Venezuela’s Economy Was Falling Apart Years Before Oil Prices Collapsed

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4 MIN READ - CO very much enjoyed this Economic overview of Venezuela from the Cautious Optimism Correspondent for Economic Affairs and other Egghead Stuff.

As Venezuela suffers from chronic inflation, shortages of food, basic consumer staples, and running water, power blackouts, shrinking oil production, empty shelves, dwindling foreign reserves, hunger, street violence, and long lines outside stores, we’ve seen an explosion in excuses from socialists and left-wing progressives blaming anything other than socialism itself. Economist Lawrence Reed discusses the constantly moving target for socialists—the definition of socialism itself—here:

https://fee.org/articles/socialism-force-or-fantasy/

But I’d like to address some of the common excuses parroted to exonerate Venezuela specifically:


1) “It wasn’t real socialism.” 

During the first few years of Hugo Chavez’s nationalizations and lootings, the same apologists claiming it’s not real socialism today were praising Chavez’s “Socialism for the 21st Century” then—as he showered the poor with seized wealth (while it lasted). Hollywood celebrities, left-wing academics, and even a Nobel Laureate incessantly lauded Venezuelan Chavismo as proof-positive that socialism works... until it didn’t. At which point it suddenly wasn’t “real socialism” anymore.

In other words, it’s socialism until it isn’t.


2) “Venezuela isn’t socialism. It’s dictatorship.” 

First, all socialism—with the exception of Karl Marx’s vision of the final stage of history: full communism, which no socialist economy has ever come close to attempting—is dictatorship by definition. Even so-called democratic socialism is a form of dictatorship since the seizing of wealth to be distributed and downward price controls must be enforced at gunpoint. Marx himself, who Chavez endlessly cited in public speeches, called the first stage of socialism the Dictatorship of the Proletariat.

https://en.wikipedia.org/wiki/Dictatorship_of_the_proletariat

But more importantly the same apologists weren’t calling Venezuela a dictatorship years ago either—because they thought it was working. Even though as soon as Hugo Chavez was swept into power he began practicing dictatorship—sending armed troops in to seize foreign energy assets, domestic steel plants, cement plants, department stores, grocery stores, farms, power stations, and more. He seized radio and television broadcasters and took control of the mass-media dissemination of information. 

The Marxian Dictatorship of the Proletariat was established to seize the means of production, and left-wingers in the Americas and Europe praised it as “democratic socialism” (not “dictatorship”) until the predictable result of economic dysfunction and collapse became too obvious to ignore. At which point the problem suddenly became “dictatorship,” not socialism. 

Just as it’s socialism until it isn’t, it’s not dictatorship until it is.


3) “Socialism would have worked, but the USA/CIA has declared economic war on Venezuela by manipulating the world price of oil downwards.”

If the U.S. government really had the power to manipulate the worldwide price of oil downwards from $100 to $26, it would never have allowed oil prices to remain high for the first fifteen years of the Socialist Party’s rule (1999-2014). And if the USA really wanted to “declare war” on the United Socialist Party of Venezuela, wouldn’t it have done so right away—instead of hesitating for fifteen years first? 

With all of Hugo Chavez’s belligerence towards the USA, calling U.S. President George W. Bush “the devil” at the United Nations in 2006, wouldn’t the White House have wanted its pound of flesh and taken revenge before Chavez died in 2013? 

Or did Barack Obama simply wake up one day in late 2014 and capriciously decide, after nearly six years in office, that now was the time to hurt Venezuelan socialists with oil price manipulation? 

For that matter, since the U.S. has been a major oil importer for the last several decades, why has it ever allowed oil prices to rise at all? After all it’s to America’s benefit to manipulate oil prices downwards all the time. The whole idea that one country—even the United States—can simply push a button and ratchet world oil prices down by 75% or more ($26/barrel at the early 2016 bottom) is ridiculous.


4) “OK maybe the USA wasn’t behind it, but the collapse of oil prices is what brought Venezuela down, not socialism.”

But one of the timeless claims going back to Karl Marx is that socialist central planners, being disinterested philosopher-kings whose thoughts only dwell on the good of society and never their own bank accounts, are more forward-looking and adept at anticipating future economic trends than short-sighted, myopic capitalists who only care about the next quarter’s profits. In other words, socialists are better planners.

Venezuela’s socialists came to power in 1999 and have yet to give it up. So in the sixteen years they were in power before oil’s decline, did they never once plan for the eventuality that oil prices could fall one day? Which begs the question: Are socialists better planners than capitalists or not? And is the failure with the price of oil, or with socialism itself which by its very nature is looking much worse at planning than capitalism?

Ironically the evil, shortsighted capitalist energy firms like ExxonMobil, Chevron, Shell, BP, Statoil, Total, etc… are even more dependent on selling oil than the entire sovereign nation of Venezuela which at least has some exports and domestic production other than energy, yet oil companies are faring much better. In fact, the large capitalist energy firms, many of whom had their Venezuelan assets seized, are still profitable (even though profits are down) while socialist Venezuela is bankrupt.


5) “OK they may not have planned as well as they should have, but socialism was really working very well in Venezuela at first. If it wasn’t for the collapse in oil prices it would definitely be a Workers Paradise today.”

Also not true, as anyone who read the news in 2006, 2007, 2008, 2009… all the way until the oil collapse began in 2014… already knows. Venezuela’s economic dysfunction began long before oil prices started their dramatic decline. Here is just a sample of news stories about long food lines, empty shelves, blackouts, and inflation going back to 2006 (more than eight years before the oil price collapse started). A whole lot more can be found simply by Googling keywords like “Venezuela,” “shortages,” “inflation,” “blackouts,” “long lines,” and be sure to enter a random pre-2014 year number like “2006” or “2008.”

2006 (food shortages)
https://www.ft.com/content/e0d7320e-7e39-11da-8ef9-0000779e2340

2007 (food shortages)
https://www.theguardian.com/world/2007/nov/14/venezuela.international

2008 (milk shortages)
https://www.npr.org/templates/story/story.php?storyId=91680886

2008 (power blackouts)
https://www.reuters.com/article/us-venezuela-blackout/power-blackout-in-venezuelan-capital-oil-province-idUSN0145186220080901

2009 (shortages, inflation)
http://www.mcclatchydc.com/news/nation-world/world/article24523447.html

2009 (water shortage)
https://www.reuters.com/article/us-venezuela-chavez/chavez-urges-3-minute-showers-to-conserve-water-idUSTRE59L0OU20091022

2010 (food shortages, rotting stockpiles)
http://www.economist.com/node/16326418

2010 (power blackouts)
http://www.washingtonpost.com/wp-dyn/content/article/2010/04/28/AR2010042805712.html

2013 (hyperinflation)
https://qz.com/125339/hyperinflation-is-forcing-venezuela-to-print-hundreds-of-millions-of-extra-banknotes/

2013 (food shortages)
https://www.theguardian.com/global-development/poverty-matters/2013/sep/26/venezuela-food-shortages-rich-country-cia