Oil Wars

According to the latest polling numbers most Venezuelan's support the Oil War's vision for Venezuela. From a Datos poll here is the socio-economic system preference of Venezuelans:

Social Democracy 60%

Socialism 24%

Capitalism 4%

Communism 1%

Dont' know 11%


What is interesting is that the opposition represents capitalism which is desired by only 4% of the population while Chavismo offers socialism which is only desired by 24% of the population. The 60% who favor Social Democracy are effectively unrepresented (though obviously when they have to choose they choose Chavez over the opposition).

This goes to show the extremists are dominating the debate in Venezuela, which has actually been obvious for some time now.

So the question then becomes - under the Venezuelan consitution can a blog be elected president?
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The international reserves have been a hot topic as of late (obviously the quick return to
29.5 billion ahead of schedule was glossed over) From Rosales predicting the apocalypse would be upon us the minute the YES side wins, to
"economists" arguing that the real value of a currency is as simple as comparing M2 with the reserves. Foolish would not begin to describe their voodoo economics, not only since they are arguing against decades of fiat currency practice. But also they now naively assume that the black market rate is tied to their value and not actual supply and demand. I would love to see them put their money where their mouth is and gamble with this little theory on countries with free floating exchanges.

But back to the good news, the reserves are back up in record fashion well ahead of schedule, and if we were to extrapolate current trends we might finish the year at around 34 billion. That is unless the government dips in again.
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Having been in the limelight for years the general narrative of recent Venezuelan history is well known. But because of the contention surrounding that history most in depth articles and books on the subject revisit that history over an over again in an endless debate of who did what.

Yet for many those debates are at this point beyond boring. And for even many casual observers the real question of interest isn’t who backed Pedro Carmona or has Gustavo Cisneros made a pact with Chavez – the overriding question is what is this thing called the “Bolivarian Revolution”? With Chavez now riding high and potential threats seemingly vanquished, at least for now, the questions of what is this all about and where is it all going are absolutely key.

With those questions in mind the new book by Greg Wilpert, “Changing Venezuela by Taking Power, couldn’t be more timely.



In this book you will get only the most cursory telling of Venezuelan history. Rather the book is almost exclusively dedicated to figuring out what “21st Century Socialism” and in what ways the Chavez government is working to bring it about, or at least build a foundation for it.

The discussion of exactly what 21st Century Socialism is resides in the book’s appendix. Given the importance of that question in relation to everything else it is a good idea to skip straight to it. Pointing out that Chavez has given no blueprint for 21st Century Socialism, Greg starts with a discussion of what ideals it should incorporate; liberty, social justice, solidarity and sustainability. Then different political/economic systems are discussed in their ability to fulfill those ideals.

While it is a thorough and interesting discussion it is actually what goes unsaid, or is taken as self-evident, that was most provocative to me. For example, in reviewing the various forms of socialism, social democracy, defined as a largely capitalist economy with a strong state and extensive social welfare programs, is quickly brushed aside as a failure with it being said (p. 247):

The ideological onslaught of neo-liberalism, combined with First and Third Word debt crises, the collapse of the state socialist economies, and the structural adjustment programs of the International Monetary Fund, pushed social democracy aside in the 1980s and the 1990s.

Social democracy having been “pushed aside” would probably be news to people in much of western Europe. That there may have been cutbacks in some social programs would hardly seem a reason to be so dismissive of a social system which seems to provide a very high quality of life to tens of millions of people in the world today.

Further, while Wilpert later goes on to describe a very egalitarian and just society where capitalism has been replaced by things like “self-management” and exchange is dictated through “participatory planning” these concepts have never been fully implemented nor endured anywhere. So while social democracy may have its draw backs it would seem that it has worked well enough and broadly enough to be worthy of consideration by Venezuelans.

In reading through what Wilpert thinks 21st Century Socialism might look like it becomes apparent that he is quiet, for lack of a better term, idealistic. That is all well and good. We all should strive for creating the best society we can. But sometimes I had the feeling his idealism was getting the best of him. For instance, in a section on worker control of enterprises he states (p. 353):

Cooperatives have over and over again proven to be every bit as – or more – efficient and productive as traditional capitalist enterprises, so there is no reason to be concerned that cooperatives would lead to economic stagnation and decline, as is sometimes argued.

Amazingly, for a book that is exceedingly well documented and sourced this anything but obvious statement is undocumented and unsupported. Surely, no one can be expected to go through with an entirely new organizational paradigm without some reason to believe it would actually work – unless idealism and faith are enough.

In other places he makes statements that are very true, but as even he notes in other sections, not in line with present day Venezuelan reality. For example, in his “Five Guiding Principles” for building 21st Century Socialist institutions he states (p. 251):

…ideas for developing institutions for a better future cannot be dogmatic. That is they cannot treat texts, ideas, or leaders statements about anything as unquestionable dogma. Another way of putting this is to say that the model and its analysis and justification must be based on an open mind and must be open to revision and modification in light of new ideas and new evidence. Too many movements for a better society have deteriorated because they took the ideas of a certain individual or text as the last word on all matters.

What can I say - Chavez must not have gotten that memo. But more on that later.

Almost certainly the biggest omission was the lack of a discussion regardingVenezuela’s current state of development and how that impacts any decisions on what political and economic systems should be employed. Rather than address Venezuela’s underdevelopment and relative poverty Wilpert very curiously refers to Venezuela as being “relatively rich”. I can honestly say “rich” is an adjective that has never come to my mind riding into Caracas from Maiquetia.

It is worth noting that Marx himself saw socialism as something that would only come into being after countries were developed by capitalism, a system which he acknowledged excelled at bringing about rapid economic growth. In fact, Marx derided those who advocated socialism in as yet undeveloped countries, saying that socialism in such circumstances would accomplish nothing but redistributing poverty (ie, making everyone poor).

It would seem that this should be obvious; that the problem of health care in Venezuela isn’t just unequal distribution, but that there aren’t enough doctors, nurses, hospitals, and medicines to go around; the problem of housing can’t be resolved by simply parceling out estates in the exclusive Country Club neighborhood, Venezuela needs millions more houses; and even having supermarkets give away everything for free wouldn’t be enough to give all Venezuelans three meals a day.

The Venezuelan economy simply doesn’t have the ability to give the majority of the population what most people would consider an adequate standard of living. How to change that state of affairs would seem to be something that should be a top consideration in deciding how to re-structure an economy. Stunningly, it is never brought up as a consideration or otherwise mentioned in this otherwise fabulous book.

I find this emblematic of much of the debate on Venezuela. While the virtues of capitalism and socialism are heavily debated in this blogger’s opinion Venezuela doesn’t need capitalism or socialism per se – it needs an economic system that will allow for the quickest economic development possible.

The main part of the book opens with a very brief overview of how Chavez came to power and the most important events of his eight years in power. While this summary doesn’t cover any new ground Wilpert does put forward an interesting thesis – that Chavez didn’t start out as much more than a social democrat and was only radicalized and turned to socialism over time saying (p. 28):

If the opposition had merely accepted its defeat in 1998 and had recognized Chavez’s legitimacy as the elected president of Venezuela from the start, it is quite likely that Chavez would never have moved towards an all-out effort to create “twenty-first century socialism” in Venezuela. We will never know whether this would have happened for certain, but it cannot be denied that Chavez radicalized his program in reaction to the opposition’s actions and not the other way around.

Without being in Chavez’s head this is impossible to know. But it strikes me as equally likely that Chavez was a socialist all along and simply moved further along that path as he overcame obstacles and potential threats and the path became clearer.

Wilpert then gets to his central task - evaluating Chavez government policies and how they further or retard the movement toward 21st Century Socialism going through governance policy, economic policy, social policy, and foreign policy in successive chapters. Even those who are intimately familiar with Venezuela under Chavez are likely to be impressed all over again by how much this government really has accomplished in 8 years.

For example, it is easy to think of the new Constitution written in 1999 as simply an empty document. Yet as Wilpert reminds us it did things like finally recognize women as being fully equal to men and in something almost unheard of recognizes women’s domestic work as creating value added worthy of recognition and compensation. Empty words? Under this government not at all. Housewives are now being incorporated into the social security system and hundreds of thousands of poor mothers now receive monthly stipends as compensation for their work.

We also learn 16,000 communal councils have been established with throughout Venezuela. Not only have they received billions of dollars to fund their projects but their decisions are binding on mayors and possibly will be on even higher levels of government in the future.

As part of a new economic model over 100,000 co-operatives have been created. These co-ops now employ of a million Venezuelans. At the same time over 3 million hectares of land have been redistributed to 200,000 families. And with an innovative urban land reform 600,000 barrio dwellers for the first time have title to their homes.

One startling statistic that demonstrates how things have changed under the Chavez government is that between 1992 and 1998 public school enrollment was flat at 5.5 million even though the countries population is growing very rapidly. In a complete reversal, during the first 3 years of the Chavez government school enrollment increased by a million students. Clearly it is all a matter of priorities and the Chavez government has very different priorities from governments that came before.

That these different priorities have led to a better life for millions of Venezuelans is beyond dispute. Then again, even reformist governments such as the one led by F.D.R. bettered the lives of millions.

So again the question is what are the changes made by Chavez all about, where are they headed, and can the positive changes be sustained? While the author doesn’t have a crystal ball any more than the rest of us do he does an excellent job of enumerating many of the internal contradictions of the “Bolivarian Revolution” and obstacles that it will have to overcome if it is to survive. And just as with its accomplishments, these are many.

In the economic sphere Wilpert recognizes that the Venezuela’s continued dependence on oil revenues is constantly threatening to undermine the entire project. For example, with the afore mentioned co-operatives largely dependent on government largesse the hundreds of thousands of jobs they create could evaporate in an instant should oil revenues fall.

Yet the economy is one topic where Wilpert’s generally insightfull analysis fails. For example, he completely misunderstands the “Dutch Disease” when he writes the following (p. 102):

However – and this is the second obstacle, the Dutch Disease – just as happened in the 1970s, the huge oil revenues undermine non-oil sectors because the revenues represent an increase in Venezuelan’s incomes that is not matched by increased productivity. That is, it ends up being cheaper (again) to import agricultural and industrial products than to produce these in Venezuela. In other words, high oil revenues, the very phenomenon that allows Chavez to “sow the oil,” also undermine the non-oil economy. This fundamental contradiction cannot be resolved as long as the government allows market mechanisms to play a predominant role in determining allocation.

This is really very wrong and gives Chavez a free pass on something he definitely does not deserve one for. It is true that oil rich economies tend to price themselves out of other economic activities and live off their oil income. But there is nothing inevitable about this – it is simply that governments that rule oil rich countries often find it expedient and easier to live off their oil rents than engage in the hard work of building a more diversified economy.

Currently this Dutch Disease manifests itself in Venezuela through an overvalued currency and very high levels of consumption relative to investment. Yet the Chavez government could change that very easily if it wanted to. Instead of using currency controls to keep the Venezuelan way over valued, which heavily promotes imports while stifling exports, Chavez could devalue it, yet he chooses not to [the very ironic fact that Chavez has in effect used a very large portion of Venezuela’s oil income to feed a consumption frenzy amongst the middle classes which largely despise him anyways has always mystified me].

Further, instead of just giving wage increase after wage increase and bonus after bonus to government workers more money could be used for productive investments, paying down debt, and even saving up for a rainy day. These measures would help cure Venezuela’s very bad case of the “Dutch Disease” and help wean Venezuela from its dependency on black gold.

So there are no “fundamental contradictions” here nor is it the fault of market mechanisms. Rather, these policies, which threaten to take Venezuela’s economy off a cliff and most of Chavez’s accomplishments with it, are the result of deliberate government policies. Presumably the government has its reasons for following these policies (maybe its near constant electoral campaigns lead it to always want the economy running at fever pitch?) but if they aren’t changed soon it should be clear who will be responsible for the day of reckoning which will inevitably come.

One of the biggest contributions Greg Wilpert has made with this book is his recognition and diagnosis of some of the internal political contradictions and failings of the Bolivarian movement. Namely, that in spite of it being a “socialist” movement aimed at empowering the Venezuelan citizenry in reality most power is growing ever more concentrated in one person and internal dissent and good faith critiques are met with suspicion. Wilpert summarizes this problem excellently saying (p. 190):

However, the policies for creating a participatory democracy are undermined by the creation of a strong presidency and the persistence of an old public administration that operates according to very hierarchical principals. Despite the participatory nature of the social programs known as missions, practically all other areas of the government operate in a very top-down manner, where the president is the foremost commander and chief and everyone else has their place in the hierarchy and it expected to obey uncritically. The inability to distinguish loyalty from uncritical obedience makes the implementation of policies not only non-participatory, but also resistant to the correction of mistakes in accordance with criticism from below.

Wilpert attributes much of this tendency to the Chavez government having often been under siege by an extremely hostile and undemocratic opposition. Certainly there is truth to that. Yet at least for the past two years the opposition has been effectively marginalized and the government has not been under any real threat. Yet this siege mentality remains just as bad and in fact may even be getting worse.

For example, in events that happened after this book was written the pro-Chavez political party PODEMOS was promptly denounced as counter-revolutionary for even wanting to discuss proposed Constitutional reforms. So while it may be more comforting to view Chavismo’s intolerance of internal dissent as a defense mechanism the unfortunate reality is it probably results from Chavez’s personality.

As Wilpert points out, while Chavez has been an indispensable leader without whose extreme determination, singularity of purpose, talent, and extreme confidence in his own ideas and beliefs Venezuela could never have reached this point, the flip side of some of those traits, self-assuredness to the point of arrogance and inability to accept criticism are now becoming serious problems (p. 234):

It is Chavez’s charisma that managed to unify an otherwise extremely internally divided left in Venezuela and which to a large extent has contributed to winning one election after another…. At the same time, it is this charisma that creates an overdependence of the movement on Chavez, for giving it unity, and it thus creates a very personalistic politics, where faithfulness to the Bolivarian project, loyalty to Chavez, and uncritical acceptance of all Chavez’s policies are seen to be one and the same thing.

In other words, the Bolivarian project faces a contradictory situation in which, on the one hand, it would never be where it is without Chavez and his charisma, and his strategic vision, and on the other hand, the movement’s dependence on Chavez and his charisma reproduces some of the worst aspects of the previous regime that the movement set out to overcome.

Despite all these obstacles and internal contradictions Wilpert manages to remain optimistic about the overall project and its chances for success. Unfortunately this observer of the situation is less optimistic.

In just eight years it isn’t to be expected that a countries centuries old problems can be resolved, much less a radical new system put in place. Nevertheless the country and the movement should at least be headed in the right direction. Yet with the Bolivarian movement we see that in key areas, such as the economy and internal democracy, it has festering problems that are if anything growing worse. Moreover, there is no hint that these problems are even acknowledged by those in power, much less discussed and solutions sought.

One possible reason for this is that it is widely understood that one of the downsides of success are complacency and arrogance. It could be said that the recent string of victories on the part of the Bolivarian movement instead of giving it an opportunity to reflect on its shortcomings, correct weaknesses and mistakes, and be even stronger going forward has led the movements leaders to have a sense of infallibility.

Yet unless this complacency is overcome Venezuela's festering problems and internal contradictions will almost certainly blow up in the face of this project destroying much, if not all, of what it has accomplished. Neither time nor resources are infinite, even though the recent long run of success may make it seem to some that they are, and unless they are used more wisely this project will almost certainly fail.

Of course, others may come to different conclusions. But for anyone wanting to make a serious appraisal of what is going on in Venezuela and what its chances of success are there isn’t a better place that you could begin than reading Changing Venezuela by Taking Power.

I am sure that most other readers, regardless of their views on Chavez, will find it to be equally informative and thought provoking. I am also sure that even if they, like me, are not as optimistic as the books author, they will still hope his optimism is ultimately vindicated.
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