Venezuela Didn't Disgrace Socialism, Only Itself

Chavez and Maduro had no strategy beyond taking oil profits and giving them to the poor. Even in the best of times it couldn’t work, and it didn’t

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Venezuela's President Hugo Chavez, left, holds up a copy of the Venezuelan national constitution as his Vice President Nicolas Maduro looks on during a televised speech at Miraflores presidential palace in Caracas, Venezuela.
FILE PHOTO: Ex-President Hugo Chavez, left, holds up a copy of the Venezuelan constitution as now-President Nicolas Maduro looks on, December 8, 2012Credit: AP

What's keeping Venezuelan leader Nicolas Maduro in power is probably the fear among the ruling Chavismo elite of what will happen to them if they lose power.

The revolution no longer has any achievements to its name. All that’s left is a faith that somehow ideology will, one day, overcome all. But really, could a Venezuela controlled by the old oligarch class or as an American client state leave the country more mired in poverty, disease, malnutrition and oppression?  As one young Venezuelan told a New York Times reporter, she’d be glad to see American tanks rolling down the streets of Caracas.

The revolution and the it promised to bring was music to the ears of people on the left. And you can’t really dispute its goals of ending poverty, exploitation, sexism and racism, etc. As the German theorist Heinz Dieterich designed it (and Hugo Chavez - president of Venezuela from 1999 to 2013 - presumably planned it), this new brand of socialist economics would take all the beauty of Marxism and exorcise it of all the ugliness of dictatorship and central planning. And add a dash of leftist Christianity.

Chavez and Maduro stayed rhetorically true to the idea, but there was never much substance to it. Communes were formed and businesses were nationalized, but the state sector wasn’t run by the workers but by the Chavismo elite (in fact, when the workers of the state oil company PDVSA dared to strike in 2002, ).

The communes and worker cooperatives Chavez encouraged were minor players in the economy, and became characterized by inefficiency, corruption and politicization. Though as much as pre-Chavez Venezuela was not exactly the poster boy for world capitalism, Chavismo isn’t an indictment of socialism in many places.

What it is an indictment of, is the allure and dangers of oil.

What made Chavismo run?

The communes were just a side show to what really made the Chavez economy run, which was the massive transfer of oil profits into the pockets of the poor. Some oil was also sent at knock-down prices to allies like Cuba.

Give Chavismo credit where it is due: Venezuela has but unlike most oil-rich countries, Venezuela didn’t use them to enormously enrich a tiny elite, though there was some skimming.

Yet from the get-go, the strategy was a non-starter. Tiny countries with vast energy reserves and microscopic populations, like Qatar or Brunei, may use oil to solve poverty, but countries like Venezuela and its 32 million people can’t.

Chavez’s defenders point to the high rates of economic growth and the sharp drop in poverty during the Chavez years, but it was all smoke and mirrors. Even at $100 a barrel or more – an unsustainable level and certainly not one you build a country’s long-term prospects on – oil profits could never give Venezuela rates of growth that would genuinely cut poverty by generating jobs and business.

The much-touted rates of were misleading. Today, of course, Venezuelan unemployment is running close to 90%, but even in the heyday of Chavismo and sky high oil prices in 2012, they were close to 24%. Bear in mind that number represents real poverty -- the percentage of households that can’t afford a basket of basic food items.

Venezuela failed to plow back enough oil profits into the industry to keep production at current levels, much less increase it, nor did it hold on to enough cash to sustain it through a period of falling oil prices. If it had, there would have been even less money to shower on the poor and social projects, and the achievements of 21st-Century Socialism would have been even more meager.

However, the failure of the 21st- Century Socialism was that the country was that Chavez and Maduro never gave any real thought about how to develop an economy that could compete in the world economy and generate real jobs as against fake employment of the communes.

That error is not uncommon to leftist economics all over the world. Venezuela had enough oil to be deluded into thinking that a fairer distribution of profits was all the country really needed to end poverty.

In more developed economies, the thinking is little different – that the wealth created by capitalist industry is there for the taking. All you have to do is figure out the best way to do it.

The underlying assumption is that capitalist wealth is created by needless exploitation of workers and consumers, and that anyone can form and manage a successful enterprise. We don’t need a Steve Jobs or a Henry Ford to create an Apple or a Ford Motor – a workers’ cooperative could do the job just as well and in a way that all of society benefits.

The persistence of this erroneous belief in the face of how many thousands of experiments from Soviet communism to the gig economy isn’t remarkable when you think about it.

Capitalism has brought the countries that have adopted it unheard of wealth and has enabled them to eliminate the worst scourges of poverty and disease. But along the way it has committed enormous sins like child labor and severe environmental damage, to name just two. It’s hard to love it, especially measured against a dreamy vision of a utopian future. Chavez and Venezuela are the latest victims of the dream, but they won’t be the last.