Venezuelans will go to the polls on Sunday 6th December to elect deputies to the National Assembly. A combination of factors have made this one of the most difficult challenges the Bolivarian Revolution has faced in the 17 years since President Chávez was first elected in 1998. In addition to the usual challenges of a profoundly undemocratic opposition and belligerent imperialist provocations we have to add a combination of national and international economic factors which have put Venezuela in a very tight spot and which lead to one conclusion: either the revolution is completed, or it will be defeated.
The collapse in the price of oil, the failure of the attempt to regulate the capitalist market, and open sabotage by the capitalist class have put an end to a situation in which the government was able to implement wide-ranging social reforms without fundamentally taking on the capitalist ownership of the means of production. Those in the Bolivarian leadership who refuse to move in the direction of abolishing capitalism are preparing the movement’s defeat.
Economic sabotage and decline
The last three years have seen a sharp deterioration of the economic situation in Venezuela. The price of Venezuelan oil in the world market has collapsed. It hovered around $100 a barrel in 2013, went down to $88 in 2014, and has averaged $47 during 2015 so far. In the second week of November it further decreased to $37 a barrel. This has severely constrained the ability of the government to invest money in social programs as well as that of importing food and other products from the world market.
Venezuela’s GDP grew by 1.3% but then contracted 4% in 2014, and is forecast to fall by a further 7 to 10% this year. Inflation was already a record high 68.5% last year when the Central Bank stopped publishing figures. President Maduro has said that inflation this year will be 85%, but many basic products have already risen by an annual inflation rate of over 100%. The IMF forecasts an inflation rate of 159% for the whole year in 2015.
Some of these problems can be traced back to decisions taken in 2002–3 at the time of the bosses’ lockout and sabotage of the economy. The government of Hugo Chávez decided to introduce regulation over the prices of basic products in order to protect working people and the poor against racketeering, speculation, and hoarding on the part of the handful of monopoly groups which control food production and distribution in Venezuela.
At the same time the government introduced foreign exchange controls in order to prevent the flight of capital. These measures could only have worked over a short period of time and could have provided the revolution with a breathing space, but over a long period they created massive distortions in the economy which are now bursting onto the surface. It has become increasingly apparent that the capitalist market cannot be regulated, and that any attempt to do so leads to dislocation, sabotage, and rebellion on the part of the private owners of the means of production.
Private producers have found loopholes in order to avoid and openly sabotage price controls. Instead of producing rice (which is regulated), they produce a flavoured or coloured variety (not regulated), and the same goes for every single product which is regulated. In the run-up to every election, private producers have withdrawn their products from the market in order to provoke artificial scarcity or force the government to lift or ease price controls.
The latest example of this has been in relation to the price of eggs. This basic product, which is one of the main sources of protein in today’s diet of the Venezuelan people, was being sold at around 100 bolívars per carton of 30 eggs at the beginning of 2014. A year later it had gone up by 200% and was being sold at 300 bolívars. By the end of October 2015 its price had gone over 1,000 bolívars, and then the government decided to regulate its price at 420 Bs. for a 30-egg carton. The immediate result has been the almost complete disappearance of eggs from the shops, as producers and shopkeepers refuse to sell them at the official price. Examples like this can be given for every single basic product.
In the end, this results in a situation in which the state is forced to use the country’s currency reserves to import massive amounts of basic products from the world market, which it then sells at subsidised prices through state-owned distribution channels. This, while allowing Venezuelans access to a limited amount of basic foodstuffs at low prices, has a double negative effect: since these products are scarce, a massive black market is created where they are sold, illegally, at 5 or 10 times their regulated price. On the other hand, it acts as a massive drain on the country’s foreign currency reserves.
The government has responded to this campaign of sabotage of the economy—to call it by its proper name, an economic war of attrition—in an erratic way. At regular intervals, controls are made, warehouses of hoarded products raided, and exemplary measures taken against individual capitalists. This is then followed by concessions to different sections of the capitalist producers, by increasing the price of regulated products, lifting regulations on others, etc. Right now, Fedenaga, the cattle ranching capitalists’ association, is demanding that the price of meat be increased by 330% and that of milk by a massive 960%!
The situation has now become truly untenable. Ordinary working people are forced to queue for hours on end to be able to access small amounts of products at regulated prices in the state-owned supermarkets and distribution chains, and then pay extortionate prices to cover the rest of their basic needs.
Foreign exchange controls, which were designed to fight capital flight, have also been a source of massive distortions in the economy. Instead of investing their money in production, capitalists find it much more profitable to use preferential exchange rate dollars supplied by the state in order to import products, which they then sell in the domestic market at prices marked with the black market exchange rate.
Other, even more unscrupulous capitalist bandits get preferential dollars from the state to import containers full of scrap metal (under the pretence of importing parts), and then directly sell the dollars in the black market. The preferential exchange rate for importers is between 6 and 12 bolívars to the dollar, when the black market rate has jumped from 187 bolívars to the dollar at the beginning of 2015, to over 890 at the time of writing this article. The official free exchange rate (SIMADI) is just under 200 Bs. to the dollar.
No complete figures have been produced, but at one point the government revealed that around $20bn given to the private sector importers had been illegally used in 2013 alone under the old CADIVI preferential exchange rate system for importers. However, to this day, tens of billions of dollars are being given to the capitalists every year from the state coffers, at preferential prices.
In turn, this dislocation of normal economic activity has led to a sharp collapse in private investment, as capitalists prefer to use legal and illegal methods of exploiting the exchange rate differential rather than investing in production. The exchange rate controls have turned into an means by which the country’s oil revenue is transferred directly into the pockets of the parasitical oligarchy. The country’s hard currency reserves have collapsed from around $30bn in 2012, to $20bn at the beginning of the year, and $14.8bn at the beginning of November. Venezuela has to meet around $15bn in foreign debt repayments in 2015 and 2016.
These massive imbalances in the economy are also largely responsible for fuelling corruption and the black market, which are twins and interrelated.
Gains under threat
For many years, after the defeat of the 2002–3 bosses’ lockout, when the government regained control over the state-owned oil company PDVSA, the Bolivarian Revolution could invest massive amounts of money in social programs without fundamentally touching capitalist property.
The gains have been astonishing: A massive expansion of free university education (from 800,000 students to 2.6 million), health care, poverty reduction (from 48% down to 27%), the eradication of illiteracy, reduction of malnourishment levels (from 21 down to 5%), massive expansion of old age pensions (from 380,000 beneficiaries to 2.1 million), the delivery of over 800,000 newly built fully furnished flats and homes to people in need, just to mention a few.
All of this solidified the support for the Bolivarian Revolution, which went on to win 18 out of 19 democratic elections and referenda between 1998 and 2013. These social gains were accompanied by a genuine revolutionary process, an explosion of activity and organisation of the masses of workers and the poor, with factory occupations, workers’ control, the setting up of communal councils, and the active participation of the masses in political activity.
The conditions which made all of that possible are rapidly coming to an end. The economic situation no longer allows for a massive social investment from diminishing oil revenues. The attempt by the government to preserve and expand social spending in this situation has partially contributed to the inflationary explosion. The money supply (M2) has shot up from 1.2trn bolívars in January 2014, to 2trn in January 2015, and to a record high of 3.5trn now. Of course, if the money in circulation increases without the number of goods produced increasing accordingly, this leads to inflation.
The sabotage of the economy by private monopolies has broken the system of price controls. The revolutionary enthusiasm of the masses has been affected by all of these factors, and also by the growth of bureaucratism and corruption.
The role of imperialism
To this we have to add the continued pressure of US imperialism, through conflicts in the border with Colombia and now also Guyana, the harassment of Venezuelan government officials, constant allegations in the mass media, slanders, and bias. To mention just the more recent examples, we saw a clear provocation on the part of the United States when a US Coast Guard plane violated Venezuelan airspace for over 3.5 minutes in the area of Los Monjes on November 6. Revelations made by US whistleblower Edward Snowden also confirm that an NSA surveillance operation based at the US embassy in Caracas hacked into the internal communications of hundreds of officials at the state-owned oil company PDVSA. Just imagine if the roles of Venezuela and the US had been reversed in each of these cases! Finally, it is worth noting that the election of right-winger Macri as President of Argentina poured petrol on the flames of harassment against Venezuela when he announced, in his first press conference after his election victory, that Venezuela should be suspended from membership of Mercosur.
In this context, there is a serious danger that the opposition will get a good result in the parliamentary elections, winning a majority of the votes and perhaps even a majority of the seats. This would be a disaster, as they would use that position to launch an offensive against President Maduro and to start to unravel the many social gains of the revolution. If that happens, it will not be the fault of the Bolivarian masses, but that of their reformist leaders, who have consistently avoided the path of expropriating the capitalist class, and have chosen instead to appeal to the goodwill of private capitalists, or to use administrative measures to try to regulate the capitalist market.
That is not a foregone conclusion. There is also an element of demoralisation amongst opposition supporters after having been defeated in their attempted uprising in 2014, and their leaders are split. However, the margins with which the Bolivarian forces won the 2013 presidential election (0.4%) and the 2010 national assembly election (0.9%) were so narrow, that it would only take 200,000 people switching sides or abstaining to make a fundamental difference.
Socialism or defeat
The outcome is not yet decided. The Venezuelan revolutionary masses have shown on every occasion to possess a very sharp class consciousness, and have decided the fate of the Bolivarian revolution many times. That revolutionary feeling has not disappeared, but it has certainly been blunted by economic difficulties and the apparent inability of the government to deal with these economic difficulties in a decisive manner. They are fully aware of the dangers of a right-wing victory, and might react at the last minute.
In October, a leaked phone conversation between Grupo Polar owner Mendoza and Venezuelan-born IMF hit man Haussmann, based at Harvard, revealed their plans in case of the opposition coming to power: to ask for a $40bn bail out from the IMF, which would of course come with strings attached.
Even if the Bolivarian Revolution manages to win the December 6 election, and that is something Marxists will fight for with all the forces at our disposal, the economic difficulties will not go away. There are already authoritative voices in the Bolivarian movement demanding tough action and radical measures.
There is only one way to deal with the problems the revolution is faced with, one which was already advanced by Hugo Chávez before his death in a famous speech called “turn the rudder” (Golpe de Timón), in which he advocated building a socialist economy and replacing the bourgeois state with one based on the communes.
One thing is clear: the path of attempting to regulate capitalism has failed, and unless there is a sharp turn to the left, the Bolivarian Revolution will be defeated.