Are Chavez' policies in Venezuela a good model for developing countries?

BrainGlutton · April 6, 2005, 9:18pm

In The Nation, 3/24/05, Christian Parenti has an interesting article assessing the record to date of the government of President Hugo Chavez of Venezuela. http://www.thenation.com/doc.mhtml?i=20050411&s=parenti He has survived a coup attempt and a recall election and he seems to have the passionate support of the majority and the passionate hatred of a minority. His opponents compare him to Castro, but in fact Chavez, while he might have broken or at least curtailed the political power of the country’s traditional ruling class, has not expropriated their property. In part this is simply because he hasn’t needed to – Venezuela’s oilfields and main industries were nationalized in the '70s, so he took over their control when he became president. His policy has been to sembrar el petroleo – “sow the oil” – that is, invest the country’s revenue from oil exports in economic redevelopment and social programs:

What the government has done is spend billions on new social programs, $3.7 billion in the past year alone. As a result, 1.3 million people have learned to read, millions have received medical care and an estimated 35-40 percent of the population now shops at subsidized, government-owned supermarkets. Elementary school enrollment has increased by more than a million, as schools have started offering free food to students. The government has created several banks aimed at small businesses and cooperatives, redeployed part of the military to do public works and is building several new subway systems around the country. To boost agricultural production in a country that imports 80 percent of what it consumes, Chávez has created a land-reform program that rewards private farmers who increase productivity and punishes those who do not with the threat of confiscation.

The government has also structured many of its social programs in ways that force communities to organize. To gain title to barrio homes built on squatted land, people must band together as neighbors and form land committees. Likewise, many public works jobs require that people form cooperatives and then apply for a group contract. Cynics see these expanding networks of community organizations as nothing more than a clientelist electoral machine. Rank-and-file Chavistas call their movement “participatory democracy,” and the revolution’s intellectuals describe it as a long-term struggle against the cultural pathologies bred by all resource-rich economies–the famous “Dutch disease,” in which the oil-rich state is expected to dole out services to a disorganized and unproductive population.

But for the moment, the Venezuelan battle against poverty is possible only because oil prices have been at record highs for several years, and the state owns most of the petroleum industry. All of Venezuela’s oil and mining and most of its basic industry were nationalized in the mid-1970s. On average, oil sales make up 30 percent of Venezuelan GDP, provide half of state income and make up 80 percent of all Venezuelan exports.

Internal and often sympathetic critics of the reform process in Venezuela say it is one thing to “spend the oil” on social welfare; it is another altogether to “sow the oil” and create new collectively owned, productive, nonsubsidized industries that will generate wealth in an egalitarian and sustainable fashion.

Some of the elite class accuse the Chavez government of being both corrupt and incompetent – but say that’s actually good for business:

“Business has never been better,” says [Oscar Garcia Mendoza, president of Banco Venezolano de Credito]. “This government is totally incompetent. They have no idea what they are doing. The head of their land reform, Eliezer Otaiza, is a former male stripper. And did you see they just appointed Carlos Lanz, a former terrorist kidnapper, a communist, as head of Alcasa, our largest aluminum company?” Through it all, Garcia wears a slightly suppressed grin as if he thinks the whole thing is hilarious. “I mean, can you imagine that?”

In a way, Lanz’s appointment is not so outrageous: Another former guerrilla, Ali Rodriguez Araque, once minister of mining and energy, then head of OPEC, is now foreign minister and widely respected as a level-headed negotiator.

Garcia also has some very concrete criticisms. He says that the current economic boom is a chimera based on oil prices. In 2004 government spending jumped 47 percent, much of which went to pay for healthcare and education–the missions. But despite the oil windfall, the government has had to borrow heavily. Instead of turning to international financiers, it has increased its internal debt to Venezuelan banks.

Garcia says that in the past four years this internal debt has gone from $2 billion to more than $27 billion. The Finance Ministry confirms these figures and says that 60 percent of this debt is held in government bonds.

“But what makes this really crazy,” says Garcia, “is that the government is depositing all its oil revenue in the same banks at about 5 percent, then borrowing it back at 14 percent. It’s a very easy way for bankers to make money. That’s why I say this is a government for the rich.”

Last year Venezuelan banks made $1.38 billion in profits, just a bit more than they did the year before. And most of that money came from lending to the Chávez government and trading in special government-approved, dollar-denominated bonds, a legal loophole in the new currency-control law. Garcia’s bank actually does no business with the government, but the huge increase in oil revenues has doubled his loan portfolio. The economy is awash in money: Growth was 17.3 percent in 2004.

So if the economy is booming, why does Garcia dislike Chávez?

“These people are crooks,” he says. “Look, Venezuela has always been corrupt, but these guys are the worst.” When I point out that the government just fired 120 managers in Zulia state for corruption, Garcia waves it away as insufficient.

“What are they doing with all the money? They are not investing. They spend it all on food and medicine. As soon as oil goes down, their party is over.” So what should the government do to avoid this? “They should privatize everything.”

Issues for debate:

Will Chavez’ policies help Venezuela achieve broadly shared prosperity?
Will they help Venezuela develop an economy that can sustain itself if the oil runs out, or if (highly unlikely) the price drops drastically?
Can other developing nations, in Latin America or elsewhere, beneficially copy anything from Venezuela’s example – even if they don’t have something valuable like oil to export?

BrainGlutton · April 14, 2005, 3:35am

From http://www.venezuelanalysis.com/articles.php?artno=1413:

In Venezuela over 80 percent live below the poverty level. Before Chavez, most of the poor had never seen a doctor or dentist. Their children never went to school, since they could not afford the annual fees. The neoliberal market “adjustments” of the 1980s and 1990s only made things worse, cutting social spending and eliminating subsidies in consumer goods.

Successive administrations did nothing about the rampant corruption and nothing about the growing gap between rich and poor, the growing malnutrition and desperation. Far from ruining the country, here are some of the good things the Chavez government has accomplished:

A land reform program designed to assist small farmers and the landless poor has been instituted. Just this month (March 2005) a large landed estate owned by a British beef company was occupied by agrarian workers for farming purposes.

Education is now free (right through to university level), causing a dramatic increase in grade school enrollment.

The government has set up a marine conservation program, and is taking steps to protect the land and fishing rights of indigenous peoples.

Special banks now assist small enterprises, worker cooperatives, and farmers.

Attempts to further privatize the state-run oil industry - 80 percent of which is still publicly owned—have been halted, and limits have been placed on foreign capital penetration.

Chavez kicked out the U.S. military advisors and prohibited overflights by U.S. military aircraft engaged in counterinsurgency in Colombia.

“Bolivarian Circles” have been organized throughout the nation, neighborhood committees designed to activate citizens at the community level to assist in literacy, education, vaccination campaigns, and other public services.

The government hires unemployed men, on a temporary basis, to repair streets and neglected drainage and water systems in poor neighborhoods.

Then there is the health program. I visited a dental clinic in Chavez’s home state of Barinas. The staff consisted of four dentists, two of whom were young Venezuelan women. The other two were Cuban men who were there on a one-year program.

The Venezuelan dentists noted that in earlier times dentists did not have enough work. There were millions of people who needed treatment, but care was severely rationed by the private market, that is, by one’s ability to pay. Dental care was distributed like any other commodity, not to everyone who needed it but only to those who could afford it.

When the free clinic in Barinas first opened it was flooded with people seeking dental care. No one was turned away. Even opponents of the Chavez government availed themselves of the free service, temporarily putting aside their political aversions.

Many of the doctors and dentists who work in the barrio clinics (along with some of the clinical supplies and pharmaceuticals) come from Cuba. Chavez has also put Venezuelan military doctors and dentists to work in the free clinics.

Meanwhile, much of the Venezuelan medical establishment is vehemently opposed to the free-clinic program, seeing it as a Cuban communist campaign to undermine medical standards and physicians’ earnings. That low-income people are receiving medical and dental care for the first time in their lives does not seem to be a consideration that carries much weight among the more “professionally minded” practitioners.

I visited one of the government-supported community food stores that are located around the country, mostly in low income areas. These modest establishments sell canned goods, pasta, beans, rice, and some produce and fruits at well below the market price, a blessing in a society with widespread malnutrition.

Popular food markets have eliminated the layers of middlemen and made staples more affordable for residents. Most of these markets are run by women. The government also created a state-financed bank whose function is to provide low-income women with funds to start cooperatives in their communities.

There is a growing number of worker cooperatives. One in Caracas was started by turning a waste dump into a shoe factory and a T-shirt factory. Financed with money from the Petroleum Ministry, the coop has put about a thousand people to work. The workers seem enthusiastic and hopeful.

Ale · April 14, 2005, 12:04pm

Dear Og in heaven I hope not; the guy is an ideologue of the first magnitude; when the leftist goverment took office here (alas, a tragedy worth a thread on itself) 4 months ago he was a special guest for the party, the diatribe he gave at the municipal building plaza was something to behold and cringe; he put himself up in the cross saying how evil the USA was and how Bush was behind him, how all Latin America should rise against the USA to fight and so on and so forth. He´s a disgusting populist with all the charisma of a snake oil seller.

Your quotes speak for themselves, you said he´s not like Castro because he doesn´t expropiated properties, but your first cite says how the goverment can, and does do that, if considers the propertie is not productive enough; how he bases the welfare programs on oil revenues wiothout investing on wrought programes when the oil runs out. He buys the good will of the people giving money and talking like a magnanimous equal. All this is bound to fall someday when the chickens come to roost.

No, it´s not a good model, it´s not sustainable. It´s creating a welfare dependant society, I´ve seen this hapen in my own country, in the 50´s the state was the great giver, welfare galore, large hospitals, schools, social programs, the whole nine yards; and no development projects worth a damn; 50 years later the old generations still linger with the memory of the good old days and most people still expect the state to fix their lifes; a couple generations of people lived in a limbo of apathy and nostalgia for those days not doing a darn thing to put the country back in motion, expecting Father State to do it for themselves, while the younger generations running away from the statist mire and fleeing (half a million out of a 3 million population) to other countries.

Ale · April 14, 2005, 12:06pm

Holy cow!, my spelling surely sucks in the morning!!!

Paul_in_Qatar · April 14, 2005, 12:13pm

An interesting question, but a near-idle one as the Real World will give us the answer in a couple of years. I would not bet big money on his populism succeeding.

If he does as he claims he will, his regime will alienate those who have (and make) money. You cannot have a rich country without having rich people in it. If he takes a pragmatic approach he will betray those who support him.

In any case, what nation has ever succeeded economically by appealing to the unwashed hoi polloi?

I wish his nation the best of luck. I love that neck of the woods. Still I fear the worst.

even_sven · April 14, 2005, 2:18pm

Judging by past events, if he does create the changes he is talking about, the US will be around in some guise shortly to do something about it.

Spoke · April 14, 2005, 2:24pm

The guy sound like Huey Long. What’s Spanish for Kingfish?

BrainGlutton · April 14, 2005, 2:38pm

Caballa, assuming “kingfish” means “mackerel.” According to the Wikipedia, the word “kingfish” is a nickname for 11 different species of fish – http://en.wikipedia.org/wiki/Kingfish.

Meanwhile, in this week’s National Review, they’re calling Castro and Chavez the new “Axis of Evil.” (I’d link to the article but I can’t seem to find an on-line version.) They warn of Chavez being a new sign of communism/leftist sweeping Latin America – including Lula da Silva in Brazil and the comeback of the Sandinistas in Nicaragua (first I’ve heard of that).

BrainGlutton · April 14, 2005, 3:25pm

Thomas Jefferson, Andrew Jackson, and several others have won the presidency of the United States with that kind of appeal; and I don’t see how the country has fared any worse, economically, during the administrations of such (nominal) populists than it has under the government of more elitist presidents.

Spoke · April 14, 2005, 4:39pm

Well Huey Long got some impressive public works projects done while in power, improved the education of poor children, and generally improved the lives of the most impoverished (a pretty big segment of the population in Louisiana at the time). And the people loved him.

On the down side Long was in practical effect a dictator, and could be a ruthless one.

Tamerlane · April 14, 2005, 4:49pm

Minor hijack, but Huey Long was “the Kingfisher” - i.e. a bird, not a fish :). Don’t know the spanish word for kingfisher, but I’m sure Colibri does.

Tamerlane

Tamerlane · April 14, 2005, 4:56pm

Poking around to doublecheck myself, 'twould appear there is some discrepancy here. Some sources say “kingfish”, other “kingfisher”, which is what I always heard. Hmmm…

Tamerlane

Tamerlane · April 14, 2005, 5:01pm

Heh. Listed right next to each other in a list of historical films:

All the King’s Men (1949) – the Kingfisher, populist governor of Louisiana

Kingfish: A Story of Huey P. Long (1995) – populist threat to FDR

Tamerlane

Spoke · April 14, 2005, 6:01pm

Tamerlane, I’ve always heard Kingfish, and I had assumed that he’d taken the nickname from the Amos ‘n’ Andy character (that show being wildly popular during his reign).

rjung · April 14, 2005, 6:01pm

Big deal; the conservatives have been demonizing Hugo Chavez for quite a while now. Have we forgotten Chavez’s brief ouster from office back in 2002?

Spoke · April 14, 2005, 6:03pm

This site seems to confirm my theory:

Spoke · April 14, 2005, 6:13pm

Venezuela’s efforts to arm itself have set the Bush administration into a tizzy.

One does wonder about the purchase of 100,000 AK-47s. An innocent upgrade of Venezuela’s military weaponry? Is Venezuela arming itself against a perceived threat from the US? Or will the weapons (as the Bush folks claim) wind up in the hands of various South American insurgent groups?

Rashak_Mani · April 14, 2005, 6:50pm

Chavez policies aren’t stimulating enterprise… so eventually things will fall apart
Venezuela depends on oil too much… and I don’t see Chavez changing that
His example isn’t to be copied… strong state models are things of the 70’s and they didn’t work out back then.

I think some people tend to exagerate the “invasion” of left wing parties in Latin America. Lula has shown himself to be quite conservative about economic policies for example. Trying to create silly panic in the US by inventing new “Axis of Evil” isn’t warranted. Chavez is a nutjob and not much of a danger… just yet. He is a populist like some many before him.

Ike_Witt · April 14, 2005, 7:02pm

Banana Republics are not the grist for the communist mill that they once were. The only reason that communism spread as far as it did was thanks to the largess of the Soviet Union. Without a benefactor state any latin american flirtation with communism will be short lived.

The supposed Venezuelan support of FARC rebels in Columbia is what is really going to cause them problems.

Spoke · April 14, 2005, 8:00pm

I dunno. The Chavez model at least allows the poor some benefits from the oil economy, which is better than what you see in other oil-rich nations.

And if the majority of Venezuelans see benefits, who are we to say that they can’t keep Chavez in power? What should be our first priority, democracy or capitalism?

I don’t think the Chavez approach can be a model for other South American nations because, as Rashak Mani points out, Venezuela depends on oil dollars that other nations do not possess.