Deepening the Bolivarian Revolution: What options are available to Venezuela?

by Jehu

If you have been keeping up with the news from Venezuela, you probably know the Bolivarian revolution has entered a stage of deep and prolonged crisis. This crisis is not unexpected, since Venezuela has been the target of unceasing opposition and attempted subversion by the United States and the domestic allies among the bourgeoisie.

As The Nation put it:

“The economic crisis in Venezuela, though, is real, and the reporting on it has been stultifying. Shortages are being reported on with glee in the United States, with the takeaway being that the failure of the Bolivarian Revolution is inherent in the idea of the Bolivarian Revolution, in the fundamental premise related to socialism. Latin America has long served as a sharpening stone, on which ideas about what a proper, temperate, and responsible politics and market-based economics could be honed. Want to see where Sanders-style social democracy will lead? Cast your eyes south! Spectacle is always more fun to look at than structure, and despite the current shortage of toilet paper in Venezuela, the fact remains that poverty, inequality, malnutrition, lack of healthcare, and chronic violence in Latin America owe more to the neoliberal structural adjustment policies Ronald Reagan and Bill Clinton put into place than political movements seeking to roll back those policies.”

According to The Nation’s correspondent, Alejandro Velasco:

“I spent five weeks in Caracas. It was worse than I imagined, but not in the way I expected. Most of the coverage has offered up scenes that rival anything coming out of Aleppo or Sudan or the Mediterranean: starving Venezuelans rummaging through trash or getting by on mangos, fleeing to the tune of tens of thousands a day—by raft to Curacao, overland to Colombia, on planes to anywhere they can—fending off outbreaks of malaria and diphtheria, locked in their homes at all times but especially after nightfall. One analyst recently stated that Venezuela’s current crisis is the worst in all of Latin America in the last 35 years. That’s in all of Latin America. Since 1981. No worse crisis. Period.”

Velasco continues:

As the government holds on to a thoroughly discredited currency control, for little more reason than to feed the corruption that keeps its inner core afloat, it has basically moved increasingly to dollarize more and more parts of the economy, both formally and informally. Last year it was real estate and auto sales. Now it’s extended to most food items, which are imported as Venezuela’s historic dependence on foreign products has deepened over the last decade plus.”

Dollarization is, by far, the most acute symptom of the crisis the Bolivarian revolution is going through right now not simply because it expresses the loss of confidence in the bolivar, but because it expresses the loss of confidence in the state itself. The shortages of commodities and high prices, as well as the domestic expansion of those commodities that no amount of bolivars can purchase, has nothing to do with the bolivar itself — which has always been a valueless token — but reflects a profound loss of confidence the state can maintain control of economic events.

As of this writing, it is unclear whether the revolution will weather this storm.

As I like to do from time to time, I will spend some time doing a thought experiment on how Venezuela can exit the impasse it now faces. The attempt is not intended to hand out free advice to folks who likely will ignore it anyways, but to clarify in my mind the options available for any movement facing this same situation in the future.

Dollarizing the Revolution?

Enter Prof. Steve Hanke (Twitter: @steve_hanke), who offers Venezuela a piece of free advice:

“Venezuela has two surefire options to fix its monetary woes: dollarization or adoption of an orthodox currency board”

According to Professor Hanke, Venezuela has one surefire option to fix the loss of confidence in the bolivar: it should simply stop having an independent monetary policy. I agree with the professor — that’s right, occasionally even bourgeois simpletons get it right.

Venezuela has to figure out how to end the grave threat to the Bolivarian revolution without relying on conventional monetary and fiscal policy tools that might be available to it with its own sovereign currency. Frankly, no one except advocates of Soviet-style central planning has given any thought to how a country addresses its social ills when conventional Keynesian policy tools do not work because the world economy is increasingly open to the movement of labor, capital and commodities of the sort Velasco complains.

The problem, of course, is that central planning itself requires controls that are far more stringent than even Keynesian policy, including managed trade and limitations on the free movement of individuals, etc. Central planning absent these controls has never been tried. Can you have central planning in what is essentially an open world economy? What would it look like?

In any case, as Hanke suggests, Venezuela should get rid of the bolivar and the economic policy tools invented by Keynes. Doing so would eliminate both conventional KeynesIan policy and likely the sort of Soviet style central planning we are familiar with as options. Once accomplished the economy would be completely open to the movement of capital.

What would be left?  After dollarization, Venezuela would have an open economy, zero capital controls,  no fiscal or monetary policy, and a state that is limited to spending only what it can raise by taxation and the income generated by nationalized sectors like the oil industry. Assuming the aims of the Bolivarian revolution remain unchanged, what means does it have to achieve these aims?

This is a big question because, as we all know, the aims of the Bolivarian revolution are not consistent with the capitalist mode of production. According to Wikipedia, those aims include providing public services to improve economic, cultural, and social conditions; including redistribution of wealth, land reform, and democratization of management of the economy through workplace self-management and creation of worker-owned cooperatives; using revenue from oil production to loosen dependence on U.S. and European governments and to promote economic and political integration with other Latin American nations.

Compare those aims with the normal operation of the capitalist mode of production which concentrates land and other forms of wealth into ever fewer hands, centralizes management of these into ever larger capitalist concerns, increases dependence on the fiscal and monetary policies of Washington and Berlin and fragments Latin America into competing national capitals.

After dollarization what?

I think that there is nothing Venezuela will do by complete dollarization of its economy that makes the aims of the Bolivarian revolution unreachable. To understand why, consider that previously Venezuela tried to accomplish these aims mainly by state spending.

Of what did this spending consist? One of the first programs undertaken by the Chavez government was to distribute mass vaccinations, food, and education to the poorest sections of society. To accomplish this distribution, the means necessary were secured by purchasing them from the private sector and soldiers were paid to deliver them to the population.

This method of realizing the aims of the revolution was made possible by diverting the revenue of the oil industry. But this diversion was only necessary because the Chavez government remained committed to private property. Since the means to achieve the revolution’s program were in private hands, the government had to pay the owners of these means. Had the government simply nationalized these means, as was possible under the revolution, they would have been public property.

To put this another way, the Bolivarian revolution was dependent on monetary and fiscal policy (and on having an independent currency), because the means to satisfy human needs remained in private hands. The access to the means to satisfy human needs rested on, and was mediated through, the policy tools the state had on hand to finance itself: foreign exchange income, taxes, borrowing or printing.

Absent these policy tools, securing the means to life necessary to achieve the aims of the Bolivarian revolution requires the revolution directly expropriate of those means. There is no reason this expropriation could not have been accomplished directly by self-organized communal councils as originally envisioned by Chavez in 2007.

The insufficiency of political means

Of course, the actual taking of the means of life under the control of society is far more complex than this simple example. I only use it here to identify a bigger problem Venezuela is now facing: limiting the aims of the revolution to what could be accomplished by Keynesian means — fiscal and monetary policy and the entire mess resulting from this — only appeared necessary because private monopoly of the means of life was tolerated in Venezuela.

At the same time, the private monopoly on the means of life could be tolerated by the revolution only so long as fiscal and monetary policy was available to the Venezuelan state. Once dollarization is inevitable, and I think this is true now, Venezuela has no choice but to put an end to the private monopoly over the means to life.

Some people are horrified by the prospect of dollarization today but were not horrified by the private monopoly over the means to life; yet, as I have tried to show here, money and Keynesian economic policy are simply the necessary expression of private monopoly.

To put an end to the need for a state monopoly over its own currency, requires revolution put an end to private property as well. Keynesians who are so enamored of the Bolivarian revolution haven’t wanted to accept this conclusion, but with the prospects of Venezuelan dollarization looming they will have to figure it out.

As Karl Marx and Frederick Engels stated in The Communist Manifesto:

The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces as rapidly as possible. 

Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionising the mode of production.

The impasse the Bolivarian revolution has encountered cannot be resolved except by deepening the revolution, since every measure it took was always economically insufficient in the first place. If Venezuela cannot accomplish this, the revolution is likely lost.