The moral of Venezuela

Is Venezuela a cautionary tale? If so, to whom?

—from Claire: Venezuela is now the poorest country in Latin America. More than 5.4 million Venezuelans have fled, creating a refugee crisis exceeded in numbers only by Syria’s. To the rest of the world, Venezuela is synonymous with hyperinflation, starvation, disease, crime, corruption, and misery.  

One of the most astonishing and alarming aspects of Venezuela’s story is that only recently, it was the wealthiest country in South America. It was believed to be one of the most stable democracies in the region. Indeed, in the 1950s, Venezuela was one of the wealthiest countries in the world—it ranked fourth—with a per capita GDP that rivaled West Germany’s. Well into the 1980s, Venezuela had far more in common with the United States than with Syria.

Maracaibo, the second-largest city in Venezuela, is the capital of Zulia, once known as Venezuela’s Texas. By all reports, Maracaibo was city of opulent wealth, fast cars, private jets, and all-night parties. This is Maracaibo now:

Venezuela’s story inspires horror, for it suggests that a single mistake at the ballot box can lead to ruin, starvation, and despotism. The name Venezuela has become a morality tale. On the right, it signifies the dangers of socialism: Right-wing figures in the United States invoke Venezuela much as they do meth. Not even once. The more lunatic even intimate that Joe Biden is the gateway drug. The left, meanwhile, prefers to ignore the socialist sources of Venezuela’s misery and explain its plight entirely in terms of American sanctions.

Simón Franco is Venezuelan political scientist who lives in exile in the United States. On a recent Cosmopolitan Globalist Zoom call, I asked him what we should really learn from Venezuela. Is this just a classic example of the application of socialist ideology? Or is Venezuela’s crisis less the consequence of its socialism than of its populism, corruption, and authoritarianism? Or perhaps some of both?

What are the lessons of Venezuela, really? If we’re really only an election away from this kind of disaster, it would be best to be precise.

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By Simón Franco

Will voting for AOC turn you into a starving Venezuelan refugee?

Neo-socialism has been on the rise around the world. It is particularly striking to see this in the United States, long the world’s embodiment and global symbol of capitalism. In the 2020 elections, 36 members of the Democratic Socialists of America won office, and Bernie Sanders was one of the top candidates in the Democratic field.

The Victims of Communism Memorial Foundation recently commissioned a YouGov poll of US attitudes toward socialism and communism. They found that 49 percent of Gen Z respondents viewed socialism favorably, up from 40 percent in 2019. Favorable views of capitalism declined, among all Americans, from 58 percent in 2019 to 55 percent in 2020. Among millennials, favorable views of capitalism were down to 43 percent. Roughly a third of millennials and Gen Z favored gradually eliminating capitalism in favor of socialism. Membership in the Democratic Socialists of America has soared.

In response, conservative and far-right politicians have taken to invoking Venezuela as a boogieman and a totem. By invoking the horror of Venezuela, they mean to scare young people straight. Rarely, though, do they seriously ask the question, “Could it happen here?”

This question is apt, no matter where here is. But the answer isn’t simple. The tragedy engulfing the people of Venezuela has many causes. If we wish seriously to answer this question, we must do something that politicians and pundits with an axe to grind seldom do—learn about Venezuela. This requires a comprehensive appraisal, beginning with Venezuelan history, continuing through its political and social institutions, and ending with the political ideology it has embraced. Only then can we appraise the likelihood that this catastrophe might happen chez vous.

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How to kill a golden goose

If you heard anything about Venezuela between the 1960s and the 2000s, it was probably related to oil. Because hydrocarbons are Venezuela’s only export of significance, its history must be understood in these terms. Venezuela was one of the founding members of OPEC and followed OPEC charter’s policies. In 1960, it declared a “no more concessions” policy toward foreign and multinational corporations. This is widely seen as the first step toward the nationalization of the sector. In 1976, Venezuela signed into law the sector’s formal nationalization, declaring that the production and distribution of its oil was to be conducted by the newly created Petroleos de Venezuela (PDVSA).

The burgeoning oil industry in Venezuela brought hitherto unseen riches to the country. In 1970, national GDP reached US$ 11.56 billion, creating a new middle class of educated technocrats and professionals. By 1980, per capita GDP was growing at a rate of 19.05 percent annually. By the 1990s, however, the gulf between the haves and have-nots was increasing rapidly. Enticed by the riches of the oil boom, many families had migrated to densely populated urban areas, where they settled in shanty towns on the cities’ outskirts. The settlers in these newly formed barrios at the fringes of the cities and Venezuelan society came to be known as los marginales, or the marginalized. The concept of extreme poverty entered the social vernacular through regular news broadcasts. All of these maladies devolved from the government’s mismanagement of oil revenues.

In 1989, the government’s failure to invest in social programs, city planning, or education led to a social schism that ignited the streets of Caracas and other cities. An IMF-approved plan to restructure the debt caused gasoline prices to rise, leading to the riots known as El Caracazo. Hugo Chavez erupted onto the Venezuelan scene against this backdrop of social unrest, which continued through the early ‘90s. A failed coup, in 1992, overnight propelled Chavez—an unknown army lieutenant colonel—to stardom. Los marginales saw Chavez as a savior. In 1994, having been pardoned and sprung from prison, Chavez travelled to Cuba, where Castro and his regime feted him as a hero. Many believe that during this encounter, Castro passed on to Chavez his Cuban-style revolutionary playbook. Chavez returned to Venezuela, spent the next few years campaigning, and was elected president in 1998.

The first order of business for the new Chavez administration was abolishing the 1961 Venezuelan constitution. La Moribunda, he called it—the Dying. A constitutional congress was called in 1999; the constitution was abrogated in 2000.

The new constitution changed the country’s power dynamics. It created two new branches of the government. The electoral branch and the citizen’s branch were added to the executive, legislative, and judiciary. The electoral branch, as its name indicates, oversees elections, and they have been busy. Venezuela has had 26 national level elections in the past two decades. The citizens’ branch, in principle, is where communal power is expressed; in practice, the citizens’ branch involved creating communal councils, the very popular colectivos, and, this year, the creation of a communal congress.

The new constitution changed the structure of the executive, legislative, and judiciary branches. The executive branch, for example, now directly controls the state-run oil company. The Venezuelan congress lost one of its cameras; its bicameral congress and senate became a single institution. Finally, the judiciary became in every practical sense the servant of partisan politics. The judiciary’s egregious lack of independence was exemplified in 2009, when on national television Chavez condemned a judge who displeased him to 30 years in prison. The Supreme Court complied with his mandate.

In 2002, a general strike prompted Chavez to fire all opposition from the state-run oil corporation. Thousands of executives and workers, along with their years of collective expertise and technical knowledge, were lost overnight and replaced by Chavez’s cronies. People with no experience, education, or concept of how to run a corporation now presided over the future of the goose, its golden eggs, and by extension the whole country.

But in a stroke of luck for Chavez, the early 2000s saw oil soar near reach of US$ 100 per barrel. By contrast, the budget of the previous administration had been based on forecasts of Venezuelan crude selling at US$ 7 a barrel. Chavez tightened his grasp on this bonanza’s purse strings when he once again changed the hydrocarbon law, levying exorbitant taxes on the few foreign companies still in Venezuela. Those who refused faced expropriation. Some holdouts decided to let Chavez take their oilfields and equipment so they could later sue the Venezuelan government for billions; others chose to stick it out and play the long game, betting on regime change.

The Chavista regime used the oil bonanza to jolly the public with myriad social programs. Housing, education, and health plans for the needy—“the great missions”—were enormously popular, but they rested upon a dangerous façade.

First, Venezuela imported thousands of Cuban doctors and other social engineers under the pretext of collaboration between nations. These specialists did bring expertise in their fields. But they were also Castro’s agents. They were placed in strategic government posts that allowed them to spy and report on the bureaucracy to both Chavez and Castro.

Second, the programs were simply mismanaged. From the outset, Chavez surrounded himself with passionate loyalists who were unqualified to govern. The great missions became black holes into which money would disappear, never to be seen again. Corruption became ubiquitous. Many new fortunes were created during this period through the diversion of funds destined to help the poor.

Finally, the true purpose of the great missions was not, really, to aid the poor. It was to serve as a smokescreen to popularize and advance Chavez’s—and Castro’s—socialist revolution throughout the Americas. Chavez used the oil revenues to fund regional aid, forming Petrocaribe, an 18-country economic union whose members received Venezuelan oil as concessions to be paid in long-term financing. Under the guise of exporting Venezuela’s oil, Chavez also exported Venezuela’s socialism, directly financing political campaigns in Bolivia, Ecuador, Brazil, and Argentina—with great success. Supported by Venezuela, neo-socialist governments sympathetic to Chavez came to power in all of these countries. This group expanded the reach of the infamous Sao Paulo Forum, transforming it from an internal Brazilian congress to a multinational coalition of leftist countries.

Chavez’s so-called philanthropy would reach far and wide. In 2005, he announced that the PDVSA’s US subsidiary, Citgo, would provide heating oil to the Bronx, then the poorest American congressional district: Chavez figured that if the world’s policeman came knocking at his door, it would be useful to have a congressional district in his back pocket.

Chavez had successfully consolidated his power for more than a decade. He seemed unstoppable. But in 2013, while still in power, he died of cancer. His hand-picked successor, Nicolas Maduro, would now rule the country. Maduro, an uneducated trade union man, began climbing the greasy pole of Venezuela’s power structure in 2000, when he was elected to the new national assembly. In 2006, he was appointed minister of foreign affairs, a position he held until his appointment as vice president in 2013.  

Maduro has continued Chavez’s legacy in every respect. He has staunchly adhered to the tradition of appointing technically unqualified but politically loyal goons to manage the finances and destinies of the Venezuelan people. But unlike Chavez, Maduro has not been lucky. Shortly after Chavez’s demise, oil prices plummeted from US$ 106 a barrel to less than US$ 50 a barrel. The sudden drop in the price of crude pulled the rug out from under the Bolivarian Revolution’s social programs, in Venezuela and abroad. This was when we began to see the characteristic long lines for whatever meager products could still be found on the supermarket shelves and the mostly empty drugstores.

Venezuela’s economic maladies can all be traced to corruption, mismanagement, and lack of diversification in the productive sectors of society. When the petrodollars that propped up the economy evaporated, the house of cards collapsed. After 2000, Venezuela over-relied on imports, from consumer goods to foodstuffs. So when the state’s purchasing power was slashed by more than half, the country could no longer feed itself.

Those who correctly understood the economic signs and foresaw the impending disaster—those with skills and education, that is—were the first to leave Venezuela. They left in the first decade of the millennium. When the economy melted down in 2013, everyone who could flee did. We’ve all seen stories of Venezuelan migrants who leave Caracas and walk the entire length of South America to reach places as far away as Argentina, many of them dying en route of cold, hunger, or exhaustion. It’s a modern-day search for El Dorado, except the gold they seek is just three meals a day. The Venezuelan diaspora, thus, fled in two stages: first, those who had a choice; then, those whose only choice was starvation.

In 2015, the humanitarian crisis prompted President Barack Obama to issue an executive order describing the situation in Venezuela as an “unusual and extraordinary threat to the national security and foreign policy of the United States.” The Bolivarian revolution had been crying wolf about the great imperial enemy, the United States, since Chavez’s ascent, but Obama’s executive order was in fact the first time the wolf nipped at the revolution’s heels. The Trump administration continued the policy of targeted economic sanctions against the Maduro regime. Those who believe sanctions immiserated Venezuela are confusing cause and effect.

I contend that sanctions do hurt the ruling class in Venezuela, yes; but they help them just as much by offering a scapegoat for Venezuela’s problems. No gasoline? It’s the sanctions. No food? That’s the sanctions, too. No electricity? Running water? Garbage collection? Blame America, not us.

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Why institutions matter

Since 2000, the erosion of Venezuelan institutions has accelerated. The Chavista regime created a societal shift, encouraging citizens to be dependent on government programs to make ends meet. Dependence on imports, due to a lack of internal production, creates a maelstrom of chaos when social programs can no longer be used to prop up the economy. The policy of expropriation created insecurity for foreign investors, depressing the country’s economy. No one will invest in a state that fails to protect investments. This has translated into a constant exodus of Venezuelans all over the world.

Another hallmark of the Bolivarian Revolution was the restructuring of the educational system. The implementation of a variant on the US’s “No child left behind” policy meant, in practice, that students could not fail and were promoted regardless of their mastery of the coursework. The outcome of this policy, as might be expected, is a poorly educated citizenry, in turn more dependent on governmental programs.

The significance of this brain drain can’t be overstated. Lack of human capital has crippled Venezuela’s development, leading to a contraction of the economy unknown in countries without the scourge of war. The 2020 interannual inflation rate, according to the Venezuelan National Assembly, was 4,087 percent. The escalating mismanagement of the country’s oil revenue during the Bolivarian Revolution years, coupled with the failure to invest in the infrastructure required to keep producing the black gold, has further contributed to Venezuela’s rapid economic decline.

The perfect storm of economic collapse depleted another institution upon which Venezuelans have relied since their independence from Spain, the military. The Venezuelan military’s ingrained tradition of professionalism afforded them prestige and a certain mystique: Only the best of the best were promoted to the highest echelons of command. But this meritocracy ended with Chavez. Chavez, a former military man, relied on what he imagined was the managerial expertise of his senior officers, removing them from the formal command structure to manage everything else in the country. They were named to cabinet positions and managerial positions in PDVSA. Expertise in troops and military logistics, however, in no way prepared them for public administration. When these political appointees failed at their new jobs, the Venezuelan citizenry got a glimpse behind the curtain. They didn’t like what they saw. What’s more, Chavez and Maduro used the military as their arm of repression. As a result, Venezuelans no longer trust the people who are supposed to defend them.

It’s easy to forget, living in stable societies, what we learned in civics class: The division of power, and a country’s political and social institutions, offer checks and balances on the government. We forget because we take those institutions for granted. We forget how easily things can derail. The erosion of trust in a system, coupled with widespread social discontent, is all that’s needed for a reformist with a hidden agenda, like Chavez, to create a catastrophe like the one seen in Venezuela.

Do not misunderstand me. I believe systems are flawed and that many things need to change in the world. But we must pay particular attention when changing things. We cannot throw out the baby with the bathwater, as we say in the US, when trying to solve societal issues. As an immigrant, I appreciate that the US Constitution is more than 200 years old. I appreciate that we have recognized the fallibility of the framers of the Constitution and amended it 33 times. I certainly appreciate that times change, and the Constitution must change with it—within the permitted framework. But I quake at the thought of ripping up the Constitution and starting over with a new one. To be sure, it is not just longevity that provides legitimacy and strength to a country’s institutions; it is also the people’s trust in the system, and a social contract that has mechanisms for correcting wrongdoing even as it provides stability.

On political ideologies

Venezuela, as a case study, offers a hint of the major problems we encounter when trying to analyze politics. As one of my first political science professors remarked, political scientists sure like our definitions—but we have few that are commonly understood. Take democracy: Is a democracy simply a system in which the citizenry votes? Venezuela has had 26 elections in the past 20 years, yet most, rightly, would hesitate to call Venezuela a democracy. We find the same problem with definitions when we speak about socialism, communism, liberalism, conservatism, fascism, and authoritarianism.

Let’s focus, though, on socialism. The Oxford Dictionary defines socialism as “a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.” From this definition, we can assert that socialism is not about social programs. This common misconception caused a self-proclaimed socialist in the US to make a major faux pas in the last election cycle. Bernie Sanders’ campaign focused on the success story of what he calls “the social democracies of the Nordic States.” The Danish prime minister was forced to set the record straight by explaining that theirs is a market economy, not a socialist one.

The hallmark of socialism is not social programs that protect the most vulnerable in a society. It’s the control of the means of production and distribution. It’s fair to say that everywhere this ideology has been implemented—particularly because central planning is used to accomplish this task—it has failed. Venezuela is just the latest and most egregious example of a failed ideology. Nor should the failures of socialism be underestimated. Israel, India, and the UK all socialized sectors of their economy after the Second World War; they have now mostly re-privatized them.

Countries that have not been so lucky—or smart—continue to perpetuate the suffering of their people. In Latin America, Bolivia, Argentina, and Paraguay are prime examples. The horrors of socialism can be felt far and wide. Most of these countries need to centralize power. The dictatorship of the proletariat that Marx envisioned as a transitory stage towards communism has, in practice, become the final stage or fixed state of socialist governments. Because they are socialists, these purportedly democratic rulers end up creating regimes that are democratic in name only.  

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So, to answer your question 

Could it really happen here? The answer is yes and no. Yes, the horrors and suffering of the Venezuelan people can be exported. Socialism as a political ideology is alive and well in the world. But socialism does not mean what most in the West think it does. The general public does not understand and apply the term the way political scientists do.

Socialism is not about social programs. It is about seizing the means of production and then mismanaging the hell out of them. It is about capitalizing on social unrest to persuade people that socioeconomic inequalities can be alleviated by governmental oversight. It is about thoroughly eroding trust in political institutions so you can start over with new ones. It is about making sure these new social and political institutions look and feel right to the masses, all the while hiding plans to concentrate power, in perpetuity, in the hands of a new elite that claims to be able to save the public from the evils of the old elites. It can happen here if populism and demagoguery prevail over reason.

At the same time, it cannot happen here because here is not Venezuela. Here—wherever it is—does not have the same history, the same resources, the same overdependence on government programs. Here does not have the same people or the same structural failings. And here does not have Chavez.

But a word to the wise. When political opponents of Chavez started sounding the alarm about what, in the end, Chavez wanted to accomplish, many in Venezuela disregarded their predictions. Many opponents warned, too, that Chavez’s plan would lead to the Cubanization of Venezuela. But still more shrugged and said, “Venezuela is not Cuba; that won’t happen to us.” Today, I hear the lamentation of the Venezuelan people when others argue, “That cannot happen here; here is not Venezuela.” Well my friend, Venezuela was not what Venezuela is today. And it did happen there!

Simón Franco is a political scientist who now lives in Minnesota