Chavez’s Socialism Has Been a Disaster

When Venezuela’s president, Hugo Chavez, died, the Left eagerly rushed to defend and praise him. Why? Well, let’s hear them out: “President Chavez cared deeply about the poor,” said Citizens Energy President Joe Kennedy. “We hope that as Venezuelans recall [Chavez's] positive legacies — especially the gains made for the poor and vulnerable,” said former president Jimmy Carter. “Poor people around the world have lost a champion,” said Hollywood actor Sean Penn. In short, Chavez is good–”[a] great hero” (in the words of Oliver Stone)–because he was concerned with the poor.

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Yet, Chavez’s socialism has been a complete and utter disaster. Especially for the poor.

Chavez’s policies have undermined the country’s industrial sector. Thousands of businesses have disappeared and hundreds of thousands of jobs have been lost as a result. Labor participation has gone down from 52% to 46%. And with an average unemployment rate of 11%, the country has been suffering from mass unemployment ever since 1998. As a result of the Venezuela’s shrinking industrial base, the country is more dependent on imports than ever. In the past, the country produced other things of value besides oil. Not anymore. Now it’s virtually all the country is producing. Thus, oil constitutes almost 100% of its exports.

To pay for Chavez’s welfare programs, the government has resorted to money printing, i.e., inflation. And as a result, the cost of living has gone up by an average of 24% per year. Since 1999 “the cost of the dollar in bolívar terms has risen more than tenfold” (“The not-so-strong bolívar”, 2013/2/11, The Economist). Considering that the country is importing 70% of the food it needs, that translates into a substantial reduction of the Venezuelan standard of living. Real wages have dropped by 40% since 2000. Venezuela is actually the only country in the region with declining real wages. (“The Twisted Economics of Twenty-First-Century Socialism”, Foreign Affairs.)

In response to the very inflation caused by the government printing too much money, Chavez imposed price controls. The result? Now “shortages of staples like milk, meat and toilet paper are a chronic part of life” (“With Venezuelan Food Shortages, Some Blame Price Controls”, 2012/04/20, New York Times). So, although you may be earning more than $1 per day, you’re obviously not better off if your money is not worth anything and there’s nothing to buy.

Chavez has also resorted to treating state-owned companies as cash cows, plundering them for all of their worth. Venezuela’s state-owned oil company, PDSVA, generates almost 50% of the government’s revenues. As a result of this unsustainable capital consumption, the PDSVA is now producing 25% less oil than it did in 1998. In his hunt for new companies to loot, Chavez has expropriated 1000 companies, including hundreds of foreign-owned companies. Since then the capital flight from Venezuela has only intensified and private investments have dropped by nearly 80% between 2007-2010.

Chavez’s war on capitalists has led to a severe shortage of capital–the very capital necessary to maintain the country’s infrastructure and industrial production. We are already witnessing how the country is literally falling apart due to the lack of capital: “Roads are crumbling, bridges falling, refineries exploding. A wheezing power grid condemns much of the country to rolling blackouts.” (“Hugo Chávez: a strongman’s last stand”, 2012/10/2, The Guardian.) Unless this trend reverses, life in Venezuela will, of course, only continue to deteriorate.

The sole reason the economy hasn’t yet collapsed under the weight of Chavez’s “21st-century socialism”, is because the country has been propped up by an international commodity boom which drove up oil prices from $9 to $100. That’s right: we, the great oil consumers in the growing capitalistic economies, have in effect been subsidising Chavez’s regime; it’s capitalism which has kept socialist Venezuela floating.

This cannot go on indefinitely. Chavez has left the economy in ruins by consuming the nation’s savings today, leaving the country with no means of producing (or consuming) tomorrow. What does the future hold for Venezuela? It doesn’t look too bright. Today the country can barely feed itself despite its oil reserves. What can we, then, expect the day after tomorrow, when Venezuela’s oil industry falls apart?

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  • http://www.facebook.com/BuzyLiz Lizette Dufour

    Sounds like Capitalism in the USA. Is capitalism without social conscience and ethics any better. Corporations are getting richer but people are getting poorer. Capitalism out of control doesn’t work neither. I am not socialist but Capitalism certainly is destroying the world with their greed. Just ask the pope the growing poor..

  • JohntheCapitalist

    Yes, it certainly does sound like what is happening in the U.S. but how can you possible relate any of this to capitalism? Capitalism encourages growth, innovation and job creation that in turn creates an environment of prosperity. It is cronyism and socialism that sucks the life out of the individual and the economy resulting in the likes of Venezuela. Did you even read the article, it is not the a free market that is destroying the economy of the U.S. or Venezuela it is government out of control. Viva Obamanation ! Not !

  • Pepe Restrepo

    Svanberg seems like he knows very little about Venezuela from actual experience. He talks like another disconnected intellectual with no real experience. Poverty is the plight of the mass of people and Chávez offered an answer. Prior to him, the capitalists enriched themselves and cared nothing about the lower classes. They lived in contempt of the lower classes and now what we see is the chickens coming home to roost. Saying that Chávez ruined the country falls on deaf ears to the lower classes. They loved Chávez because he knew how to talk to them. The capitalists, in the country clubs and private residences of luxury, can´t relate to the poverty stricken masses. When you are hungry and without hope, logic means nothing, nor does an article like this have any effect on your need to be heard and listened to.

  • jm323

    What is the point of hearing and listening to someone for whom “logic means nothing”? If this is true, then the impoverished masses have nothing of value to say and are deserving of the contempt of the wealthy.
    The underlying premise of your comment seems to be that the “poor and the helpless” are automatically to be regarded as morally superior simply on account of their poverty; and that they are owed something simply on account of being needy. …And, of course, that they are incapable of lifting themselves out of poverty by hard work in an environment in which risk-taking, hardworking people are allowed to keep the fruits of their efforts.
    Did Venezuela really have a laissez-faire capitalist economy before Chavez?
    Chavez’s answer to those among the poor who cried out about their hunger and hopelessness was to offer them a share in the plunder.
    Well, tell me, has the situation improved for the poor? Or is it the case that after the first generous portions of spoils, that there is just less and less to loot and spread about because less and less is being produced?
    Contrast Venezuela’s poor and helpless to Hong Kong’s poor and industrious in the decades after World War II? Did the impoverished Chinese masses of Hong Kong look to a Chavez or a Mao for solutions to their poverty?

  • Pepe Restrepo

    What do you think that I am a supporter of Chávez? I only offer an explanation of what happened. I can tell by reading your post that
    you speak without experience just another rationalistic spin doctor offering up dead-wood opinions absent of real world experience. Have you ever been hungry without eating for two or three days? See how well logic will work on you when you are starving to death with no future in sight.

  • jm323

    LOL!
    Oh, I get it now! …..You are starving yourself right now, …you know, to gain more empathy with the poor and hungry; …and that’s the reason why YOU are incapable of using logic! …Or accepting any assertion that cannot be DIRECTLY perceived by you right at this very moment! …None of that silly abstract stuff for you, eh?!? ….The science of economics, the historical record, the laws of logic, …”Pffffft! Forget that! I just FEEL their pain!”
    Pepe, it sounds like you actually have a very low opinion of the “poor and the hungry” of Venezuela. ….Much lower than, say, the impoverished masses –the formerly impoverished masses, I should say– in South Korea, Hong Kong, Singapore, even Chile! …What’s with that?
    Is your CONTEMPT for the lower classes of Venezuela any where near the degree of your RESENTMENT of the lowerclasses of those other countries I mentioned? (….Oh, I’m sure it is resentment; what else can you feel for those …who so obviously do not need your pity!)

  • Henry Johnson

    Viva Hugo! Viva Venezuela libre!

  • William Ashley

    I must congratulate you because is one of the few citizens that are telling the truth. You are a very knowledgeable man.
    I congratulate you. An excellent article that reveals the hidden truth and that most authors do no know.

  • writeby

    I recall when Cubans said that about Fidel.

  • Henry Johnson

    Yes. So that is.

  • writeby

    Now they–*especially the poor*– speak of him differently.