Does Venezuela’s crisis show socialism can’t work?

Venezuelan leader Nicholas Maduro is hanging onto power in the face of US efforts to support self-declared interim president and opposition leader Juan Guaidó.

The US has imposed sanctions targeting the state-owned oil company and is aiming to deny the Maduro government $11 billion in export revenue. It hopes to direct this money into the hands of Guaidó. These efforts by imperialist powers to impose regime change in Venezuela must be opposed.

Venezuela has the world’s largest proven oil reserves. The “Bolivarian revolution” begun by former President Hugo Chavez in 1999 and continued by his successor Maduro since 2013 took state control of the oil industry in order to increase royalties and use that income to redistribute wealth.

Chavez increased government expenditure on social services in the interests of workers and the poor, initially lifting many people out of poverty.

The US wants to put back in power the old capitalist elite who spent decades plundering the country.

But Venezuela’s economy is now at breaking point, crippled by runaway hyperinflation.

This crisis is not a demonstration of the failings of socialism, as some have claimed.

It shows what happens when there is a challenge to the rich, but they are allowed to stay in control of key areas of the economy and society. It is not an example of too much socialism, but rather not enough.

Chavez’s “Bolivarian revolution” was centred on the idea that socialism can be delivered from above through a capitalist state.

But in 2014 world oil prices crashed and much of the government’s revenue disappeared. Oil production has also dropped due to lack of investment. As a result, many Venezuelans have slipped back under the poverty line.

Chavez—despite all of his radical rhetoric—never took on the bosses and tried to wrest ownership of the rest of the economy away from them. His regime allowed Venezuelan capitalists to continue making huge profits. This means they can now wield their economic power to undermine the Maduro government and create chaos in the economy. They have done this in the past when they tried to shut down production in 2003. More recently they have been hoarding goods in order to push up prices.

Between 2006 and 2007 Chavez nationalised parts of the strategic sectors of the economy: electricity generation and distribution, telecommunications, cement, aluminium, steel, banking and mining. Crucially, the enterprises in these sectors were not confiscated from their capitalist owners as they should have been—instead the state bought them, often at inflated prices. This cost over $23 billion.

Despite the nationalisations, from the time Chavez came to power in 1999 to 2011, the private sector’s share of economic activity actually increased from 65 per cent to 71 per cent.

Political power

Some people claim that the problems in Venezuela started with Maduro, who has begun implementing anti-worker policies like increasing consumption taxes. But the rot started under Chavez because he refused to allow workers to participate in the struggle for socialism and aimed at doing it on their behalf.

Workers and the poor mobilised in 2002 when Chavez was attacked in a right-wing coup. Hundreds of thousands of people took over the streets and beat back the coup plotters.

Despite the huge outpouring of support for Chavez, there was never widespread workers’ control over enterprises or democratic control of state structures.

The nationalisation of the main oil company PDVSA in 2003 turned it into a sort of shadow state, not open to any public audit or oversight. In the absence of mass democratic control over its operations corruption became rife. A new privileged layer of bureaucrats around the government emerged.

Oil revenues were increasingly channelled through a fund directly under presidential control. In total $69 billion in oil revenues raised between 2003 and 2012 has been squandered, much of it on imports.

There was talk of diversifying the economy but this never eventuated.

After winning the election in 2006, Chavez launched the United Socialist Party of Venezuela (PSUV). Nearly six million people joined within weeks. However, internal elections were controlled from above by appointees, not from below.

The party was based on the model of the Cuban Communist Party, which is highly authoritarian and admits no serious critical opposition. Delegates to its party congresses as well as the lower level state and party institutions are nominated by the party leadership. This leaves no room for ordinary workers to participate democratically and directly hold the leadership to account.

If we want to break the hold of the bosses and build socialism, we have to build democratic workers’ organisations that assert their own control of society, not rely on a state bureaucracy to do it for us.

By Miro Sandev


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