It’s not “Special,” It’s Socialism
I still remember my childhood trips to Venezuela and long what I left behind. Caracas was a vibrant city, filled with nice restaurants, busy malls, and close to gorgeous beaches. Weekends on Venezuela’s main vacation island - Margarita - were identical to days at upscale resorts in Florida or the Carribean. It was metropolitan and very wealthy nation - not far off from some of our Western democracies.
During the period I visited—throughout the early 2000s—Chavez’s welfare reforms won him reelection and the poor, as well as Labour politicians, worshipped him. The working class flocked to his rallies and faithfully turned out to vote. Poverty rates went down and support soared, but one thing was clear - the center could not hold much longer. Not as Chavez’s nationalized industries shrank oil production and national revenue dropped.
Throughout his time as president, Chavez had some key victories for his socialist cause. For one thing, he succeeded in banning term limits on his presidency. Though not an explicitly socialist policy, it broadened his reach to promote his brand of Chavismo - a wholly socialist vision. As for the poor, Chavez indeed decreased poverty rates and raised literacy and health statistics among the poor. And he did so by nationalizing private industries.
Free education, sweeping healthcare benefits, food subsidies, and nationalized industry—it should all sound familiar. It might conjure pictures of Bernie Sanders or Jeremy Corbyn, of happy students and excited voters. But what do we get in the end? Hungry children and congested hospitals—pictures are not reality.
Chavez pursued - wait for it - social welfare policies. Venezuela was not an outlandish, utopian state, as many Labour or liberal pundits would have us believe. It was a mainstream case of democratic socialism. And this worked. For a little bit.
These changes—though temporarily positive—were built on a shaky platform. Chavez funded his social programs with national oil revenue from PDVSA, Venezuela’s state oil company, nationalized in 1976, and secondarily from revenue gained by nationalizing 1,168 companies, spanning from agriculture to petroleum, from 2002 to 2012. What’s more, in 2003, Chavez took away PDVSA’s largely autonomous status and replaced tens or thousands of workers with loyalists. Now, cash was available for the government to spend, but what would be the fate of these state industries? In the words of Juan Carlos Hidalgo, a Latin American policy analyst at Cato: “Most of them were run into the ground due to sheer incompetence, sleaze and negligence, decimating Venezuela’s productivity.”
The plan initially worked twofold: Chavez could be praised for his generous welfare and progressive thinking while also benefiting from the corruption and mismanagement of the oil industry that cost the country billions and enriched its leaders. PDVSA itself claims that its main end is to enrich the people and the nation: it is a company “subordinated to the Venezuelan State and profoundly engaged with the genuine owner of oil: The Venezuelan People”. And for a time, this was true. According to the World Bank, poverty dropped from 54% in 2003 to 26.4% in 2009. Chavez was elected to office in 1999 and replaced PDVSA engineers and employees with loyalists throughout 2002. At the same time, his most loyal supporters were being enriched with billions of dollars and Chavez, himself, was living in luxury.
The hoax of socialist policy is such: you can immediately deliver on your promises. Until the money runs out, you can spend it, and you can spend it on helpful measures. But what happens when the money ends? What happens when these programs do not have another source of income? What happens when you drain your country to its last drop?
All of a sudden, in 2007, after a major loss of professions in the petrol industry following Chavez’s mass-firing, oil production went plummeting. According to a BP review, production went from just under 3.5 million barrels a day to about 1.5 million a day in 2017 under Maduro. Yes, PDVSA may have been “profoundly engaged with the genuine owner of oil: The Venezuelan People”, but it also fell victim to “sheer incompetence, sleaze and negligence” under the control of self-enriching, underqualified Chavista cronies.
PDVSA (being a nationalized company) could not keep up with the global oil market. It failed under Chavez and thus, the welfare programs that depended on its revenue also failed. In the face of these inefficiencies and government price controls, poverty rates skyrocketed to 82% in 2017.
What’s more, a nation that had briefly experienced the benefits of a robust welfare state was immediately left with nothing. The centre fell through and left a disaster: no welfare and no competitive oil industry to salvage the economy.
Is this a detached reality for places like the UK, where socialism is becoming the mainstream? Is Western socialism more “sophisticated”? Well, for one thing, these places are not that different from Venezuela. Venezuela is not a “special,” “off-brand” form of socialism. It is true that it is a country plagued with corruption - but that is inevitable when all power has eventually been usurped by one entity - the government. Venezuela was once the gem of South America and a very rich nation - one where Europeans settled and entrepreneurs flocked. Today, still sitting on one of the largest oil reserves in the world, it stands decimated.
Yes, we may be rich, and yes, we may have good intentions, but how far can these factors take us? Venezuela was primed for success, and within a decade, not-so-utopian socialist reforms destroyed the country and left its once-poor people, even poorer.