Venezuela Isn’t Just a Failed State. It’s a Failure of the Left
By Tyler Cowen
As Venezuela careens toward a further economic and political collapse, the blame game is heating up. In the U.S., Republicans are labeling the country “socialist,” using Venezuelan problems as a weapon against more left-leaning Democrats. Commentators on the left, in contrast, are arguing that Venezuela is more of a failed petro-state with bad leadership, rather than a test of socialist ideals. Who is right?
If we look at government spending as a percentage of GDP, Venezuela seems far from socialism. In recent years government spending in Venezuela has been measured at about 40 percent of GDP, with the caveat that these statistics are not fully reliable. For the U.S., the corresponding figure is about 37 percent.
Yet emerging economies typically cannot afford the same government programs as wealthier countries, and they cannot run them with the same efficacy. Poorer countries that try to expand their governments to size of wealthier countries, such as Brazil and Venezuela, typically encounter sub-par economic performance. These are indeed stories of big government run amok, as some of conservatives are suggesting.
Furthermore, rates of change are important. The Venezuelan figure of about 40 percent is up from about 28 percent in 2000, a very rapid increase. By boosting government spending so quickly, the Venezuelan government was sending a message that the key to future riches is courting government favor, not starting new businesses.
Or consider exports, which for most developing economies play an especially critical role. They bring in foreign exchange, provide contacts to foreign markets, and force parts of the economy to learn how to compete with the very best foreign companies. Yet over 90 percent of Venezuela’s exports are oil, and those resources are owned and controlled by the government. For this all-important growth driver, Venezuela comes pretty close to full socialism — to its detriment.
Chile has prudently managed its state-owned copper reserves (also a big export earner), but Venezuelan leaders have treated state oil money as a slush fund for themselves and their cronies, and furthermore they borrowed against future oil revenues. The daughter of former President Hugo Chavez, who died six years ago, is still reportedly one of the richest women in Venezuela. Of course that came largely from state resources, and it happened while the Venezuelan citizenry was sinking further into poverty.
In fact, nationalizations under Chavez were numerous — encompassing much of the oil sector plus parts of the agriculture, transport, power, steel, telecommunications and finance industries. Even though many of those nationalizations were small in scale, the threat of further encroachments on private property rights discouraged investment and sent the wrong signal about where the nation was headed.
And this may be the most important point: Socialism, capitalism and other systems matter not only for the conditions they create but because of the ideas they propagate. This is true even if these ideologies are followed incompletely or imperfectly.
One simple way to trace that influence for Chavez is to look at Wikiquotes, where you will find plenty of utterances against globalization and the market economy. “Privatization is a neoliberal and imperialist plan,” he said in 2005. “Health can’t be privatized because it is a fundamental human right, nor can education, water, electricity and other public services. They can’t be surrendered to private capital that denies the people from their rights.” That rhetoric of victimization and absolute moralizing against markets doesn’t sound so different from a lot of what I hear from non-Venezuelans on social media.
Like his praise for anti-capitalist, anti-American regimes such as Belarus and Iran, a lot of Chavez’s rhetoric might have been written off as political posturing. But it has continued under his successor, Nicolas Maduro, who has also failed to use his post to educate Venezuelans about the benefits of capitalism and globalization — in stark contrast to many East Asian leaders. Instead, the promotion of socialist ideas has helped to make Venezuelan society less economically robust and more vulnerable to collapse.
And while many on the left are now keen to disavow any connection to the Venezuelan disaster, their earlier enthusiasm is on the record. Greg Grandin, writing in The Nation in 2013, offered a laudatory take on Chavez and suggested that Venezuela “might be the most democratic country in the Western hemisphere.” (He also argued, oddly enough, that Chavez “wasn’t authoritarian enough.”) Jeremy Corbyn, leader of the U.K.’s Labour Party, has also been a big Chavez fan, while Nobel laureate economist Joseph Stiglitz praised Venezuela’s economic policies in 2007 and declared that the risks of higher inflation were overrated.
Yes, there are some exaggerations and mischaracterizations in the right-wing charge that Venezuela’s system is socialism, pure and simple. At the same time, the evidence shows that, for some parts of the ideological left, the cause for embarrassment is very real indeed.