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