Venezuela: Chavismo caught on horns of dilemma

May 31, 2015


Protest against Guarimba, Caracas, January 21. Photo: Cory Fischer-Hoffman.

Leftists in Venezuela have put forward several explanations for the pressing economic difficulties and growing discontent that have beset the nation recently. These difficulties raise the possibility of an opposition takeover of the National Assembly in this year’s elections.

High on the list of explanations is an unfavourable comparison between the charisma and political acumen of late president Hugo Chavez and his successor, President Nicolas Maduro. This same line of reasoning is often presented by members of the right-wing opposition, who – implicitly or explicitly – attribute Maduro’s deficiencies to his working-class origins and background.

A second explanation is that corrupt government officials are responsible for the nation’s economic bind, which includes acute shortages of basic goods and the onset of triple-digit inflation.

However, a rigorous analysis of the government’s predicament must go beyond such personal factors, not least because the roots of the crisis date back to the start of Chavez’s rule and not simply to policies implemented by Maduro since he assumed office in 2013.

Examining the fundamental underlying problems going back to Chavez’s first election in 1998 can shed light on the low-intensity challenges and complex dynamics any successful democratic socialist government will inevitably face.

Sixteen years of Chavista rule separates Venezuela’s case from that of other socialist governments over the past 100 years, be they undemocratic regimes (such as the Soviet Union), those that made concessions to the establishment to avoid the sharp polarisation that characterises Venezuela (such as the post-1945 British Labour Party) or those too short-lived to have been subject to the complex predicaments facing Venezuela (such as Chile’s 1970-’73 elected socialist government of Salvador Allende).

An analysis that goes beyond personalities is also essential to counter the demoralisation stemming from the simplistic, if not wrong, conclusion that current Chavista leaders have “sold out”. Such pessimism is worsened by the prospect of big setbacks facing the Chavistas in the near future.

Opposition destabilisation

The starting point in understanding the Chavistas’ current dilemma is appreciating the intensity of the opposition’s destabilisation campaign. This has included legal, semi-legal and illegal activity, as well as a permanent refusal to recognise or accept the legitimacy of the elected government.

For more than three months in early last year, Venezuela was subject to a campaign of violence and disruption known as the guarimba. Ample evidence also demonstrates that the business sector is at least partly responsible for the shortages stemming from hoarding and contraband.

Needless to say, all leftist governments face recalcitrant conservative oppositions. But two factors distinguish the situation in Venezuela.

First, over an extended period of time, opposition-induced disruptions with dire economic side effects in a democratic setting have had a wearying effect on the enthusiasm of government supporters.

Second, unlike during periods of open violence and civil war, as pressure builds it becomes increasingly incumbent on the government to show it is capable of guaranteeing economic production and stability, even though the economy remains largely in private hands.

Dilemma

In the face of these weighty, ongoing challenges, the Chavista government has been caught on the horns of a dilemma. On the one hand, it has tended to opt for populist policies to avert the onset of fatigue and apathy among its supporters.

But at the same time, it has chosen to pursue pragmatic policies and alliances with often unreliable partners to maintain economic stability. Once both sets of policies are in place, it becomes difficult for the government to switch paths in favour of more rational and practical approaches.

Chavez’s pragmatism was evident early on when he allied his government with a small group of businesspeople who refused to back the two-month “general strike” in 2002-2003 spearheaded by the main business organisation, FEDECAMARAS. The business dissidents reaped handsome political rewards.

The episode marked the origins of an emerging group of capitalists who received preferential treatment from the government, but which included opportunists whose sole motivation was self-enrichment. This alliance was not unconditional, however. Chavez jailed some members of this group for several years as a result of a big banking crisis in 2009.

The Maduro government has continued this strategy of combining flexible and confrontational approaches in its relations with the private sector. On the one hand, Maduro sponsored a “peace dialogue” with FEDECAMARAS leaders last year, at a time when the opposition was promoting the guarimba protests.

The initiative implied concessions in the form of accepting business demands that a fast track to handle cases of hoarding, contraband and price speculation be ruled out. On the other hand, Maduro accused FEDECAMARAS of having unleashed an “economic war” in the form of shortages of basic goods.

In late April, Maduro announced FEDECAMARAS firms would not be granted preferential dollars to pay for imports. He said Venezuelan businesspeople already possessed US$5 billion deposited abroad, asking: “Why don’t they bring the money here to invest?”

He added: “Our dollars are for the people – for housing, transportation and food.”

Like Chavez, Maduro’s relations with the emerging capitalists have also been strained. The government’s closest business ally, Miguel Perez Abad, serves as a liaison with the private sector and agrees with FEDECAMARAS that the currency exchange rate should be set by the open market and that prices of basic goods should approximate those on the international market. Maduro flatly rejects this position.

’Strategic alliance’

Chavez and Maduro’s discourse calling for a “strategic alliance” with the private sector, taking in what they refer to as “productive businesspeople” who supposedly represent most of the members of that class, has translated into government concessions to business.

Chavista leftist factions, such as the Trotskyist-influenced Marea Socialista that is part of the governing United Socialist Party of Venezuela (PSUV), are convinced the “peace dialogue” with FEDECAMARAS has resulted in policies and practices for which the working class pays a heavy price.

Even the docile Wills Rangel, who heads the Bolivarian Socialist Workers’ Central (CBST), the main Chavista labour federation, criticises the government for failing to enforce the labour law of 2012. The law was supposed to eliminate contracting out of permanent positions by May.

In short, Chavista socialist rhetoric notwithstanding, the threats from a Washington-backed opposition, as well as the church hierarchy, big business, much of the media and the traditional labour leaders, have forced the government to backtrack on many of its promises and slow down the pace of change.

Implementing and maintaining the government’s populist policies obeys a similar logic. Some measures, adopted in response to opposition destabilisation, have proven hard to dismantle once in place.

A prime example is the system of controls on the exchange rate for foreign currency and prices of basic commodities. The measures were forced on the government by the 2002-03 business-backed general strike, which created a major scarcity of goods and the threat of uncontrollable inflation.

Exchange controls kept down prices for goods consumed by the popular sectors. It worked fairly well until late 2012, when the unofficial or open market rate for the dollar skyrocketed.

Since then, the wide disparity between official and unofficial rates for basic commodities and the US dollar has had dire consequences. Extreme artificially low prices have discouraged production, even in state companies.

A black market has flourished along with contraband as a result of the scarcity of goods with official prices set at rock bottom. Also, some businesses have requested and received preferential dollars for bogus imports. This was documented by health minister Henry Ventura in May in the case of several pharmaceutical companies.

Any devaluation that substantially cuts the disparity between official and unofficial prices runs the risk of triggering rampant inflation. In the face of this dilemma, and with an opposition bent on regime change at any cost, the government has opted for a populist strategy that rules out painful decisions.

This means the non-privileged wait in lines, sometimes for four hours or more, to purchase basic goods at extremely low prices. But the middle class buys the same products on the black market or in unmonitored commercial establishments at three or four times the official price.

Elections

Under normal circumstances, a progressive government might be inclined to take steps over time to cut such disparities, while stopping short of eliminating the controls. But a decision of that nature would hit the pockets of the popular classes and forfeit votes in the upcoming National Assembly elections.

Much is at stake in these contests. In May, Jesus Torrealba, head of the main opposition coalition Roundtable for Democratic Unity (MUD), announced that with control of the assembly, the MUD would be positioned to force Maduro out of office.

The opposition voiced the same threat ahead of municipal elections in December 2013. It called that vote “plebiscite” to determine Maduro’s fate, which backfired with the Chavistas emerged victorious with an 11.5 percentage point margin.

The Chavistas call the opposition’s strategy the “Paraguay option”, a reference to the Paraguayan congress’ ouster of progressive president Fernando Lugo in 2012.

A similar dynamic explains other government actions and policies that were considered necessary responses to subversive actions of the opposition, but proved to be of dubious economic efficacy.

Thus, for instance, in reaction to the general strike of 2002-2003 that paralysed the oil industry and caused economic mayhem, the government fired 17,000 striking employees of state oil company PDVSA and replaced them with loyalists.

But privileging loyalty over competence as a hiring practice can easily translate into clientelism in public administration. Similarly, Chavez’s celebrated slogan of “unity, unity, and more unity” to confront belligerent adversaries has served to discourage criticism and dissent within the Chavista movement.

Populist logic also lies behind the tendency to relax controls over allocating resources to the popular sectors. Thus, for instance, the government eased the collateral requirements for loans to worker cooperatives involving marginalised sectors, which constitute the backbone of the Chavista movement.

Flexible rules were considered essential to stimulate interest among the poor, who are traditionally distrustful and apathetic, but the political imperative of retaining their active support in the face of the enemy also factored into administrative decisions.

Another populist policy favouring the poor is the distribution of free or highly subsidised goods, ranging from electrical appliances and computers to housing.
The expropriation of many companies that the governments says were responsible for shortages of basic goods and price speculation, starting in 2007, was another example of responses to the enemy with unanticipated consequences. The government has been bogged down in demands for compensation of up to $1 billion or more brought before the World Bank’s arbitration panel.

The resulting outflow of dollars is a more important factor in the government’s cash shortage than its foreign aid programs and other allegedly unnecessary expenses about which the opposition harps on.

Ideological arguments

Ideological arguments justified all of the above actions and policies. Expropriations, for instance, were considered steps in the direction of socialism, and free goods for the underprivileged as examples of “socialist humanism” – another Chavista catchword.

But the bottom line is that these measures were taken when the Chavistas were on the defensive. Although not necessarily ill-advised, they have led to budgetary imbalances, excessive centralism, inefficiency and corruption.

Leftists in Venezuela who call for a more rational and purist approach free of clientelism, centralism and concessions to both elites and non-elites tend to underestimate – perhaps naively – the intensity and complexities of the political challenges facing the left in power.

But does this mean that the government is at no point able to change course to correct for such deficiencies and deformations? Is the entire process of change path dependent?

During situations in which the Venezuelan government is on the defensive, as is now the case, a middle course based on moderation may be needed. But the opportunity to overcome pressing problems is presented immediately after victories, when the enemy is discredited and demoralised.

One of the paramount lessons of the Chavista experience is that leftists need to take advantage of political triumphs to deepen the process of change and take decisions that in other contexts would be costly and used by the opposition to undermine stability. Chavez understood this rule and, with a few exceptions, put it into practice.

Missed opportunities

The most prominent examples of missed opportunities and misplaced priorities along these lines are the following:

Rather than seize the opportunity after the unsuccessful coup of April 2002 – led by FEDECAMARAS and supported by all government adversaries, including Washington, the parties of the opposition, the private media and the Church hierarchy – Chavez tried to placate opposition leaders by granting unnecessary concessions. These enabled the opposition to position itself to launch a general strike later that year.

After having emerged victorious in the recall election in 2004, Chavez called for a campaign to win 10 million votes in the 2006 presidential elections that represented 80% of the voting electorate. Such a target was not needed. Chavez’s hard-earned political capital could have been better invested by promoting an anti-bureaucratic drive, internal democratisation and an all-out war on corruption, as embodied in Chavez’s call for a “revolution in the revolution.”

After the 2006 presidential landslide victory with 63% of the vote, Chavez took full advantage of the honeymoon. He decreed important expropriations, rejected renewing the concessions for the TV channel RCTV on solid legal grounds, and launched his new party, the PSUV.

However, these moves were overshadowed by a referendum on a proposed 69-article constitutional reform. This set the terms for political debate throughout 2007, but was defeated at the polls. The proposal consisted of provisions that could have been incorporated in legislation and submitted to the Chavista-controlled National Assembly for approval.

After the December 2013 municipal elections that gave the Chavistas an overwhelming victory, Maduro failed to immediately seize the initiative, allowing the opposition to launch the guarimba two months later.

After the defeat of the guarimba in May last year, Maduro continued his call for a “peace dialogue” while again failing to take advantage of favourable circumstances.

Maduro has paid heavily for his failure to act decisively. In both instances, the government was well-positioned to take bold moves to confront the shortage of basic goods and related problems.

Maduro’s options included currency devaluation to check the disparity between official and unofficial exchange rates and nationalising foreign commerce, a proposal supported by the Venezuelan Communist Party (PCV) and Marea Socialista.

The government could also have revved up its campaign against the illegal acquisition of preferential dollars through imposing more severe measures against those in public and private sectors accused of fraudulent transactions.

Revolutionary openings

Just as the problems the government faces were in large part thrust on it when the opposition was on the offensive, moments in which the Chavistas had the upper hand represented golden opportunities to achieve viable solutions.

Revolutionary theorists have long observed that the weakening of institutions and classes that defend the old order is an essential condition for revolution. Russian revolutionary V.I. Lenin, for instance, argued that divisions within the ruling class pave the way for the seizure of power by socialists.

Italian socialist Antonio Gramsci argued that the loss of government legitimacy and winning a new hegemony precedes socio-economic structural transformation. Along these lines, the clash among powerful economic groups in Venezuela and their resulting weakening contributed to Chavez’s rise to power and his ability to retain it.

Nevertheless, the enemies of Chavismo had enough power and resources to undermine stability to the extent that the government was forced to adopt expedients and other measures that eventually undermined the functioning of the state and economy.

These challenges undeniably have implications for all political movements in favour of far-reaching change. Two in particular stand out.

First, the failure of anti-neoliberal and socialist governments to develop a viable alternative has, to a great extent, been the result of political factors with largely unanticipated consequences. They do not necessarily demonstrate inherent shortcomings in a new model.

And second, even when the left in power achieves a relative degree of stability – more so in Venezuela's case than existed in Allende’s Chile – the political struggle will determine the outcome of the efforts to bring about an authentic transformation.

[Abridged from New Left Review. Steve Ellner has taught at the Universidad de Oriente in Puerto La Cruz, Venezuela since 1977. His latest book is his edited Latin America’s Radical Left: Challenges and Complexities of Political Power in the Twenty-First Century.]

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