Monday, November 28, 2005

Venezuelan Boom

The Venezuelan political conflict of recent years was something remarqable, not the least for the fact that both sides preferred to fight it out with mostly (but not always) the weapons of 'soft power'.

The opposition tried mass protests, strikes, capital flight, polls and media manipulation (especially before and during the failed US-supported coup attempt), litigation, elections, and a recall vote (ironically using a law introduced by President Chávez). The Chávezistas took over all instances of power, Chávez has his own TV show (tough the opposition owns most of the private media), his supporters had their own mass protests, recall petition signers' names
were publicised.

But Chávez's most effective use of 'soft power' were social programs for the people who became the committed base that saved him, the poor. Chávez may or may not have been a committed social revolutionary before, but either way, his political fortune now firmly depends on delivering to Venezuela's poor. So let's look at some numbers - numbers reported with as much spin as any used by neoliberals.

In a preemptive strike, let me state what Venezuela's 'socialism' is not: it is not a state-run economy like, say, Cuba: the public sector is less than 30% of the economy, the oil sector reform still foresees joint ventures, land reform mostly goes with compensation (all of these earn criticism for Chávez from the local and parts of the international hard left).

Now first let's have a look at what neoliberals focus on instead of general well-being: GDP growth. During the Chávez years, including this year's until the third quartal compared to Q1-Q3 last year (all graphs mine based on data I collected):

Last year and this year, that's quite some rebound, ain't it? And that's with a budget surplus1, and foreign debt reduced (from 46% to 38% of GDP)! Next year may make the Chávez presidency the first longer period in 30 years with per capita growth2.

No wonder Chávez's approval rating climbed to 77%, and that members of the opposition became critical of their own (a good starting point is this assessment of "Ni-Nis", then further posts on that blog).

Two criticisms have usually been levelled at this growth: (a) it is based on increased government spending, (b) it is based on windfall from rising oil prices.

However, on the spending front, government expenditure is still below 40% of GDP; while on the production front, for example in the third quartal this year, the whole of the public sector only grew 5.4% overall, but the private sector soared 11.1%. We get the same picture when comparing the oil and non-oil sectors: +4.2% vs. +10.4%. The current rebound is also very different from what happened in Venezuela during previous oil price hikes (see second footnote).

On the low side, while the new JODI data [Read Jérôme's discussion at EuroTrib] show that the post-strike 2004 oil production was much closer to Chávez's claims than sceptical analysts' estimates (see f.e. MEES's), in the first half of this year the surmised maintenance problems seem to have had their effect (more here). Also, with oil income giving some 50% of the government budget, those social programs seem in danger if oil prices fall.

However, even disregarding Peak Oil doubts about falling oil prices, production problems may be solved next year or after, and some of the social programs (like the adult literacy campaign) are one-off things that'll run out. And another thing critics fail to note is that non-oil tax receipts increased too, in fact more than government oil income (see discussion of next year's plan).

Meanwhile, even without taking social benefits into account3, the poverty rate (more here) is now 38.5% and falling (see chart below), while other human development figures like literacy and health also improved (the latter is set for further improvement). Tough more slowly, unemployment (11.4% in October), informal employment (c. 47%), and percentage of homes without basic services are also falling.

Before making a connection to Europe and elsewhere, I shall mention that I am less interested in Chávez the person than what the 'Bolivarian Revolution' brought. And I won't even posit Venezuela as a coherent positive model - for example, it had so far no solution to the problems with police and military4, and only little effect on corruption (for the latter see point 2 in Gregory Wilpert's part in this web-based debate and this article on some recent discussion), and there is the controversy of authoritarian laws (where it must be noted that the supposedly Chávez-controlled Parliament seems to be more authoritarian than the President, and the also supposedly also Chávez-controlled Attorney General wants to remove these laws). But some aspects of this class war5 may be contemplated even here in Europe.

In Europe, any left-wing government is under the threat of "capital flights" and "capital strikes", when in effect business "votes" on the markets instead of the people. And the standard response has indeed been appeasement or complete submission (helped by a media that doesn't even wince at reporting business demands and spin as unquestionable wisdom). But what Venezuela shows to me is that by reliance on the people, and steadfastness to ride it out over years, such a conflict can be won.

  1. Some foreign analysts doubt official numbers, and - maybe based on foreign debt still increasing on market value (tough less so on nominal value) - still expect a budget deficit. However, given that even their figures are relatively low, and how wrong they were before, and signs like that this year's non-oil tax revenue exceeded plan already in October, I'm not convinced.
  2. As far as I could piece together Venezuela's economic history, the previous 'best' was the turbulent Carlos Andres Pérez presidency (early 1989 to 1993), with the IMF-recipe shock therapy followed by the Gulf War oil boom, that ended at about zero net per capita GDP growth - but with increased poverty.
  3. The Venezuelan statistics office does plan to change poverty statistics so that social expenditures are taken into account. Opposition spinmeisters however 'reported' this as if such new methods were already in use, to be able to dismiss the improvements.
  4. Do you remember when Columbia kidnapped ex-FARC-leader Rodrigo Granda in Venezuela? The part the US media liked to gloss over was that Interpol didn't accept Colombia's arrest warrant - hence Venezuela was not 'hiding a terrorist' and was under no obligation to hand him over. The part Chávez didn't want to hear much about was that the 'kidnapping' was executed by bribed Venezuelan army officials.
  5. Another parallel to Europe: in European welfare states, large chunks of the worker class moved up to middle class, and now defend themselves against newcomers (this is one aspect of the problem of the French banlieues) - in Venezuela, the anti-Chávez opposition included trade unions, but those representing the best paid: oil workers, public workers.


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