Protester facing the Venezuelan National Guard during a protest in May 2017. Source: Wikimedia commons. Some rights reserved
Recent footage from Venezuela reveals
an increasingly desperate situation. In videos posted online, people can be
seen chasing
livestock through the fields to butcher it for its meat, while others resort to
eating dogs and cats
on the streets of
Caracas.
Food-related protests and the looting of
stores have become more and more widespread, while thousands flood across
the border into neighboring countries.
Despite all of this, Maduro and
his defenders on the left have basically turned a blind eye to this situation.
They claim the
mainstream reports are exaggerated, and that
the situation is the result of a US-led “economic
war” intended to sabotage the Maduro
government.
Others admit
Maduro deserves some of the blame, but claim he has been limited by low oil
prices and sabotage from the right-wing opposition. Supporting the Maduro government
as a bulwark against imperialism and neoliberalism is still the best option,
they assure.
However, while it is true that
Washington and its local allies have long sought to overthrow the Venezuelan
government, a closer look at the current crisis shows a supposed “economic war”
has very little to do with it. Nor does it have much to do with low oil prices.
The primary cause of growing hunger and desperation in Venezuela today are the government’s very own policies, which are under control of President Maduro himself.
In fact, the primary cause of
growing hunger and desperation in Venezuela today are the government’s very own
policies, which are under control of President Maduro himself, and could easily
be rectified if he so desired.
But the policies remain in
place, and the reason is that government insiders are benefiting enormously from
them. As ordinary Venezuelans scramble to survive, Maduro and his friends are
lining their pockets with oil dollars.
Instead of coming to their
defense, and minimizing the scale of the disaster, the left should seek to understand
how it got to this point, and how it might have been avoided.
“A
gang of thieves”
At the crux of Venezuela’s crisis
is the currency control system, which began under Hugo Chavez as a way to
restrict access to foreign exchange and ensure enough dollars to import priority
goods.
Like previous attempts at fixed
exchange rates, there was some corruption and abuse of this system. But it wasn’t
until Maduro came to power in 2013 that things really started falling apart.
“A gang was created that was
only interested in getting their hands on the oil revenue,” says Hector
Navarro, former Chavista minister and socialist party leader.
“They are thieves with no
ideology,” he added.
Chavez’s former finance
minister, Jorge Giordani, has said the same thing, estimating that some $300
billion have been embezzled in this way. Navarro and Giordani were
long time members of Chavez’s inner circle and mainstays of his cabinet until
they became critical of Maduro in 2014 and were sacked.
Chavez’s former finance minister, Jorge Giordani, has said the same thing, estimating that some $300 billion have been embezzled in this way.
Longtime Chavista insider Mario
Silva also warned about
this back in 2013, claiming that a group of officials headed by then Vice
President Diosdado Cabello were gaining the upper hand inside the government,
and were “bleeding” the country of its dollar reserves.
This made Giordani’s dismissal in
2014 especially noteworthy, as he was the primary person in charge of keeping
the currency regime in check, making periodic adjustments to avoid major
distortions. Once Giordani was out of the way, the currency was allowed to get
increasingly overvalued, greatly benefitting the “gang of thieves” and their foreign
exchange schemes.
Venezuela’s currency became increasingly overvalued starting in 2013. Data from dolartoday.com
The basic scheme goes like
this: those who can get access to foreign exchange at the official rate set by
the government then simply turn around and sell those dollars on the black
market, or deposit them in bank accounts abroad. The greater the distance
between the black-market rate and the official rate, the more profitable the
scheme becomes.
Since 2013, Maduro has refused
to make any significant adjustments to the exchange rate, allowing rampant
inflation to continually erode the real value of the currency. The going rate
for dollars on the street is now thousands of times
higher than the official rate, creating huge incentives for illicit activities.
The going rate for dollars on the street is now thousands of times higher than the official rate, creating huge incentives for illicit activities.
As a result, hundreds of
millions of dollars have disappeared in goods
that are never imported, infrastructure that is never completed, and briefcase
companies that don’t exist.
Instead of using the oil dollars to pay for basic
needs, government officials and their associates simply abscond with them, leaving
ordinary Venezuelans to deal with the consequences.
Numerous examples have
come to light in recent months, the common denominator being that those involved
usually have close ties to the
Maduro government—a necessary ingredient for
acquiring dollars at the official rate.
President Maduro and his vice president
El Aissami have also gotten in on the fun. According to the former attorney general,
a company owned by El Aissami was granted $120 million to import food from
Mexico, while another $340 million went to a company with
ties to Maduro.
All in all, the two companies received
nearly half a billion dollars at a rate of exchange that was only one percent
of the real value of the dollar at the time. This is why Maduro and gang aren’t
interested in fixing the distorted currency—it allows them to funnel massive
amounts of oil dollars into their own pockets.
Squeezing
the poor
With so much of state revenue being
misappropriated through the currency system, or sent abroad in the form of debt payments,
there is little money left over for the needs of ordinary Venezuelans. But instead
of fixing the currency, or defaulting on the debt, the solution for Maduro has
been to impose austerity on the country.
Since 2012, imports have been cut by over 65 percent, even amidst widespread shortages.Since 2012, imports have been
cut by over 65
percent, even amidst widespread shortages. Social spending has also
been cut drastically, with total expenditure reaching
a lower percent of GDP than the neoliberal years of the 1990s.
The results of these cuts have
been very predictable, causing a collapsing health
system, severe shortages of food and
medicine, skyrocketing infant and maternal mortality, and
thousands of preventable deaths.
Wages have also been slashed by more
than 90 percent since 2013, as runaway inflation has been met with inadequate
wage hikes from Maduro. The national minimum wage has gone from about $300 in 2012
to less than $5 in 2018, leaving nearly half of the Venezuelan population scrambling
to get by on just $5 per month!
Venezuela’s national minimum wage has collapsed since late 2012. Data from dolartoday.comAs might be expected, this has
caused growing hunger and malnutrition. Hundreds
of thousands of Venezuelans now flood into neighboring
countries in search of basic necessities, while others attempt the risky and
often deadly trip by
boat to nearby islands.
Meanwhile, workers are leaving
their jobs en masse as their
salaries have become worthless. Major sectors of the
economy are now critically understaffed, only
worsening what is by far the worst economic
crisis in Venezuelan history.
A
litany of excuses
Maduro and his defenders point
to a number of factors to deflect blame for this situation—from the “economic
war,” to low oil prices, to US sanctions. But none of these excuses holds much
water.
The capitalists and food
traffickers accused of “economic war” are actually just following the
incentives set up by government policies, and are often well-connected insiders
themselves. Some of the worst food traffickers have been shown to be
people inside the military.
Meanwhile, it is the government
alone that controls the exchange rate and the allocation of oil dollars, making
this a fairly easy problem to solve. But despite constant calls to fix
it, Maduro has insisted on maintaining the currency system, and has continued
to hand over the
oil dollars to those who squander them.
As for falling oil prices, they
only exacerbated what Maduro’s policies were already causing. By the time oil
prices fell in late 2014, the economy had already been contracting for
three straight quarters, wages had already dropped 80 percent,
and imports had been
cut by 25 percent.
The growing inflation, food shortages, and currency
distortions at the root of the crisis all began in late 2012, two
years before oil prices had fallen.
The same goes for US sanctions,
which had a negligible impact until Trump imposed broader sanctions last year.
By that time, Venezuela’s economy had been in a free fall for four
straight years.
In other words, it makes little
sense to try to point the finger at things that did not occur until after the
crisis was well underway. The truth of the matter is that Maduro’s own policies
have destroyed Venezuela’s economy far more than Washington or the opposition
could have ever dreamed possible.
Lessons
for the left
Venezuela’s collapse has a
number of important lessons for the left, but in order to grasp them, we must
take an honest look at what went wrong. While Maduro is clearly to blame for
the current disaster, Chavez’s economic policies also contributed in important
ways.
Chavez’s approach to the
economy generally involved taking over strategic sectors, with the notion that underinvestment
by the private sector could be remedied by state control. Firms were often
expropriated on a whim, and state-owned endeavors were launched without careful
thought or planning.
This led to a bloated bureaucracy,
growing corruption, and a long-term decline in key sectors. State-owned
enterprises often ended up in the hands of corrupt bureaucrats who made
them into their own domains, and then milked them dry.
A key example of this was in
2010, when Chavez launched an offensive in agriculture
by expropriating hundreds of farms and food industries. Given that these
enterprises were often undercapitalized and unproductive, state intervention
was necessary.
But most of the firms were
then handed over to bureaucrats who had little preparation or oversight. The
result was complete mismanagement, and a
drastic decline in food production thereafter.
Food production declined sharply after government takeovers in 2010. Data from Fedeagro.orgThe lesson here is that state
takeovers of major sectors of the economy are not necessarily a good idea in
poor countries with weak institutions.
These types of interventions must take
into account the capacity of the state to administer enterprises without
running them into the ground, especially in sectors so crucial to the national
economy.
One alternative might have been
to turn control over to the workers, and, in fact, there was a proliferation of
community and workers’ organizations under Chavez.
But the government did not
do this in most cases, and here lies another important lesson for the left.
The lesson here is that state takeovers of major sectors of the economy are not necessarily a good idea in poor countries with weak institutions.
While increasing worker power
and control over production should be a goal of any socialist project, to be
successful, workers and social movements must build organizational power that
is independent from political parties
and the state.
In Venezuela, the communal movement
was very much a state-sponsored initiative, with local communities following
directives on how to organize from above. The extent of their power and control
over production was decided by the government, not workers.
Nowadays, the communes are used
as mechanisms of patronage and control rather
than vehicles of liberation. Members get certain perks and benefits from the
government, but come election time they are forced to vote
for government candidates to avoid losing those benefits.
Finally, there is an important
lesson on the question of liberal democracy. Though Chavez was justified in his
criticisms the exclusionary kind of democracy that existed in the country
before 1998, in attempting to reform this system, he ended up creating
something even worse.
Although a new constitution, greater
participatory democracy, and transparent electoral system were all major accomplishments,
at the same time, virtually all organs of the state were being stacked with
party loyalists, and yes-men that were valued more for their obedience than
their competence.
The promising new institutions created
by the constitution slowly became little more than rubber stamps for orders
coming out of the executive. When Chavez died and Maduro’s “gang of thieves”
gained the upper hand inside the government, there were no longer any checks on
their power.
The lack of independent
institutions allowed them to force out internal opponents, neutralize
the congress, hold fraudulent
elections, and form an all-powerful body that now
runs the country as they please.
Instead of making liberal democracy more democratic,
the Maduro regime now deports
journalists, jails union
leaders, detains
activists, murders
whistleblowers, and tear gasses the poor
and hungry. What was once an infallible electoral systems has now been stripped of all
the guarantees that ensured
fair elections, allowing Maduro and gang to bend
everything in their favor.
All of this should serve as an
important lesson for the left—that despite the major limitations of liberal
democracy, having some checks and balances is better than having none.
Had
Chavez allowed room for independent institutions, and permitted checks on the
power of the presidency, Venezuela might not be in the mess it is today.
As the country heads into
another very questionable election,
the left should not give its support to the corrupt and authoritarian Maduro
regime, nor should it support the US-aligned right-wing opposition.
Our support
and solidarity should instead be with the Venezuelan people, and their right to
democratically decide their fate. That is the only possible solution to the
crisis.