Chapter 1
Socialism Destroyed Venezuelaâs Once-Vibrant Economy
Socialismâs great. Just ask Oliver Stone.
Oliver Stone has composed not one but two biopics glorifying the socialism of Hugo Chavez. Wonder if itâll become a trilogy with the finale showing images of Venezuelans eating their pets and burning their currency for warmth?
Doubt it. Remorse and honest regret are not found in any great quantity in Hollywood.
How did Oliver Stone, Michael Moore, and Sean Penn get it so wrong when observing the Venezuelan âmiracleâ?
Venezuela was so rich with oil that it took some time for socialism to completely destroy its once-vibrant economy. Even to this day Venezuela still has the largest oil reserves in the world, even greater than Saudi Arabiaâs. They just canât get it out of the ground because socialism has destroyed the pricing system, and endless government spending and debt caused hyperinflation that has destroyed its currency.
Some blame Chavez for this disaster. Some blame Maduro. But really, could any one man take a country with more oil reserves than Saudi Arabia and screw it up so badly that hundreds of thousands of citizens would flee the country? Could one man take the richest country in South America and turn it into a hellhole where citizens literally starve in the streets?
Chavez and Maduro alone didnât lay waste to Venezuela. Rather, it was the terrible constellation of ideas called socialism that reached its pinnacle under Chavez and Maduro that devastated Venezuela.
Some like to point to the Castro-loving Hugo Chavez as the beginning of socialism in Venezuela, but the roots of its government owning the means of production started decades before Chavez. State control over Venezuelaâs oil industry dates back to the 1970s.
According to freelance writer JosĂ© Niño, âin the 1950s, . . . Venezuela was at its peak, with a fourth-place ranking in terms of per capita GDP worldwide.â1 In the 1950s, when the Perez Jimenez government ruled, there were no extensive price controls. At that time, Venezuela was neither democratic nor a completely free market economy but rather a military regime with aspects of crony capitalism. For the most part, prices were not controlled and a limited marketplace allowed supply and demand to intersect and work their magic.
As Niño describes it: âA combination of a relatively free economy, an immigration system that attracted and assimilated laborers from Italy, Portugal, and Spain and a system of strong property rights, allowed Venezuela to experience unprecedented levels of economic development from the 1940s up until the 1970s.â2
Daniel Lahoud is a professor at the Universidad CatĂłlica AndrĂ©s Bello, a Catholic university, and at the Universidad Central de Venezuela (UCV). Lahoud describes Venezuelaâs long path to socialism:
âBefore 1973 our government did not own any companies and Venezuela grew 6.5 percent year-on-year. In contrast, between 1974 and 1998 we experimented with democratic socialism and brought GDP growth to 1.9 percent year-on-year. Since 1999 we are experimenting with scientific socialism and the rhythm is 0.0 percent or negative.â3 (Today, Venezuelaâs GDP is contracting at 10 percent.)
In contrast, consider another South American country, Chile, which abandoned its flirtation with socialism back in 1973. At that time, Chilean income was about 36 percent of Venezuelaâs. Operating under free markets and capitalism, Chilean incomes have increased by 228 percent, while Venezuelan incomes have declined by 21 percent. Capitalism has left Chileans 51 percent richer than their Venezuelan counterparts, who now starve despite the vast resources of their country.4
Lahoud thinks it is very important that people understand not only the enormity of Venezuelaâs disaster but the root cause:
âI have known the reality of the failure of socialism in my own flesh. And as I live in Venezuela, I want to show that this is an absolute failure always and everywhere. Socialism, whatever form it may take, only brings economic destruction and worsening of the conditions of human life.â
Lahoud admits that âVenezuela was never a country of economic freedoms. But when we had less public spending, we grew more. . . .â5
In the late 1950s, military rule was replaced with âdemocracy.â Romulo Betancourt (1959â64), an ex-communist, assumed the reins of power and made a significant turn away from a market economy. Niño describes Betancourt as adopting a âmore gradualist approach of establishing socialism,â as he was âpart of a generation of intellectuals and student activists that aimed to fully nationalize Venezuelaâs petroleum sector and use petroleum rents to establish a welfare state. . . .â So, socialism in Venezuela was not a new program created by Chavez, but rather Chavez simply took socialism to another level.
Niño tells us that Betancourtâs government tripled income taxes and generated massive fiscal deficits that âwould become a fixture in Venezuelan public finance during the pre-ChĂĄvez era.â6
Betancourt was succeeded by Carlos Andres Perez, who nationalized the entire petroleum sector in 1975.
As Niño puts it:
If socialism means that the state owns the means of production, then 1975 was a significant milestone in Venezuelaâs descent into socialism. With enormous oil reserves and a steady flow of cash, it would take a decade or two for socialist policies in the form of price controls and currency controls to completely ravage the economy.
Chavez didnât just arrive unannounced on the scene. He first came to prominence in a failed coup in 1992 against the Andres Perez regime. Chavez was imprisoned for two years. Upon his release, he decided this time to take power through the political process. He founded the Fifth Republic Movement and was ultimately elected president of Venezuela in 1998.
Leftists in America heralded Chavezâs election. Bernie Sanders, Noam Chomsky, and others pointed with glee to data showing a decline in poverty. When socialism finally strangled the economy and Chavez resorted to violent means to quell protests, many on the left went radio silent on Venezuela.
Some leftists, however, stuck with Chavez and put an interesting spin on their defense of state violence against the people. George Ciccariello-Maher is a writer and activist who supported Venezuelaâs Bolivarian Revolution led by Chavez. He taught political science at Drexel University until being consumed by a Twitter storm over his tweet: âAll I want for Christmas is White Genocide.â When prompted to clarify his comments, he tweeted: âwhen the whites were massacred during the Haitian revolution, that was a good thing.â8
Commenting on Chavezâs crackdown on protesters, Ciccariello-Maher wrote: âIf we are against unnecessary brutality, there is nevertheless a radically democ...
