Venezuela: the Agony and the…Well, More Agony

As I try to assemble some reasonable thoughts on the topic of Venezuela, here and now, we may be about to see a modern, prosperous, beautiful country breathe its last.  This is not an exaggeration, and not said for shock value.  One of Latin America’s more prosperous, modern countries is in the throes of dissolution.  It may well be that in a year or two, we will all look back on this week as either the fuse that lit a civil war or as the moment that Venezuela began its final act on the world stage, and pulled inward to start a quick decline into an ungovernable failed state, remembered by many but known to few.

As I finished that first paragraph, I could picture large numbers of people in the United States and elsewhere thinking only in clichés, nodding, and saying with a “knowing” nod, “Well, that’s what happens when you choose socialism.  It never works.”  As is the case with all clichés, this has an element of truth, but only an element.  I would agree that the economy of Venezuela was largely doomed to fail, but other economies and other countries, faced with similar problems, have faced and even solved them, avoiding in the process, the human and material catastrophe that looms over Venezuela.  But nobody took the crucial, necessary steps to avoid the current situation and its likely outcome.

Too many look at Venezuela and assume that it is  “just like Cuba was” in the late 1950’s and early 1960’s, a country that had choked off social revolt for years, only to embrace some revolutionary figure and later watch as that revolutionary figure revealed his true colors and began a despotic multi-decade rule over the people who had elevated him.  No.  NO.  It’s not that way.  Cuba, though it always had had its high society, shoeless rural population, and deep class divisions, was not a country with a well-developed economy.  Its economy was all too typical of Latin America at the time,  typifying what a Latin American economist called “economias de postre,” i.e., dessert economies.  Their fortunes rose and fell with the success of export crops such as sugar, bananas, and other tropical fruits.

20th and 21st century Venezuela, on the other hand, has had its share of military government and (at least) two-party democracy, until the late 1980’s and the rise of Hugo Chavez.  Its economy was based, not in dessert, but in oil.  Yeah, the black, oozing gold.  Oil rigs sprout from the surface of Lake Maracaibo and here and there throughout the country.  Its agricultural sector was less robust than one might expect, given the climate and the fertile soils.  If neighbors Colombia and Brazil could earn export millions from coffee, why could not Venezuela?  A strong agricultural sector, together with an investor class, and untold oil millions, should have produced a vibrant economy that young Venezuelans should never have abandoned.  No such economy ever became strong enough for that outcome, though.

Anyone who has read this far is probably entitled to ask why.  Venezuela is not utterly unique in its economic development, but the order in which things unfolded there is unusual and at least partly to blame.  The agricultural sector as a source of exports, and thus income, was small in the early part of the 20th century, when oil was discovered.  Subsequently production of oil became profitable for investors, a source of employment for laborers, and a national asset.  World War II meant that both the Allied powers and the Axis became, shall we say, intensely interested in the country’s oil reserves.  Because American oil companies had bought more than half of known exploitable reserves, the Venezuelan government of the time both moved to increase its control of the nation’s oil, and to take a somewhat larger share of the profits from it.

By 1947, oil profits had grown sixfold as compared to the 1941 figures.  The country was largely able to fund its own economic development in the post WWII environment.  There was simply little reason to work in agriculture or other labor-intensive and less rewarding pursuits.  Oil had become the country’s only real export commodity, and the country did not diversify; by the 1980’s, it was a food importer.  All the foregoing led to a crash in the national economy in the late 1980’s, when a world glut in the oil market depressed prices, and Venezuela’s economy dived.

As always, economic disruption produced political turbulence.  A lot of it.  By 1992, an obscure Army colonel named Hugo Chavez had led two unsuccessful coups against the civilian government, and then had been granted a full pardon by President Rafael Caldera in 1994.  By 1998, Chavez was himself running for president at the head of a so-called Bolivarian Revolution; this movement was said to have incorporated the political philosophy of Simon Bolivar, the Great Liberator of South America, through a “socialist” lens.  Chavez won.  He quickly obtained a rewrite of the Venezuelan Constitution, granting him increased power to implement his version of the socialist vision.  This is the key to the unceasing hatred shown by US politicians toward Chavez, given the American tendency to assume that the terms “socialism,” “communism,” and “totalitarianism” are all basically versions of the same thing.

In practice, Chavez was, until his death, popular with his natural constituency, the poor.  He accumulated vast personal wealth through the misappropriation of oil revenues (which are still 96% of the nation’s export earnings).  Contrary to much popular belief in the USA, he did not nationalize the nation’s oil.  PDVSA, the national oil monopoly, had been legally constituted in 1976, so as president with large power of distribution, he found it a ready source of cash, both for himself and the other Chavez constituency–the military.

In stark contrast to the love shown to Chavez, a larger than life figure with a natural charisma, by those two groups, was the lasting enmity shown to him by the country’s middle class and its hereditary landed class.  After a coup attempt against Chavez in 2002 (and the Bush administration’s clumsy handling of it) he returned to power on the strength of support from the poor and the military.  But by Chavez’s death in 2013, things were already unraveling.

Oil prices have never returned to their boom levels, and Venezuela’s external debt and oil subsidies given (for political reasons) to Cuba and even China have all added to the crisis which Chavez’ hand-picked successor, Nicolas Maduro, has been manifestly unable to cope with.  He has no charisma to rely on, and he has dealt with every setback to him personally with massive repression.  His ruling party lost the parliamentary elections last year, and he has resorted to heavy-handed packing of the courts to frustrate opposition efforts to bring him to heel.  Only the military remains as his support system.  About 20 Venezuelans have died in recent political demonstrations.

This is all at a critical stage.  In practical terms, Mao’s ancient political adage that “political power comes from the end of a gun” appears to be Maduro’s  governing philosophy.  He recently called for (and rigged) an election to a new “Constituent Assembly” whose job it will be to rewrite the Constitution again, putting more power in the hands of guess who.  Sadly, the only real hope for a brake on Maduro is if the military turns on him.  He has avoided that by turning a blind eye to corruption in the military.

I have friends in Venezuela.  It is a beautiful country, wealthy in terms of resources.  It doesn’t have to go into political eclipse.  I really hope it doesn’t.

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