by Rand Paul
Lahoud thinks it is very important that people understand not only the enormity of Venezuela’s disaster but the root cause:
“I have known the reality of the failure of socialism in my own flesh. And as I live in Venezuela, I want to show that this is an absolute failure always and everywhere. Socialism, whatever form it may take, only brings economic destruction and worsening of the conditions of human life.”
Lahoud admits that “Venezuela was never a country of economic freedoms. But when we had less public spending, we grew more. . . .”5
In the late 1950s, military rule was replaced with “democracy.” Romulo Betancourt (1959–64), an ex-communist, assumed the reins of power and made a significant turn away from a market economy. Niño describes Betancourt as adopting a “more gradualist approach of establishing socialism,” as he was “part of a generation of intellectuals and student activists that aimed to fully nationalize Venezuela’s petroleum sector and use petroleum rents to establish a welfare state. . . .” So, socialism in Venezuela was not a new program created by Chavez, but rather Chavez simply took socialism to another level.
Niño tells us that Betancourt’s government tripled income taxes and generated massive fiscal deficits that “would become a fixture in Venezuelan public finance during the pre-Chávez era.”6
Betancourt was succeeded by Carlos Andres Perez, who nationalized the entire petroleum sector in 1975.
As Niño puts it:
The nationalization of Venezuela’s oil industry fundamentally altered the nature of the Venezuelan state. Venezuela morphed into a petrostate, in which the concept of the consent of the governed was effectively turned on its head.
Instead of Venezuelans paying taxes to the government in exchange for the protection of property and similar freedoms, the Venezuelan state would play a patrimonial role by bribing its citizens with all sorts of handouts to maintain its dominion over them.7
If socialism means that the state owns the means of production, then 1975 was a significant milestone in Venezuela’s descent into socialism. With enormous oil reserves and a steady flow of cash, it would take a decade or two for socialist policies in the form of price controls and currency controls to completely ravage the economy.
Chavez didn’t just arrive unannounced on the scene. He first came to prominence in a failed coup in 1992 against the Andres Perez regime. Chavez was imprisoned for two years. Upon his release, he decided this time to take power through the political process. He founded the Fifth Republic Movement and was ultimately elected president of Venezuela in 1998.
Leftists in America heralded Chavez’s election. Bernie Sanders, Noam Chomsky, and others pointed with glee to data showing a decline in poverty. When socialism finally strangled the economy and Chavez resorted to violent means to quell protests, many on the left went radio silent on Venezuela.
Some leftists, however, stuck with Chavez and put an interesting spin on their defense of state violence against the people. George Ciccariello-Maher is a writer and activist who supported Venezuela’s Bolivarian Revolution led by Chavez. He taught political science at Drexel University until being consumed by a Twitter storm over his tweet: “All I want for Christmas is White Genocide.” When prompted to clarify his comments, he tweeted: “when the whites were massacred during the Haitian revolution, that was a good thing.”8
Commenting on Chavez’s crackdown on protesters, Ciccariello-Maher wrote: “If we are against unnecessary brutality, there is nevertheless a radically democratic form of brutality that we cannot disavow entirely. This is the same brutality that ‘dragged the Bourbons off the throne’ [ . . . ] This was not brutality for brutality’s sake [ . . . ] It is instead a strange paradox: egalitarian brutality, the radically democratic dictatorship of the wretched of the earth. Those smeared today [ . . . ] are in fact the most direct and organic expression of the wretched of the Venezuelan earth.”9
Oh my . . . “egalitarian brutality” . . . “democratic brutality”—so much for democratic elections restraining the excesses of socialism.
When Maduro took over from Chavez, some questioned whether the ensuing disaster should be blamed on Maduro. On the one hand, the country was already in a tailspin when Chavez died. Maduro, in many ways, was simply a continuation of the Chavez rule. Maduro was seen as Chavez without the charisma, and there was not enough distinction between the two to lay more blame on one than the other.
By the time Maduro came to power, Chavez had created a massive socialist welfare state to transfer wealth with the goal of eliminating income inequality, all financed by the enormous cash flow from oil.
As Al Jazeera described it, “As Chavez strived to transform the nation with what he called 21st century socialism, his populist policies began to take a more radical turn. He nationalized industries and bloated state bureaucracy at great national expense, all funded by high oil prices and unchecked borrowing. Venezuela became saddled with record-high levels of debt.”10
Yet, for several years Venezuela continued to plug along.
As CNN reported: “Hugo Chavez, the man who built his powerful persona on a populist platform of sharing Venezuela’s vast oil wealth with the poor and disenfranchised, leaves his nation with a greater distribution of cash to the poor.”11
Chavez’s Hollywood supporters continued to crow about how income inequality was melting away in Venezuela. CNN reported that income inequality “dropped to among the lowest in the Americas during his tenure” and cited the World Bank reporting that “those living below the poverty line fell to 36.3% in 2006 from 50.4% in 1998 and infant mortality fell from 20.3 per thousand births when Chavez took over to 12.9 in 2011.”12
And yet the dream of socialist paradise was always ephemeral. As Maduro came to power in 2013, the mirage of Venezuelan socialism vanished, only to reveal a disaster of immense proportion. The result was an economic catastrophe that included hyperinflation and mountains of debt and food shortages never before seen in modern Venezuela.
Margarita Lopez Maya, a professor at Central University of Venezuela, said, “Venezuelans today cannot eat. You see people eating from the garbage.”13
When Chavez died in March 2013, Venezuela was already poised to fail. As Al Jazeera reported, “Chavez handed over both the reins of power to his handpicked successor, Nicolas Maduro, as well as the poisoned chalice of an economy about to implode.”14 Within months of his death, Venezuela was forced to devalue the bolivar by 30 percent against the dollar. Despite having the world’s largest oil reserves, oil production began to decline.
Venezuela’s dependence on oil became its Achilles’ heel. When oil prices hit the skids, the fragility of Venezuela’s economy became apparent.
Ricardo Hausmann, a former Venezuelan government official, describes the economic collapse as “the largest recession in Western Hemisphere history—significantly larger, almost twice as large as the Great Depression of the US.”15
How severe was the collapse? GDP contracted by more than 10 percent as inflation soared to 26,000 percent.16
Food became scarce as grocery store shelves emptied. The British newspaper Independent reported that “the economic crisis in Venezuela is so severe that 75 percent of the country’s population has lost an average of 19 pounds in weight. . . .”17
Peter Wilson at USA Today interviewed Roberto Sanchez, an unemployed construction worker in La Victoria, Venezuela, “as he waited in a line with 300 people outside a grocery store.”
Sanchez: “We have no food. They are cutting power four hours a day. Crime is soaring. And Maduro blames everyone but himself. . . .”
Wilson quotes the mayor of Chacao: “People are hunting dogs and cats in the street, and pigeons in the plaza to eat.” Hyperinflation and currency controls limit the importation of food and medicine. Over the years, Venezuela, rather than grow its own food, purchased more than 70 percent from abroad, paying for it from oil sales.
Medicine shortages also plague Venezuela. You can hear the anguish in Luis Avila�
�s voice: “My four year old daughter is dying of cancer, and there’s no medicine here to treat her.”18
Three Venezuelan universities conducted a “National Survey of Living Conditions.”
About a third of Venezuelans were found to only have enough food for two meals or less each day. Whereas Sean Penn and others had lauded Chavez for eliminating 80 percent of poverty, this survey found that 87 percent of Venezuelan households had descended into poverty.19
The survey found that poverty had nearly doubled from 48 percent in 2014 to 87 percent in 2017. So much for socialism curing poverty. As poverty exploded under Maduro’s socialism, more than a half-million people fled Venezuela into Colombia and Brazil.20
Socialism destroyed the economy of a country with vast natural resources. Despite the promises of leftist politicians and celebrities, the truth won’t be denied: socialism poisons everything it touches.
Chapter 2
Socialism Rewards Corruption
Like most socialists, Chavez was elected on a promise to help the poor and equalize income, and yet like most socialists, he did not apply the theory of equality to himself.
Sympathetic international agencies reported that Chavez did partly succeed in reducing income inequality. But the result was less income inequality and less overall prosperity. Which goes to the heart of the question: would you rather be richer yourself—or make sure the rich get poorer?
And as the overall economy in Venezuela finally cratered, it became obvious that as Orwell warned, “some animals are more equal than others.” As poverty and hunger became widespread across Venezuela, Chavez himself got richer and richer and fatter and fatter.
Famous for bloviating ad nauseam against the rich, Chavez was secretly enriching himself. As the Washington Examiner reported, “billions of dollars of public funds were diverted into secret Swiss bank accounts. The major beneficiaries of the Chavez regime appear to have been his family and friends. His daughter is reported to be a multibillionaire and the richest person in Venezuela. By contrast, Venezuelan doctors make an average of $2.20/day.”1
What about Cuba? A refugee from Cuba tells of his father who as a doctor in Cuba had to “sell illegal meats out of his ambulance . . . because Cuban doctors earn less than 1% of American doctors.”2
Chavez and Maduro both worshipped at Castro’s Cuban altar and visited Cuba often. In fact, Venezuela and Cuba were in many ways joined at the hip. For many years, Chavez then Maduro provided Cuba with oil below the market price.
It should surprise no one that Castro, like virtually every socialist leader before him, expressed nothing but love and concern for the proletariat while living like a king. Castro pretended to live in modest homes while shielding from the public his mansions and private islands. Forbes once estimated that Castro was worth nearly a billion dollars. As Keith Flamer comments: “That’s a lot of socialist rationing for one person.”3
Maduro, like Chavez, grew fatter and fatter as Venezuelans starved or took to scouring garbage for food. Like most men with money (in his case, someone else’s money) he tried to disguise his enormous girth in supersized suits. (Think Ted Kennedy in his later years.) But his incessant need to be seen on television allowed the public to make up its own mind about whether Maduro subjected himself to the same “equal” lack of food as everyone else.
The public outcry hit a peak when Maduro was caught at a ritzy restaurant in Istanbul owned by the celebrity Nusret Gökçe (“Salt Bae”), stuffing his mouth with expensive steak personally cut into delectable morsels by the chef. Ironically, the celebrity chef had posted a photo of himself, cigar in hand, next to a poster of Castro to celebrate the opening of his luxury Miami restaurant. Only celebrity socialists can be so tone-deaf and obtuse.4
CNN recorded the response from exiled opposition leader Julio Borges: “while Venezuelans are suffering and dying of hunger, Nicolas Maduro and [his wife] Cilia enjoy one of the most expensive restaurants in the world, all at the expense of the money stolen from the Venezuelan people.”5
Maduro had earlier singled out Borges as the mastermind of the failed drone assassination. Without any proof, of course. But proof is overrated in a dictatorship.6
The hypocrisy of yet another advocate of the people accumulating vast wealth is, unfortunately, the rule, not the exception. In fact, for all the incessant sop served up about equally distributing all goods and services, socialism and kleptocracy often seem indistinguishable.
Glenn Reynolds puts it this way: “Under capitalism, rich people become powerful. But under socialism, powerful people become rich.”7
Power corrupts and as Lord Acton remarked: “absolute power corrupts absolutely.” Unless you imagine a voluntary revolution where all owners of industry or commerce give up their wealth to the state, you have to acknowledge that state ownership of the means of production can only occur at the end of a truncheon.
Around the world, time and time again, strongmen have come to power promising the free stuff of socialism, only to succumb to the siren song of power. In the end, many of these authoritarians are remembered more for their kleptocracy than their socialism, but it is important to remember that most of these dictators came to power promising to use the apparatus of the state to redistribute the wealth.
Egypt’s Hosni Mubarak is another prime example. While history does not remember Mubarak as a socialist, people forget that Mubarak’s rule as an authoritarian directly descended from Gamal Abdel Nasser’s Arab socialism. As Gerard Di Trolio writes at jacobinmag.com, Hosni Mubarak’s National Democratic Party was a member of the Socialist International for decades.8
Mubarak, however, was, for the most part, seen less as a socialist and more as an authoritarian adept at corruption and personal aggrandizement. Nevertheless, Nasser’s ideology bore the same fruit that did so many other schemes to accumulate centralized power. Even as Mubarak returned some industries to private ownership, he did so while replacing state ownership with his family’s ownership, proving once again that once power is obtained, accumulating one’s own wealth becomes more important than spreading the wealth.
ABC News estimated that the Mubarak family’s personal wealth was probably between $40 billion and $70 billion, thanks to “military contracts during his days as an air force officer.”9
Who said socialism doesn’t pay? All economies ultimately distribute goods and wealth unequally. For those who can’t stand a capitalist economy where income is largely based on merit, a big government–planned economy doesn’t necessarily result in income parity. It often means that instead of being distributed on merit, income is distributed through the prism of party loyalty and cronyism.
Over and over again, history shows that socialism quickly devolves into kleptocracy. After all, despite the lofty rhetoric of socialist thinkers, they cannot ignore the fact that human nature is inherently self-interested and self-preserving. Socialism has failed humanity in every country where it has been tried, from the former Soviet Union to China, from North Korea to Venezuela, always with the same disastrous results.
Not all dictators came to power promising socialism, egalitarianism, and redistribution of the nation’s wealth. Yet, even without an overt socialist agenda, many of these dictatorships share the central tenet of socialism: government ownership of the means of production.
Corruption is the one consistent theme of big governments with central ownership of resources. Equatorial Guinea is a prime example. A small, oil-rich city-state in Africa ruled by the Obiang family, Equatorial Guinea takes the cake when it comes to the mantra “some are more equal than others.” President for life Teodoro Obiang Nguema Mbasogo is worth billions while 75 percent of the citizens live on less than a dollar a day.10
Not only does the autocrat Obiang use public money to fund his lavish lifestyle, he also brazenly diverts oil offshore and sells it off the books for cash. Some say he siphons off 40 million pounds a day in oil revenues. His son Teodoro “Teodorín,” though, puts a capital L in lavish. A few years b
ack he was arrested leaving Switzerland on his private jet loaded with eleven superluxury cars.
“Among them was reportedly a Porsche valued at more than $830,000 (£667,000) and a Bugatti Veyron which sells for $2m (£1.7m).” At home, dear leader Dad closes the freeways so Teodorín can race his sports cars without interference from the hoi polloi.
The BBC reports that “[p]rosecutors in Geneva say [Teodorín] has plundered his country’s oil wealth to buy luxuries, including a private jet and Michael Jackson memorabilia.”11
If President Obiang is the penultimate crook, his son Teodorín is the ultimate kleptocrat. According to the Guardian, “his official salary as minister of agriculture and forestry is about £5,000 a month, but in just three years he spent twice as much as the state’s annual education budget on luxury goods. He was caught trying to buy a £234m super yacht earlier this year—and last month was reported to have lost a briefcase in Swaziland with £250,000 inside. ‘He’s an unstable, reckless idiot,’ commented one US intelligence official.”12
Like Saudi Arabia, Obiang spends millions to curry favor with the United States and obscure their terrible human rights record. What does that kind of money buy? Can money buy respectability for a kleptocrat?
Well, it seems to have bought him a great picture with Condoleezza Rice and other world leaders.
Chapter 3
Interfering with Free Markets Causes Shortages
Chavez and later Maduro instituted widespread price controls that José Niño describes as the “main culprit in Venezuela’s economic tragedy.” Beginning in 2002, Chavez went beyond the oil industry to nationalize other sectors of industry. Currency exchange limits and price controls were added as well.