SocialismToday           Socialist Party magazine

Issue 173 November 2013

Venezuela: a deepening crisis

The Venezuelan economy faces runaway inflation, speculation and severe food shortages. At the same time, capitalist forces are increasingly emboldened by the growing divisions in the government. JOHAN RIVAS, of Socialismo Revolucionario (CWI Venezuela), reports.

The void at the top of the Venezuelan government since the death of Hugo Chávez, along with the deepening global economic crisis and the limits of the government’s reforms, have combined to expose the weaknesses and contradictions of the so-called ‘Bolivarian revolution’. This has opened up a new stage with a deepening of the class struggle.

At the same time, the absence of a conscious organisation of the working class and poor in opposition to capitalism, corruption and bureaucratisation, has allowed right-wing forces to go on a new political and economic offensive with the perspective of regaining political control.

Since the death of Chávez in March, the contradictions within Chavismo have become sharpened, leading to disputes and divisions between civil and military sectors for control of the ruling PSUV (Partido Socialista Unida de Venezuela) and the government. This has led to a political crisis in the PSUV, which is reflected in the selection of candidates for the municipal elections due on 8 December.

The imposition of candidates from above, ignoring the PSUV rank and file and community leaders, has provoked splits. In some regions, the discontented base of the PSUV, calling themselves ‘rebel Chavismo’, have stood independent candidates, going over the heads of party leaders. Diosdado Cabello, vice-president of the PSUV and president of the parliament, denounced those who do not ‘respect’ party decisions as traitors and counter-revolutionaries, stating that no candidate outside the PSUV could represent the legacy of Chávez.

Against the background of what the government calls ‘sabotage’ and ‘economic war’, the bourgeoisie is denounced for conspiracy. Yet, at the same time, the government is trying to form an alliance with sections of the capitalists which it regards as ‘national’ and ‘democratic’.

Chávez’s successor, Nicolás Maduro, did not call an assembly of workers, the poor and social movements to develop a revolutionary political plan to confront capitalism – and the violence by reactionary thugs it encourages – following his election victory of 14 April. Instead, he met with big-business and bourgeois representatives, including the Mendoza family, owners of the biggest monopoly, the POLAR food and drinks company. The government offered them big concessions so they can promote their businesses, essentially allowing them to ignore important obligations to workers’ rights, and giving them more favourable conditions for financing. A price hike in basic food substances was allowed, and the currency was devalued by 46%.

Not satisfied with these, the bosses are now pressuring for more flexibility in the currency exchange market and a further devaluation, which the government is considering. At the same time, they demand weaker labour laws, which cover 20-30% of production. According to the bosses, workers’ rights are one of the factors behind the shortages in the economy.

Inflation and speculation

Tragically, the main spokespeople of union federations, like the CBST (Central Bolivariana Socialista de Trabajadores) and UNETE (Unión Nacional de Trabajadores de Venezuela), have also stated that employee absenteeism is a factor in the decline of production. They cover this up with rhetoric about how workers need more incentives to contribute more to their company.

Of course, there are other reasons for the fall in production. For example, in Cordero region, Lara state, the SOUTO chicken processing factory was driven to bankruptcy and closed fraudulently by its owners. Then, in August, the whole company and its many factories throughout Venezuela were closed, contributing to the food shortages we experience today. SOUTO workers have put up heroic resistance over a number of months, demanding that the government nationalise their plant under workers’ and community control. The government’s response, however, has been to step up the importation of food, including chicken. There are many similar examples.

The trade union bureaucracy seems to prefer to opportunistically link itself with the opposition to the government, rather than fight for unity in action in defence of workers’ rights and a revolutionary alternative to the government’s shift to the right and the sabotage of the right wing.

Government policies are making the economic situation worse. Scarcity is reaching historic levels – generally about 20%, but reaching 50% and even 100% for some items, such as milk, chicken, oil, etc. Bureaucratic attempts to control prices have not worked and the bosses continue with their speculation. Inflation is at 40% generally, and near 70% in relation to food. High world oil prices, of over $100 a barrel for years, have not been enough to allow the government to maintain its social policies, which are further undermined by the concessions given to some bosses (who try to bring it down, nonetheless).

The government is in a serious liquidity crisis, mainly stemming from production problems at the PDVSA state-owned oil company, and CVG (decentralised state-owned metals and mining), which account for 97% of GDP. This is exacerbated by the massive flight of capital being promoted by the capitalists and their mafias.

Despite an income of more than $900 billion in the last 14 years, the government is deeply in deficit. This is only getting worse. China has become its principal creditor. The Chinese regime, however, is concerned at the instability in Venezuela and the constant demands for more credit. Thus, Maduro had to visit China in early October to ask for an extension of credit. The Chinese regime is investing in the technology, construction, telecommunications, and automotive sectors, as well as staking a claim to huge tracts of arable land. This seems paradoxical for a country with massive food shortages.

It is a very risky policy. Despite its record growth over the last years, China is not immune to the crisis of capitalism. The slowdown in its economy and an economic collapse in Venezuela, combined with a big fall in global oil prices, would put the country in a critical situation. This would raise the level of class struggle.

Under the guise of fighting corruption and the flight of capital, the government is targeting ordinary people who, for one reason or another, usually because of extreme necessity, are taken in by criminal networks who buy foreign currency at state prices and sell it on the black market for a much higher price. Those at the top of the networks are largely untouched.

The domination of the currency black market is strangling the economy, with massive speculation on prices. For example, the price of flights has soared by 400%. Electronic and phone devices, typically costing between $100 and $500 abroad, cost between $1,000 and $5,000 in Venezuela! The government has taken new measures through the state currency control agency, DADIVI, limiting the amount of foreign currency which those who travel abroad can access. However, this is the tip of the iceberg, representing only around 10% of the flight of capital taking place.

Increased inequality

Last year alone, $23 billion was given to the private sector for ‘importation costs’. This disappeared into phantom companies set up to facilitate corruption, with the involvement of elements of the state bureaucracy. The government tries to avoid the issue because it has stirred up discontent among the base of Chavismo, and a questioning of how genuine the government’s anti-corruption crusade really is. The government is attempting to hide the fact that bureaucratic currency controls from above, without any real participation of the workers, and the high levels of corruption within the state, have provoked and encouraged this crisis.

Over the last 14 years, the government has left intact the main economic power strongholds of the capitalists, who continue to maintain and increase profits. Seventy per cent of GDP remains in the hands of 1% of the population. Last year, 97% of the money income of the central bank came from the PDVSA company. So the top 1% contributes less than 3%! Of this money, 60% was spent on imports, mostly food and manufactured goods, mostly to the private sector. Therefore, this parasitic class gets most of the oil money and most of the GDP.

ALEM (Latin American Association of Marxist Economists) has estimated that, in Venezuela, there are 423 ‘units’ of agricultural production. Two per cent of these possess 17 million hectares, 55% of the land. Since 1999, the state has increased the tax loopholes for big business. Multinational companies based abroad do not pay any tax on production in Venezuela, but only to their ‘home’ country. This new tax treaty has been denounced by Luis Brito Garcia, a well-known left-wing member of the government’s Federal Council. He says that the state lost $17 billion through this policy up to 2009. Clearly, this tax break should be abolished, along with unjust taxes such as VAT.

Despite the fact that the radicalisation of the masses pushed Chávez into nationalisations of companies and expropriations of big landlords, making capitalism and imperialism tremble, these same capitalists have maintained and even increased their wealth under Chávez and Maduro. For example, the private banking and finance sector continues to make record profits, even during the recession.

Moreover, despite diplomatic conflicts and attempts to forge new alliances with Russia and China, the Venezuelan economy remains highly dependent on the USA, which is still its principal trading partner in key sectors. The US State Department recently summed this up: "Diplomatic tensions between the Venezuelan government and the US administration do not affect or have anything to do with the fruitful commercial relation between the two countries".

Past gains under threat

The working class faces many great challenges in Venezuela, not only that of replacing the political weight of Chávez. The main challenge is continuing with the process which has posed the question of a socialist revolution to end poverty in the minds of broad sections of workers and the poor.

However, the absence of an organisation from below of the workers and poor, able to play a key role, means that the process will remain weak and limited to democratic and populist reforms within the capitalist system. This is the main factor explaining how a process which became such a strong reference for those struggling against capitalism all over the world has been unable to break decisively with the system.

The current political and economic crisis threatens not only to do away with the steps forward achieved by the revolution, but threatens us with political defeat. This would be used – and partially already is being used – by the ruling class internationally to argue that ‘socialism’ has failed and is an obsolete model, and that we must only seek reforms within capitalism and social peace between the classes. There could be nothing more false than this line of argument, given the reality that we experience on a global scale.

The government has spoken of sabotage and economic war against it all through the current episode. It did so on the 40th anniversary of the military coup against Salvador Allende in Chile in 1973. It has attempted to make a historic analogy in a mechanical way to convince the people that the current situation has nothing to do with its political failures but merely represents another attempt by capitalism and imperialism to defeat the revolution. This is a clear manipulation aimed at hiding the fact that the government is engaged in a policy of class conciliation, betraying the aspirations of the workers who supported Chávez and the idea of socialist revolution.

The role of the military

The failure of the government’s economic policy, and its dealings with a section of the capitalists, have shaken up the government’s social base. Based on the last election results of 14 April, Chavismo lost two million votes in less than five months. There is growing discontent among the base of Chavismo and the workers who, despite some confusion and the lack of political leadership, still hold the aspiration of revolution and real system-change. This makes it impossible for the right wing and the Chavista bureaucracy to fully control the situation or to prevent a new revolutionary explosion.

In situations such as this, the military often plays a role as arbitrator, intervening to preserve the stability of the system. However, this is also a complex issue and there are many political contradictions within the military itself. In Venezuela, elements of the military have working-class origins, unlike in many countries of the region, and Chávez did introduce the idea of socialism into the military, albeit with a nationalistic tinge.

Even if these socialist ideas are abstract and confused, they open up the possibility of divisions and confrontations within the armed forces. Nonetheless, the majority in the military are dedicated to protect the system, and it could come to play a key role.

Maduro has also been handing more power over to the military, going much further than Chávez. Many key departments of the state are led directly or indirectly by military figures. This is intended to pacify some of the growing discontent within the army. The government has announced wage hikes for army personnel, and new credits to buy arms and equipment, and fund military repairs. This is not new; Chávez took a similar approach. The difference is that Chávez had sufficient leadership and authority to be able to balance between the military and civil sectors. He also based himself on a stronger economic position.

The deepening contradictions within Chavismo, the political and economic crises, and the intensification of divisions among the parties which support the government, especially the PSUV, open up the prospect of a reorganisation of the left and rank and file who struggle for a radicalisation and deepening of the Bolivarian revolution.

In the next period, we will see a rise in social conflict, as we are already seeing by workers in the SIDOR steel corporation and among other workers. The need for a leadership built on the struggles of workers and the poor continues to be the decisive factor. This represents the main challenge for the revolutionary left.

On the other hand, given the current balance of forces, it would not be surprising if the bourgeoisie takes back full power, either through the right-wing alliance, MUD (Mesa de Unidad Democratica), or through a counter-revolution within Chavismo itself. However, it would be wrong to draw defeatist conclusions, as the contradictions of capitalism in Venezuela are reaching breaking point.

On a world scale, the crisis of capitalism is continuing. Change will not come by itself but, in the context of a new period of class struggle, any government which operates on a capitalist basis will face the possibility of revolutionary explosions from workers and the poor.

Translated by Danny Byrne

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