The Biden Administration declares that the left-wing government of Nicolás Maduro stole the election in Venezuela. I’m inclined to believe it, not so much because my government said it but because of what’s been happening in Venezuela in the past 20 years. For the story of that, I recommend Things Are Never So Bad That They Can’t Get Worse. The book is two years old, so it’s a bit dated, but it’s worth a read. The author, William Neuman, was the New York Times correspondent in Venezuela for much of the past ten years. He knows the country and tells its story.
In March 2019 the power went out in Venezuela. A decade earlier, Venezuela’s socialist caudillo, Hugo Chávez, had nationalized the private and public power companies under one state monopoly, Corporación Eléctrica Nacional (Corpoelec). When the power went out, it was nationwide.
After four days of no electricity, a desperate order went out to find to find the four engineers from the old regime who knew how to get it back on.
The engineer was a loyal Chavista, but he did not want to work for the general who had fired him.
The men were not happy. Chávez’s successor, Nicolás Maduro, had installed a general of the national guard as boss of the state power monopoly. The power that the general knew was only the power to order underlings around. Two years earlier, when the system had a breakdown, the general had falsely accused one of the four engineers of being a saboteur, and had fired him.
In the new emergency, Corpoelec demanded that he come back. The engineer was a loyal Chavista, but he did not want to work for the general who had fired him. Venezuela’s vice president promised that the general would stay out of his hair. The engineer and his three colleagues came back.
At Venezuela’s big Caruachi hydro plant on the Caroni River, the twelve generators were stopped. One was surrounded by a lake of oil that no employee had bothered to clean up. Spare parts were gone. The radios didn’t work, and even the light bulbs were burned out. Most troubling, half the employees were gone. The value of their pay in bolivars, Venezuela’s currency, had been reduced to almost nothing. Many of them had emigrated to Colombia, Chile, or the United States.
And the engineers — the “Quatro Fantásticos” — got the power back on.
The story of the Venezuelan collapse is like something out of Ayn Rand’s Atlas Shrugged. Explaining the collapse takes more than saying, “Socialism doesn’t work.” That statement is not really true, anyway. In East Germany, for example, a fully socialist planned economy worked — after a fashion. It provided its people food, clothing, housing, education, newspapers, and TV programs, and even a people’s car. Of course, none of those things was of good quality. To buy the car, called the Trabant, you had to pay first and wait about 10 years for delivery. The car had a two-stroke, lawnmower-type engine and a top speed of 55 miles per hour. It was one of the worst cars on the planet — but it worked.
Spare parts were gone. The radios didn’t work, and even the light bulbs were burned out. Most troubling, half the employees were gone.
The system in Venezuela didn’t work. From 2013 to 2019, the country’s gross domestic product plunged by 65%, a depth more than twice as deep as the drop in US GDP in the Great Depression. The bolivar fell to nothing. One-sixth of the population fled the country — and Venezuela is the country blessed with the greatest oil reserves on the planet. It has more oil than Saudi Arabia.
That was part of the problem. “What is distinctive about Venezuela is that its economy revolves entirely around oil,” Neuman writes. “The government owns the oil in the ground and receives money from oil sales. The effect of that is to put the government at the center of economic life. And the government’s main function becomes the distribution of the oil money to its citizens.”
It has been that way for many decades.
And that changes people. Neuman gives the example of a woman who has been given a house — a small one, of cinder blocks — by the government. She’s unhappy with her house and complains to the American correspondent that her government never painted it. When Neuman suggests that she could paint it herself, she is indignant. “If you give me a house, you should give it to me painted and finished,” she declares.
From the government as fountainhead it is a short step to the idea that the distribution ought to be more equal. And in the 1980s, Hugo Chávez, army officer and instructor in the national military academy, began a movement for “Bolivarian socialism.” In 1992, Chávez attempted to seize power in a coup against the elected president, Carlos Andres Pérez. The coup failed, but the government allowed Chávez, who was then unknown, to address the nation by radio. Though Chávez went to prison, his performance on the radio made him a hero of the left. In 1998 Venezuelans elected him president.
Venezuela still has elections — but the ruling party has corrupted the process so much that the president always wins.
When Chávez took power, the national oil company, Petróleos de Venezuela, S.A., was already owned by the government. Chávez bought former government assets that had been privatized, including the national phone company, from Verizon; and the national steel company, Sidor, from an owner in Luxembourg. But for Chávez, Neuman writes, taking over the means of production was a show — “all means and no production.” The steel company, he writes, “wasn’t for making steel, it was for making Chávez look like a socialist.”
“Chávez was neither a Marxist nor in any real sense, despite the rhetoric, a socialist,” Neuman writes. “Chávez made no serious effort to dismantle the market economy. Because of its unique history and the state control of the oil industry, long before Chávez, Venezuela had a deeper state penetration of the economy than any country in the hemisphere other than Cuba. Chávez simply continued what was already there and painted it a different color.”
Neuman calls Chávez a populist, a kind of Latin American Huey Long. Chávez was a demagogue who pitted the poor against the middle and upper classes. After reading Neuman’s account, I wouldn’t go so far as to say that Chávez wasn’t a socialist. He said he was one, he talked like one, and the political organization he created was called the United Socialist Party of Venezuela. To me, he’s a socialist. However, the system he built still had market prices, mostly. And Venezuela never became fully a one-party state. It still has elections — but the ruling party has corrupted the process so much that the president always wins.
Under Chávez, who ruled from 1998 until his death in 2013, the courts were packed, the military was politicized, and the 12-year term limit on the president was repealed. Venezuela’s political system, writes Neuman, was “stripped of checks and balances, without a separation of powers.” Chávez had his face painted on walls and billboards. He was regularly on television, speaking to his fans. He wielded the state’s power, of course, but while he lived, the iron fist came out only occasionally.
After Chávez died of cancer and Nicolás Maduro was elected in his place, things got worse. Oil prices fell. Chávez had been lucky that way; while he was in office, world oil prices had been rising. “With Chávez there was protest but also money and good times,” Neuman writes. “There were political prisoners, but not many . . .” Maduro, he says, “had fewer plums to dole out, so instead he doled out violence and repression.” In the economy, Maduro made up for the drop in oil prices by printing money. When prices began to soar, he put in price controls, and store shelves emptied out.
The wife says, “This isn’t the socialism that we dreamed about” — but she and her husband still believe in the dream, and still support Nicolás Maduro.
As a way to keep the army’s loyalty, Maduro appointed generals to head state enterprises. They were leeches and the employers of leeches. At the state oil company, production collapsed to a fraction of what it had been before. The state and its employees had sucked it dry. By 2019, Neuman writes, Petróleos de Venezuela “wasn’t an oil company anymore. It was a junkyard.” Sidor, the state steel company, shut down. And, for several days in 2019, the national electric grid failed.
It was like a story out of Atlas Shrugged — except that the engineer Neuman interviewed, one of the four called back to restore the nation’s electric power, never gave up his belief in socialism. Neuman tracks him down after the power crisis is over. The man and his wife are trying to start small businesses in a forlorn shopping mall, with the wrecked economy all around him. The wife says, “This isn’t the socialism that we dreamed about” — but she and her husband still believe in the dream, and still support Nicolás Maduro.
A century ago, the socialist dream was about the future. Stalin’s Five-Year Plan set about quickly building a 20th century economy through forced labor. The waste of material and human lives was enormous, but the world’s first socialist state did build dams, steel mills, Lego-block housing and a war-winning military machine.
Socialism in Britain was more humane than in Russia, but it was also about rationing today to build a brighter future. In Ordeal by Planning (1948), economist John Jewkes wrote of the archetypal socialist politician, “He is much more concerned with the distant future than with the present, and is prepared to make immediate sacrifices, and force these sacrifices on others, for some hypothetical gain in the future. The planned economy always promises ‘jam tomorrow’.”
Socialism in the 21st century is about benefits now — and, for that project, Venezuela’s would seem to be ideal. It was a place where nature made production easy, and others had already created the productive apparatus. Chávez, Maduro, and their followers didn’t have to build it. They didn’t even have to understand it. They could just take it.
And they did.
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Review of Things Are Never So Bad That They Can’t Get Worse: Inside the Collapse of Venezuela, by William Neuman. St. Martin’s Press, 2022. 303 pages.
