Shadows of the Past in Venezuela

ANATOLY KARLIN • JANUARY 24, 2019

Caracas, Venezuela.

One curious thing about Venezuela that few people seem to have remarked upon is that Chavez and Maduro are not really all that hardcore about their class war. The latter assumed the powers of Congress in 2017, but didn’t send armed men to round up the querulous parliamentarians. They continued to yack and squawk in their assembly, and now one of them has declared himself President. Bourgeois speculators, comprador elites, and dark foreign powers are conspiring to keep food off the supermarket shelves, but there haven’t been any demonstrative shootings of saboteurs and wreckers. Economic populism ran amok in an unsustainable flood of gibs that has only been recently been devalued by hyperinflation, but there was no serious attempt to set up central planning organs. Even Salvador Allende began to do that from his first year in power.

Anyhow, this easygoing Bolivarian socialism seemed to work okay so long as oil prices were high and there were still plenty of PDVSA assets to strip down to keep up approval ratings for the champions of the Revolution. But it’s become rather harder to do that now that the economy has plummeted more than Russia’s did after the collapse of the USSR. Now the only reason Maduro is still in power is the support of loyalist Army officers appointed under Chavez – and only so long as he keeps the gibs flowing to them, and the Cubans keep removing malcontents amongst the ranks faster than they can concentrate a critical mass.

And yet for all that, even at this late stage, Venezuela is not a hardcore authoritarian regime. It’s authoritarian, to be sure, but not yet the type of regime that kills lots of people. Venezuelans are not afraid to vent their hatred of Maduro on the Internet and on the streets. But they are afraid of criminals. Say what you will of them, but true authoritarian regimes never have homicide rates paralleling those of the Yanomami tribesmen. There are massive protests, and no mass arrests – yet, anyway – despite an open coup attempt supported by foreign powers. Maduro doesn’t have much more blood on his hands than Macron.

This, incidentally, might partly explain why Venezuela hasn’t adopted central planning. Central planning works – not very efficiently, to be sure – but it does get things manufactured, transported, and somewhat matched to demand. But for central planning to work, it needs coercion. No coercion – central planning falls apart, and the whole structure disintegrates. This is what happened in the late Soviet Union.

So why didn’t the chavistas go FULLCOMMUNISM? The Bolsheviks didn’t have any qualms imposing Soviet power on a much more recalcitrant Russia, with savageries unseen in Europe since the Thirty Years War. The Chicoms were also very brutal. Nor is this a Latin American oddity. The Cubans might have been gentler, but they weren’t particularly nice either. They were about as brutal as the Argentinian junta or the Pinochet regime in Chile, though stretched out over a longer period. Venezuela? They haven’t even brought back the death penalty, after having been the first nation to abolish it in 1863.

It doesn’t have much to do with idealism, either. Venezuela’s leaders are not nice people. I am not saying that the opposition, or the American ideologues dead set on overthrowing them, are “better.” But let’s not entertain any delusions. Family members and friends of Chavez have become very rich, and many of them prefer to live far away from the Bolivarian paradise their parents and colleagues have created. Chavez’s own daughter lives abroad, and is reputed to be Venezuela’s richest female billionaire.

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While thinking about this conundrum, I recalled an essay I once wrote about the history of the Venezuelan economy: https://akarlin.com/2012/02/history-of-venezuela/

Perhaps the answer lies, as it so often and strikingly does, in what we might call deep history. See, the Venezuelan state has traditionally been weak; it didn’t produce any gold or silver, so Spanish colonial administrators allowed it a relatively large degree of autonomy. Primary commodity exports – that’s cacao, back then; oil after the 1920s – had to pass through and feed the Caracas bureaucracy, but otherwise the white landowning magnates were left to their own devices. After independence, Venezuela had no fewer than 41 Presidents and 30 insurrections from 1829 to 1899. That’s competitive with the Roman Empire during the grisly Crisis of the Third Century. But that’s where the similarities ended. The striking thing about these yearly color revolutions is how bloodless they were.

So imagine this handsome, mustachioed caudillo called Juan, he is relaxing at his hacienda and he has perhaps drunk a bit too much rum this afternoon. Or maybe just the right amount, considering what is about to happen. He doffs his big gaucho hat, calls over his loyal posse, and sets out for the nearest plaza in the eastern llamas, where he regales the mob with a drunken, rambling speech about how President Jose is a pendejo. Ragtag militia in tow, Juan marches to Caracas, makes his grand entrance on a white horse, and drunkenly proclaims himself the new El Presidente. Jose, being a good sport and all, accepts this development in good humor, confident in the knowledge that he or his good amigo Joaquín would repeat this piece of performance art in a year or two. *This story has been dramatized for effect. May or may not accurately describe actual historical events.*

As you might guess, enriching oneself while in power is also a veritable tradition in Venezuela historically shared by left and right alike. In the late 19th century, President Guzman Blanco amassed massive debts, some of which mysteriously made their way into his bank accounts. Spending his time as President between Caracas and Paris, the revolution happened to coincide with one of his trips to the French capital, where he wisely elected to stay. (Incidentally, the Europeans sent gunboats to Venezuela in 1902-03 when they refused to honor Blanco’s debts. Thankfully for Venezuelans, we now live in gentler times). The early 20th century dictator Juan Vicente Gómez became the country’s richest oligarch upon his death in 1936, having amassed a $400 million fortune (that would be $7.2 billion today).

So yes, to be sure, the chavistas have overturned many of the patterns of Venezuelan history. Chavez’s personal example has emboldened and empowered the pardos, and they have bestowed munificent largesse on the Venezuelan people (in fairness, this latter development already has ample precedence; there were similar experiments in the oil-rich 1970s, when Venezuelan salaries briefly became the highest on the South American continent, before oil prices and the economy collapsed in the 1980s and the neolibs had to clean up the mess). Still, perhaps can’t just alter fixed national templates too much. Perhaps this is why Maduro hasn’t made himself into a proper, self-respecting dictator. It would be just too un-Venezuelan, where authority and violence have always been concentrated at the local level. Presumably, this is why, having – for a time – enriched ordinary Venezuelans, the chavista elites hardly want to live in penury themselves. If kleptocracy was good enough for the great caudillos and dictators of the past, what makes them inferior? And ultimately, as Steve Sailer points out, even Hugo Chavez eventually married into white. His grandchildren are probably going to be quite a bit fairer than him, the epitome of the Raza Cósmica ideal. As it turns out, the limits to racial idealism are no less absolute than the limits of socialist idealism.

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But back to the present. While I don’t observe Venezuela particularly closely, my impression is that the conventional wisdom is broadly correct. Maduro’s power is dependent on maintaining the flow of gibs to the Army officers. Flow of gibs depends on oil export earnings. Oil export earnings are dependent on the ability of state-owned oil giant PDVSA capability to maintain production at its wells.

Venezuela is often cited as having the world’s greatest oil reserves, but 90% of it is economically uncompetitive heavy oil. Extracting it will cost more than it will get on the oil markets and turn the Orinoco into a tarry slurry. Still, it does have a modest amount of “normal” oil. It’s still quite sulfuric, so it sells at a discount, but a country like Venezuela should still be able to live quite comfortably off it. Not like the Emiratis, or even the Saudis… but like the Azeris or Gaddafi-era Libyans, sure, why not. Unfortunately, competent human capital has been hounded from PDVSA and substituted with ruling party cronies, while investment in oil production capacity has been woefully neglected. As a result, oil production is going down inexorably. Not only is this putting a crimp on foreign currency earnings – Venezuela’s current reserves are sufficient for a mere month of imports – but this year production is expected to fall to a level where it becomes impossible to service China’s and Russia’s loans, at which point Venezuela loses a bunch of assets to them, such as the Citgo oil refinery. In the worst case, production will fall so low that even the Army officers can no longer be bought off.

There are three possible ways out of this imbroglio:

1. The utopian state-backed cryptocurrency schemes that Venezuela is currently dallying with might come in handy for subventing Western sanctions, but they don’t solve underlying problems. Apart from that, Venezuela needs to at least adopt a modest economic reform program, such as the one proposed by Russia. It retains some socialist elements (e.g. a minimum income for households), but otherwise returns policy-making to some semblance of economic sanity. In particular, Venezuela will need to stop financing its budget deficit by printing money, and reform the tax code to focus on more easily collectable indirect taxes. This is its best bet for maintaining some semblance of sovereignty, and salvaging what can still be salvaged of the Bolivarian Revolution.

2. Fold to the color revolution – and sign back up to the US-dominated world order.

3. Go hardcore techno-totalitarian by combining Venezuela’s state-issued national ID cards, which are used to access subsidized food and fuel purchases, with Chinese-style social credit. This is the most radical step, and will fundamentally transform – lock down – any society that implements it. And Chinese state corporations are only too happy to make it happen. After all, the only thing better than lording over peons forced to smile for the Panopticon is to be the guys responsible for its maintenance. Since Venezuela’s own capacity to run such a complicated system is questionable, this onus will fall on China, with all the accompanying power and influence deriving from that. In this scenario, Venezuela permanently drifts into the emerging Sinosphere – the likely primary antagonist to US primacy in the coming decades.

Which of these choices Venezuela makes will tell us a great deal about the balance of power in the coming world order.

http://www.unz.com/akarlin/venezuela/