Marxist analyst Jorge Martin examines the causes, responses and solution to Venezuela’s current economic crisis.
The aggravation of the economic crisis is making life unbearable for working people in Venezuela. The destruction of the purchasing power of wages has been combined with the collapse of all basic infrastructure (water, electricity and public transport). Workers in different sectors have started to organize and protest, demanding higher wages; while peasants in the countryside are fighting attempts to destroy Chavez’s agrarian revolution.
I have visited Venezuela every year for over 15 years now, and in my most recent visit this June I was struck by the severe and sharp deterioration in living conditions.
The economic crisis in Venezuela has entered its fourth year, and rather than abetting, it is worsening. Hyperinflation has destroyed the purchasing power of wages – to the point that the current level of the minimum wage, after it was last increased by the government in June to 5 million Bolivars a month – barely buys a kilo of meat or a full chicken, or a little more than a carton of 30 eggs.
The scarcity of banknotes forces many workers to spend long hours queuing at bank branch offices and cashpoints to withdraw the necessary amount of money to pay for transport. The owners of buses operating on the regular lines are demanding steep fare increases to cover for the exorbitant prices of spare parts, tyres, motor oil and so on. The government has allowed some increases, but these are considered insufficient by the bus owners, who have resorted to refusing to operate or doing so only as “pirates”: stopping outside the regulated stops and charging customers much higher prices. Owners of trucks have now started to replace buses as a means of public transport. These open trucks are unsafe for the transportation of passengers and they have already caused several accidents.
People have to queue for long hours before they can get onto any form of transport. In the barrios (shantytowns) on the hills of Caracas, transport has almost disappeared and people have to walk up and down the steep slopes that separate their homes from the Metro stations. The Metro is just about the only form of transportation that works, and as of August last year has become free, as the tickets cost more to print than the fare they represent, as well as the fact that there were no longer coins nor notes of low enough denominations to pay for the fares (which had not increased with inflation).
However, the Metro is now supposed to cope with transporting many more passengers who can no longer use the buses either, because they cannot get access to cash or because the buses are not running. The Metro system has also been affected by lack of maintenance, mismanagement, lack of spare parts, worker absenteeism, etc. Trains are much less frequent and stop for long periods at each station, and as a result are unbearably crowded.
Large parts of the country, including the capital Caracas, now suffer from regular water cut-offs, with some areas only getting running water once or twice a week, and in some cases every 10 days. Electricity blackouts are also frequent, and in places like Maracaibo have led to street protests as people cannot bear the heat and the ruining of food in their freezers and fridges. The main reasons for this collapse in infrastructure are corruption, mismanagement and a lack of maintenance, resources and workers.
Hyperinflation is also slowly bringing the whole economy to a halt. Many workers are still employed in factories where nothing is produced. They sometimes go to work, just to keep that income, but only for a few hours, then spend the rest of day chasing after cash, food or perhaps doing a few deals in the informal sector in order to complement their wages, which no longer allow them to feed their families.
A comrade who works in a printing company told me they have not had any orders for six months. The car assembly plants in Carabobo have not assembled a single unit since December 2016. Companies have offered workers redundancy packages (“cajita feliz”) and many, in despair, have taken them, even though the amount they receive in Bolivars loses its value in just a few months.
In these conditions, many have been forced to emigrate. Though the figures are disputed, we are talking about millions (perhaps 2 to 4 million) who have left Venezuela in the last few years. A phenomenon that originally mainly affected the middle classes and professional layers is now spreading to working-class families, who sell all of their goods to send one or more members of the family unit abroad to earn a living and send back a few dollars in remittances. While the middle classes are leaving by plane and going to Europe, the US or Argentina, the working class leaves by coach via Colombia to Perú, Bolivia or Chile. There they face conditions of horrible exploitation but at least are able to send perhaps 50 dollars a month back home, which provides a welcome relief at a time when the minimum wage equals approximately US$1.50 on the black market.
The amount of workers emigrating is having an impact on many public institutions, including Corpoelec (electricity), CANTV (telecoms), MovilNet (mobile phones and internet), etc, adding to the collapse in infrastructure. Even at the Heroinas de Aragua textile factory, occupied and running under workers’ control, three workers had left the country out of a workforce of fewer than 50.
The economic crisis is also destroying one of the conquests of the revolution: free university education. Teachers and students alike are abandoning the universities in large numbers, as the purchasing power of wages has been destroyed and students are forced to earn a living to help their families or a pushed to emigrate. At the Colegio Universitario de Caracas, comrades told me that in some degrees up to 80 percent of students have abandoned their courses before the end of the school year. This is despite the fact that the university provides students with three, free meals a day. Still, for many students who come from working-class families in Los Valles del Tuy, it is not worth continuing their studies as they cannot even get the necessary cash to pay for transportation. A comrade at the UCV told me that 1,500 students have abandoned their courses this semester in his faculty alone. The situation is similar in Bolivarian institutions like the UBV, UNEFA and others.
Remittances from Venezuelan migrants working in other countries provide one of the escape valves, which have so far prevented a social explosion. It is calculated that remittances amounted to a total of US$2bn last year and will rise to US$6bn this year.
The other escape valve is provided by the CLAP: subsidised food parcels sold by the government. These are provided once a month or, in some areas, once every 20 or 15 days, and contain a number of basic foodstuffs (rice, pasta, maize flour, oil and so on). Products in the CLAP boxes are mainly imported (from Mexico, Colombia, Turkey, etc.), adding to the depletion of government foreign reserves. The government has also implemented a policy of bonuses, which are paid to millions of families on a regular basis to supplement unlivable wages. These are also paid for by printing money.
It should also be noted that, through Misión Vivienda, the Bolivarian Revolution has provided 3 million homes to working-class people who in the main pay no rent. The percentage of wages spent on food has gone up to almost 100 percent: people are almost giving up altogether on small luxuries like buying new clothes, shoes or going out for a drink. Furthermore, when workers receive their wages, they have to immediately spend the whole amount, usually buying food items, as the money will lose its value in a matter of days or weeks.
On top of all these difficulties, the medicine and health care system are also severely affected by the crisis. Drugs are very difficult to find and when they are available they are very expensive. If you have the misfortune of ending up in hospital, you have to provide your own medication and in many cases also pay for materials and utensils. The crisis is not only affecting hospitals but also the Misión Barrio Adentro Clinics, one of the conquests of the revolution.
Class struggle in the countryside
In the countryside, there is a coordinated offensive to dismantle the gains of the agrarian reform that was carried out under Chavez with the expropriation of big landed estates, which were given to peasant communes. Private capitalist landowners buy off local judges, officials at the Land Reform Institute (INTI) and National Guard officers to violently dispossess peasant collectives from land they had been legally granted by the INTI itself. In some cases, peasants have been arrested by the National Guard, in others threatened or killed by the hired goons of the landowners (sicarios), which in some cases are connected to the state bureaucracy and in others to the reactionary opposition.
The worst cases of this counter-offensive, which revolutionary peasant activists describe as a “restoration of the latifundio”, are taking place in the region south of the Maracaibo lake, but examples can also be found in Barinas, Apure, Yaracuy, Portuguesa, etc. Despite solemn promises by president Maduro during the election campaign that these attacks on recovered peasant land were going to cease, they have continued.
The low-intensity war against the El Maizal Commune is part of this counter-offensive. Recently, the bureaucracy at the state-owned Agropatria (run by military officers) denied them the necessary seeds and fertiliser for their sowing campaign. When they tried to acquire them on the black market (which is supplied directly from within Agropatria itself), they were briefly arrested on charges of illegal purchases! The peasant movement replied by taking over the Agropatria premises, demanding solutions.
Another example of how bureaucracy, corruption and mismanagement threaten the gains of the revolution is the case of the nationalised Porcinos del Alba pig farm in Lara. The farm was abandoned by its state-appointed manager and the pigs were dying away. Recently, Communards of El Maizal decided to take it over and run it themselves.
This whole situation has become unbearable. The government promised measures to deal with the economic war prior to the Constituent Assembly elections a year ago, but nothing was done. Maduro promised to restore “economic prosperity” if he won the presidential election on 20 May, but again nothing really has happened and the conditions for working people have continued to deteriorate.
Recently the government floated the idea of negotiating the prices of 50 basic food products with the capitalists. An announcement was promised but it never came. It is clear that producers will not agree to any form of price controls in a situation of acute hyperinflation. It makes absolutely no business sense to them.
In the last two weeks, a growing number of Chavista left intellectuals have published very critical articles, berating government inaction on the economic field and warning of the growing anger accumulating amongst the Bolivarian masses.
Workers and peasants are growing increasingly restless and are starting to take to the streets. The Platform of Peasant Struggle has organized a march by foot to the capital under the name of “the admirable peasant march” in defense of the “agrarian legacy of Chavez” and against “sicariato” (targeted killing of peasant activists).
Nurses at hospitals across the country have been protesting for weeks, some of them on strike, others holding pickets outside hospitals. Their demands can be summed up in the following: “we want a decent wage, we don’t want to emigrate”. When the government offered them more regular delivery of CLAP boxes and asked them to make sacrifices, they replied that they didn’t want charity but wages they can live on and that they would make sacrifices if they could see high-ranking state officials and ministers suffering the same conditions as ordinary working people in terms of wages, transportation, etc.
There is a threat that, if the nurses’ demands are not satisfied, there will be a mass resignation of healthcare workers, which would complete the collapse of the system.
Workers at CANT, Movilnet, cement companies, the Caracas Metro and the electricity company have all held protests and demonstrations; and threatened strike action. The situation is coming to a boiling point. This week there were protests of CANT workers that went beyond what the trade union leaders had called for. While they wanted a controlled protest to deliver a letter to management, workers occupied the company headquarters and blocked the road outside.
Now the Corpoelec workers federation, Fetraelec has called for a national, all-out strike, starting on 23 July. The mood is such that workers at CANT, Movilnet and others might join in. The beginning of a genuine movement on the part of workers is to be welcomed and is an encouraging sign. From a situation of despair, hopelessness and abandonment, we are moving to one where workers are moving to collective action in an attempt to solve their problems.
The question arises, however: from where will the money come to meet the necessary and just wage demands of the workers? This is the crucial issue. There is a sharp debate amongst different trends in the Bolivarian movement about the reasons for the crisis and what economic policies should be used to combat it. Some, like former minister Jesús Farías, argue for a complete abandonment of foreign exchange controls, which he argues have not worked. Others, like former minister Luís Salas and economist Pascualina Curzio, say that the devaluation of the currency is mainly “induced” by a concerted attack on the Bolivar, carried out through websites which act as indicators for the black market exchange rate (like Dollar Today and others).
This is wrong as it confuses the symptom for the cause. The existence of a black market for dollars is not the result of the existence of a website that says dollars are worth 3.5 million Bolivars. On the contrary, it is the scarcity of dollars in relation to the demand that drives its price up. Capitalists engage in a flight of capital because they have no confidence that investing their money in Bolivars in the local economy will guarantee them what they consider to be a reasonable rate of profit. At bottom, the main reason for this is the fact that, in Venezuela, a revolution took place that has encouraged workers to, amongst other things, take over factories. There was also government expropriation in the past. No sane capitalist would invest under these circumstances.
Added to this is the fact that the government, by implementing foreign exchange controls, has been allocating a limited amount of dollars at subsidized prices for importation. The Venezuelan economy, heavily distorted by oil production, is largely reliant on imports. The mechanism of subsidized dollars for importation, however, became a conduit for a massive transfer of the oil revenue to the private sector. Companies that need to import (and others which do not), apply for preferential dollars, which they then exchange on the black market, making a massive profit without the need to produce or import anything. Hundreds of billions of dollars from the oil rent have been handed over to the capitalists in this way.
The Venezuelan economic crisis was triggered by the collapse of the price of oil after 2013, but what the crisis revealed starkly is the impossibility of regulating capitalism. If you attempt to do so, by imposing price controls, foreign exchange controls, tight labor protection laws and so on you will end up with a flight of capital and a capital investment strike.
Of course, the Venezuelan economic crisis is exacerbated by corruption, mismanagement, imperialist sanctions and deliberate economic sabotage. But these are aggravating factors, not the root cause of the crisis.
Farías and others partially identify the problem of controls. Their solution is to lift them all and therefore to allow the ‘normal’ functioning of capitalism. That is one possible way out of the crisis, one in which the workers would be made to pay. If you remove all controls from the economy and allow capitalism to come out of the crisis using its own methods, we know full well how this will be done. There will be mass layoffs of workers, closing down of factories, destruction of the productive forces, the privatization of state-owned companies and so on.
However, the solutions proposed by the group of economists around Luís Salas and Pascualina Curzio are no solution either. They basically propose renewed controls, that is, the policy that has already failed. Curzio proposes to deal with the devaluation of the currency (which she ascribes to the pernicious role of a website) by creating a new currency backed by gold reserves in the central bank. That would certainly solve one problem. The Bolivar-Oro would be a sound currency, which would offer capitalists security. In fact, since gold can be measured by its price in dollars in the world market, what Curzio is proposing is the pegging of the currency to the dollar at a given exchange rate. The problem with this proposal, which Curzio does not seem to realize, is that the government would not be able to print money to pay for the fiscal deficit, which currently amounts to about 20 percent of GDP. That would mean a massive cut in public spending, something Curzio certainly does not advocate but which would be the necessary consequence of the policy she advocates. If, on the other hand, the government were to print money on the basis of the same amount of gold that would inevitably lead to inflation again and we would be back in the position we are now.
The government seems to be following a policy midway between that of those who advocate the continuation of controls and those who favor lifting them. For instance, the government is de facto allowing the controlled devaluation of the currency to bring it closer to the black market rate. Price controls have effectively ceased to exist, as the promised 50 agreed prices have never been released. The government makes appeal after appeal to private capitalists to invest, to which they demand full “liberalization” (of prices, foreign exchange and labor market). Now the government is appealing to Turkish capitalists to invest. Given the extremely low real wages in Venezuela, some of them might be tempted. That is not a real solution, and in any case is not in the interest of Venezuelan workers who are unable to survive at the current level of wages.
The continuation of the present situation in any case already represents a massive adjustment plan, which the workers are paying for through the destruction of the purchasing power of wages.
What is the solution, then? The only way out of the crisis that would benefit the working people of Venezuela would be to expropriate the capitalists, bankers and landowners in order to create a democratically planned economy under workers’ control. Venezuela in the last 15 years has provided many examples of the superiority of workers’ control over both private capitalism and the bureaucratic management in the public sector. However, the state bureaucracy and the government have asphyxiated workers’ control, which is now at its lowest point.
On my last visit, I had the privilege of visiting Alina Foods, in Mérida, a snack-making factory that has been running under workers’ control for over two years. The workers defended the installations when the bosses fled (after having made a lot of money out of speculating with preferential import dollars) and then later on started producing under their own control. They have had to face all sorts of difficulties, including open sabotage on the part of the former “Bolivarian” governor, vice-ministers, army officers in charge of other state-owned companies, etc. They have not only maintained production but have now incorporated a whole new shift of over 30 workers. This is the example to follow.
The Maduro government insists there is an economic war against the Bolivarian Revolution. Why is it then making an appeal to those waging this war to change their ways and invest productively to satisfy the needs of the people? Not only that, but it keeps giving the enemy in this war the preferential dollars with which to wage the war! This makes no sense whatsoever and is a policy that has already been attempted and has led to the current disaster from which working people (not government ministers, army officials or bureaucrats) are suffering.
Imperialist aggression and military coup
Clearly, the economic crisis is the main, immediate threat facing the Bolivarian Revolution, or more correctly, what is left of it, which can be found in the peasant communes, the factories under workers’ control, the communities in the cities organising the supply of food and in the public sector, still at their workplaces despite all difficulties.
However, imperialism has not desisted from its attempts to put an end, once and for all, to this revolutionary experience. It has now been revealed that in August of last year, US President Donald Trump asked his aides to work out a plan to invade Venezuela. He used the examples of Panamá and Grenada as proof that such a plan could work. His aides insisted that this was not a good idea… not because it would be anti-democratic, nor against international law. No! That has never before worried US imperialism! They argued against because they thought it would backfire. And they are right. Any attempt at a military invasion by the US in Venezuela would immediately generate an armed movement of anti-imperialist resistance involving millions and would have a knock-on effect throughout the continent and beyond.
That did not stop Trump from raising the issue at a meeting of four Latin American presidents in September. We can bet those involved were the Colombian, Mexican, Brazilian and Argentinian presidents. They all had the same opinion and were against an invasion. In any case, this means that the issue of a military invasion has been discussed seriously, which in itself is an absolute scandal. Just imagine any other country in the world discussing invading the US because they do not like its president!
In fact, the most astute US imperialists probably are arguing for a tactic that involves increasing sanctions from the US and other countries in Latin America in order to bring about ‘regime change’ in Venezuela by means of economic asphyxiation. It is imperialist aggression all the same, just using different tools.
What is even more worrying than that are the recent revelations about a coup plot from within the Venezuelan army. According to an investigation by Bloomberg, a group of military officers (captains, colonels and generals from the four wings of the army) had planned a military coup to take place a year ago, at the time of the guarimba riots by the opposition. The coup, codenamed Operation Constitution, involved seizing the Miraflores Presidential Palace and Fuerte Tiuna and putting president Maduro on trial. Another simultaneous plot was codenamed Operation Armageddon and involved the assassination of president Maduro during a military parade.
These plans were delayed as the army foiled a separate coup plot. Army officers involved in the coup then decided to delay the implementation of the plot until this year in the run-up to the 20 May presidential election. The report by Bloomberg says that the military officers involved held some of their secret meetings in Colombia. Of course, Colombian and US intelligence agencies were aware of the coup plotters’ plans and while they were not given open support, they were winked off. We can be certain that the report underplays the role played by US and Colombian intelligence. Any right-wing military coup in Venezuela would start by ascertaining the US and Colombians’ disposition!
These reports reveal that malaise within the army goes much deeper than the government lets on. The Maduro government has been careful to maintain the loyalty of the army top brass, by giving them a stake in the economy (through companies like CAMIMPEG and AfgroFANB), and by appointing military officers to run state-owned companies (from PDVSA to Aceites Diana), where they have been notoriously inefficient and corrupt, and more recently by raising the wages of the top officers.
However, if the situation of economic collapse continues and deepens and that is combined with a wave of worker and peasant protests, it is likely that a section of the army might decide to intervene and take power, under the excuse of “dealing with economic chaos with a strong hand”.
A military coup would be a disaster for working people as it would be used, either directly or through a ‘technocratic transition’ to implement the ‘necessary adjustment’ that the ruling class requires in Venezuela.
The situation in Venezuela is therefore critical. At last, workers and peasants have started to move, offering a glimpse of an organized way forward. Only the Venezuelan working people can offer a way forward from the current crisis.
Top Photo | Demonstrators push police’s shields as they protest Venezuela’s President Nicolas Maduro near the attorney generals office in Caracas, Venezuela, July 18, 2018. The previous night, former presidential candidate and opposition leader Henrique Capriles called on the country’s political forces to reorganize in order to cope with the South American country’s hyperinflation, and lack of food and medicine. Fernando Llano | A
Source | In Defense of Marxism