Caracas, Venezuela.

January 2019: I have just reread an essay I wrote – a short history of Venezuela from c.1800-1950 – for an economic development class during my Berkeley days. It’s not entirely irrelevant given current events, so I am posting it for perusal.

The beginning of Venezuela’s integration into the world economy can be dated to 1522, the start of Spanish colonization. It did not produce gold or silver, so colonial control was lax; local and municipal officials enjoyed a degree of leeway unusual for the rest of Spain’s American possessions. Apart from grain grown for subsistence, the 16th century economy was dominated by ranching, with the livestock raised by Indian herders, using Spanish-introduced horses, for their Spanish landlords on the llanos grasslands. By the 17th century, the cash economy came to be dominated by cocoa, cultivated by imported African slaves. This ushered in the basic format of Venezuela’s subsequent integration with the world economy: Primary commodities exports to the North Atlantic markets filtered through the Caracas-based bureaucracy. It allowed the capital to develop as an economic and cultural center; the Universidad Central de Venezuela was founded in 1721, and – thanks in part to the lack of censorship, which provided Venezuelan luminaries access to Enlightenment European thinkers such as Voltaire and Rousseau – it would come to play an important role in the war for independence.

In general, however, the country remained underdeveloped, 90% rural, and almost entirely illiterate; indeed, as late as 1936, only 35% of school-aged children were enrolled and the literacy rate was at only 20%[1] (this is comparable to 17th century England, late 18th century France, or c.1900 Russia). This of itself greatly constricted possibilities for economic development, and deeply stratified Venezuelan society. The hacienda system of cocoa exports required slaves, and from the 16th century yjod would come to define Venezuelan society, hardening it into a caste system in which white Spanish peninsulares and criollos, their descendents, occupied the top of the economic chain, while mixed race pardos and African slaves filled out the bottom rungs. Although slavery was abolished in 1854, the basic structure has remained to this day, reflected in income inequality that has remained very high by global (if not Latin American) standards, even under the Chavez administration. This inequality had intellectual underpinnings, in the form of Laureano Vallenilla Lanz – a sociologist who worked under the Gomez administration – who in his Cesarismo Democrático (1920) wrote that the pardos had to be ruled by white caudillos in order to maintain order, for such was the “unconscious suggestion of the majority[2].” Under the Gomez regime, passports were issued for the first time, which identified carriers by the color of their skin; this system remained in place until the 1980’s. This served to reinforce socio-racial stratification in Venezuelan society.

To the extent that Venezuela saw industrialization before the developmentalist era it was almost entirely confined to the oil industry, which exploded in the 1920’s. This would be the latest, and by 1927 by far the most dominant, commodity to dominate Venezuelan exports; by 1929, it was the world’s single largest petroleum exporter. But even this sector’s development was constrained, as the dictator Juan Vicente Gómez, who ruled Venezuela at this time, forbade the construction of oil refineries on Venezuelan soil because of his distrust of trade unions and industrial labors. The proceeds of the oil boom were narrowly distributed: US oil corporations were allowed to write Venezuela’s early petroleum laws[3], and Gomez himself came to possess a $400 million fortune upon his death in 1936, making him the country’s richest oligarch[4]. Meanwhile, apart from a patrimonial bureaucracy that grew up alongside the oil industry, benefits from the oil boom were meager: Education and other social services were neglected, while the in-flood of oil revenue contributed to high inflation, with food prices running ahead of average incomes.

Venezuela shook off Spanish rule in the Venezuelan War of Independence, a brutal struggle that killed off a third to half the population. However, the subsequent state was weak and riven by constant internal infighting: From 1829 to 1899, Venezuela had no fewer than 41 Presidents and 30 insurrections. This was in large part a function of Venezuela’s social structure. White landowners controlled most of the land, many with a few hundred or thousand pardos tenants on it. Due to the profound weakness of the state, all it frequently took was for a local caudillo in the central and eastern llamas to make an inspiring speech, march to Caracas with a ragtag militia, and proclaim himself President.

Furthermore, while Venezuela was formally independent, in practice the post-Bolivar elites almost exclusively looked to Europe. Legislation was progressive – Venezuela became the first major state to abolish capital punishment, and – in theory if not in practice – free and compulsory education was prescribed in 1880-81. But the state remained a plaything for the elites rather than a motor of development. For instance, the late 19th century President Guzman Blanco divided his time between Caracas and Paris; during this period, he amassed massive loans, from which he happened to make a small personal fortune. When a coup was organized, his response was to just stay in Paris. The European powers intervened with gunboats in 1902-03 under Cipriano Castro when Venezuela, for a time, refused to honor the loans amassed under Blanco.

This caudillo system came to an end with the ascendancy of the Andean elites from 1899, of whom Gomez was the most prominent representative. A national army and telegraph system united the country, so caudillo insurrections became a thing of the past. However, the coups and political instability that plagued Venezuela would continue well beyond; indeed, Gomez himself took power in a coup against Castro in 1908, and would himself experience a crisis of authority in 1928 from student insurrectionists taking a cue from the experiences of the Mexican and Russian Revolutions, and the new thinking challenging colonialist relations with the developed world. From the time of Castro’s death in 1935, López ruled as a modernizing dictator; a partial (and unsustained) transition to democracy was made in 1945-46. It is around this time that the colonial period of Venezuelan can be said to have truly come to an end, as consequent regimes until the 1990’s would be dominated by interventionist developmentalists implementing import substitution policies.

In conclusion, Venezuela suffered from a number of features common to other Latin American countries under their conditions of integration into the pre-World War Two global economy. The most important of these, though they are interrelated, are export dependencies on primary products – from cacao to coffee to oil – which made budgets cyclical and encouraged the growth of “comprador elites” dependent on rents and culturally beholden to Europe; and the development of a caste system centered around race. This fostered an unstable form of government, i.e. the caudillismo that resulted in arbitrary authoritarian power structures at the local levels, despite the formally liberal and federal political macro-structure. These factors retarded progress, to the extent that despite its formidable resource wealth and forty years of substantial oil revenues, Venezuela in 1960 was still a very undeveloped country; its total fertility rate was at 6.62, a pre-industrial rate, and literacy was at a still modest 74% (about equivalent to India today).

[1] Sanchez, George I. (1963), The Development of Education in Venezuela, Office of Education (DHEW), Washington, DC., page v.

[2] Executive Power in Venezuela, Leo B. Lott, The American Political Science Review 50, #2 (June 1956), pp. 422–441.

[3] Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York: Simon and Schuster. 1990. pp 233-36; 432.

[4] Bart Jones. Hugo!: The Hugo Chavez Story from Mud Hut to Perpetual Revolution. Steerforth. 2007. Pp 31.