Venezuela on the Brink

John Wight

The crisis engulfing Venezuela appears to have reached the point of no return. Inflation is heading for 1000% while shortages of food and other essentials are now widespread. It has prompted many to speculate that it is just a matter of time before President Maduro is forced from office and Chavism is consigned to the dustbin of history.

The legacy of Hugo Chavez

When Hugo Chavez first came to prominence in the early 1990s, as a young military officer leading a failed coup attempt, Venezuela was a country that appeared ripe for revolution. Despite possessing some of the largest oil reserves in the world, it recorded some of the worst social indicators anywhere in Latin America. This was in contrast to its status in the 1970s as the richest and most stable country in the region, boasting high growth and low inequality compared to its neighbours.

But then came the eighties and the onset of instability – reflected in three failed coup attempts and one presidential impeachment – which sent economic growth south and with it social justice, as the rich and wealthy sought to maintain their wealth at the expense of the poor.

External factors were key in this regard, specifically the arrival of Ronald Regan onto the global political and geopolitical stage. The neoliberal reforms he introduced, authored by a clutch of ideologically driven madmen emanating out of the now infamous Chicago School – associated most prominently with the work of free market fundamentalist guru Milton Friedman – were a disaster not only for working people in the US but throughout the world, particularly the Global South. Countries such as Venezuela, despite its enormous oil wealth, were vulnerable to capital flight, particularly to the US, predicated on the role of the dollar as the world’s international reserve currency. The process of dollarization, in which those who could preferred to hold most of their money in dollars rather than their domestic currency, effectively reduced countries such as Venezuela to the status of US neo colonies, led by governments whose overriding priority was to appease Washington rather than serve the needs of their own people.

When Hugo Chavez came to power in 1999, having abandoned force and embraced democracy, it seemed the region was witnessing its political and economic rebirth, one that involved breaking the chains of servitude that had bound them to Washington’s agenda since the Monroe Doctrine laid claim to the region in the interests of US domination in the 19^th century. Not only was Chavez a man of the left who took inspiration from the life of the continent’s Great Liberator, Simon Bolivar, he had risen to power as a member of the country’s much maligned indigenous population. This breaking of centuries of racial prejudice was of enormous historical significance, helping to lay the political ground upon which Evo Morales, likewise of indigenous heritage, was elected President of Bolivia in 2005.

Indeed prior to Chavez becoming Venezuela’s president in 1998, under the auspices of his United Socialist Party of Venezuela (PSUV), it was almost impossible for left wing leaders to win elections in Latin America. Afterwards it became almost impossible for them to lose. Inspired by his example and popularity with the poor, progressive governments arrived in Brazil, Argentina, Uruguay, Paraguay, Ecuador, Bolivia and Peru in the years following, producing a seemingly unalterable shift to the left in a continent that had long been accustomed to right wing dictatorships, military juntas, and proto-fascist governments in the decades previous.

Achievements of the Bolivarian Revolution

Chavez was intent on utilizing Venezuela’s oil wealth to transform the lives of the masses of the people, instead of allowing it to remain in the hands of the nation’s oligarchs, who used it to fund exorbitant lifestyles redolent of Miami Beach, Monaco, and Beverly Hills. The Venezuelan president undoubtedly kept his word, as over the next decade a social transformation took place in the country, measured in vast improvements in literacy, healthcare, housing, and the overall share of the nation’s wealth redistributed to the poor. Social spending doubled under Chavez from 11.3 percent of GDP in 1998 to 22.8 percent of GDP in 2011. The Gini coefficient, measuring income inequality, improved from one of the highest to one of the lowest in the region.

These achievements should be considered in the context of a relentless attempt by the forces of the right in Venezuela – the oligarchs in control of the private media, big business, and other economic interests – to block, derail, and even overturn the country’s democracy with an attempted coup in 2002, followed by a politically orchestrated strike within the oil industry in 2002-03.

The current crisis

Eighteen years on from 1999 and the crisis that has enveloped the country under Chavez’s successor, Nicolas Maduro, shows no sign of abating. A sharp decrease in global oil prices has had a grievous impact on an economy whose one export of note is oil. It is a factor commonly found in oil rich countries, wherein the abundance of oil can distort rather than enhance economic development.

However the real question is who or what is responsible for the price of crude plummeting a mammoth 60 percent since 2014? For the answer look no further than Riyadh.

In an article that appeared on the website of Forbes magazine in January 2016 – ‘Why Saudi Arabia Won’t Cut Its Oil Production’ – Yassin K Fawaz opines that the answer is to be found “in the global climate change accord agreed to by 195 nations in Paris”, which was reached at the end of 2015.

Fawaz goes on to assert that “Each step they take toward reaching that goal (ending the world’s reliance on hydrocarbons for energy) diminishes the value of Saudi Arabia’s vast crude oil reserves–the economic lifeblood of the kingdom. The Saudis apparently figure that they might as well sell as much as they can now for whatever they can get, rather than leave it in the ground and see its value wither.”

The key example of how energy production and use is transforming away from a reliance on oil is the shale gas revolution that is underway in the US, along with an upswing in domestic production of crude. The result is a sharp decrease in US oil imports, down 60 percent since 2008, from OPEC countries, with Saudi Arabia and Venezuela prime among those.

For good or bad, oil was the economic foundations of the Bolivarian Revolution inspired and led by Hugo Chavez. It is a commodity whose price is so volatile that it can only leave economies dependent on it vulnerable to global factors outwith their control. But this oil dependency cannot be laid at the door of either Chavez or his successor Nicolas Maduro. The country’s underdevelopment had taken root long before they arrived on the scene, a consequence of generations of Venezuela’s unofficial status as US neo colony controlled by a small clique of oligarchs who benefited from this state of affairs.

Those oligarchs and vested interests never went away. On the contrary, exploiting Chavez’s determination to uphold the most advanced example of mass participatory democracy Latin America has seen, the right in Venezuela has been hyperactive over many years in its efforts to undermine, oppose, and ultimately end everything to do with Chavez and Chavism. In this they have enjoyed Washington’s unflinching support.

It is capitalism not socialism that has failed the people of Venezuela. However it is socialism that is carrying the can. Consequently, as things now stand, the Bolivarian Revolution is teetering on the brink.