Venezuela: Chavismo on the horns of a dilemma

By Steve Ellner

May 22, 2015 – VenezuelAnalysis, posted at Links international Journal of Socialist Renewal with permission – Leftists in Venezuela put forward a number of different explanations for the pressing economic difficulties and growing discontent that has beset Venezuela and increases the possibility of an opposition takeover of the National Assembly in this year’s elections.

High on list of explanations is an unfavourable comparison between the charisma and political acumen of Hugo Chávez and the inferior leadership qualities of his successor, President Nicolás Maduro. (This same line of reasoning is often presented by members of the 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 current economic bind, which includes acute shortages of basic goods and the onset of triple-digit inflation.

However, a rigorous analysis of the government’s current predicament must go beyond such personal factors, not least because the roots of the crisis date back to the outset of Chávez’s rule and not simply to policies implemented by Maduro since he assumed office in 2013. An examination of the fundamental underlying problems going back to Chávez’s election in 1998 can shed light on the low-intensity challenges and complex dynamics that any successful democratic socialist government will inevitably face.

Sixteen years of Chavista rule separates the Venezuelan case from that of other socialist governments over the last hundred years, be they undemocratic regimes (the Soviet Union, Cuba, etc.), those that made concessions to the establishment in order to avoid the sharp polarisation that characterises Venezuela (e.g. the post-1945 British Labour Party) and those too short lived to have been subject to the complex predicaments facing Venezuela (e.g. Chile under Allende).

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

The starting point in understanding the Chavistas’ current dilemma is an appreciation of the intensity of the opposition’s destabilisation campaign, which has included legal, semi-legal and illegal activity, and the permanent refusal of the anti-Chavistas to recognise the legitimacy of the government. For over three months in the early part of last year, Venezuela was subject to a campaign of violence and disruption known as the guarimba.

Since then ample evidence has demonstrated 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.

In the first place, 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. In the second place, and unlike during periods of open violence and civil war, pressure builds and it becomes increasingly incumbent upon the government to demonstrate that it is capable of guaranteeing economic production and stability, even though the economy remains in private hands.

Pragmatic

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

Chávez’s pragmatism was in evidence from very early on when he allied his government with a small group of businesspeople who refused to go along with the two-month “general strike” in 2002-2003 spearheaded by the main business organisation, FEDECAMARAS, for which the dissidents reaped handsome political rewards. The episode marked the origins of an emerging bourgeoisie that received preferential treatment from the government, but which included opportunists whose sole motivation was self-enrichment. (The alliance was not unconditional, however, as Chávez ended up jailing some members of this group for several years as a result of a major 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 last year sponsored a “peace dialogue” with FEDECAMARAS leaders at a time when the opposition was promoting the guarimba protests. The initiative implied concessions in the form of acceptance of the business demand 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 and, in late April of this year, announced that its firms would not be granted preferential dollars (at an exchange rate far lower than that on the open market) to pay for imports.

The president argued that Venezuelan businesspeople already possessed $5 billion deposited abroad and asked, “why don’t they bring the money here to invest?” He added: “our dollars are for the people – for housing, transportation and food.”

Like Chávez, Maduro’s relations with the emerging bourgeoisie have also been strained. The government’s closest business ally, Miguel Pérez Abad, who serves as a liaison with the private sector, 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 – a position Maduro flatly rejects.

The discourse of Chávez and Maduro that calls for a “strategic alliance” with the private sector, taking in “productive businesspeople” who supposedly represent most of the members of their class, has been translated into concessions to business by the government.

The Chavista leftist factions, such as the originally Trotskyist group Marea Socialista, are convinced that the “peace dialogue” with FEDECAMARAS has resulted in various policies and practices that fall heavily on the backs of the working class. Even the docile Wills Rangel, who heads the Central Bolivariana Socialista de Trabajadores, the Chavista labour federation, criticises the government for failing to enforce the labour law of 2012 that was supposed to eliminate the practice of contracting out permanent positions by May 2015.

In short, Chavista socialist rhetoric notwithstanding, the threats from an opposition that is both openly and covertly supported by Washington, as well as the church hierarchy, big business, much of the media, and the traditional labour leadership, have forced the government to backtrack on many of its promises and slow down the pace of change.

Populism

The implementation and maintenance of the government’s populist policies obey a similar logic. Some of the measures, adopted in response to the destabilisation actions of the opposition, once in place have been hard to dismantle. 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 general strike of 2002-2003, which created a major scarcity of goods and the prospects of uncontrollable inflation. Exchange controls kept down prices for goods consumed by the popular sectors, and 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 for US dollar has had dire consequences. Artificially low prices in the extreme have discouraged production, even in state companies. A black market has flourished along with contraband as a result of the scarcity of goods the prices of which are officially set at rock bottom. In addition, some businesses have requested and received preferential dollars for bogus imports, as was documented by Health Minister Henry Ventura in mid-May in the case of a number of pharmaceutical companies.

Any devaluation that substantially reduces the disparity between official and unofficial prices runs the risk of triggering rampant inflation. In the face of this dilemma, and with an opposition that is bent on regime change at any cost, the government has opted for a populist strategy that rules out painful decisions. While the non-privileged wait in lines, sometimes for four hours or more, to purchase basic goods at extremely low prices, the middle class buys the same products on the black market or in unmonitored commercial establishments at three or four times the official price.

Under normal circumstances a progressive government might be inclined to take steps over time to reduce such disparities, while stopping short of eliminating the controls. But a decision of that nature would hit the pockets of the popular classes and in so doing forfeit votes in the coming elections for the National Assembly. Much is at stake in these contests.

In May, Jesús Torrealba, head of the main opposition coalition Mesa de Unidad Democrática (MUD), announced that with the control of the National Assembly, the MUD will be positioned to force Maduro out of office.[1] The opposition voiced the same threat prior to the previous municipal elections of December 2013, which it called a “plebiscite” to determine Maduro’s fate, though the use of the term backfired as 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.[2]

A similar dynamic explains other government actions and policies that were considered necessary responses to the 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 petroleum industry, the government fired 17,000 striking employees of the state oil company PDVSA and replaced them with loyalists. But privileging loyalty over competence as a hiring practice can easily translate into clientelism in the public administration.

Similarly, Chávez’s celebrated slogan “unity, unity, and more unity” in order to confront belligerent adversaries has served to discourage criticism and dissension within the Chavista movement.

Populist logic also lies behind the tendency to relax controls over the allocation of resources to the popular sectors. Thus, for instance, the government eased the collateral requirements for loans to worker cooperatives taking in members of the marginalised sectors, which constitute the backbone of the Chavista movement. While flexibilisation was considered essential to stimulate interest among the poor, who are traditionally distrustful and apathetic, the political imperative of retaining their active support in the face of the enemy also factored into administrative decisions along these lines.[3] Another populist policy favouring the poor is the distribution of free or highly subsidised goods ranging from electrical appliances and computers to housing.

Unanticipated consequences

The expropriation of numerous companies that according to the government were responsible for shortages of basic goods and price speculation beginning in 2007 was another example of responses to the enemy with unanticipated consequences. The Venezuelan government has been bogged down in numerous 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 far more important factor contributing to the government’s cash shortage to meet its commitments than are the foreign aid programs and other allegedly unnecessary expenses that are so harped upon by the opposition.

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 taken when the Chavistas were on the defensive, although not necessarily ill advised, 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 so – 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?

Take advantage of political triumphs

As I have argued in a recent article, during situations in which the Venezuelan government is on the defensive, as is currently the case, a middle course based on moderation may be necessary. [4] But the real opportunity to overcome pressing problems is presented immediately following 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 in order to deepen the process of change and take decisions that in other contexts would be costly and utilised by the opposition to undermine stability. Chávez understood this rule and, with a few exceptions, put it into practice. The most prominent examples of missed opportunities and misplaced priorities along these lines are the following:

Maduro’s options included currency devaluation in order to check the disparity between official and unofficial exchange rates and the nationalisation of foreign commerce, a proposal supported by the Communist Party (PCV) and Marea Socialista (which acts as a faction within the PSUV). In addition, the government could have revved up its campaign against the illegal acquisition of preferential dollars through imposing more severe measures against those in both public and private sectors accused of fraudulent transactions.

Just as the problems the government currently faces were in large part thrust upon 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 a sine qua non for revolution. Lenin, for instance, argued that divisions within the ruling class pave the way for the seizure of power by socialists. Gramsci affirmed that the loss of government legitimacy and the achievement of a new hegemony precede socio-economic structural transformation. Along the same lines, in Venezuela the clash among powerful economic groups and the resultant erosion of their strength contributed to Chávez’s rise to power and his ability to retain it.[5]

Nevertheless, as this article points out, 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 the 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 and do not necessarily demonstrate the inherent shortcomings of the new model. Second, even when the left in power achieves a relative degree of stability – more so than existed in Allende’s Chile – the political struggle will very much determine the outcome of the efforts to bring about authentic transformation.  

[Steve Ellner has taught at the Universidad de Oriente in Puerto La Cruz, Venezuela since 1977. His latest book is his edited volume Latin America’s Radical Left: Challenges and Complexities of Political Power in the Twenty-First Century (Rowman & Littlefield, 2014).]

Notes

[1] Clodovaldo Hernández, “Una asamblea para derrocar a Maduro”, El Universal, May 9, 2015.

[2] Adán Chávez, personal interview with governor of Barinas. Barinas, September 6, 2014.

[3] Ellner, Rethinking Venezuelan Politics: Class, Conflict and the Chávez Phenomenon. Boulder, CO: Lynne Rienner, 2008, p. 130.

[4] Ellner, “Maduro and the Market”, Red Pepper, April-May 2015, pp. 36-37.

[5] Nelson Ortiz, “Entrepeneurs: Profits without Power”, in Jennifer L. McCoy and David J. Myers (eds.), The Unraveling of Representative Democracy in Venezuela. Baltimore: Johns Hopkins University Press, 2004, pp. 79-81, 85-88; Leslie C. Gates, Electing Chávez: The Business of Anti-Neoliberal Politics in Venezuela. Pittsburgh: University of Pittsburgh Press, 2010, pp. 111-131.