In Venezuela, Lessons to be Learned From A Nation in Crisis

John Washington
June 29, 2017

A helicopter commandeered by anti-government forces recently attacked the Venezuelan Supreme Court, dropping two grenades, following up with a bellicose YouTube post, and inciting new fears that a coup could be imminent. The attack occurred on the same day President Nicolas Maduro warned that government loyalists “would go to combat” if the regime was toppled. The hair-trigger tension is coming a month away from the July 30 constituent assembly, in which delegates “selected from the base of the working class” (critics claim they will be pro-government zealots) will rewrite the constitution, and let Maduro skip the previously schedule 2018 election. Is civil war on the horizon? How has the populist government become so unpopular?

Venezuela, led for over a decade by the brash, super-telegenic, former tank-commander turned generalissimo Hugo Chavez, propelled the first wave of South America’s pink tide—what seemed, for a few years (and from a distance) like a socialist success story. Chavismo, backed by hundred-dollar-a-barrel oil prices and the largest oil reserve in the world, offered itself as the western hemisphere’s antidote to neoliberalism. And it wasn’t just that Chavez nationalized industries, created farming co-ops, and fire-hosed oil money at development projects, he also cozied up to Cuba, Russia and China, and consistently picked at American hegemony, handing newly elected Barak Obama a copy of Eduardo Galeano’s poetic anti-colonial tract Open Veins of Latin America. In the early-aughts, Venezuela seemed perhaps not just the antidote to American neoliberalism, but a viable alternative.

Today, on the Venezuelan streets, hunger-stricken, rankled youth are battling government goons and riot police, inflation is higher than anywhere in the world, there is a chronic medication shortage and a resurgence of an HIV/AIDS epidemic, and Chavez’s bumbling successor, Nicolas Maduro, seems increasingly desperate to hold on to power. At least 70 protesters have been killed since the clashes began, and as the July 30 referendum on a new constitution nears, more violence seems likely.

The easy explanation for the crisis is that the charismatic leader died and oil prices plummeted. But the etiology of the blood and the hunger goes back to Chavez’s over-reliance on petro-profit, a hypertrophic spending agenda, and his consolidation of power into the executive branch. And it also goes further back: to the pre-Chavez decades of rampant corruption, strong-arm rule, and—perhaps the root of it all—the Devil’s Excrement, the curse of oil.

There are, however, plenty of people still hoping that the Bolivarian Revolution—as Chavez dubbed his ascent to power—will motor through the hard times. They claim that the power-bereft opposition is resorting to violence as a destabilizing tactic, and this is yet another example of a socialist experiment being denigrated and marginalized by the international neoliberal-backed media. There may be chunks of truth to their defense of Chavismo: poverty rates fell dramatically in the mid-2000s, illiteracy decreased (the government claimed it was eradicated), and Chavez-hailed free health clinics (staffed by Cuban doctors in an oil-for-doctors trade) extended health care into poor and previously neglected neighborhoods. But, as is evident on the streets today (as well as in Maduro’s flailing attempt to rewrite the constitution) and as explained to me by David Smilde, a senior fellow at the Washington Office on Latin America, if Chavez left Venezuela’s economy on the edge of a cliff, Maduro has effectively driven it into the abyss.

Smilde recognizes two key aspects that provoked the current crisis. First, hypertrophic and unsustainable growth fueled by petro-dollars while the price of oil was high, and, later when oil prices sank, loans from China. Second, Chavez concentrated too much political power into the executive branch—power that Maduro isn’t savvy enough to wield. Chavez “actively marginalized his competition,” Smilde explained, confusing “loyalty with competence.” (Maduro, a former bus driver and union leader, was part of Chavez’s political project since the late ‘90s.) The death of beloved leader Chavez led to the “classic problem of charismatic succession,” Smilde said, in which the uncharismatic successor hangs on to and refuses to compromise the predecessor’s legacy.

Rory Carroll, former Latin American Bureau Chief for the Guardian, based in Caracas from 2006 to 2012, and author of Comandante: Hugo Chávez’s Venezuela, painted a portrait of the country as a Potemkin Village, with Chavez garrulously celebrating socialist triumph on his weekly live television show while, on this side of the screen, reality was much bleaker. As an example, Carroll described to me a pro-Chavez propaganda tour that took foreign visitors to a government-organized t-shirt factory. Directly behind the smiling factory supervisor who was cheering the newly employed and supposedly newly empowered women, the seamstresses were mouthing and whispering to Carroll: “bullshit” and “lies.” The seamstresses then turned to the supervisor directly, accusing her of not paying them. The t-shirts the workers were sewing were emblazoned with Chavez’s face.

Carroll also pointed to the economic manipulations that fomented the current state of crisis. Price controls, Carroll explained, though perhaps having “an enlightened goal” to keep prices low enough that goods were widely accessible, also caused producers to lose the incentive to produce. Farmers and factory owners were losing money or were barely covering costs. Along with price controls for food products and the creation of government-organized co-ops, domestic agriculture wilted, and the country had to import more and more food. At the same time, Chavez was boasting about “food sovereignty,” and how he was turning Venezuela into the breadbasket of South America. Meanwhile, exchange rate controls, which set the dollar-to-bolívar exchange rate artificially low, contributed to enormous corruption and rampant arbitrage, in which government cronies would buy bolívares at an exchange rate of ten-to-one dollar and sell them on the black market at 8,000-to-one. The exchange rate fiasco “completely sabotaged and distorted the economy,” according to Carroll.

Already seeing the system breaking down in 2006, Carroll described Venezuela’s policy as a case study in economic mismanagement. But roots of the crisis, he explained, reach into a history of corrupt and authoritarian governance, as well as over-reliance on the oil industry, which had “shaped and disfigured the political culture of Venezuela” since the 1920s.

Raul Gallegos, author of Crude Nation: How Oil Riches Ruined Venezuela, offered up some general lessons for the political left:

-Believe in incentives more than ideology: You cannot create a new economy out of a flurry of decrees. A law that forces companies to produce and sell goods at a loss with unrealistic price controls will lead companies to stop producing.

- Learn fiscal restraint: Having a lot of money poorly managed is worse than not having any at all. Saving and investing wealth for the future is not a neo-liberal construct, it's just basic common sense

- Printing money at will is bad: Economists can go back and forth about the roots of inflation, an academic debate in countries where inflation is just a few percentage points and where the economy is soundly managed. If you print money with no backing by another currency or real economic growth… inflation [will] speed up quickly. Venezuela… has the highest inflation on earth. [It reached an all-time high of 800 percent last December.]

Carroll sees the situation as “ever grimmer, ever more chaotic.” Smilde, in encouraging the Organization of American States (OAS) to demand a rollback of the Constituent Assembly, writes about Maduro the way a parent tiptoes around a child in tantrum: don’t try to push Maduro to come to the international table. Maduro would balk, Smilde implies, at sitting down with a patronizing gaggle of imperial mediators. And yet he emphasizes that "there is no possibility of a democratic solution to the crisis without international pressure or engagement," be it from the Union of South American Nations, the UN, or some other ad hoc alliance.

The OAS and other concerned parties may have limited control over the constitutional (or unconstitutional) process in Venezuela this summer. For now, outsiders can provide needed food and medical aid to a country that was recently flush with oil wealth and general highfaluting, but is now staring down mass hunger, mass exodus, constitutional chaos, and increasingly violent clashes. The lesson, especially in the shadow of global climate change, may be that petrocracies should, like the dinosaurs from which they’re derived, be a relic of the past.

John Washington is a translator and writer currently based in Arizona. Find more of his work at www.jblackburnwashington.com.

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