By Michael Roberts
This blog was originally published by Michael Roberts on Saturday, 27 July 2024. The original article can be found here.
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Venezuela has a general election tomorrow. This promises to be a decisive election that could see the end of the so-called Chavista governments, first under Hugo Chávez from 1998-2013 (on his death) and then under Nicolas Maduro for the last eleven years. Maduro is seeking a third six-year term.
There are more than 21 million registered voters in Venezuela, including about 17 million people currently living in the country. Current opinion polls indicate that Maduro will be defeated by the pro-US, pro-business opposition candidate Edmundo Gonzalez. Gonzalez is standing because the real leader of the opposition, Maria Corina Machado, is banned by the Maduro government from standing. Both sides are drawing large crowds of support in campaigning. But polls suggest that this could be the end of the Maduro presidency.
Over the decades since 1998, many on the left have understandably backed Chavez and Maduro against the unceasing attempts of the economic elite within Venezuela and without by US imperialism to oust them. But as the Venezuelan economy has been brought to its knees, large sections of working people who fought to defeat several coup attempts against Chavez and Maduro appear to have lost confidence in the government. Venezuela’s population has been depleted (with seven million, mostly skilled better-off citizens, leaving the country in the last two decades). The working class is now divided, with sections even prepared to vote for the opposition in the hope of ‘change’.
What’s happened to the great hopes from the Chavez era?
How did the great hopes of Chavez’s government come to this? In my view, there are two main factors: US imperialism and its sanctions, along with the machinations of the Venezuelan elite; but also the failure of Chavez and Maduro to end the economic rule of capital in Venezuela.
In 1970 Venezuela had become the richest country in the region and one of the 20 richest countries in the world, ahead of countries like Greece, Israel, and Spain. But this wealth was almost entirely based on one commodity, oil; Venezuela has some of the largest proved reserves in the world. Then came the downturn in the world economy during the 1970s. Between 1978 and 2001, Venezuela’s economy went sharply in reverse, with non-oil GDP declining by almost 19 percent and oil GDP by an astonishing 65 percent. Government revenues plummeted.
A succession of corrupt pro-capitalist governments came and went. There was a growing movement to end this nightmare among sections of the military, intelligentsia and the organized working class. This eventually led to Hugo Chavez gaining power and attempting to switch the country’s resources from the rich towards the poor.
Massive help to the poor in the early Chavez years
To begin with, as oil prices rose, Chávez presided over years of robust and sustained economic growth in Venezuela, averaging 4.5 percent a year from 2005-2013. Chávez reasserted state control over the state oil company, PDVSA, and directed enhanced oil revenues to the poor, with Venezuela’s social spending doubling between 1998 and 2011. The government used price controls, direct state provisioning through newly created missions and subsidies into health care, education, social services, housing, utilities, basic goods and other economic sectors.
This helped bring about major social gains. Poverty was nearly halved between 2003 and 2011, with extreme poverty cut by 71 percent. School enrolments rose and university enrolments more than doubled, with unemployment cut in half. Child malnutrition was cut by nearly 40 percent, and Venezuela’s pension rolls quadrupled. Inequality declined steeply, with Venezuela’s gini coefficient of inequality dropping a full tenth of a point, from 0.5 to 0.4 from the early to late 2000s. By 2012 (and through 2015), Venezuela had become Latin America’s most equal country.
Redistribution rather than ownership and control
But Chavez’s programme was one of redistribution of the value gained by Venezuela’s non-oil capitalist sector, the oil industry and multi-nationals. The ownership and production of the non-oil sectors was not brought under state control to plan the economy. Víctor Álvarez, an economist who was part of the government under Chávez, notes that private industry actually increased under Chávez, despite the government nationalizing a number of important industries. Most important, Chávez failed to wean Venezuela from oil dependency, with the percentage of government export revenues derived from oil increasing from 67 percent in 1998 to 96 percent in 2016.
This was nothing new. Venezuela was not able either before or after Chavez to change this one-trick pony economy. This was not the case to some extent in other energy-rich economies like Mexico and Indonesia. Their non-oil export sectors grew somewhat to compensate for any decline of oil export revenues, even if those sectors were dominated by multi-nationals from the US and Japan. Venezuela’s growth rate of non-oil exports is just one-sixth that of Mexico and one-fourth that of Indonesia. Venezuela’s participation in non-energy-intensive sectors has not increased since the early 1990s.
Between 1999 and 2012 the state had an income of $383bn from oil, due not only to the improvement in prices, but also to the increase in the oil royalties paid by the transnationals. However, this income was not used to transform the productive sectors of the economy. There was no plan for investment and growth. Venezuelan capital was allowed to get on with it – or not as the case may be. Indeed, the share of non-oil industry in GDP fell from 18% of GDP in 1998 to 14% in 2012.
Falling world oil prices and US-led sanctions
The good years came to an end when oil prices started to fall. Oil exports fell by $2,200 per capita from 2012 to 2016, of which $1,500 was due to the decline in oil prices. This situation worsened just as Maduro took over in 2014 when oil prices declined by nearly 75% in a matter of months. Although oil prices began recovering in 2017 and output stabilized in other oil producers, it did not in Venezuela – because that was the year that sanctions by the US and other countries were imposed.
The coming to power of Chavez had threatened capitalist interests in Venezuela and blocked US multi-national investment, unlike in Mexico. So the US aim was to bring down the Chavista regime. The US barred oil purchases, froze government bank accounts, prohibited the country from issuing new debt, and seized tankers bound for Venezuela. This decimated Venezuela’s oil exports and stopped the government from re-investing in oil technology.
The US did not stop there. They decided to ‘recognize’ a so-called interim government in opposition to the Maduro government and transferred to it control over Venezuela’s offshore assets. Doing so blocked Venezuela from accessing its US refineries, or obtaining financing from multilateral organizations, or even using most of its international reserves. Then the US attempted to foment a military coup and tried what turned out to be a tragicomic sea invasion by US mercenaries.
In this period, Venezuela saw a 65 percent decline in the number of correspondent banks that were willing to process international transactions and a 99 percent decline in the value of those transactions between 2011 and 2019. This meant that Venezuela’s private sector was less able to engage in international trade or payments.
Venezuela placed in a worse position than Cuba
In many ways, Venezuela has been in a worse position than Cuba. The attempted destruction of the Cuban economy comes from outside, from the US. But there are no serious opposition forces inside. But Maduro has faced waves of opposition intransigence and violence, often inspired by US agencies. Maduro has responded with repression, directed not only against the elites in the opposition, but often also against the popular sectors that formed Chávez’s core support base.
The Maduro government started to rack up huge foreign debts to try and sustain living standards. Venezuela is now the world’s most indebted country. No country has a larger public external debt as a share of GDP or of exports or faces higher debt service as a share of exports. From 2014 to 2021, Venezuela suffered one of the worst economic crises in modern history. The economy contracted by 86 percent. Poverty rose to an estimated 96 percent in 2019. Inflation reached an absurd level of 350,000 percent that same year. In 2018 nearly a third of the population suffered undernourishment. And roughly a quarter of Venezuelans have since fled in an unprecedented migration that now exceeds 7.7 million.
Failure to end control of capital
Right-wing pro-capitalist economists tell us that Venezuela shows that ‘socialism’ does not work. But the lesson of the history of Venezuela in the 21st century is not the failure of ‘socialism’, it is the failure to end the control of capital in a weak (an increasingly isolated) capitalist country with apparently only one asset, oil. There was no investment in the people, their skills, no development of new industries and the raising of technology – that was left to the capitalist sector. And there was no involvement of the people through independent organisations from below to check the government’s corruption and direct its policies against US sanctions and the disruption of Venezuela’s elite.
As there was no move to socialist investment in the economy, Venezuelan capitalism was tied only to the profitability of the energy sector, which was in a death spiral after the collapse of oil prices and US sanctions.
The gains for the working class achieved under Chavez have now dissipated. While the majority struggle to survive, many at the top of the Maduro government are as comfortable as the Venezuelan capitalists and their supporters who are trying to bring the government down.
The power base of the Maduro government
The Maduro government now relies increasingly not on the support of the working class but on the armed forces. And the government looks after them well. The military can buy in exclusive markets (for example, on military bases), have privileged access to loans and purchases of cars and departments, and receive substantial salary increases. They have also won lucrative contracts, exploiting exchange controls and subsidies, for example, selling cheap gasoline purchased in neighbouring countries with huge profits.
Since the end of the COVID pandemic slump and the consequent huge rise in energy prices Venezuela’s economy has improved slightly. The Council on Foreign Relations reports economic growth of 8 percent in 2022, 4 percent in 2023, and estimates that it will be 4.5 percent this year.
And the rise in energy prices after the pandemic prompted the US to offer a deal to Maduro to allow ‘fair’ elections in return for the relative easing of US sanctions. As a result, inflation has dropped to a still very high 55%.
But this small improvement probably comes too late and too little to avoid electoral defeat for Maduro. Maduro currently faces drug trafficking and corruption charges in the US and is under investigation for crimes against humanity by the International Criminal Court. If the opposition does clinch victory, a transition period of six months is likely to include an intense negotiation around amnesty for Maduro and members of his government, which people say he is certain to require ahead of any potential handover.
Latent support for the Chavista legacy
The election result is still unclear and what happens afterwards even more so. Despite the state of the economy and the conditions for working people, there is still a large body of latent support for the Chavista legacy, but this election could be the end game for that, bringing a return to the direct rule of a neo-liberal pro-capitalist government backed by US imperialism – and all that attains for Venezuela’s distressed people.
From the blog of Michael Roberts. The original, with all charts and hyperlinks, can be found here.
