Last Word On Chavez

When I said this post would be “the last post” on the matter, I meant posts written by myself. 🙂 Alexander Mercouris’ was too good to pass up, so it is reprinted here:

Any discussion of Chavez must explain why he was (to his detractors) such a terrible man. He was a terrible man because he did a terrible thing. This terrible thing was to distribute Venezuela’s oil wealth to the majority of its people by funding ambitious health, education and social security programmes.

To understand why doing this was so terrible one must understand something about the historic situation not just in Venezuela but throughout Latin America (Costa Rica being the exception). Briefly, political and social power in Latin America since before independence from Spain has been concentrated in a small group of wealthy families who conduct bitter and even violent political feuds with each other using labels such as “Liberal” and “Conservative” but who unite when faced by a challenge to their power. This oligarchy sustains itself through the support of a middle class that sees its social and economic interests as bound up with those of the oligarchy. Concepts of a wider social contract underpinned by shared patriotism and by a sense of social responsibility do not exist. The mass of the population are excluded and typecast as lazy, shiftless, dishonest and violent. This justifies denying them a share in the country’s economic profits, which supposedly neither belong to them or are deserved by them, and which makes any attempt to share these economic profits with them a theft from those to whom these profits supposedly actually belong. All this is underpinned by an ugly strain of racism with the middle class and the oligarchy priding themselves on their whiteness whilst often concealing their mixed origin whilst emphasising or exaggerating the colour of the poor.

The result is that governments in Latin America have historically failed to provide even the most basic services at even a remotely satisfactory level. The only institutions in Latin American that have historically been reasonably funded have been the very highest echelons of the state bureaucracy and the judiciary (which is usually recruited directly from the oligarchy) and the army and police whose main function is not to defend the nation from foreign aggression to keep the poor in order.

In such a system requiring the oligarchy and the middle class to pay taxes to fund say a good system of universal secondary education from which the poor might benefit is an idea so outrageous that it is guaranteed to provoke passionate and often violent anger and resistance. Americans, Europeans, East Asians and indeed Russians find all this very difficult to understand. As a Greek I am better able to understand it not only because it resembles the historic situation in my own society but because a section of my family emigrated to Argentina where they are today members of what was once the country’s oligarchy.

Not surprisingly in a Continent where basic education and health care for the bulk of the population was scarcely provided (though the means to do so was always there) economic development has been disappointing to say the least. However since this is a system that is deeply embedded and which is sustained by often extreme violence all previous attempts to change it have been largely unsuccessful with reformers likely to end up either in exile or dead. I am not going to discuss the role of the US in sustaining this system since it is so well known. I would say that I do think people who blame the US for Latin America’s problems overlook the many internal reasons why Latin American societies have historically been as dysfunctional as they are.

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A Short History of Venezuela, c.1800-1950

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.

Victimized Venezuela III: Myths And Reality

At the recent Summit of the Americas in Trinidad, two great leaders, Obama and Chavez, shook hands in what could be the symbolic first gesture of reconciliation. Treasonous neocons will no doubt rush to condemn this as yet another limp-wristed and unilateral concession to “America’s enemies”, reminding their listeners that Chavez closed down opposition media, nationalized American assets and welcomed Russian warships and strategic bombers to his realm.

Yet their stubborn animosity is worse than just imperialist arrogance – it is stupid. They fail to realize that in the past decade Latin America in general, and Venezuela in particular, has become too politically mature to be easily manipulated into serving US (corporate) interests by economic hitmen, CIA operatives and their local surrogates. It is to Obama’s credit that he is willing to move from willful denial to cautious acceptance of the decline of overt American power in Venezuela and elsewhere.

For that is the new reality. The Venezuelan opposition is increasingly discredited for its unconstructive hostility to the government and extra-legal attempts to overthrow Chavez, one of which nearly succeeded in 2002. This resulted in blowback against the US for its covert involvement  The government’s refusal to renew the licenses of opposition media outlets that seditiously backed the abortive coup is thus completely understandable, as is Chavez’ personal animosity towards Bush and outreach to other states in similar straits. Furthermore, it should be noted that the owners of newly nationalized companies, including American ones, were fairly compensated.

Meanwhile, within five years of taking real power in Venezuela, a corrupt, disorganized and class-ridden country, Chavez managed to a) double the GDP, b) halve the number of people living in poverty and c) drastically improve practically every indicator of social wellbeing from child mortality rates to inequality to tertiary education enrollment rates (I already covered these successes in prior posts). This does not mean that Venezuela is no longer a corrupt, disorganized and class-ridden country – it still is, to an extent – but the improvements are undeniable and Chavez enjoys high approval ratings. It is thus unseemly and dishonest of the Western MSM to excoriate Chavez as a thuggish populist strongman and economic illiterate.

Let us hope they take a clue from Obama. Or from Mark Weisbrot and his fellow authors, who in their latest paper, The Chávez Administration at 10 Years: The Economy and Social Indicators, give a glowing verdict on the achievements of the Bolivarian revolution.

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Victimized Venezuela II: Beware of Schadenfreude

Much like Putin’s Russia, Venezuela has been unfairly victimized by Washington’s foreign policy elite and savaged by the Western MSM, which have caricatured Chávez as a run of the mill Latin American populist strongman. In a previous post on this matter, I drew attention to the work of Mark Weisbrot at the CEPR, who has demolished these crude myths (The Venezuelan Economy in the Chávez Years). Under the Bolivarian regime poverty plummeted, access to high-quality healthcare, education and affordable food widened and the GDP skyrocketed by 94% from Q2 2003 to 2008.

Unable to criticize Venezuela on humanitarian grounds, the only option left open to the neoliberal ideologues was to claim that the Venezuelan economic miracle was nothing more than an ‘oil boom headed for collapse’. Unfortunately for them, the Venezuelan state kept a balanced budget, reduced its foreign debt from 47.7% of GDP in 2003 to 24.3% in 2007 and total interest on all public debt amounted to just 2.1% of GDP in 2006 – overall, a fiscal policy far more responsible than Washington’s itself. For 2008, the government assumed an oil price of 35$ per barrel; it is true that in practice the state spends beyond budgeted expenditures when oil revenue far exceeds the budgeted for price, so a fall in oil prices would trim government spending and growth. However, a budgetary crisis or economic downturn are very unlikely, since the government has more than 50bn $ of international reserves it can draw upon in a crisis.

That was the theory when Weisbrot published the paper in February 2008…but how does it stack up in the face of 50$ per barrel today?

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Victimized Venezuela

Chavez is frequently shafted in the Western media, who allege that the only reason the Venezuelan economy is doing well is because of record oil prices. This is not to mention all the invective hurled against the Chavez administration for its supposed disrespect for democracy, from refusing to renew the licenses of TV stations support foreign-sponsored coup attempts against him (while ignoring human rights violation in friendly countries in the region like Colombia, where more union workers are killed annually in than in the rest of the world combined) to the latest smear job by the Economist about crime.

But let’s focus on the economic-boom-is-because-of-oil mantra. Having disproved similar claims about Russia, I decided to investigate this further. Novel Prize winning economist Stiglitz has praised Venezuela’s economic policies. And I found this excellent paper, Update: The Venezuelan Economy in the Chávez Years by Mark Weisbrot and Luis Sandoval from 2008. I’ve quoted its main findings.

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