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I’m going to do thread on Venezuela’s economic history to try and dispel some of the myths going around that the present crisis is due to socialism. Actually, colonialism, US imperialism, and neoliberalism are far more important factors for why Venezuela is in dire straits.
Colonial Venezuela was defined by an encomienda system producing tobacco, cotton, indigo, and cocoa. Indigenous peoples were essentially enslaved to work huge plantations for white overlords, much like in the Caribbean or the US South.pic.twitter.com/5NXmG7YHow
Just as today, countries that only produce raw commodities are highly dependent on volatile commodity prices. Many former colonies, like Cuba, were locked into producing a single profitable export (like sugar) and their economies were never diversified.pic.twitter.com/84JWb4xrux
The Spanish crown abolished the encomienda system in 1687 and black slaves were used instead of locals. The fortunes made in Venezuela from cacao—produced by applying whips to African bodies—were invested in new plantations, mines, and more slaves, NOT institutional capacity.pic.twitter.com/68QEwnPC3q
Even after independence Venezuela remained an agriculture-exporting country chained to the boom-and-bust of coffee and cacao prices. The two products created the capital that led to the rise of a domestic bourgeoisie, made fat off the continued economic exploitation.pic.twitter.com/lYVk8Bo3qT
In 1922, oil was discovered in Venezuela, and oil has reigned economically without interruption ever since. Venezuela's dictator Juan Vicente Gómez permitted U.S. oil companies to write Venezuela's petroleum law. Thus the country came to be central to the U.S. demand for oil.pic.twitter.com/sxEmyk1nFn
In 1957, more than half of Standard Oil's global profits came from its Venezuelan affiliates; in the same year Shell's Venezuelan affiliates accounted for half of Shell's world profits. These corporations funneled a torrent of petroleum and dollars into the U.S. and Europe.pic.twitter.com/V9PPZt4pzK
By the 1970s Venezuela was producing 3.5 million barrels of petroleum to run the U.S.'s industries, but four-fifths of the concessions owned by Standard Oil, Shell, Gulf, and Texaco were untouched reserves and over half the value of the exports never returned the country.pic.twitter.com/zMiMnTOkPs
"The profits milked from this wonderful cow, in proportion to capital invested, are only comparable with those obtained by old-time slave merchants and pirates." -- Eduardo Galeano, Open Veins of Latin America, on U.S. multinationals' exploitation of Venezuelan oilpic.twitter.com/kNqgV9PvBc
"Here you have freedom to do what you like with your money; for me, this freedom is worth more than all political and civil freedoms put together." -- U.S. businessman in Caracas, 1953 (quoted in Galeano)pic.twitter.com/JAy1nD4USm
Again, as with many former colonies, Venezuela's internal market was weak because most people remained poor and uneducated. The ability to develop their own advanced manufacturing industries was therefore limited; more commonly, the wealthy elite imported U.S. finished goods.pic.twitter.com/7WDy2kjTw4
In the 1970s, Venezuelan liberals succeeded in building up state institutions (finally!) to direct some of the crumbs left behind by U.S. companies to things like education, health care, etc. The Arab oil embargo of 1973 led to an oil bonanza for "Saudi Venezuela."pic.twitter.com/xXvGs3v7FG
Middle class Venezuelans routinely traveled to Miami on the weekends in the 1970s, becoming famous for the saying, "Esta barato. Dame dos" ("It's cheap. Give me two"). Still, for the much larger poor working class, they remained mired in poverty, with some crumbs from oil riches.pic.twitter.com/RfXVRtL6E4
In the 1980s oil prices fell and revenue fell from $20 billion in 1981 to $11 billion in 1983. The bolivar was devalued and its free market rate tripled. Unemployment doubled. External debt was over $30 billion. Venezuela entered the "Lost Decade."pic.twitter.com/guTv3YNwCw
One example of elite corruption and misuse of public funds was the RECADI scandal, where Venezuela's wealthiest citizens could buy dollars at preferential rates through a currency exchange system and then covert the (much more valuable) dollars into bolivars at a profit.pic.twitter.com/1KqXnRujrd
In 1989 President Carlos Andrés Pérez accepted $4.5 billion from the IMF for adopting the "Washington Consensus," i.e. unfettered free-market capitalism. While elites had robbed the country blind it was the working class who suffered. Riots known as the "Caracazo" erupted.pic.twitter.com/yVVSrjOoBX
It was the 1989 riots and the subsequent murder of hundreds (perhaps thousands) of rioters that really killed the old prosperous, stable Venezuela. No longer would the more numerous poor enable the elites to live like parasites. Soldiers who fired on civilians became rebels.pic.twitter.com/0Ncj4Za5AH
I have to take a break now but I will to 1990s-2010s later!
In 1994 Venezuela elected Rafael Caldera, a former president from the early 1970s, on the promise he would undo Perez's neoliberal reforms. He lied. Inflation was the highest in Latin America (sound familiar) and by 1996 he introduced even more economic "shock therapy."pic.twitter.com/bez6t5zVeI
Caldera enlisted the support of former Marxist guerilla (no joke) Teodoro Petkoff who became his Minister of Planning. The new economic program, "Agenda Venezuela," was cheered by Wall Street, but inflation only jumped again to 103% in 1996. Economic woes continued.pic.twitter.com/PCJep1pufy
By the end of the 1990s 78% of Venezuelans lived in poverty. Despite possessing the largest proven oil reserves outside the Middle East, the country had seen its living standards crash. Crime was rampant. Neoliberalism had destroyed what little welfare state existed.pic.twitter.com/tQvo2qkMsL
So total was the discrediting of the status quo that in 1998 the two party system that had dominated Venezuelan politics collapsed. The original frontrunner was a former beauty queen, but the winner was Hugo Chavez, a military officer imprisoned after a 1992 coup attempt.pic.twitter.com/gwizG9SZ1t
Chavez had disdained elections despite his popularity because he did not believe he stood a fair shot in an unfair two party system. But the old liberal order had lost legitimacy. He won on a pledge of 1) dismantling the two-party system, 2) fight corruption, and 3) end poverty.pic.twitter.com/bDpPqVGtmn
In 2000 (quite independent from Chavez) oil prices soared, helping to lift the Venezuelan economy. The price of a barrel of crude oil, long ~$25, hit $30 in 2003 and climbed to $60 by 2005. This windfall supplied Chavez with the funds to raise the standard of living in Venezuela.pic.twitter.com/rN3RWIQZQU
To be clear it is *undisputed* that the Chavez regime in Venezuela had a net positive on human development in a country that, while stable and prosperous, had until the 2000s many masses wallowing in extreme poverty. This is often not mentioned in recalling Venezuela's past.pic.twitter.com/rQTUor7u3o
Despite the oil boom Venezuela remained unstable . In 2002 the conservative opposition attempted to seize power, suspending the new constitution and using private media to spread propaganda. The US was also tied to the coup. In the end, Chavez was reinstated by his supporters.pic.twitter.com/JC0zkJCjQp
The 2002 coup attempt preceded a general strike ("paro cívico") as conservative politicians and business interests attempted to force Chavez out. As with the coup attempt, the effort fizzled out due to lack of popular support, but not without doing huge damage to the economy.pic.twitter.com/M5YO7ZkU2p
Simultaneously, Venezuela was hit with intense capital flight, because left-wing politics make the markets sad. Without foreign investment or the technology and expertise provided by multinationals, Venezuela became even more dependent on its oil income.https://www.wsj.com/articles/SB1019168278472139840 …
To recap so far: Hugo Chavez in 1998 inherited a ex-colony whose institutions were still centered around capturing profits from rents and funneling it to elites at the expense of the poor WHICH HAD ALSO been driven off a cliff by IMF-imposed "shock therapy." So there's that.
To blame Chavez for extensive corruption and lack of a robust, diversified economy only makes sense if you believe he possessed time travel technology to somehow go back and prevent the Spanish plunder of the Americas. I mean, if he did... whatta jerk for holding out on us!
But more importantly... Yeah, Venezuela is unstable because it's society has been in crisis *since 1989* because, as the history of France or Russia will tell you, a ruling class can only drive its underclass into deprivation for so long before your society breaks down.
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