The Crisis in Venezuela

[Stavros]

Venezuela has been lurching from one crisis to another since the elections of December 2015 if not before. Trying to explain how one of South America's richest and most successful countries has found itself transformed into an economic basket case is not easy, and is not simply a consequence of the 'Bolivarian Revoution' initiated by Huge Chavez in 1999. In addition this is not new in South America as Argentina in the late 19th and early 20th centuries was also rich and successful, yet by the end of the 20th century was also condemned as a basket case with rampant inflation, political instability and social deprivation.


If there are structural factors at work here that are relevant to Europe and North America, they relate to the attempts to create a democratic state with a mixed economy in which benefits are shared by the state and private enterprise. The institutions of the state, notably the National Assembly, the Military and the Media are assumed to be loyal to the state rather than their own interests, and corruption is dealt with through the rule of law which becomes the key defender of citizen's rights. Democracies also tend to thrive when the economy is diverse, and when opportunities in education and work create a gainfully employed workforce with a corresponding decline in illiteracy, poor health, poverty and crime.

Historically, however, Venezuela has experienced an uneven form of democratic development, as factional politics and competition for the riches of the country have seen numerous military coups since the 19th century. Crucially, it is argued by some, the discovery of vast reserves of oil and gas in the early 20th century presented the country with a 'resource curse', a precious and valuable commodity that has dominated the national economy to the detriment of everything else. In fact, it is because the riches earned from petroleum -particularly after 1979-were not used to diversify the economy that a 'petro-state' emerged which strangled business initiatives and through widespread corruption diverted wealth into private accounts rather than the state for the benefit of all, while corruption at such a level has tended to erode the citizen's respect for the state and its institutions.


Why has the state failed?
In the first place it has been too dependent on oil, and has failed to diversify the economy to enable wealth to emerge from domestic businesses not dependent on the price of oil


In the second place, the Bolivarian Revolution of 1999 instead of engaging in structural reform retained one bloated layer of the economy based on oil, and laid over it a raft of social programmes funded from oil which could not be sustained when the oil price fell, as it did. With no alternative sources of wealth, an economic and social crisis was inevitable.


In the third place, currency controls from 2003 maintained artificial prices so that when the oil price fell, producers and distributors found themselves selling goods at below their market value, with the result they were withdrawn from the shops leading to shortages of basic commodities, allegations of hoarding, and so on. To complicate this, there were three tiers to the exchange rate which meant that one official rate was used for food and medicines, while two others were 'auctioned' off for other commodities even though the exchange rate was fixed by the state. With the decline of the Bolivar Fuerte the Dollar became a valuable currency but with that a thriving trade in illegal money changing, and until the borders with Brazil and Colombia were closed, cross-border trade to Venezuela's disadvantage. There are now just two exchange rate tiers, but the currency has been devalued by 37%.



In the fourth place, rampant corruption has eroded faith in the political system, which itself has been torn apart through the creeping dictatorship associated with Maduro. The Constitution introduced by Chavez in 1999 replaced the bi-cameral with a uni-cameral legislature, giving the President increased powers, a six rather than five year term in office, and increased state control of the media, and ownership of businesses across the economy. Maduro has now decided to re-write the 1999 Constitution even though a referendum to endorse this was boycotted by the opposition, some of whom have been arrested in recent days.



In the elections of December 2015 the ruling party lost, yet President Maduro, instead of working with a new party in government, proposed emergency powers which were challenged by the new party in power but defeated in the Supreme Court, packed with pro-Maduro judges. The result was a repudiation of the election and the declaration of a State of Emergency, none of which has resolved the problem of inflation, debt and both a weak oil price and a fall in production as segments of the petroleum industry grind to a halt owing to the inability to pay foreign contractors.



What we learn from this is that State institutions work as long as those participating are loyal to the State, rather than to narrow interests, be it party, business, the military, and personal enrichment. Accountability thus becomes important as part of the public debate on what those in power are doing with the national wealth, but must also use the law to punish those who break it, whereas both before and after Chavez, the State was used to protect individuals from the rule of law and the Media has been increasingly shackled by the government (as is also a feature of the incipient dictatorship in Turkey and Saudi Arabia's demand that Qatar shut down al-Jazeera).

We learn the importance of an open and critical media, and of the crucial need to diversify an economy so that the national wealth is not determined by a commodity vulnerable to the rise and fall of prices on world markets out of national control -and that indeed, state control of the currency is a risky business that can produce commodity shortages and increase the level of corruption and organized crime in the shadow economy.



I don't know if Venezuela can emerge from this crisis soon and recover a degree of economic and social stability, but the ease with which a relatively stable and prosperous country descended into chaos is a warning to us all, for democracies can appear to be robust when they are fragile, but most often are vulnerable to dangers that lurk within the state.

Some links -
http://www.icwa.in/pdfs/IB/2014/CrisisinVenezuelaIB11052017.pdf

http://www.huffingtonpost.com/entry/venezuela-economic-crisis-explainer_us_57507abde4b0eb20fa0d2c54

https://www.theguardian.com/world/2017/jul/25/venezuela-elections-all-you-need-to-know

[peejaye]

Saw a piece on George Galloways excellent Sputnik programme last Saturday, on Russia Todays network, ch.135 on Freeview if anyone is interested.
Nice thread to start Stavros, thanks.

[Stavros]

Saw a piece on George Galloways excellent Sputnik programme last Saturday, on Russia Todays network, ch.135 on Freeview if anyone is interested.
Nice thread to start Stavros, thanks.

I don't think George Galloway is qualified to speak about anything, and he like Ken Livingstone and others have either been silent on their 'favourite' socialist country or make excuses. Ken Livingstone, former Mayor of London and Labour MP (suspended from the party at the moment) denies saying the mistake Chavez made was not to murder all the 'oligarchs' but also concedes the poor investment decisions of Chavez and his successors has weakened the economy. A good example of the desperation with which some attempt to both defend Chavez and accept he did wrong things is in the Guardian link below. What always puzzled me was why Labour people like Livingstone and Corbyn had such a hard-on for the combination of Venezuelan Nationalism and Socialism, two concepts that in practice have been disastrous in history when joined together. Blaming the Americans is also standard fare. What they could have said was that under Venezuela the attitude was 'we've won the lottery, so let's go spend!' At one time the government was funding a Formula 1 driver to the tune of $45 million a year even though he could not get round the track without trashing his car.

Meanwhile, the country's Chief Prosecutor, Luisa Ortega has been removed from office in classic style: first she was arrested, then the new 'Constituent Assembly' voted to remove her from office, and even though she was a former ally of Maduro, his supporters after the vote denounced her as a 'traitor'. The problem for Maduro is that his most potent rival in his own party, Diosdado Cabello is an army officer. A coup now looks like the next step in Venezuela, but as the army was the vehicle Chavez used to initiate the 'Bolivarian Revolution' this does not look like a long term solution.

https://www.theguardian.com/world/2017/aug/05/venezuela-chief-prosecutor-luisa-ortega-removed
https://www.theguardian.com/world/2017/aug/05/venezuela-civil-war-coup-nicolas-maduro-politics-violence

excuses, excuses-
https://www.theguardian.com/commentisfree/2017/aug/02/left-learn-maduros-failures-in-venezuela-bolivarian-revolution-chavismo

[Stavros]

Looks like the US President is making good his promise to put America First...

Donald Trump said last night he was considering possible military action against Venezuela in response to Nicolas Maduro's power grab.
Mr Trump told reporters at his New Jersey golf course that he was "not going to rule out" a military option".
"The people are suffering and they are dying. We have many options for Venezuela including a possible military option if necessary," the US president said.
He adds that it's "certainly something that we could pursue".
http://www.telegraph.co.uk/news/2017/08/11/donald-trump-threatens-venezuelas-nicolas-maduro-military-option/

[peejaye]

You won't like George Galloway or Ken Livingstone if you support right wing politics! Simple as that! :yayo:

[Stavros]

You won't like George Galloway or Ken Livingstone if you support right wing politics! Simple as that! :yayo:

I am surprised that you would make such a facile remark. Have you ever met either of them? I could give you some insight from my now ancient days in the party, Livingstone in particular, but it would not be 'the sorrow and the pity' so much as 'the sordid and the petty'. This so-called left was divided against itself in the 1980s, as it was in the 1950s, and just as the 'left' could not decide if Nye Bevan was their leader, so on one day I had an argument with one party member on the left who believed Livingstone was the only hope and another, also on the left, who denounced him as a fraud. George Galloway should be remembered as the man who took over the campaigning charity War on Want, and transformed it into the George Galloway Fan Club, before walking away to make a nuisance of himself in Parliament.

The issue in Venezuela can only be understood with references drawn from its own history, the socially fractured country which has been producing oil and gas for most of the last century. But whoever was in power, civilian or military, left or right, they failed to use its wealth for the benefit of all through long term investment in the economy and society. It has always been easy for outsiders to parachute into the country to congratulate whichever dictator was in power at the time. The so-called left turned a blind eye to the fact that Chavez was a soldier and a nationalist, as if those two factors did not ring alarm bells, and lacking any depth of understanding congratulated him for spending money on the poor much as one would congratulate a millionaire who picks up a group of refugees from Calais, takes them to Maxim's for dinner, then buggers off. In the end, for Livingstone and Corbyn, the 'Bolivarian Revolution' (the one that in reality never happened), was more about themselves and their need to find a cause that made them feel good, it had nothing to do with socialism, and nothing to do with the people. Most times it is better to think about a point of view than from it.

[fred41]

....

[fred41]

You won't like George Galloway or Ken Livingstone if you support right wing politics! Simple as that! :yayo:

When you make comments like this, it pretty much just paints you as a left wing idealogue.

[broncofan]

I understand the purpose of this thread is to talk about Venezuela and not Galloway or Livingstone but I am interested in discussing (maybe in the thought of the day thread) what makes them men of the left. One cannot be a person of the left simply because he identifies with a country or loathes a country but rather because he supports certain principles and applies them equally whether he is discussing his enemy or a comrade in arms. Even an adversary is capable of behaving well and even a country that symbolizes the aspirations of socialism can make policy mistakes. These are not principled men but clowns.

[Stavros]

I understand the purpose of this thread is to talk about Venezuela and not Galloway or Livingstone but I am interested in discussing (maybe in the thought of the day thread) what makes them men of the left. One cannot be a person of the left simply because he identifies with a country or loathes a country but rather because he supports certain principles and applies them equally whether he is discussing his enemy or a comrade in arms. Even an adversary is capable of behaving well and even a country that symbolizes the aspirations of socialism can make policy mistakes. These are not principled men but clowns.

As I think I have pointed out before, the issue with Livingstone and Corbyn is their belief that revolution is a positive thing and that socialist revolution is even better. Talk to any of the Trotskyists in Momentum and they will cheerfully tell you what a rotter Stalin was, denounce the USSR as a 'state capitalist' distortion of socialism, but without pausing for breath defend Lenin and the Bolshevik (as opposed to the Russian) Revolution, Fidel and the Cuban 'Revolution' though they still can't work out if Mao was one of them. Again, there are different traditions within the Labour Party and the 'revolutionary left' only had a brief moment at the top in the early 1980s when Michael Foot was leader, and though he had never been part of the revolutionary left, he was leader at a time when the Labour Party Annual Conference was a policy making body and he could not control it (as Blair later did, by turning Conference into a rally and neutralizing it as a policy making forum). It is still not clear how long Corbyn can last though here are predictions in some quarters that the Tories may be the party that loses most from Brexit, presumably to Labour's advantage.

The Bolivarian Revolution was a magnet for people like Livingstone and Corbyn who cut their teeth opposing the US in Vietnam at countless demonstrations in London in the 1960s and for whom the overthrow of Salvador Allende in Chile in 1973 was an even greater challenge. Allende became the tragic hero and Pinochet (another 'liberator' in Uniform) the most wicked man in the world, but a puppet on American strings, even though the 'Marxist' Allende as President in Chile offered a political programme more modest and less radical than the Civil Rights and Social Welfare legislation passed in the US when capitalist LBJ was President. The Sandinista Revolution by contrast proved what the people, united, could achieve while Reagan's support for the 'Contras' underlined the extent to which the Americans would go to derail a popular revolution determined to improve people's lives.

So for this version of the left in Britain, the context with Venezuela is provided by successful and failed revolutions in which the military, the US and its 'corporate clients', and the People are locked in a perpetual struggle while rational people wonder when success will be marked by an end to a few elites controlling most of the economy, an end to corruption on a scale that draws every part of society into its venal net and promotes organized crime, and the freewheelin' spending of money made from oil until there is none left, often on projects that have a shelf-life of six months or a year at best.

None of this should degrade the issues of importance in Venezuela, but having tried military rule before, why did anyone think a military man then or now was going to be the saviour of the nation? The curious obsession people have with leadership as a form of salvation is found on left and right, yet in the UK the most effective and successful Labour leader, Clement Attlee, had no ideology and certainly no charisma, being dull to the point of anonymity. What he did have in 1945 was a practical mind and an ability to get things done and in doing so improved the quality of life for everyone in Britain for decades to come. There are alternatives, and they don't involve mass casualties and endless rallies and parades.

[broncofan]

That provides a lot of context and helps me understand the alliances and the history. I am not knowledgeable enough on the subject to fully grasp where the current crisis fits into this history but your suggestion that a lack of economic diversification, state control of the media, currency controls which led to artificial rather than market prices for commodities, corruption and elements of authoritarian control have all played a role actually makes sense.

It doesn't make sense to me personally that because the country's wealthy elites are still living and breathing they have magically exerted an influence unless Mr. Livingstone has somewhere explained what that influence is. Or that because the Americans or the Blairites believe there's a crisis, there must not be because both the former and the latter are really just interested in "the black stuff" and the Americans will get first dibs. This is Mr. Galloway's view and I have not heard anyone else describe it as he has on twitter, namely that Venezuela faces "terrorist attack, propaganda war, and economic subversion."

So, I guess instead of arguing whether either of these two men have ever had ANYTHING relevant to say, as the prophetic Mr. Galloway believed Trump was the lesser evil in our election, I'm curious if there is anything to what they are saying NOW. Surely the United States has taken positions in conflicts that are based on our economic interests and our ability to secure access to energy resources, but is that the cause of this crisis? Were the current circumstances procured by our meddling and now exaggerated by our media to justify intervention or are their real structural problems within Venezuela that the country must deal with? The latter seems more likely to be true....but I'm just curious if the former view can even be defended.

[Stavros]

To understand the mind-set of Livingstone, and Corbyn in particular, given that he has had a personal interest in Latin America through his wives, you should be aware that in the 1960s and 1970s there was a growing literature, produced by various Marxists, and shaped by 'dependency theory' which argued that 'third world' countries were poor because they had a structural and unequal relationship with the rich countries of Europe and America, which meant that the elites of the Third World who were landowners and beneficiaries of the national wealth, had more in common with elites of their own kind in Europe and America than at home where poverty and corruption were facts of life and largely ignored by the ruling class.
The national wealth was not used to invest in long term development as in the 'make or buy' option they chose to buy in what they needed, and educate their sons and daughters in posh schools and universities in the US and the UK. In return, corporations invested in the extraction of the national wealth on favourable terms -petroleum in Venezuela's case- while across Latin America, the US guaranteed the security of the state so that whenever there were threats to the existing regime, the US would step in to help, famously in Guatemala in 1954, again the Cuban problem (though the attempts to overthrow the Fidelistas failed), and then the insurgencies in the southern cone in the 60s and 70s which led to military coups in Paraguay, Brazil, Chile and Argentina, until in the 1980s you had Nicaragua (another of Reagan's foreign policy failures), and Grenada in 1983.

From this background you have 'the left' on the side of Fidel and any mass movement or left-wing experiments (so-called, as with Chile), and an instinctive hostility to the US believing it is always on the side of the military (the irony of Chavez again -but I guess he was 'our kind of soldier' and those Trotskyists can always quote their hero from the revolutionary period when he was in charge of the Red Army).

Again, it is the fetish for revolutionary politics which cannot quite get over the fact that, with the exception of Chile under Allende, and to some extent the first of the Sandinista governments in Nicaragua, these new experiments failed, either because they didn't have time to mature, as was the case with Chile, or because the revolutionaries were too bold too soon and pursued changes that could not be accommodated with limited resources. Venezuela nationalized most of its petroleum industry in the 1970s (as did Colombia) and much of the country's internal changes did begin around this time, but it was based on the surge in the price of the oil which peaked in 1979, crashed in 1982 and sank to its lowest rate in 1986 undermining attempts the state was making to invest in its future. Internal opposition, corruption, the intense roles of the military in some states, the Church in others complicated the issues -the Church was conservative and pro-military in Chile and Argentina, radical and populist in Colombia and Brazil.

This does not suggest the 'left' has always been wrong, but a more rational view of what was achieved and where it failed is replaced in the mind-set of Corbyn for whom the 'struggle' in Latin America has always been about rapacious capitalists and military hard men backed by the US versus the People, and it really is more complex than that. The current arguments about the 'neo-liberal' order that is associated with Reagan and Thatcher are that the old dependency model was replaced with a hard-nosed military capitalism which extended the reach of global corporations and in Venezuela strangled domestic economic development, while states like Peru and Colombia became dependent on narcotics, though I think this is all too simple.

Perhaps in the end it just comes down to bad leadership, that for all his charisma and enthusiasm for change, Chavez just wasn't up to the job and allowed people with the power in his government to spend money on fatuous schemes that had no long term prospects, funded by the illusion that the $100 barrel of oil was going to last longer than it did.
Venezuela appears to have run out of money and the intelligent people it needs to get them out of this mess. Rather like the the situation the UK could be heading into over the next few years.

[Stavros]

The crisis in Venezuela has taken a new turn, one that now puts the elected President Maduro on a collision course with the President of the National Assembly leader Juan Guaidó. Maduro's election has been treated as fraudulent, while Guaidó became leader of the NA on the 5th of January and has used that position to declare himself interim leader, dismissing Maduro as President. It is hard to believe that Guaidó acted without first consulting the US, but it would have served him better to contact the head of the armed forces who has spoken in favour of Maduro -for the good of the country or his share of profits from the state oil company now part-owned by the military.

The tension mounting exists because of the instability in the country, the possibility that divisions may open up in the military (lower ranking officers without access to the revenues from oil and other parts of the economy are badly paid, as they were in Iraq when Saddam was in charge), and the fact that external parties are taking sides: the US supporting Guaidó, Maduro relying on support from Russia, China and Iran.

Iran has had close relations with its OPEC partner for some years, with Iranian investments in Venezuela reaching $4 billion by 2008, in energy, agriculture and food. President Ahmadinejad went to Caracas for the funeral of Chavez in 2013 and Maduro has been to Tehran, often on the way to or back from Moscow. What probably made the eyes of John Bolton go pop was the announcement last December that Iran would be sending its new warship, the Sahand to Venezuela for a three month tour, accompanied by maybe two others, though there is some speculation on whether this will happen or indeed if ships are already there -I heard this on the BBC Radio 4 World at One today but can't find any confirmation of it on the web.

The Russians have been developing relations with Venezuela for some time, now owning a proportion of five oilfields, trading oil, and advising the Government on financial matters, creating a digitial currency -the Petro- with which to trade with Venezuela while avoiding US sanctions. It has been claimed however that the Russians are annoyed with Venezuela for not paying its bills and that Putin will regard Maduro as surplus to requirements when the time comes, which may come soon. The major nuisance however was the arrival in Venezuela of two Russian bombers capable of transporting nuclear weapons, not quite Cuba Redux but enough to alert the Pentagon.

If the Russians and the Iranians are wondering where all that money went they invested in Venezuela then maybe its just simple -Chavez spent it, and Maduro would like to if he could get more of it. That may also be what China wants to know as it too has been a significant investor in Venezuela, not least because of its thirst for oil most of which is imported. By the time of Chavez's death in 2013, Venezuela-China loans for oil were worth $40 billion.

Crucial here may be the US argument that they cannot turn a blind eye to the domestic collapse in Venezuela or the strategic importance of having a Chinese, Russian and Iranian military and political presence in the Americas. While these are for the most part commercial arrangements, Chavez was deliberate in selecting as partners rich patrons he knew the USA was wary of. The US President has not said the US will not use military force, and though one can imagine Bolton raring to go, the strategic rationale does not seem to make sense, yet, if Maduro decides to fight Guaidó with or without military support, the integrity of the country could be in jeapordy and both Colombia and Brazil might feel their own military need to get stuck in, if only to 'protect' their borders. The US could offer military 'assistance' to Colombia and Brazi, and who knows, the President may even suggest they build a wall to keep out refugees from Venezuela.

The situation is delicate, and I don't have any predictions, other than that it will probably get worse before its gets better.

Some links:
On Iranian warships in the Atlantic-
https://www.rferl.org/a/iran-navy-to-send-warships-to-atlantic/29693199.html
http://www.thedrive.com/the-war-zone/25797/no-iran-isnt-about-to-send-a-stealth-destroyer-to-venezuela-or-off-the-coast-of-the-u-s

Iran and Venezuela
https://en.wikipedia.org/wiki/Iran%E2%80%93Venezuela_relations

Russia and Venezuela
https://www.washingtonpost.com/world/national-security/in-venezuela-russia-pockets-key-energy-assets-in-exchange-for-cash-bailouts/2018/12/20/da458db6-f403-11e8-80d0-f7e1948d55f4_story.html?noredirect=on&utm_term=.d0610f4b4c8c

https://www.americasquarterly.org/content/russian-interests-venezuela-new-cold-war

China and Venezuela
https://carnegietsinghua.org/2018/09/24/china-venezuela-relations-perfect-storm-pub-77352

US and Venezuela
https://www.theguardian.com/world/2019/jan/25/trumps-white-house-feels-its-way-through-regime-change-in-venezuela

https://www.theguardian.com/commentisfree/2019/jan/24/donald-trump-venezuela-nicolas-maduro

[Jericho]

Yes, it's nothing to do with bad neighbours! :whistle:

[Jericho]

When you make comments like this, it pretty much just paints you as a left wing idealogue.

Which just goes to illustrate how divisive this whole brexit situation is.
I'm probably further to the left than PJ, yet we're both bitterly divided on Europe.
I'm staunchly remain, always will be.

[Nikka]

I heard a mansion in Venezuela costs $40 dollars

[Stavros]

This is a very good article on the crisis, two excerpts:

Back in 2012, Venezuela was selling almost $100bn to the rest of the world. Last year it sold $32bn. Just like a person or a family, an economy that suffers a large decline in what it sells to other economies will be able to buy much less from them. Put simply, Venezuela suffered a two-thirds decline in its annual paycheck. Any country that suffers such a massive decline in its income is bound to experience a collapse in living standards.


Advocates of sanctions on Venezuela claim that these target the Maduro regime but do not affect the Venezuelan people. If the sanctions regime can be linked to the deterioration of the country’s export capacity and to its consequent import and growth collapse, then this claim is clearly wrong. While the evidence presented in this piece should not be taken as decisive proof of such a link, it is suggestive enough to indicate the need for extreme caution in the design of international policy initiatives that may further worsen the lot of Venezuelans.

https://venezuelablog.org/crude-realities-understanding-venezuelas-economic-collapse/

[Stavros]

Labour (https://www.independent.co.uk/topic/labour)’s Emily Thornberry (https://www.independent.co.uk/topic/emily-thornberry) has refused to recognise Venezuelan (https://www.independent.co.uk/topic/Venezuela) opposition leader Juan Guaido (https://www.independent.co.uk/topic/juan-guaido) as the country’s interim president despite acknowledging the “desperate” situation in the country.
https://www.independent.co.uk/news/uk/politics/venezuela-crisis-labour-emily-thornberry-guaido-maduro-corbyn-human-rights-socialism-a8765381.html

This is an odd position to take with the Popular Will party that Juan Guaidó represents, as it was formed in 2009, and in 2014 joined the Socialist International, thus becoming a fraternal member of the SI with, yes, you guessed it, the Labour Party...for whom Emily Thornberry speaks on foreign affairs...
https://en.wikipedia.org/wiki/Popular_Will