Six Reasons Why Venezuela Still Has Socialism

Six Reasons Why Venezuela Still Has Socialism
A billboard in Venezuela promotes the slogan "Made by Socialism" in this file photo. The logo also features on confiscated products by private companies. (Creative Commons)
Fergus Hodgson
The undeniable crisis in Venezuela and the largest mass exodus in Latin-American history has led socialists to contend that the Chavistas have not introduced real socialism. All problems in what was supposed to be revolutionary socialist paradise are the fault of an “economic war” from the evil American empire.
Given the cultish allegiance to socialism around the world, this obfuscation has garnered plenty of traction. Unfortunately, that includes prominent members of the Venezuelan opposition, who appear incapable of seeing what is before their eyes. For example, the Popular Will political party of Leopoldo López—a political prisoner and perhaps the most recognized opposition leader—is a full member of Socialist International.

The scapegoating and continued push for socialism, however, spells no end to the insanity. It also dooms more nations to follow Venezuela’s lead to a self-imposed economic and political nightmare.

The word “socialism” is not necessarily the crucial element; what socialism stands for is the centralization of the means of production. Often couched in feel-good terms, such as “liberation“ and ”justice,” socialism means a command-and-control economy that dismisses property rights and individual autonomy, in contrast to capitalism.
In the words of the newspaper Socialist Worker, socialism means “a society based on workers collectively owning and controlling the wealth their labor creates ... in the Marxist tradition.” The dominant theme in socialist publications is the pursuit of egalitarian outcomes, achieved through the redistribution of resources and heavy intervention in the economy, especially with explicit state ownership and control of industries.
How does Venezuela in the Chavista era (1999 to the present) stack up? Hugo Chávez and his allies were so hellbent on introducing a socialist “revolution” that one feels like a mosquito in a nudist colony, there are so many policies to highlight. Chávez vastly expanded existing socialist programs, and dictator Nicolás Maduro—Chávez’s handpicked successor—has continued and accentuated the interventionism. When Chávez died in 2013, he had 32 government ministries. Now there are 40, including the ministries of Communes, Food Sovereignty, Water and Ecosocialism, and Supreme Social Happiness.
Here are a few ideologically symbolic socialist policies from the Chavista era, grouped into five categories:

1. Confiscation, Nationalization of Industries

Seizures of private businesses have become standard procedure in Venezuela, and a recent international court decision awarded a $2 billion settlement to ConocoPhillips for a 2007 appropriation. That year also included communications companies. In 2008, it was cement, steel, mining, and dairy products. Likewise, in 2009, it was rice, a local airline, and some farmlands.
Inevitably, in 2010, as shortages became glaring, the regime took control of supermarket chains, food processors, and package manufacturers—not that this relieved the shortages. In 2008, there were 800,000 private companies registered in Venezuela. By 2017, that number had dwindled to 270,000.

2. Price Controls

Fixed prices are the bastion of economic illiterates, since they generate shortages or surpluses and fuel black markets. However, the Chavista propaganda arm, TeleSUR, celebrated 33 minimum-wage increases between 1999 and 2016, driven by reckless monetary policy and astronomical inflation.
The minimum wage was just the start. To achieve “just prices,” since 2014 all businesses have been limited to a maximum profit margin of 30 percent of costs. Meanwhile, almost all household items have had prices set by the Superintendent for the Defense of Socio-Economic Rights (SUNDDE), generating empty shelves for everything from toilet paper and deodorant to beer. Venezuela’s free-market think tank, Cedice Libertad, estimates that price controls forced 28,000 businesses to close in 2015 and 20,000 in 2016.
Perhaps the worst price control of all—one that is a magnet for illicit enrichment—has been the tiered exchange-rate controls. These predate the Chavista regime and go back as far as 1940, but they have grown to incomprehensible magnitudes, straying from the black-market exchange rate by orders of magnitude. That happens when you have hyperinflation and cut three zeros from the currency (2008), then another five (2018).
A useful first step for any reform-oriented government would be to dismantle entirely the National Center for Foreign Commerce (CENCOEX), which administers (read: corrupts and dislocates) currency exchange in Venezuela.

3. Utopian Projects

Chávez started more pet projects than one can keep track of, but perhaps the largest giveaway has been for new houses and housing renovations. In a population of 32 million, the program that began in 2009 has renovated almost 600,000 homes. An expansion in 2011 saw the building of 1.9 million new houses for those deemed poor.
One can see how the regime managed to spend enough money to generate inflation and eventually hyperinflation. Such was the dependence and entitlement mentality of the people that, when oil prices declined, the regime refused to cut back and merely printed more currency to maintain spending levels.
To show how faithful he was to socialist ideals, Chávez also started 50 communes (comunas), new suburbs or villages with “social” property. The initial sizes were about 250 families, and the hope was to get 350 functioning. However, given the economic crisis, residents and candidates have abandoned that pipe-dream idea.

4. Demonization of Employers

What good would a socialist movement be without greedy capitalists to demonize? The common recipients of vitriol are employers, and Venezuela is no exception.
Chávez pitted employees against employers and made firing someone essentially impossible. Aside from upping the required benefits to include a minimum of 15 percent profit sharing, Chávez banned trial periods. The tremendous risk associated with hiring labor means that more than half of people work off the books in the informal sector of the economy.
Can you blame employers for their reluctance? The revolutionary red tape means starting a new business in Venezuela takes at least 230 days.

5. Anti-Capitalist, Marxist Alliances

Chávez’s socialist alliances began well before his tenure as president. After leading two bloody coups d'état in 1992, Chávez received a pardon and release in 1994 (what a mistake that was). When he got out, he accepted an invitation from Fidel Castro to meet in Havana, and Chávez didn’t hide his admiration for the totalitarian dictator and subsequent mentor.

The Chavista international alliances have had two main purposes: to unify socialist regimes and to work with anyone who opposes the United States. Since the United States is the capitalist symbol, the logic has been that the enemy of my enemy is my friend. The less ideological allies have included Belarus, Iran, Libya, and Syria.

The chief ideological bloc has been the Bolivarian Alliance, which Chávez founded with Cuba in 2004. Its members include hardline-socialist and authoritarian regimes of Latin America, such as those of Bolivia and Nicaragua. So ardent and anti-American are the members that even Ecuador withdrew recently.
The friendly relationship between the Chavista regime and the terrorist Revolutionary Armed Forces of Colombia (FARC) is just as bad. In 1995, Chávez received guerrilla training from these violent Marxists, and he and Maduro backed the FARC peace deal, which Colombian voters rejected in 2016. FARC commanders roam freely throughout Venezuela and poach Venezuela’s natural resources.

6. Rationing

“Free” is the ultimate price control, since it places a maximum of zero. When people face no cost at the margin, they consume as much as they can, up until they garner zero additional benefit.
Socialist regimes and mixed economies have come up with many ways to impede unbridled consumption, from making people wait in lines for hours to setting maximum quantities per person or household, as in Cuba.
The Chavistas have a particularly elaborate scheme called the Motherland Card (carnet de la patria). It is a personal ID card that gives Venezuelans access to social programs, medical care, rationed food, and subsidies. It also lets the regime know who voted in the sham elections.
Chávez ran for president in 1998 on a militantly socialist agenda—backed by Cuba, the Venezuelan Communist Party, and the Socialist Movement—although he branded himself as a revolutionary “humanist.” He and his successor, Maduro, proceeded to enact every socialist policy in the book for almost 20 years. They spent precious national resources on a litany of social-engineering schemes, and they imposed countless price controls.

International rankings affirm Venezuela’s transition to radical socialism, not to be confused with Nordic welfare states that rest heavily on capitalist production. The Fraser Institute’s Economic Freedom of the World ranking places Venezuela as the least free economy—the most centrally planned—in the entire world.

Useful idiots around the world celebrated the rise of 21st-century socialism.
Yet now that the catastrophic results have arrived—shortages, poverty, misery, unemployment, hyperinflation, emigration, corruption, hunger, lawlessness, and conflict—suddenly everything that happened is no longer socialism.

The rulers in Venezuela are no idealistic saints, to say the least, and their socialist policies have coincided with the end of democracy. The notion, however, that the latter rather than the former is responsible for the crisis is misleading at best.

Consider Singapore, with limited democracy and restricted rights to press and association. With one of the world’s most capitalist economies, Singapore offers high standards of living and safety, and attracts expats. How many socialists want to live in Venezuela? Even the Chavistas are getting out.

Authoritarians tend to favor socialism because it emboldens them with more power and leaves the populace weak. In contrast, laissez-faire capitalism—the right to property and freedom to exchange—emboldens the individual and leaves rulers with a limited role.

Fergus Hodgson is the founder and executive editor of Latin American intelligence publication Antigua Report.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Fergus Hodgson is the founder and executive editor of Latin American intelligence publication Econ Americas. He is also the roving editor of Gold Newsletter and a research associate with the Frontier Centre for Public Policy.
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