Affronting a Global Assault

A foreign exchange student I went to high school with in 1970 was a beautiful girl from Caracas who went on to become Miss Venezuela. As first impressions go, Venezuela has since always held much interest for me as a beautiful nation with beautiful people. During the 1970s, Venezuela was the richest country in Latin America. With the region’s highest growth rates and the lowest levels of inequality, it was also one of the most stable democracies in the Americas. In the mid 1980's I found myself working indirectly with the Venezuelan government and military to procure mothballed 737- and 747-class Boeing aircraft for a emerging airline to service a proposed gambling empire on Marguarita Island off the coast of Caracus. All very exciting enterprise, but one that gave me an appreciation for the connectedness between peoples in North and South America, especially Venezuela. By the mid 1980's, however, things were beginning to unravel in Venezuela, with three coup attempts and one presidential impeachment before 1990. Per capita growth plunged, and mass protests became the norm. The productive people I had become acquainted with became angry.

Today, as Venezuela careens toward a further economic and political collapse, the blame game is heating up. In the U.S., Republicans are labeling the country “socialist,” using Venezuelan problems as a weapon against more left-leaning Democrats. Commentators on the left, in retort, argue that Venezuela is more of a failed petro-state with bad leadership rather than a failed test of socialist ideals. Who is right?

If we look at government spending as a percentage of GDP, Venezuela seems far from socialism. In recent years government spending in Venezuela has been measured at about 40 percent of GDP (with the caveat that these statistics are not fully reliable). For the U.S., the corresponding figure is about 37 percent.

Emerging economies, however, typically cannot afford the same government programs as wealthier countries, and they cannot run them with the same efficacy. Poorer countries that try to expand their governments to size, like Brazil and Venezuela, to that of wealthier countries typically encounter sub-par economic performance. The South American failures are indeed stories of big government run amok, as some conservatives are suggesting.

Rates of change are important. The Venezuelan figure of about 40 percent is up from about 28 percent in 2000, a quite abrupt increase. By boosting government spending so quickly, the Venezuelan government was sending a message that the key to future riches is courting government favor, not starting new businesses.

Or consider exports, which for most developing economies play an especially critical role. They bring in foreign exchange, provide contacts to foreign markets, and force parts of the economy to learn how to compete with the very best foreign companies. Yet over 90 percent of Venezuela’s exports are oil, and those resources are owned and controlled by the government. For this all-important growth driver, Venezuela comes pretty close to full socialism — to its detriment.

Chile has prudently managed its state-owned copper reserves (also a big export earner), but Venezuelan leaders have treated state oil money as a slush fund for themselves and their cronies, and furthermore they borrowed against future oil revenues. The daughter of former President Hugo Chavez, who died six years ago, is still reportedly one of the richest women in Venezuela. Of course that came largely from state resources, and it happened while the Venezuelan citizenry was sinking further into poverty.

In fact, nationalizations under Chavez were numerous — encompassing much of the oil sector plus parts of the agriculture, transport, power, steel, telecommunications and finance industries. Even though many of those nationalizations were small in scale, the threat of further encroachments on private property rights discouraged investment and sent the wrong signal about where the nation was headed.

And this may be the most important point: Socialism, capitalism and other systems matter not only for the conditions they create but because of the ideas they propagate. This is true even if these ideologies are followed incompletely or imperfectly. One simple way to trace that influence for Chavez is to look at Wikiquotes, where you will find plenty of utterances against globalization and the market economy. “Privatization is a neoliberal and imperialist plan,” he said in 2005. “Health can’t be privatized because it is a fundamental human right, nor can education, water, electricity and other public services. They can’t be surrendered to private capital that denies the people from their rights.” That rhetoric of victimization and absolute moralizing against markets doesn’t sound so different from a lot of what I hear from non-Venezuelans on social media.

Like his praise for anti-capitalist, anti-American regimes such as Belarus and Iran, a lot of Chavez’s rhetoric might have been written off as political posturing. But it has continued under his successor, Nicolas Maduro, who has also failed to use his post to educate Venezuelans about the benefits of capitalism and globalization — in stark contrast to many East Asian leaders. Instead, the promotion of socialist ideas has helped to make Venezuelan society less economically robust and more vulnerable to collapse.

And while many on the left are now keen to disavow any connection to the Venezuelan disaster, their earlier enthusiasm is on the record. Greg Grandin, writing in The Nation in 2013, offered a laudatory take on Chavez and suggested that Venezuela “might be the most democratic country in the Western hemisphere.”

Yes, there are some exaggerations and mis-characterizations in the right-wing charge that Venezuela’s system is socialism, pure and simple. At the same time, however, the evidence shows that, for some parts of the ideological left, the cause for embarrassment is very real indeed.

The President was in Miami last night giving a speech about the dangers of socialism, with all that is going on in Venezuela. On the Fox Business Report, commentator Lou Dobbs asked Dennis Gartman hypothetically what would happen if in November 2020 we elected a far-left socialist Democrat to the White House. Gartman replied it would immediately collapse the markets. "If we've learned one thing in the last 70 to 100 years, it's that socialism, communism, and Marxism are deleterious to any kind of economic activity. It destroys societies; it does not give you strength, it gives you weakness; that would be the worst thing. The problem is they are teaching socialism in our schools. That has to stop"

The play that is being made in Venezuela is a big deal. As goes Venezuela, maybe so goes the United States. Capitalism is making a stand against the advances of a paradigm of thinking that has never successfully led nations to prosperity and and people to happiness. The acronym WWG1WGA includes all the peoples of the world. Our stand against socialism and top-down elite control must be global. I hope before the end of days to once again see the beautiful country of Venezuela thrive and prosper as it once did with its copious resources and wonderful people.