What does Venezuela's crisis mean?

[New Zealand's right-wing political commentators have been taking a certain pleasure in the economic collapse and mass protests in Venezuela. Kiwiblog's David Farrar recently asked why left-wing New Zealanders had nothing to say about the crisis of Hugo Chavez's Bolivarian revolution. Here was a comment I put under Farrar's post.

I did a bit of research on Venezuela a decade ago, but haven't been able to follow events in the country closely more recently. I think my original research was hampered by the fact that I don't know Spanish, and by my failure to visit Venezuela. In recent years I've tried always to visit the places I write about.]

Why don’t New Zealand leftists, like supporters of Labour and the Greens, accept that their ideas have been discredited by the terrible performance of the Venezuelan economy over the past couple of years, and join the National Party or Act en masse?

One way to answer this question is to rephrase it, and ask something like: why didn’t Kiwi advocates of free market capitalism change their minds when the Argentinian economy, which had been the subject of an ambitious experiment in neo-liberalism during the ’90s, collapsed at the beginning of the twenty-first century?

The collapse of Argentina back in 2000-2001 was just as spectacular as the disaster in Venezuela today. But I don’t remember the members of the Act Party or the Business Roundtable folding up their tents at the time.

If they had been asked, I would guess that local advocates of neo-liberalism would have denied that events in Argentina had much relevance to the very different society that is New Zealand, and would have pointed to unique features of the Argentinian situation that made neo-liberalism a failure there. They would, if they were clever enough, have said that it is not a good idea to take a set of events in one country and make them into generalisations valid for all times and places.

And the same can be said now, when we see the crisis in Venezuela. 

Both the left and the right have tended to forget about the very particular history of Venezuela when they have analysed the Chavez and Maduro eras. Instead of understanding Venezuela and the rise of Chavez with reference to unique local factors like the country’s lopsided, oil-dependent economy, unusually structured military, and chronically underdeveloped agricultural sector, both left-wing supporters of Chavez and right-wing detractors of the man have tended to talk in very abstract terms about the pros and cons of socialism. Some articles about Venezuela in the Chavez era have spent more time discussing the Soviet Union and Cuba than South America.

If we are to compare Venezuela with another country, then we shouldn’t turn to the Soviet Union, which had a vastly different economy, nor to a New Zealand run by a Labour government, but to Nigeria. 

Like Venezuela, Nigeria has been dubbed a petrostate, because of the almost complete dependence of its economy on oil exports, and the way that its governments have traditionally held power by distributing revenue from oil sales through intricate networks of patronage. And like Venezuela, Nigeria is in crisis at the moment, as the result of the big drop in oil prices.

In both Venezuela and Nigeria, a succession of governments have attempted to deal with the key problem of a petrostate: the problem of how to insulate the economy, and therefore society, from the inevitable fluctuations in oil prices. Some governments, like the regimes that ruled Venezuela during the Punto Fijo era of the ’60s and ’70s, have attempted to protect themselves by pursuing economic nationalist policies like tariff-driven import substitution and state-driven investment programmes. They wanted to build a strong domestic economy insulated from the global market.

Other governments, like those that ruled Venezuela in the late ’80s and the ’90s, have taken the opposite approach, and have privatised, cut tariffs, and tried to create favourable conditions for foreign investment. It’s easy to forget today, but these neo-liberal policies were very unsuccessful in the Venezuela of the late ’80s and ’90s, and the governments that implemented them had to resort, just like Maduro is resorting now, to the use of violence to put down dissent.

The ‘Caracazo’ of 1989, which was prompted by falling oil prices, a shrinking economy, and the removal of state subsidies for transport, was an uprising against neo-liberalism that was put down with machine guns. Fifteen hundred people died during the Caracazo, mostly in the poor suburbs of Caracas.

The point I’d make, then, is that we have to understand the latest crisis in Venezuela with reference not to some abstract concept of socialism or to the very moderately left-wing programme of Labour and the Greens here in New Zealand, but as the latest in a series of disasters caused by the impact of falling oil prices on a petrostate. Maduro has demonstrably failed to protect Venezuela’s economy from the terrible impact of collapsing oil prices; but so, just as demonstrably, did his neo-liberal and Punto Fijo predecessors.

[Posted by Scott Hamilton]