also controls the Supreme Court. And so we had the spectacle of state television broadcasting masked officials opening election boxes and perusing through them at the sort of supposed vote receipts. And then on the 22nd of August, the kind of pantomime finished. The court endorsed as definitive the original false election result, which gave a comfortable victory to Maduro. All of the major democracies in the region have either rejected this result or called for an impartial audit of it.

And we spoke to you shortly after the election about the protests going on inside Venezuela. How has that turned out?

More than 2,400 people were arrested in just 16 days after the vote. According to the government, There were some 24 people killed in demonstration demonstrations, mostly by gunfire. But rather than express regret for those deaths, the regime has instead been labeling its opponents and the journalists and poll workers that it's locking up as terrorists and fascists. This is already having an effect on the region, too. I mean, border posts with Brazil, you know, got kind of now crowds of people at them, desperate to leave. Other places are bracing themselves for an influx of Venezuelans who are leaving, you know, as sort of hope is now really running out. There was another escalation over the weekend, which was that security forces, heavily armed, started to surround the Argentine Embassy in Caracas, the capital of Venezuela. There are six opposition leaders that have taken sanctuary in that embassy. And suddenly these security forces were sort of staking the place out as if ready to sweep in.

So the implication there is that the safety of those opposition leaders was in serious question.

Well, the six took refuge in that embassy in March, actually, after a prosecutor ordered their arrests on charges including conspiracy. Relations between Argentina and Venezuela have now really broken down. It rejected quickly and outright Maduro's claim to have won the election. Just last week, Maduro called the Argentine president, Javier Milei, an asshole in a television interview. In that same interview, he sort of bizarrely declared that Christmas could start early in Venezuela. A real indication of the sort of black is white, up is down, 1984 style world that many Venezuelans are now living in. This embassy crisis has been slowly ratcheting up. Earlier, after Argentinian diplomats were essentially forced to leave Venezuela, Brazil instead took over control of the embassy to represent Argentina's interests. But their custody of the Argentine embassy has now been rejected by Venezuela. And this is when members of what seems to be the government's intelligence agency was seen surrounding the building. As we're speaking, that situation doesn't seem to have been resolved, but certainly there's huge anxiety for those sheltering inside about what might be going to become. It's possible, though, that the departure of Edmundo Gonzales from the country may take the pressure off a little bit.

But about that pressure and whether it's falling, I mean, it seems clear this time, as frankly, with the last election, that Mr. Maduro isn't too bothered by pressure.

Yeah, Maduro certainly does seem very willing to kind of ignore international pressure. There has been something of a regional diplomatic push for the regime to compromise, but frankly, that has made very little headway. Fortunately, with Edmundo Gonzalez now out of the country, that effort is in danger of dying altogether. One of the reasons it's so hard is that diplomats need to convince not just President Maduro, but also his closest confidants, who were given yet more power in a reshuffle at the end of last month. And they, being deeply implicated in the regime's crimes, are in many ways sort of less likely even than Maduro perhaps to want to compromise because they're less likely to get some kind of amnesty in any deal. There's also been lots of pressure on Venezuela from outside of Latin America. The United States has strongly said that Gonzalez was a rightful winner of the election. They, in fact, seized an airplane belonging to Nicolas Maduro recently, which they said had been bought illegally. And these are just part of America's ongoing sanctions. But frankly, it doesn't look like any of that is really having much impact on the question of whether Nicolas Maduro will stay in power.

But let's put this into context here, because exiled Venezuelan opposition leaders have a habit of slipping into irrelevance after a big international upheaval. We've seen this happen before. When we spoke to you six weeks ago, you suggested there was something of a glimmer of hope in the form of the protests that were taking place on the streets. In light of the brutal response. Response to that, how would you characterize things now?

That's right. I did Have a little bit of hope. I mean, there were these spontaneous protests immediately after the clearly false election result was announced. And those protests came in parts of Caracas that have been traditionally strong supporters of chavismo, of this movement that Nicolas Maduro now heads. And so it seemed that perhaps he was losing some of that core support in poorer barrios of Caracas. But that that hope, I think, is now very slim. If there's one thing to cling onto, it's the fact that Maria Corinna Machado, who is in many ways the most high profile opposition leader, she wasn't the candidate. She was barred from running. She is still in many ways the leader of the opposition. She remains in Venezuela. She said, let me be very clear, Edmundo will continue to fight from the outside, and I will continue to do so here. She means in Venezuela, alongside you. So she seems to be staying. She is saying, we must fight on. But the chances now really are very slim of a sort of dramatic reversal. It's worth remembering at this point that it is also ordinary Venezuelans, you know, who are going to pay the price, who already are paying the price in terms of repression and in terms of economic despair. Because in all probability, it is Maduro who will begin his third six year term on January 10th next year. And I think we can say now with kind of a grim confidence that assuming he does, he will rule as a dictator.

Thanks very much for your time, Kenley.

Thank you.

I started writing Schumpeter, which is the Economist's weekly column covering global business, back in 2019.

After six years as the Schumpeter columnist, Henry Tricks is now our US Technology editor.

When I started, the idea was to travel the world covering all companies, big and small. And it took me to some extraordinary places. So in my first few weeks, I went to a forest in Germany where I met forest dwellers protesting against the coal mine. And I also went to a factory in China where they were automating the making of white shirts. It was all great fun, but my editors informed me that our readers, what they really wanted to hear were the really big business stories of the day. So I took what I called the Linda evangelista approach. In 1990, the supermodel famously said that she wouldn't get out of bed for less than $10,000. And I decided to only get out of bed for companies worth more than $100 billion. And I'm now looking back on this six years on with some nostalgia. And I have to say that number seems rather quaint.

So, Henry, are you saying that the Supermodels have got more and more exclusive. The biggest companies have just got bigger and bigger.

Yes, absolutely. When I started, the tech giants were already dominant. So the biggest at the time was Microsoft, which was worth a cool 780 billion. So that was worth getting out of bed for. It was followed by Apple, Amazon and Meta, and together their total value was $3.4 trillion. Well, today Apple alone is worth more than that. And the combined worth of all of them has more than tripled since 20.

So what about the rest of them? The ones that haven't quite made it to that top tier?

Yeah, that's what I find quite striking. The tech giants. If you put those five companies together, they are worth more than one and a half times the value of the next 25 biggest companies in the S&P 500. That includes America's biggest oil companies, ExxonMobil and Chevron. It includes giant pharmaceutical firms like Johnson and Johnson, banks like JP Morgan, and huge retailers like Walmart. So in other words, the tech giants have got bigger and more powerful, while the others have basically been left lagging ever further behind.

Had that been true in earlier times, had there been a few companies that dominated pre tech?

Certainly in a different era. Microsoft was valued way more than some of its competitors at the dawn of the tech era, if you like. But it sort of flies against conventional wisdom. And the conventional wisdom is actually partly derived from the chap who is, if you like, the patron saint of my column. He's called Joseph Schumpeter. He's a Austrian American economist from back in the first half of the 20th century. And he made famous this idea of creative destruction, which has become one of the great business mantras of our time. You think about it in terms of the way that Mark Zuckerberg once described Facebook's ethos as moving fast and breaking things. The idea that innovators bring disruptive innovation that topple old orders and create new ones. And what's interesting is that all of these tech giants actually started in that same vein. They were created in garages, in dorm rooms, in dingy parts of town. So they were, in a sense, the original creative destroyers. But that's all changed.

And has it changed? I mean, is it that there aren't innovators now, or is it they're not actually breaking through into the big companies?

There are definitely innovators, but actually what's interesting about Schumpeter's theory itself is that it's often misunderstood. So we tend to take it as a view that creative destruction only comes from the little guys. And what I've found over the years writing this column and spending quite a lot of time thinking about the theories of my alter ego, Mr. Schumpeter, is that creative destruction is actually more complicated than that. So at the start of his academic career, Schumpeter revered entrepreneurs, and he described them as, in a sense, the detonators of change within the world of business. But he changed his tune later on in life, and this was after he'd moved to America and he'd seen the power in the 1920s and the 1930s of the big American companies, and he decided that actually they were the motors of creative destruction. It was the large firms, even the monopolies, who had huge amounts of money, big R and D budgets, the best brains in the business, and the most to lose.

So what you're saying is that the detonators of change are now coming from within those companies rather than from outside, Is that right?

Yes, that's exactly right. So since 2019, the five tech giants, plus Nvidia, which is the darling of the moment, that makes the semiconductors for the AI revolution, they have doubled their capital expenditure. And just last year they invested $169 billion, whereas the next 25 companies spent a combined total of 135 billion. So quite a lot less. And you can see it's not just CapEx. The big six added 1 million jobs, doubling their headcount over the last six years. They really are the drivers of innovation. They're investing in AI startups, they're building data centers all across the world. Some estimate that within the next five years, they could spend another $1 trillion just on AI alone. So that puts them at an enormous advantage over their competitors.

So the big tech companies are here to stay. What does that do to this whole idea of creative destruction? Was that a myth all along?

I don't think it's a myth. I think it's an inevitability. As Schumpeter made out. The question is, is where does it come from? Does it come from the small guys or does it come from the big guys? And sure enough, the big guys have spent a lot trying to protect their fiefdoms. However, one day, new competition will come, whether that is from smaller insurgents or government antitrust actions, that sort of thing. One of the interesting things, Rosie, that I've seen over the last six years is actually some of those former giants from previous eras meeting their end. A good example is German Electric, that firm which has been an icon of American business For the last, I don't know, 100 years or so, it has effectively been broken into three over the last few years. And that's true of some other industrial giants, such as Dow and dupont. So the big ones do eventually fall by the waysides and new ones emerge. And this takes me back to Nvidia, which was worth less than 100 billion when I started, so I wouldn't have got out of bed for that. And now it's worth a cool 3 trillion, which is surely worth getting out of bed for.

Henry Tricks, our new Catwalk correspondent for the Economist. Henry, great to talk to you. Thank you so much.

Thank you, Rosie. Lovely talking to you too.

On a quiet street in rural Shropshire, between a big row of houses, there is this hall.

Ann Hannah is a news editor at the Economist.

I saw a bunch of teenage boys, 16 or 17, playing pool. There is a craft room. In another part, there is a kitchen where young people can go and learn to cook or bake. I went up to meet Andy Hal School, who is a youth worker, and he told me about the difference that youth workers can make.

And I've had young people that have.

Come to me and they've had problems at school.

Now, one lad, he came to me.

And the only reason he didn't do well in school was that he couldn't.

See the board because he hadn't got a pair of glasses.

Right?

He came from a reasonably dysfunctional family and they wouldn't even take him for an eye test. So when he was under 18, we took him for an eye test. We've got some glasses, he can read the board.

He is now in what the first.

Young people in a generation of his household that's working.

Before starting at the Economist, I did youth work for a charity in Manchester, and it wasn't all glamorous, but as with the situation that Andy described, it could make a really big impact on people, particularly on children who might have otherwise fallen through the cracks. Youth clubs have been around in Britain since the 19th century and they've been part of the safety net and a part of the fabric of our society since then. But in the past 14 years, more than 1,200 youth clubs have closed, leaving a threadbare service.

So who's going to youth clubs? How many people are actually attending youth clubs in Britain?

So UK Youth, a charity, reckons that there are millions of people still involved in youth work in some sort of capacity. But the funding to council run youth services has been cut massively since 2010 because of austerity. The funding has gone down from about £1 billion to £400 million in real term as of 2021.

And you say that the funding is done by councils, which means it's a local thing. So how does that mean that the provision of youth clubs varies across Britain?

Massively varied. Councils that are overspent really struggle to spend on youth services. So Shropshire is actually one of the areas that has been most affected. And Andy hall, who we heard from earlier, is in one of the areas that has been hardest hit. That area now only has two youth centres, down from 12 in 2010. And they also have had a massive reduction in the number of qualified youth workers as well. There are voluntary groups that have popped up in place of those youth services that had been funded by councils. But the services are much more splintered, harder to monitor, much harder to involve everybody into those groups. They tend to be targeted towards specific groups or individuals or run by religious groups and things like that.

We know that a lot of local services suffered cuts under the Conservative government. Why were youth clubs hit so hard?

So one of the reasons is that it's quite hard to prove the benefits of youth work. A lot of the benefits are anecdotal, a lot of the information that we have is anecdotal, and it's particularly hard to prove the benefits of any preventative work. Right. It's hard to prove that, that you've stopped a negative thing from happening in the future. But evidence of benefits is growing. One study by a team at University College London found that nearly half of those who go to youth clubs had higher education qualifications by the time they were 25, compared to just over a third of those who didn't. Another found that those who went to youth clubs were more likely to be in paid employment later on in life. And it may be that youth clubs just reach children that other services can't.

And, of course, we now have a Labour government. Are we likely to see any change?

Yes, I think so. They seem to be more interested. We don't know exactly what they're going to do yet, but they have pledged 300 million pounds for a network of 90 youth hubs for those most at risk. And they're hoping to focus on mental health, which is great because most youth workers will say, anecdotally that the mental health of young people has really suffered in recent years. The Labour government seems to want to tilt that money towards preventing things from happening. So preventing mental health from deteriorating or preventing the likelihood of involvement with crime and things like that. And they say that they want to follow evidence of what works and speak to people in those positions to know what that might be. So far, it seems like youth work. Even though it might be patchy for the next couple of years, it will remain. And that is a really, really great thing.

Anne, thank you so much.

Thank you for having me.

That's all for this episode of the Intelligence. We'll see you back here tomorrow. It.