The Price of Venezuelan Oil? Democracy

Venezuela has inherited from its colonial past a feature that has handicapped its economic development as well as its free institutions: rentierism.

Rentierism, or what is called in Spanish rentismo, refers to an economy that depends too much on government spending because the government maintains a monopoly that permits it to be independent from tax revenues, and hence from its population. The Empire of Charles I of Spain financed all of its costly foreign and interior policy with gold brought over from the Americas. Over time, this led to inflation, further feudalization of Spanish society, and a weak commercial balance dependent on imports from England, the Italian republics and the Netherlands.

Today, President Hugo Chavez’s Venezuela works in a strikingly similar fashion. His so-called “Socialism of the 21st Century” has been a long campaign to expropriate and take over the private businesses of Venezuela’s weak bourgeoisie. He has utilized gigantic oil revenues in order to finance the government without the need for tax revenues or the private sector.

Chavez has systematically expropriated agricultural land from the hands of private producers (some of them very efficient) in a crusade to give the land to the peasants. He has propagated a myth using socialist rhetoric in which the government must redistribute the country’s land in order to protect landless peasants from being exploited by greedy landlords. This narrative feeds off a 19th century vision of Venezuelan society — where most of the land was monopolized by military and oligarchic landlords — that no longer exists now that the country has become a mainly oil producing economy. This was a process that began decades ago with Venezuela’s oil industry, but Chavez has taken it to its ultimate extreme, resulting in the destruction Venezuela’s capacity to feed itself by decimating the country’s agricultural sector.

As a result, Venezuela now depends more than ever on foreign imports, especially from Colombia and Argentina, and the average Venezuelan depends on imported food purchased with oil revenues. High government spending has led to the highest inflation in Latin America and the almost complete demise of national production. Contrary to common sense, Chavez’s officials defend this policy as the primary establisher of national autarchy.

Venezuela’s catastrophic economic situation doesn’t end with the agricultural sector. Chavez has expropriated other important branches of national industry, like steel and aluminum, sugar, electricity, and the biggest telephone corporation, which has followed these companies into bankruptcy. His socialist ideology has resulted in an economy that depends more than ever on oil prices.

Chavez's strategy to have a tight control of the only real source of wealth in the country makes complete sense if he plans to rule for life. It has made him the indisputable, strongest and wealthiest politician in Venezuela, by leaving the private sector subservient to the central government and the civil society weak and demoralized in front of an all-pervasive civil bureaucracy.

Venezuela’s woes fit the pattern of other oil-rich countries which have also become rentier economies controlled by repressive regimes. These governments use oil wealth to bolster their popularity by buying off important segments of the population with social programs, as well as suppressing dissent, which is exactly what Chavez has been doing for more than a decade now.

Photo Credit: smoreno2007

How likely are you to make Mic your go-to news source?

Thaelman Urgelles

Monotheist Catholic, carnivorous and native Spanish speaker. I like monarchies, dislike democracies and hate dictatorships.

MORE FROM

White House says it knows of potential Syrian chemical attack, warns Assad of "heavy price"

The Trump administration did not provide any evidence backing the threat.

Serena Williams responds to John McEnroe's comments saying she would rank "like 700" against men

Williams said his statements were "not factually based."

People are way less likely to be helpful when it's hot out, according to study

Sorry, it's too hot out to help you move.

Democrats, the American Medical Association and US bishops blast the Senate health care bill

According to the Congressional Budget Office, 15 million more Americans will be without health insurance next year if the bill passes.

Dow Jones won’t talk about its reported pay gap problem

A study released by the union representing Dow Jones employees found evidence of a "significant pay gap between men and women" who had the same job title and level of experience.

Mom slams ACA repeal, shows what's at stake in a tweetstorm about son's health

This mom says that without the ACA, her son wouldn't get the medical care he desperately needs.

White House says it knows of potential Syrian chemical attack, warns Assad of "heavy price"

The Trump administration did not provide any evidence backing the threat.

Serena Williams responds to John McEnroe's comments saying she would rank "like 700" against men

Williams said his statements were "not factually based."

People are way less likely to be helpful when it's hot out, according to study

Sorry, it's too hot out to help you move.

Democrats, the American Medical Association and US bishops blast the Senate health care bill

According to the Congressional Budget Office, 15 million more Americans will be without health insurance next year if the bill passes.

Dow Jones won’t talk about its reported pay gap problem

A study released by the union representing Dow Jones employees found evidence of a "significant pay gap between men and women" who had the same job title and level of experience.

Mom slams ACA repeal, shows what's at stake in a tweetstorm about son's health

This mom says that without the ACA, her son wouldn't get the medical care he desperately needs.