The Problems of Actually Existing Socialism in Venezuela

Timothy M. Gill
University of Georgia

For nearly the past two decades, chavistas, or supporters of former President Hugo Chávez, have dominated Venezuelan government institutions and have actively promoted the Bolivarian Revolution, whose key ideological feature is the promotion of twenty-first century socialism. Cracks in the socialist hegemony, however, became apparent this past December. For the first time in the new century, the opposition won control over the National Assembly, and has since begun to usher in changes that may unravel large portions of the Bolivarian Revolution – if not, remove President Nicolás Maduro, and reverse the country’s socialist model. Far from a public rejection of the entirety of the socialist model though, the opposition victory closely corresponds with a multiplicity of domestic economic problems that are based on an overreliance on oil export earnings, currency distortions, and the unwillingness of the government to seriously modify its policies.

In Peter Hall and David Soskice’s influential work on the varieties of capitalism, the authors draw much needed attention to the diversity of experiences involved with the capitalist model. In a similar vein, it is appropriate that scholars think about the diversity of experiences concerning actually existing socialist models, moving from the Soviet Union into the present. Indeed, there exist several clear differences between the 20th century socialist experiments in Eastern Europe and contemporary Venezuela, and it is important to understand the unique crisis that faces Venezuela.

Researchers continue to disagree on what precisely led to the downfall of actually existing socialism in the Soviet Union and its regional satellite states. World-systems researchers have, for example, emphasized how these countries increasingly articulated themselves with global capitalism by receiving loans and increasing trade with the West – that is, an alleged crossing of the Rubicon from which there could be no return. In his recent work on the German Democratic Republic and the Stasi, Andreas Glaeser takes a more cultural approach to the question of socialism’s demise and argues that state elites could no longer salvage the socialist model with any sort of discursive justification. This inability to champion the model became apparent over the months before its downfall with numbers of citizens openly heckling state elites for their failure to explain their crumbling system. In other words, Glaeser says that state elites simply ran out of answers for socialism’s continued existence.

At the outset, we find several key differences in Venezuela. First, Venezuela has long articulated itself with global capitalism and its major actors. While the country has established strong relations with an anti-US nexus of allies within (e.g. Bolivia, Ecuador, Nicaragua) and beyond (e.g. China, Iran, Russia) the hemisphere, it remains reliant on North American and Western European markets for oil export earnings and much of its general imports. In fact, these relations have ultimately bolstered the Bolivarian Revolution and its domestic largesse throughout much of the century. And second, unlike GDR state elites, Venezuelan leaders remain committed to advancing the Bolivarian Revolution and provide ample justification for its existence. Instead, the government’s overreliance on oil export earnings, its exchange system, and its inability to make even modest changes amid the collapse of oil prices has fueled a public shift towards the opposition.

With oil prices hovering around $25/barrel, the Venezuelan government no longer receives the $100+/barrel windfall earnings that blew in during the early 2000s. And with prices this low, the government cannot provide its importers with the US dollars they require to pay foreign exporters for goods. As a result, shortages have ensued. On top of this, the Venezuelan government has artificially maintained the strength of its currency, the bolívar. At the official rate, one US dollar trades for 10 bolívares. At the black market rate, however, one US dollar will garner over 1000 bolívares. And while the Venezuelan government maintains price controls on products such as eggs and gasoline, the incentive for smuggling and reselling on the black market is startling. A recent Reuters report found that a “40,000-liter tank truck can be filled for $10 at the black market rate and sold in Colombia for around $20,000.” Some Venezuelan citizens have even quit their day jobs to sell abroad or on the black market. And it is also suspected that Venezuelan state bureaucrats have profited from channeling products to the black market, as well as by developing shell companies that receive US dollars for imports and thereafter importing little to nothing.

Rather than attempting to counter these challenges, chavista government leaders have blamed the country’s problems on an economic war ultimately waged by the US government in cahoots with Venezuelan capitalists. President Maduro has claimed, for example, that the Obama Administration is waging an economic war against not only Venezuela, but also Russia. At times, he has indicted the US for its use of fracking and suggested the US utilizes the method to harm countries such as Russia and Venezuela. President Maduro has also recurrently denounced US hegemony and President Obama’s “imperialist vision that aims to rule the world.”

In the end, the problems facing Venezuela are not reducible to its quest to achieve twenty-first century socialism. The government has, in fact, allocated considerable amounts of resources to its social programs – in the areas of literacy, food, medicine, and education, and the social advances that have ensued as a result of these social programs should not be understated. Venezuelan problems, however, derive from its overreliance on oil exports, government mismanagement (and potential corruption), and currency distortions. In recent weeks, Venezuelan officials have traveled throughout the OPEC world in an effort to stabilize oil prices, with some potential success. The Maduro Administration also recently announced some economic changes including raising the price of gasoline and devaluing its currency. They would do well to exert even more effort to correct government mismanagement and modify its absurd currency exchange system – that is, two areas it seemingly could gain some control over. Fortunately for consumers, oil prices might scrape the bottom for years to come.

Timothy M. Gill is a doctoral student in the Department of Sociology at the University of Georgia. His research focuses on US foreign policy towards Venezuela under the Chávez Administration. He is also a moderator and regular contributor to the Washington Office on Latin America’s Venezuelan Politics and Human Rights blog.

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2 thoughts on “The Problems of Actually Existing Socialism in Venezuela

  1. I’m surprised by the absence of another simple explanation for the troubles facing Venezuela’s socialist experiment: Socialism as an economic system isn’t sustainable. F.A. Hayek and the Austrian School laid out the economic critique in the so-called “socialist calculation debate” while public choice theorists have criticized it in terms of being political unsustainable given the incentive problems. The author argues that Venezuela’s problems “derive from its overreliance on oil exports, government mismanagement (and potential corruption), and currency distortions” but these are exactly the outcomes an Austrian or public choice approach would predict: Mismanagement occurs because bureaucrats can’t allocate resources efficiently as socialism requires and currency distortions occur because political incentives don’t align with best policy. Frankly, it seems that high oil prices were the only thing propping up the socialist model for so long in the first place. I’m curious to hear the author’s response to such criticisms.

    I would also note that there’s reason to be skeptical that the bit of social advances we’ve seen so far are actually the result of socialist policies. Grier and Maynard (2016) argue that such advances weren’t unique to Venezuela (

  2. Thanks for the response, Josh. Interesting points. I think your explanation though for the political-economic problems facing Venezuela (“Socialism as an economic system isn’t sustainable”) is a bit simplistic and misses the unique history of Venezuela. Long before the rise of 21st century socialism, many of the same problems currently facing Venezuela existed under its capitalist model, including reliance on oil and the nature of petro-state, and high-level corruption. In 1993, for example, former President Carlos Andrés Pérez, who former President Chávez sought to overthrow in a coup in 1992, was impeached and removed from power for misuse of Venezuelan government funds. This is just one example of a lengthy history of corruption, to say nothing of the corruption we find within other capitalist countries. The point is that corruption and government mismanagement, among many other problems, aren’t exclusive to socialism or socialist Venezuela, so as an explanation on its own, it doesn’t hold up. The government has also taken some steps to prosecute state bureaucrats that have made a profit off the currency distortions. How far up the chain the corruption goes is unclear.

    Indeed, oil prices have propped up socialism in Venezuela, as they have propped Venezuelan development projects for a long while. Under the socialist model though, the UN recognized Venezuela for achieving the lowest level of inequality in the region. Would this have ensued under a different government that didn’t have as much access to oil profits? It’s a counterfactual, so we don’t really know, but given Venezuelan history, it doesn’t appear probable. Whether or not socialism is sustainable in Venezuela will depend on what actions the government takes to correct the current situation and how the public responds. It seems the Venezuelan government fears making far-reaching economic adjustments due to the backlash that might ensue from the popular classes that have historically supported the government. There are other theories about the delays as well. Things currently look grim for socialist Venezuela, but I’m agnostic about the future and believe only time will tell whether or not actually existing socialism persists.

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