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Venezuela’s Classic Socialist Path to Poverty and Dictatorship

Venezuela’s Classic Socialist Path to Poverty and Dictatorship

10 Mins
March 3, 2019

It has taken more than two decades for Venezuela, once the wealthiest nation in Latin America, with a long tradition of independence and democracy, to travel the classic socialist road. From 1998, when the country elected declared Marxist socialist Hugo Chávez its president, until today, Venezuela has become an economic basket case and a political dictatorship.

Venezuela’s economy has contracted about 15 percent a year for three years, according to the International Monetary Fund, meaning that since 2013 more than half of the economy has simply disappeared. Inflation has rendered its currency virtually worthless and in many towns all ATMs are empty; the majority of its people go hungry; its cities and towns are periodically and often daily blacked out by power outages; and its medical care system is collapsing with a malaria epidemic taking hold. A continuing terror is the rising crime, especially murder, rate.

Declining continuously throughout the entire two-decade period, political freedom is now on the ropes. A presidential election late in 2018 may be the last, for now. The successor to the deceased Hugo Chávez, Marxist socialist Nicolás Maduro—a bus driver before entering politics––declared himself re-elected and took office. But, in January, the National Assembly ruled his re-election invalid and named the president of the Assembly, Juan Guaidó, to act as president of Venezuela. Maduro refused to leave office.

Venezuela’s politics now take place in the streets. Huge protest marches support Guaidó, smaller counter-protests support Maduro. Use of deadly force by the military and police has soared, with more than 40 protestors killed since January 21 as desperate crowds try to receive emergency shipments of food and medicine at the country’s borders. The shipments, from other Latin American nations and the United States, are being blocked by Maduro’s forces on the grounds that they are “propagandistic,” that there is no emergency and no crisis.

Earlier this month, the liberal British Broadcasting Corporation (BBC) presented a statistical sketch of that alleged crisis:  

  • The annual inflation rate reached 1,300,000 percent in the 12 months to November 2018. By the end of that year, prices were doubling every 19 days on average. This has left most Venezuelans struggling to afford basic items such as food and toiletries.
  • “Venezuela once boasted Latin America's richest economy, boosted by the biggest oil reserves on the planet. But under former president Hugo Chávez, who died in 2013, and current President Maduro, corruption, mismanagement, and high levels of debt have seen the country's economy collapse.”
  • The country's annual living conditions survey revealed that eight out of 10 Venezuelans do not have enough food. Six out of 10 say they go to bed hungry because they do not have the money to buy food.
  • Most people (64.3%) say they have lost weight in 2017, with the poorest losing most. Traditional meals are decreasing in size and quality. Nine out of 10 people can’t afford their daily food. Sources of iron, vitamins and other nutrients are lacking from people's diet.
  • Venezuelans don't have enough medicines. For example, Venezuela has suffered a huge rise in malaria cases in recent years in contrast to nearby Latin American countries, where numbers of cases are falling. A former health minister said: "At this pace, we will have more than one million cases in one year. Malaria is out of control in Venezuela."

As a result, three million Venezuelans have fled abroad as refugees. Amnesty International’s director for the region, Erika Guevara-Rosas, reported in September 2018 that “Millions of people have been forced to leave everything behind and walk for days on end to escape massive human rights violations in Venezuela, including arbitrary arrests, extrajudicial executions, torture and violations of their rights to food and health."

This is a glimpse of life in Venezuela, today––a country where nothing works. President Maduro rejects emergency gifts of food and medicine because, he says, “there is no emergency.” The aid, he claims, is simply a way to slander the good name of socialism. He said: "With humanitarian aid they want to treat us like beggars ... in Venezuela we have the capacity to take care of our children and women. There is no humanitarian crisis here."

In fact, Guaidó  and aid organizations in Venezuela have been appealing for the food and medicine, without which, United Nations agencies and others believe, thousands could soon die of malnutrition and untreated diseases. Venezuelan are not “beggars,” but victims of socialism, which they were promised, just two decades ago, would end poverty, hunger, and income inequality.

The strategy of the Maduro government is that of every genuinely socialist government that has ever existed: not to deal with the disaster, but to prevent it from being reported. For years, both Chávez and Maduro took steps to suppress opposition newspapers and television stations—in some cases, for example, purchasing them to bring them under government control. Now, as the crisis of presidential succession, the street protests, and government’s mass shootings worsen, internet access is blocked, social media of all kinds are being blacked out, and Venezuelan and foreign journalists are being arrested or deported. Television shows from inside and outside the country are selectively blocked when they might help the opposition.

Much of this is still denied, or is actively justified, by the Maduro government. But, for example, Jorge Ramos, who the British daily newspaper, The Guardian, characterizes as "arguably the best-known journalist in the Spanish-speaking world,"was detained along with his television members as the result of an interview with Maduro on 25 February. Their equipment and materials were confiscated. It seems that during the interview, when Maduro denied that a humanitarian crisis existed, Ramos showed him pictures of Venezuelan children eating from a garbage truck—and asked again if a crisis existed. Later released from arrest, the team was deported.

Catastrophe did not strike overnight. When Hugo Chávez campaigned and won election as a socialist in 1998, with 55 percent of the vote, his followers were ecstatic. They marched through the streets proclaiming that the day of the “worker” and the poor had come. It was dangerous, then, to disagree in public.

This has been the classic pattern—and dire risks—of the “mixed economies”—half government controlled, half “free”––that have slid into socialism.

Speaking of the "classic" evolution of socialism, it is imperative to acknowledge that everywhere socialism has come to power it has pushed out a certain type of government. Holding political power for decades, Venezuela's traditional political parties up to the 1998 election were dyed-in the-wool “crony capitalists,” with politicians growing rich in deals with the nation's "private" oil companies. As they grew rich, much of the population struggled in semi-poverty. There were handouts, to be sure; but scant genuine "free enterprise" for those not in the crony capitalist elite. Venezuela became an easy target for socialist promises to "share the wealth" of the country's natural resources. This has been the classic pattern–and dire risks–of the "mixed economies"–half government controlled, half "free"–that have slid into socialism.

Coming to power in a wealthy nation, with the largest oil reserves on earth and a working oil-production industry, Chávez had a huge source of cash to spend on his supporters. In the earliest years, socialism seemed to be delivering on its promises. Increasingly, funds were drawn from the oil industry to spend on welfare; investment in the industry declined. Cronies of Chávez took over key executive positions. After all, even Marxists may have good luck—at first. At the time, world oil prices happened to be high, creating a windfall for the socialist government to give away. None was saved, as it had been in the past, to be available as a reserve when, inevitably, oil prices cycled downward—as they have since 2014.

Oil production in Venezuela since the election of Chávez has not increased, as it always had. It has plunged from about three million barrels a day to one million barrels a day. Socialism never has any sustained “luck.” Oil prices fell sharply by the end of 2014, a year after Chávez died from cancer, slamming the country's already struggling oil-dependent economy. In 2015, the national economy began to shrink by double-digit percentages and inflation soared. Oil output has been declining ever since Chávez came to power.

Venezuela has relied on the United States to buy oil, sending two-fifths of its oil exports here. When the January presidential crisis occurred, however, the United States said it would not pay the proceeds of the purchase of Venezuelan oil to Maduro's government. Payment would be made only with recognition of opposition leader Guaidó.

The Maduro government, a year earlier, had begun to raid Venezuela’s foreign reserves of gold, accumulated over many decades. The National Assembly charged that it was illegal for Maduro on his own to seize a large part of the national reserve, sell it abroad, and decide how to use the money. Again, this year, Maduro sold another eight tons of gold from the dwindling reserve. The United States reasoned that Maduro did not have a legitimate claim to sell Venezuela’s oil and decide how to spend the proceeds.

“Economic Dictatorship” Becomes “Dictatorship”

Venezuela’s street protests, though larger and deadlier, are not new. As the economy and standard of living nose-dived, media and other freedoms were curtailed, elections became suspect, and thousands marched in 2017, chanting "No more dictatorship!" It appeared that the demonstrators might march on the office of state “ombudsman,” the government's so-called “human rights advocate.”

An opposition leader at that time, Henrique Capriles, simply stated: "The human rights advocate has to stop being the Socialist Party advocate!" But government forces blocked the march, clashing with young protesters. Protesters threw stones and Molotov cocktails and government forces fired tear gas.

The 34-member Organization of American States (OAS), to which Venezuela belongs, held an emergency meeting in Washington, DC, in response to a decision by Venezuela’s Supreme Court to take over all powers of the National Assembly. OAS head Luis Almagro declared that the court had delivered “the final blows to democracy”; Venezuela had become a “dictatorship.”

The president of the National Assembly at that time, Julio Borges, representing the party of Democratic Unity, declared “Nicolás Maduro has carried out a 'coup d'etat' ... this is a dictatorship…" He tore up a copy of the Supreme Court ruling at a news conference in the gardens of the legislature, saying "This is trash from people who have kidnapped the constitution, rights and freedom of Venezuelans ...”

That official declaration had value, calling attention to the most recent nation—one that had been Latin America’s first to achieve independence from Spanish colonial rule and once was one of Latin America’s wealthiest nations—to travel the socialist road to loss of freedom and economic catastrophe. Several Latin American nations also had taken strong diplomatic and economic stands in opposition to the Maduro government decree.

In another sense, the declarations by the OAS, the U.S. State Department, and others seem formalities to those who understand the inescapable logic of Marxist revolutionary socialism. For a century, in nation after nation, people have begun in delusional celebration of “socialism” and ended in the grip of dictatorship and economic disaster.

“Democratic Socialism” Becomes Dictatorship

For those who speak of “democratic socialism,” it is notable that elections have continued in Venezuela. At first, all the pivotal steps that ended in the government’s seizure of power were against “economic” rights. Chávez had nationalized the Venezuelan oil industry and used the money to create a huge welfare state. That included a system of “Bolivarian Missions” to provide services, directly redistribute wealth, conduct land reform, “democratize the workplace,” and set up worker-owned cooperatives. He simply gave away much of his country’s oil to other countries to gain political influence in Latin America.

When international oil prices plunged, he kept on spending by borrowing and printing money. He was spending more than all foreign profits of Venezuela’s oil companies combined, but oil production kept declining and foreign investment in the country’s oil industry, by 2013, when he died, was half that of 1999, when he took power.

With spending, borrowing, and currency controls (to keep capital from fleeing the country), Venezuela’s inflation rate became the highest in the world. Chávez then nationalized one major industry after another to gain revenues. In response to inflation, he instituted price controls, including on 400 “basic” foods. The inevitable severe shortages of goods, including especially food, began to bring hunger to the land, which has increased year by year. Within a few years, it was reported that some 15 percent of Venezuelans were relying on garbage thrown out by markets and restaurants to survive.

Chávez responded to the severe shortages by requiring producers to produce and sell at the controlled prices; inflation increased more; he sent soldiers to confiscate the goods producers would not sell.

These are a few details of a socialist government’s growing control “just of the economy.” The decline of a major economy into poverty, collapsing production, virtual bankruptcy, and starvation is a complex process. But the pattern has been crystal clear: new economic interventions such as nationalizations and accelerating social spending, then the resulting economic distortions such as declining production and rising prices, then additional economic interventions such as price controls, production controls, and seizures of goods. The pattern has occurred throughout the Venezuelan economy: industry, agriculture, banking, medical care, retailing, trade, and investment.

All major steps have been “just economic,” curtailments of “economic rights.” Until now, elections—although often charged with fraud––have continued. This is democratic socialism.

Other “economic” steps, as noted, have been the purchase by government of opposition newspapers and other media. Today, only one television station opposing government remains, and it is under heavy pressure from the regime. Interestingly, the earlier crisis of nullification of the National Assembly also was an “economic” step. The assembly had refused to approve certain joint-ventures for oil production that President Maduro sought. The high court, whose nine judges all had been replaced by Chávez allies in 2010, declared the legislature in “contempt” and assumed all its functions. That was the step that street protests and protests by governments throughout Latin America managed to reverse.

As Ayn Rand demonstrated, and illustrated many times, without property rights there can be no other rights.

As Ayn Rand demonstrated, and illustrated many times, without property rights there can be no other rights. All translation of our ideas, plans, and goals into reality requires property. Mind and body, plan and action, idea and production are inseparable. If we cannot acquire, create, use, and enjoy property by right, then all we do in life is by permission of government to "use" public property."

There have been desperate attempts to try to deny the connection between socialism and economic disaster. As Venezuela plunged into economic misery and freedom came under attack, an article in the Washington Post (January 2017) argued that, yes, Venezuela was a disaster, but that didn’t prove much about socialism. It cited other Latin American nations that proclaimed themselves socialist—and seemed to be doing fine. The “best case” was Bolivia, where President Evo Morales proclaimed himself socialist in no uncertain terms. But under his presidency, so far, the Bolivian economy has thrived and poverty been reduced. So where is the connection?.

An article by the Foundation for Economic Education (FEE) pointed out that for an economy to qualify as “socialist” required more than talk. The defining principle of socialism is public ownership of the means of production, “socializing” of business and industry. The author wrote: “By definition, socialism is state control of the means of production. In Venezuela, between 2002 and 2012, 1,168 private companies were expropriated, or taken over by the state. In Bolivia, between 2005 and 2015, only 20 private companies had been commandeered by the government.”

Yes, Bolivia’s chief industry, gas, is publicly owned, but it is run by private companies while government takes its cut of the profits. Like oil in Venezuela, gas in Bolivia enjoyed a rocketing price on world market up to 2014, giving the Morales government a six-fold increase in its share of profits (again, even socialists can be lucky at first). The Morales government used that windfall to pay down the national debt; it did not spend it, and more, as did Venezuela. When the downturn came, Bolivia had a big reserve and options.

Other Latin American nations have tried some degree of socialism without disastrous results. In some (e.g., Chile), the military intervened, stopped the advance of the Marxists, and, sooner or later, stepped aside for return of democratic elections. In others (including Bolivia), not socialism but a welfare state was set up, while major elements of a market economy continued to exist. Without the economic collapse hastened by government seizure of business, a country may avoid the chaotic poverty, inflation, and corruption that is used by socialist governments to justify the repression of freedom well advanced in Venezuela.

The Uncomplicated Hugo Chávez

Returning to Venezuela, it is relevant to ask: Who was Hugo Chávez, the socialist revolutionary, hero of the people, and friend of the downtrodden—the man who snuffed out freedom in Venezuela? I have called Venezuela’s experience a “classic” in the tragically repetitive history of Marxism. So, too, in many ways, was the rise of Chávez.

Much of his biography comes in multiple versions. He was born in southwestern Venezuela in 1952, one of six sons of two school teachers. One version emphasizes his proletarian poverty, another his middle-class upbringing. The Encyclopedia Britannica reports that as a teenager his views were shaped by a local historian who introduced him to the ideas of Karl Marx and Latin American colonial liberator, Simon Bolivar. Other reports are that he encountered the writings of Marx, Lenin, Bolivar, and others later in life. There is no disagreement that revolutionary Marxism shaped his views of the future of Venezuela and Latin America.

At the same time, he was attentive to the communist guerrilla insurgency, FALN, underway in Venezuela during the 1960’s, inspired by the then new Cuban Communist dictator, Fidel Castro. Castro would become Chávez’s inspiration and ally.

At 17, Chávez entered the Venezuelan Military Academy. He did not like to study, his passion was to play baseball, and the Academy had a good team. Chávez played, but could not make the grade. The Britannica reports that he was incompetent in his studies and graduated last in his class. Wikipedia reports that he graduated first in his class.

First or last, he emerged with the standard military commission of second lieutenant. Chávez served for two decades, much of it fighting (or later monitoring) communist guerrillas. Not surprisingly, he became disillusioned: weren’t these peasants fighting for their economic rights? He did not resign his commission, however; he became a traitor, collaborating with the guerrillas. In 1982, he and fellow officers created the clandestine “Bolivarian Movement 200” to spread the philosophy of revolutionary Marxism throughout the military.

In 1982, Chávez led officers in a military coup to overthrow the government of Venezuela. Since 1958, when democrats had united to seize power from a long line of authoritarian governments, the Democratic Unity movement had governed in Venezuela. It was this relatively new democratic regime that Chávez and his insurgents attacked. Although every other team in the insurgency achieved its goals, Chávez’s team failed and the coup collapsed. This, however, Hugo Chávez turned to his own profit.

At the head of his guerrilla team, he was surrounded by government troops. He capitulated and offered to call upon the other insurgent teams to do the same. Given just two minutes on television, urging his co-conspirators to give up “for now,” Chávez discovered the power of his rhetoric and personality. The brief speech stirred the hopes of many Venezuelans and began Chávez’s rise to power.

The government would have been justified in executing Chávez. He had betrayed the army by collaborating with the enemy. He had conspired to undermine armed forces discipline. And he had led an armed coup against the government and personally led a team to take the president of Venezuela prisoner.

The liberal government put him in jail; two years later, as his political popularity grew, he was released. Lenin, Hitler, Ho Chi Minh, Castro, and other future triumphant dictators all were in prison at one time or another and released. Let us hope that Venezuela does not pay as high a price for this folly as did Russia, Germany, Vietnam, and Cuba.

He founded the political party, “The Fifth Republic Movement,” attracting sundry socialist activists, Castro-admirers, and military officers. He was the classic “outsider,” imprisoned for his convictions, righteous in his call for the morality of socialism, sweeping in his promises to the masses, and, perhaps most appealing, a stark contrast to a string of “centrist” governments with their compromises, cronyism, and “normal” corruption. Such governments all over the world have fallen to the fiery idealists of revolutionary socialism. Chávez was open about his Marxism and openly scornful of the “neo-liberalism” of the market economies rising around the world. Above all, he attacked American “capitalism.”

In the election of December 1998, he won the presidency with 55 percent of the vote. The people of Venezuela had chosen by vote a future of socialism. It was an undeniably democratic choice.

End of the Road

It has taken Venezuela two decades to become a socialist dictatorship. By 2013, the respected “Index of Economic Freedom,” which annually compares all nations in the world based on a series of carefully tested benchmarks of freedom, ranked Venezuela almost last: 174 out of 177.

Today, Venezuela’s people are gradually starving to death, their savings and earnings are in a currency virtually worthless, their street protests are met by bullets, and the peaceful succession of power by democratic election is a thing of the proud past.

It is reported, now, that widespread arrests by Maduro’s police and intelligence services have begun, arrests focused for the time being on members of the Venezuelan military. Maduro’s government is increasingly fearful that the military will take part in a coup against the regime. It is reported that many Russian and Cuban operatives are filtering into Venezuela to protect Maduro and the socialist government.

On every hand, though, opposition is appearing. Typical of the evolution of Marxist socialist regimes, there is a moment when, in order to survive, the government drops all pretense at respecting rights, the rule of law, and due process so that it can crush all political opposition. Having put behind it this historically typical act of smashing all opposition parties, the dictatorship moves to create a massive apparatus of secret police to guarantee that opposition never again threatens the permanence of socialism.

If this is to be Venezuela’s fate—as it was the fate of Russia, China, Cuba, Vietnam, Cambodia, and other socialist experiments ending in totalitarianism—then the Venezuelan people are entering upon a long night. It is encouraging that the opposition in Venezuela is widespread, specifically and articulately anti-socialist, and supported by other nations. Given the glaring century-long historical record of genocidal killing of their own populations by governments that followed the logic of socialism to its end, the opposition must stop at nothing to save Venezuelan freedom.  

Walter Donway


Walter Donway

Walter Donway was a trustee of the Atlas Society from its founding until 2010. He launched the organization's first publication, "The IOS Journal," and contributed articles and poems to all later publications. He is the author of poetry collections, novels, and works of nonfiction, including his book, "Not Half Free: The Myth that America is Capitalist," with a foreword by David Kelley. He analyzed the philosophical meaning of the 2016 presidential election, and the import of Donald Trump's election, in his book "Donald Trump and His Enemies.: How the Media Put Trump in Office." He is an editor and regular contributor to an online magazine, "Savvy Street," that presents current events in the context of Objectivism. He lives in East Hampton, New York, with his wife, Robin Shepard.

Walter Donway
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Walter Donway

"Walter's latest book is How Philosophers Change Civilizations: The Age of Enlightenment."

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