Chavismo’s Crumbling Economic Foundations

Chavismo’s Crumbling Economic Foundations

Targeted use of revenue from commodities can be an immediate and necessary salve against brutal levels of poverty and inequality, but Chavismo’s “extractivist” model has left Venezuela as vulnerable as ever to the whims of the international market.

Protests against the Maduro government, Caracas, Venezuela, February 2014 (Andrés E. Azpúrua)

This article is part of a forum on the lessons of Latin America's "pink tide" for democratic socialists. To read the rest of the forum, click here.

A truly liberatory, democratic socialism can only be built on consensus and not by vanguards, by political pluralism and not by party monopolies. This is the challenge that Patrick Iber lays out: how to construct political hegemony without reaching the point of restricting political freedoms, a tendency latent in some governments with socialist ideologies. Like much analysis of the governments of the left in Latin America, Iber’s focuses on a political critique. But it seems to me that, at least in the case of Venezuela, we must also make a critique of its economic model, which was not greatly changed during the country’s transition to socialism and maintains its dependency on commodities markets and the international financial system. As the Argentine sociologist Maristella Svampa has argued, the predominant shift in Latin America over the last twenty years has been from the (neoliberal) “Washington Consensus” to the “Commodities Consensus,” which obeys a logic of state capitalism rather than one of democratic socialism. Here, I aim to add an analysis of the economic aspects of the pink tide to the political and discursive elements discussed in Iber’s essay.

The parliamentary elections that took place in Venezuela on December 6, 2015 gave the Venezuelan opposition its first important electoral victory in seventeen years. The opposition bloc, made up of eighteen parties, combined into the Mesa de la Unidad Democrática (MUD), commonly known as Democratic Unity, and won 56 percent of the vote, leaving it with 112 seats of a possible 167 in the legislature—a two-thirds majority. In the midst of an economic crisis precipitated by the collapse of the price of oil, the opposition achieved the upset it had long been waiting for, as the majority of the Venezuelan population began to doubt the viability of the Bolivarian project of “twenty-first century socialism.”

The current economic crisis is not without precedent, however. In the years before Hugo Chávez came to power, when Venezuela was ruled by neoliberal governments, the country experienced very high inflation (exceeding 100 percent in 1996), while oil wealth was squandered and more than half of the population lived in poverty. It is true that Chávez’s government, too, failed to completely control inflation; nevertheless, inflation levels dropped considerably from the previous decade. In the fourteen years before Chávez took office (1985–1998), inflation averaged 44 percent annually, with peaks in 1989 and 1996 when it hit three digits, while under his government (1999–2012), it averaged 22 percent. Similarly, since the “Black Friday” of 1983, currency devaluations have been frequent in Venezuelan history; they are not an invention of the Bolivarian revolution. From 1983 to 1998 the average annual devaluation was 65 percent, while under Chávez it was “controlled” to a level of 32 percent annually.

Meanwhile, Chávez’s government focused its efforts on bringing people out of poverty using the surpluses generated by oil revenue, buffered by high market prices. Social spending per person in Venezuela grew, in real terms, 170 percent from 1998 to 2006 and if we included the social spending made directly by Petróleos de Venezuela (PDVSA) the figure reached more than 200 percent per person. In 2008 education spending was more than double what it had been in 1999. The number of people living in poverty dropped from 55 percent in 1998 to 34 percent ten years later. University enrollment has almost tripled since 2000. Unemployment fell, and while a significant part—about half—of the workforce remains employed in the informal sector, Venezuela is no different in this respect from other Latin American countries. All of the redistributive measures undertaken by the government meant that in 2011 Venezuela was, by Gini coefficient, the least unequal country in Latin America, with the third-lowest percentage of people in poverty, according to the United Nations.

But what is the situation in Venezuela now? President Nicolás Maduro, Chávez’s chosen successor, confronts two clear crises, one economic and the other political. The fall in the price of oil— from more than $100 dollars per barrel in June 2014 to less than $30 at the beginning of 2016—has challenged the sustainability of Chavista social programs. The country is now in its third year of economic recession, and things are only getting worse: according to Venezuela’s Central Bank, inflation in 2015 was 181 percent, and the GDP contracted 5.7 percent.

In many ways, the current economic crisis mirrors those of the pre-Chávez era. Why these similarities in eras that are so ideologically distinct? Essentially, Venezuela under Chávez used the oil surplus to create and deepen social programs focused on the poorest, seeking a more just and efficient distribution of oil income, but it did not address the model of production based in a rent-seeking economy. The foundations of the economy did not change.

This situation has left Chávez’s heavy-handed successor Nicolás Maduro in a bind. As long as oil prices remain low (which they seem likely to for the foreseeable future), there is no financial exit available from the crisis. Nor can Maduro establish or expand “social missions” as Chávez did in 2003; there are no spare or new sources of revenue to resort to. There is no clear political solution either: Maduro lacks Chávez’s charisma, and has no real ability to mobilize the masses. He lacks Chávez’s rhetorical skill and the connection between the president and the people.

If the macroeconomic numbers during Chávez’s first term were similar to those under previous governments, the difference lay in the redistribution of social spending, which made Chávez successful and popular. But Chavismo’s incapacity to create alternatives to the rent-seeking economy has come back to haunt the Bolivarian project, and may bring it to an end altogether. If it is true that, through its redistributive programs, the Bolivarian revolution did better than the neoliberal governments at reducing poverty and inequality (the numbers don’t lie), both have failed in constructing an economy beyond oil. The Chavista project not only remained tied to the international oil market but helped create a national bourgeoisie associated with the financial system, due to the peculiar exchange rate regime (similar to the multiple exchange rate regime of 1983–1989) and many entrepreneurs’ misappropriation of preferential-rate currency. This class is more parasitic than productive, with its earnings linked to capital speculation and not the production and investment of that capital. The crisis of the Venezuelan economy, of oil rents, of inflation and devaluations, is a stone that right-wing, neoliberal, and Bolivarian governments alike have tripped over.

The Venezuelan mirror is one that other progressive and left-wing governments continue to hold out and look into. What it shows is that well-targeted use of earnings from natural resources and other raw commodities can be an immediate and necessary salve to help diminish the brutal levels of poverty and inequality in Latin America, but it doesn’t amount to changing the economic model. As long as economies are structured around extractivism, they will remain subject to the whims of global markets and demand the exploitation of people and nature. Left-wing versions of such economies, when the petrodollars are flowing, can foster relative egalitarianism and economic stability; but when the money runs out, the fragile order gives way to popular backlash, repression, and coups. The new challenge for left economies will be to rebuild from more stable foundations—readjusting labor rights and social programs without having to rely on what geographer David Harvey has called “accumulation by dispossession.”


Javier Buenrostro is a historian with degrees from the Universidad Nacional Autónoma de México and McGill University and a Ph.D. candidate in Political Science at the École des Hautes Etudes en Sciences Sociales in Paris. He writes about Latin America and the Middle East. A version of this essay (translated for Dissent by Patrick Iber) first appeared in Horizontal.

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