FEATURE
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VENEZUELA: ANOTHER SOCIALIST FAILURE? By Ewan Phillipson, Politics and Economics (2021)
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pon his death in March 2013, Hugo Chávez left Venezuela with an unemployment rate which had halved since 1999, a 70% fall in extreme poverty (Johnston and Kozameh, 2013) and inflation at its lowest levels since the 1980s. One might ask how, less than six years later, the country is in such a dire state? The answer, at a glance, would surely be the inability of Socialist governments to control a country’s finances; after all, it is hard to describe ‘President’ (as recognised by Russia and China) Maduro’s Chávismo policies – the root cause of the fleeing of three million Venezuelans since 2014 – as anything other than far-left. With a 64.6% (Doing Business, 2019) total tax rate, and the apparent necessity of nationalising key industries such as the cement industry, banks, and electric, steel and telephone companies, labelling the Venezuelan government ‘left-wing’ might be an understatement. However, to say that this crisis is, in its entirety, the fault of socialism would be unfair. In fact, there is a strong argument to suggest that three factors have played a far greater role in the downfall of Venezuela besides Socialism: Colonialism, U.S. Imperialism and Neo-Liberalism. Venezuela, as a Spanish colony, used an ‘encomienda’ system to produce raw goods (which constituted most of the countries revenue), such as cotton, indigo and cocoa. When the system was abolished by the Spanish crown in 1687, there was a simple shift to the enslavement of black males on plantations. A reliance on such goods as a primary source of income is a notoriously risky concept given the volatility of the market for raw commodities. Spain dictated the Venezuelan economy, and sought a share of the profits; as such, revenue was consistently funnelled into the expansion of plantations and the harvesting of raw materials, as opposed to being dedicated to institutional capacity. Despite gaining independence in 1811, Venezuela was a country still built on exports of coffee and cocoa. These brought in capital which further widened the gap between the bourgeoisie and the proletariat, with neoliberal ideologies acting as the driving force behind acting in self-interest, and being unconcerned with the welfare of the poor. The discovery of oil in Venezuela in 1922 was perhaps the most important dictator of the economic direction of the South American region. That is, if the United States had
not intervened. After unearthing the valuable resource, Dictator Juan Vincente Gómez almost immediately allowed U.S. companies to draw up the Venezuelan petroleum law, opening the country up to exploitation at the hands of the Americans for decades to come. In 1957, over half of both Shell and Standard Oil’s global profits came from their Venezuelan counterparts, evidently exploiting Venezuelan oil for the benefit of North America and Europe. When comparing profit to capital investment, journalist Eduardo Galeano was only able to liken the profitability of Venezuela and its oil for the West to the profitability of the slave trade (Galeano, 1971). The neoliberal objection to a large-scale redistribution of wealth meant that the proletariat (which made up a large proportion of Venezuelan society) remained poor and uneducated, limiting the countries potential to advance its production techniques. Further to this, the bourgeoisie tended to import goods from North America, meaning aggregate domestic demand in Venezuela was low, and job creation was limited. Despite this, the 1970s saw Venezuelan liberals attempt, for the first time, to make something out of the crumbs left behind by U.S. companies, with education and health care at the forefront of their plans. Further to this, the Arab oil embargo of 1973 saw Venezuelan oil revenues quadruple (Wilpert, 2003), with President Carlos Pérez promising the dedication of the revenue to fighting poverty, increasing income levels and increasing employment, resulting in what he assured would be a significant development in coming years.
The neoliberal objection to a large-scale redistribution of wealth meant that the proletariat (which made up a large proportion of Venezuelan society) remained poor and uneducated, limiting the countries potential to advance its production techniques. In a period when the future was looking bright for Venezuela, Juan Pablo Pérez Alfonzom, a Venezuelan diplomat responsible, in part, for the creation of OPEC, claimed that “Ten years from now, twenty years from now, you will see, oil will bring us ruin... It is the devil’s excrement.” (Useem, 2003). That was in 1976- it was as if he could see the future. 9
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