On the occasion of Venezuelan President Hugo Chavez’s death last week, much of the international media responded in typical fashion, by painting the Chavez administration much as they painted it when Chavez was alive—as an autocratic regime led by a foolish tyrant who mismanaged the country and squandered its oil wealth.
They showed little mercy for the larger-than-life leader, so beloved by the majority in his country, and by millions around the world, giving the impression that Hugo Chavez got almost everything wrong, and did virtually nothing right.
Many of the criticisms have an element of truth to them, as many problems persist in Venezuela. And the press made sure to highlight these problems as evidence of Chavez’s failure, making it sound as if any sensible leader or government in Chavez’s position could have resolved them. But what showed through more than anything in these anti-Chavez tirades was a very revealing, almost embarrassing, misunderstanding of Venezuela’s principal economic and social issues.
“It’s a pity no one took 20 minutes to explain macroeconomics to him,” writes Rory Carroll in an op-ed in the New York Times that claims Chavez was “an awful manager” who destroyed Venezuela. Carroll slams Chavez for everything from failing to fix up the presidential palace, to spending too much on education and health, to not investing enough in infrastructure.
As The Guardian’s correspondent in Venezuela since 2006, Carroll apparently had seen enough to conclude that Chavez had “left Venezuela a ruin”. Yet one wonders if he ever managed to talk to the millions of Venezuelans—those who packed the streets to mourn the president’s death last week—who feel the country has been forever transformed.
For literally days on end, non-stop, all day and all night, people filed through the building where Chavez’s body was displayed to pay their final respects. A line stretched for miles outside, as people waited several days, eating and sleeping in the line, just to see their president one last time. This immense outpouring of emotion is very hard to square with the image Carroll gives us.
It might be an exaggeration to say Chavez transformed the country—though many things were deeply changed—but one doesn’t have to be an expert to know that Venezuela’s problems are more complicated than one man and his personality quirks.
The Economist tells us that Chavez was a “narcissist” who was “reckless” with his country’s economy and who “squandered an extraordinary opportunity”. We are told Chavez could have used the country’s oil wealth to “equip [Venezuela] with world-class infrastructure and to provide the best education and health services money can buy”. But due to mismanagement, “the economy became ever more dependent on oil”. Carroll echoes this, blaming Chavez for a “withering” private sector, and decaying infrastructure.
But apparently these self-proclaimed experts have never taken even the most cursory look at Venezuelan history. Had they done so, they would know that since Venezuela’s oil wealth was first discovered nearly a century ago, no government has ever been able to do what they claim should have been accomplished by the Chavez government.
Past governments have invested the country’s oil wealth in infrastructure, industry, and development projects—though never as much as Chavez—yet not one of them managed to break dependence on oil, diversify the economy, create a flourishing private sector, or build adequate health and education services. Was it because they were all reckless narcissists? Or do these problems perhaps have an explanation that goes deeper than the president’s personal style?
Of course, the truth is much more complex than what the Chavez haters would like to admit. It is true that Chavez did not provide solutions to many of Venezuela’s problems, and that some problems even got worse, but contrary to the media claims, he probably did better than any previous government in Venezuelan history.
One gets the opposite impression from much of the international media. Take a look at the following paragraph from last week’s article in the The Economist:
Behind the propaganda, the Bolivarian revolution was a corrupt, mismanaged affair. The economy became ever more dependent on oil and imports. State takeovers of farms cut agricultural output. Controls of prices and foreign exchange could not prevent persistent inflation and engendered shortages of staple goods. Infrastructure crumbled: most of the country has suffered frequent power cuts for years. Hospitals rotted: even many of the missions languished. Crime soared: Caracas is one of the world’s most violent capitals. Venezuela has become a conduit for the drug trade, with the involvement of segments of the security forces.
Amazingly, almost every sentence in the paragraph is false. Agricultural output did not drop, but rather grew by 2 to 3 percent per year, and grain production, which was the government’s major focus, grew by 140 percent. Inflation was considerably lower under Chavez than the previous two governments. Food shortages and power cuts were caused by the explosion in consumption among the poor, not a fall in production.
Both electricity production and food production have increased to all time highs. Thousands of new health clinics have been built around the country. However, it is true that many hospitals remain inadequate, that crime has soared, and that Venezuela is still a conduit for the drug trade, as it shares a large border with Colombia.
The claims of increased oil dependence are also not borne out by the facts. It is true that oil as a percentage of total exports has increased, but this is largely due to the fact that oil prices have increased nearly ten-fold since Chavez came to power, making it inevitable that their value in relation to total exports would also increase.
The critics say Chavez squandered the country’s oil wealth, which he could have used to transform it into a modern state. Indeed, the oil boom left Venezuela awash in oil money, a situation that Chavez’s policies had a hand in creating, as he united OPEC and increased royalties and taxes on the oil sector, giving the state vastly more funds to work with. If only this “awful manager” knew how to administer the funds, critics say, Venezuela could have been well on its way to becoming a modern, developed nation.
But this is shortsighted. Nations do not develop on the basis of resource wealth or commodity booms. A country cannot spend its way into the first world. Rather, economic development is about systematic growth in productivity, innovation, and technical change, activities that typically fall on the shoulders of the private sector. In the developed world, it is largely the private sector that invests surpluses into new technologies and improvements in the productive process, something that does not occur in Venezuela in a systematic fashion.
Of course, critics and opponents of Chavez argue that this is also the fault of the government, that it is Chavez’s fault for not creating the right environment for private investment, and that with the “right” policies the private sector would decide to invest in the country and would produce the kind of economic development that will benefit all sectors of society. Apparently no Venezuelan government in history has been able to figure out what those “right” policies are.
But this ideology defeats itself with its own logic, for private investors in market economies don’t invest in productivity because they feel like it, or because the conditions are just as they like. They do so because they have to in order to match the competition, to survive in the market, and to avoid going out of business. In modern market economies, producers invest in improving productivity because they are compelled to do so by the market, not because they decide they want to.
The fact that much of the private sector in Venezuela has seldom been compelled to do the same only demonstrates that this economy does not function like the model market economy that these theories are based on.
Huge swaths of the nation’s agricultural land have long been dominated by large estates—the infamous latifundios—that feel very little pressure to improve productivity, and graze cattle on the nation’s best land. The commercial and industrial sectors have long been dominated by highly diversified conglomerates—the so-called grupos económicos—that control key sectors of the economy, and are rarely threatened by competition.
In other words, it goes against these critics’ whole line of reasoning to point out that what really determines whether a country is rich or poor is not commodity booms or resource wealth, but rather has to do with productivity growth—something that has seldom been a priority for much of Venezuela’s private sector.
It’s a pity that no one took 20 minutes to explain this to Rory Carroll, The Economist and others who blame all of Venezuela’s problems on Hugo Chavez, for he did more than any president in history to try to change the unproductive logic of the private sector.
More than 3.6 million hectares of unproductive land were expropriated and redistributed to over 170,000 small producers—far more than the entire 40 years of pre-Chavez land reform. Major sectors of the economy were nationalized, and state companies expanded, in an attempt to improve production, raise investment, and remove bottlenecks. Massive investments were made in agriculture and industry—far more than under previous governments—in an attempt to spur their growth.
Many of these attempts were failures. The growing state sector often allowed for inefficiency and corruption. Chavez’s solutions to the country’s economic and social issues were not always the correct ones.
But the point is that Venezuela’s problems are quite complex and defy easy answers. Previous governments with previous oil booms also failed to resolve the country’s major problems, and did much less to help the poor, something that does not seem to interest those who want to blame everything on Chavez.
Instead of seeking to gain a better understanding of the country’s problems—to understand why they have been so intractable throughout the country’s history—the major media have preferred to vilify and condemn one man; a man who, right or wrong, spent his life trying to solve the problems that plague his country, and was undeniably dedicated to helping the poor; a man who constantly reminded his country’s poor majority that they mattered, that they were not inferior to anyone, and that they should feel proud of their national heritage. That doesn’t sound like a narcissist to me.
This article first appeared at Venezuelanalysis.com.
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