Is Venezuela proof of the failure of socialism? Hardly


#1

This isn’t a defense of socialism, rather a post meant to point out that whatever happened in Venezuela, socialism was hardly to blame. Furthermore, Dem candidates who are labeled “socialists” share little to nothing with Chavez and Maduro.

Enjoy…

Venezuela’s economic failure has nothing to do with socialism. This is a long and complicated post, so fair warning.

Or to be clear has less to do with socialism than what some on the right would like you to believe.

Firstly, there’s been very little done on the part of actually “socializing” Venezuela. The economy is still mostly under private hands, including the largest supermarket chains, and small businesses (shops, restaurants, malls, etc) and most of the financial sector remains largely private.

If we define socialism to mean “worker or public ownership of the means of production” then Venezuela is only partially socialist, primarily regarding the oil industry.

BUT the oil industry was NOT nationalized under Chavismo, it was nationalized under the authoritarian but neoliberal regime of Carlos Andres Perez in 1975. The only thing Chavez did was remove the last of foreign ownership of the already-state-owned company.

So where was the actual socialism?

Some have argued the “socialism” was in higher business tax rates and reckless government spending. But to be clear, the public debt is LOWER (as of 2018) in Venezuela (standing at 30% of GDP) and personal income tax rates have REMAINED the same (35%) throughout the entire regime of Chavez.

So where was the actual socialism?

Some have mentioned the agricultural land reforms and enabling acts where Chavez expropriated privately-owned homes. And there is a good case to be made here. But where is expropriating private homes “workers owning the means of production”? That is bad and deeply unethical policy, but NOT socialism under the definition provided.

The land reforms could certainly be a descriptor for socialism, and they definitely had a negative impact on the supply side; So I will grant that.

And let’s be clear about something else, merely having a state-owned company does NOT lead to a country’s demise into destitution. Norway and Saudi Arabia are countries with large state-owned oil industries and they have built large sovereign wealth funds and remain relatively rich.

So if not socialism, then what led to the ecinomic ruin we see today?

First and foremost, we have to point out a glaring fact about Venezuela’s economic history, which was that the supposed “wealthiest country in Latin America” (circa 1970s and early 1980s) was wealthy on the back of its newly developed oil industry. In the 1970s and early 80s oil prices shot up 2000%, guaranteeing Venezuela economic expansion unseen anywhere else except in Mexico (which also had a large budding oil industry.)

Since then, Venezuela had focused primarily on developing its oil industry and had comparatively few domestic manufacturing firms. It also had a relatively small export industry other than oil. This meant that Venezuela was going to have 2 problems:

  1. Going to be dependent on foreign imports for goods and food.

  2. Dependent on oil sales for foreign exchange reserves to pay for imports.

Why is this a problem? Well, if they depend on imports then they are grossly dependent on oil exports.

But that’s not all. And here I will put the blame SQUARELY on Chavez’s regime (so far i’ve been as objective as I can)

Chavez got the Venezuelan currency which was previously free-float (like the USD, JPY, GBP etc) and fixed it for import purposes. This meant there was a new tiered system for domestic firms to import goods and food; They got preferential rates for bolivar-to-dollar exchanges.

The result was the creation of a black-market for bolivares.

And as an aside, Venezuelan corruption (while initially decreasing under Chavez) skyrocketed to unprecedented levels as private firms colluded with government officials to purchase dollars at the preferential official rate and then sell those same dollars for exponentially more bolivares at the black market.

It worked like this: You bought $1 at 50 bolivares at the official preferential rate because you are the registered major importer of coffee in Venezuela, but you then take the $1 and sell it on the black market for 2000 bolivares. You just made a huge profit, but there is no new coffee imports in Venezuela, causing shortages of coffee.

At the same time, Chavez’s regime sought to purchase staples like rice, bread, meat, chicken, corn flour etc and re-sell it at heavily subsidized prices at state-owned supermarkets, ostensibly intended for the poor. This is all fine and dandy IF AND ONLY IF the government can provide a steady supply that meets the demand of these goods. And given that the government needs to sell oil to receive dollars to purchase these goods, they ended up not only using up foreign exchange reserves, but they end up “over-paying” causing a deep hole in trade balance sheets. The state pays $5 for a kilo of Rice, and resells it for $0.25, and can’t meet the demand quickly enough due to aforementioned corruption, which means that the kilo of rice gets bought cheaply by the first people in line to buy that kilo, but everyone else in line gets told that the market has run out of rice.

It’s worth noting, however, that rich or dollar-earning Venezuelans can still find a full stock of most goods in private supermarket chains and shortages happen periodically because shipments don’t arrive (again due to that corrupt, crony clientelism of the Maduro regime)

This isn’t quite “socialism” in that there is no union or worker council or outright nationalization; But it is a form of grotesque left-nationalist-populism.

In conclusion, the monetary policies of Venezuela under Chavez have led to its shortages, inflation rates, and have contributed to the capital flight and brain drain that is now causing unemployment and poverty to rise. The situation is dire, and the only way for the government to correct this would be to institute a shock-therapy model.

The government needs to “free” the bolivar and allow for importers to import goods at the true prices, and sell them at the true prices - which would cause initial suffering that the state could alleviate by offering a poverty fund and slowly, but surely, the economy would recover as freeing the bolivar would be a sledgehammer to the corruption that has seeded in Venezuela.

Corruption, mismanagement, greed, despotism and a lack of economic understanding have led Venezuela into ruin, not “socialism”.


#2

Hold it! You can’t get away with, on the one hand, claiming that supermarkets were NOT “government-owned” and and therefore not “socialist” and a few paragraphs later claim that “government-owned” supermarkets couldn’t keep up with demand!


#3

The funny thing about socialist governments is that they are NEVER ‘socialism under the definition provided’. Thats because all forms of socialism depend on human beings to be far better than they actually are, just like every other idealistic, utopian model of government. Which is why I will always support the ‘constitutional republic’ firm of government. If human being were as good as they need to be for socialism to work, we wouldn’t need governance at all, which is specifically the communist ideal.


#4

Playing around with definitions is SO socialistic. Prove anything, escape blame for everything.

Let’s look for the common themes. For example, Venezuelan government and American K-12 suffer from the same pathologies. https://www.americanthinker.com/articles/2018/07/k12_parallels_with_venezuela.html


#5

Read what I wrote Dave,

I said;

Which is true, the largest chains are private. I never said that all supermarkets were private or that there weren’t any government-run supermarkets.

In the US there are private prisons and government run prisons, there are private schools and government run schools, private healthcare and government run healthcare.

Not all that unusual for the government and the private sector to operate in the same space.


#6

That’s not much of a rebuttal.

Venezuela’s problems have to do with mismanagement of the one abundant resource they have, combined with epic levels of corruption.

How would you define socialism?


#7

Who is playing with definitions?

Is it wrong to say that socialism is when the government controls the means of production? If not, then what?


#8

And yet, according to YOUR own “misery index” concerning Venezuela, it was the GOVERNMENT’S inability to keep up with grocery demand that was causing the most “shortages”. How did that prevent the “largest chains” from taking up the slack and providing what the public needed?


#9

Government doesn’t have to OWN the means of production in order to CONTROL it. In fact, that is the very definition of what happened in Germany in the 30’s (and why I still maintain that fascism is akin to socialism and therefore NOT “right-wing.”)


#10

Okay, CSbrown. Full stop.

This, right here, is a dodge. Most companies might not be socialized, but most of their economy is.

50% of Venezuelan GDP is produced by oil exports, which by definition, runs through the State owned oil company.

And then you have to include the list of companies Chavez nationalized.

Telecommunications (CANTV), Electricity (AES Corp in Electricidad de Caracas), the gold mining industry (Gold Reserve Inc’s Brisas project), Steel (Sidor), and cement (Lafarge SA and Cemex SAB de CV). The banking industry was simply capsized.

So, with all due respect CSbrown, I don’t think you were aware of just how much nationalization was going on, how many industries it got into.

It seems to me that you formed your opinion without knowing this.


#11

I submit that corruption, mismanagment, greed, despotism, and a lack of economic understanding were part and parcel of Venezuela’s socialism, and are hallmarks of socialism in general, as history has shown.

Not in its entirety; controlling where the products go (within the given socialist country) is a big part of it.


#12

So Chavez completed the process that his predecessor had begun. How is that still not socialism? His government now owns and runs the oil industry.

The fact that Chavez didn’t raise taxes is irrelevant given what you describe later.

Seizing private homes land and giving it “to those who need it” is socialism. Just because a house does not produce goods and services, other than shelter, does not exempt this seizure of private property rights from its proper description, socialism.

Land is part of the means of production. Seizing it is socialism.

Ignoring or declaring that the laws of supply and demand are “immoral” and therefore cannot be considered in discussions about public policy is one of the cornerstones of socialism. If you lower prices below the market levels, you must either subsidize those goods on a permanent basis or face shortages. If you can’t charge market prices for goods because of public edits that prices must be at lower than market levels, you will have shortages and black markets will develop to supply those who have the means will buy them.

This policy of subsidizing food for the poor is pure socialism because it ignores market forces. It is an unsustainable system unless money is taken from viable economic systems to subsidize it.

What you just described is capitalist reform. It gets back to laws of supply and demand which naturally gets markets back into balance.

Socialism can’t get the economy back into balance because the central planning that is at the core of its theory requires the acquisition and processing of too much data on an on-going basis. A small number of planners at the top can’t pull all of the strings to make the middle and the bottom work. It’s been tried time after time, it has always failed.

Add to that the natural human tendency to grab as much as you can for yourself if you have the opportunity to do it (corruption), and you have recipe for economic collapse. That’s what is happening in Venezuela. Half-baked socialism and the corruption that goes with it is what got them there.


#13

Socialism is not “the workers own the means of production”

Communism is “The State owns the means of production”

Socialism is a strategy to migrate an economy to Communism gradually.

Facism is the preferred method to Socialize because it retains private ownership while allowing the State to micro manage the economy through taxes and regulation; the idea is that the private ownership will preserve the efficiency of Capitalism while the draconian regulations and the taxes/fees imposed on the means of production will be spent to buy the loyalty of the people.

ALL of those seeking a Communist end embrace Fascism today, Venezuela is/was no exception just as our own political class as a whole is no exception; there are a small number of individual exceptions but the political class as a whole trusts government over the individual to make all of the important decisions in the lives of the masses.

ALL governments are prone to corruption regardless of the principles that they are founded on so pointing out that corruption as a justification that excuses the Socialist process for its inherent failures is childish at best and nefarious at worst.


#14

Venezuela is an example of how how “half tailed” communism can take you down the shaft just as fast has the full blown system can do it. Welfare payments anger some people, but at least the price rationing function still has a chance to work, which keeps the economy moving. When you set prices artificially low by government edit, shortages and eventual collapse of the economy often is the result.

The U.S. has had mild periods of this. When Richard Nixon started price controls in the early 1970s, shortages of many goods was the result.


#15

sooooo dishonest. Tell you what. YOu think socialism is so great, Go to Venezuela. I’m sure they’d be delighted for your help.


#16

Yes, you can show them that it was NOT capitalism that made them the 2nd largest economy in the Western Hemisphere, but the anticipation of socialism promised by Chavez. I’m sure they’ll buy that hook, line and sinker.


#17

It’s really strange that every place that tries socialism or communism turns into a totalitarian $#!*-hole, but it’s never “real” socialism or communism? Why would that be, you reckon?


#18

A very thoughtful and informative post. Thank you for taking the trouble to post it.

Yes, Venezuela was not ‘socialist’ in the classic sense: the means of production and distribution nationalized and production decisions made according to the Plan by a central planning board.

Cuba, yes, the USSR and the satellites, yes, North Korea, yes … but not Venezuela.
Genuine socialism proved such a disaster in thse those unfortunate countries that no sane person would advocate it now, except perhaps for some ultra-Green fanatics who want to drastically lower
our levels of consumption. (A good fictional insight into why socialism does not work
is provided in the brilliant novel Red Plenty, by Francis Spufford. Supplement this by
Googling on the ‘Socialist Calculation Question’ – although I have just seen that the problem of rational distribution of resources in the absence of market-set price signals has been ably expounded above.).

So … rather than say, “Venuzuela is what will happen to the US if you institute socialism”,
we should say, “Venzuela is what will happen to the US if you elect socialists.”

Which is what we really meant in the first place.


#19

“No sane person would advocate it now”

You need to talk to my nephews who tell me they “are socialists, not communists.” They are not alone. Polls say that over half of the Americans who are 21 to 34 say they are socialists. They are products of our education system which is dedicated to indoctrination not education.

Most of these kids don’t really know what socialism is.