Sorry John, it is socialism and it has failed

John McDonnell recently stated that Chavista Venezuela and communist Cuba, were “never socialism.” In this denial he is contradicting himself, having declared as recently as 2014 that Chavista Venezuela was “socialism in action.”  McDonnell has long praised Chavez, saying that he “lit a spark that really started a firebrand…Venezuela and the Bolivarian Revolution became an item on the agenda for all socialists…here you had the contrast between capitalism in crisis and socialism in action”.

As a Venezuelan who has lived the bulk of his life in Venezuela before coming to Britain, the nature of the system in Venezuela and whether it is worthy of support from foreign politicians like Mr McDonnell are important questions.  International support from sympathetic politicians and the states some of them control is one of the reasons that the regime has been able to survive for as long as it has.

Have we in Venezuela experienced socialism and has it worked? Let’s look at some of the individual policies we have experienced.  Firstly, nationalisation.  It seems clear that nationalisation is a socialist policy.  It was defined as the “common ownership of the means of production, distribution and exchange” in the original clause four of the Labour Party constitution and further defined as ‘public ownership’ in Labour’s 1945 election manifesto. Nationalisation was one of Chavez’s most significant economic policies, and he proceeded to nationalise not only the ‘commanding heights’ of the Venezuelan economy, but many other assets too, often refusing to compensate the owners of the property that he confiscated.

Let me provide a few examples:

The steel industry was nationalised. The biggest steel company, Sidor, produced 4.3 million tonnes of steel a year before it was expropriated by Chavez in 2008 and handed over to an allied member of the military. By 2014 its production was less than 700,000 tonnes per annum. In March 2019 Sidor closed its doors for the last time and ceased production permanently.  13,000 employees lost their jobs.

The Venezuelan assets of the four major private cement companies were expropriated by Chavez, and the assets were integrated into one state company, the Socialist Cement Corporation, which controlled 90% of cement production.  By 2015 production had fallen by 42% and today cement is barely available in Venezuela, with resulting mass unemployment in the construction sector. Utilities have also been nationalised and now there are constant power cuts (of over 10 hours a day in my home city), a lack of running water to most dwellings and extraordinarily poor telecommunications service.

Agricultural land was also expropriated under a Land Law introduced by Chavez in 2001. Seized estates were turned over to co-operatives and regime supporters without the technical know-how, management skills and capital necessary to run them. By 2010, the government had seized 20% of all agricultural land.  Consequently the remaining private farmers do not invest in their farms for fear of expropriation and food production has collapsed.

Secondly, price controls, a common feature of socialist economies. Any products made by the remaining private companies are subject to price controls, which usually means they operate at a loss. The 2014 ‘Law on Organic Prices’ created the National Superintendency for the Defence of Socioeconomic Rights (Sundde), responsible for the “consolidation of the Socialist economic order.” With inflation at around 1.3 million%, prices have to change constantly if a business wants to survive. But under the law an inspector can immediately occupy or shutdown an establishment if he accuses it of non-compliance. In 2017 alone, there were 9,341 inspections which resulted in 3 outright expropriations, 12 shutdowns, 10 occupations, 186 confiscations, and 1,189 cases of state-encouraged looting.

The combination of nationalisation and price controls have led to a collapse in domestic production, which the regime sought to compensate for by increasing imports, which more than doubled in per capita terms between 2000 and 2012. It financed this with over a decade of unsustainable borrowing. Between 2002 and 2016 Venezuela increased its debt burden by a factor of 6. Venezuela’s foreign debt now equals more than 5 years’ worth of exports, the worst ratio of any country. Now the regime can no longer finance imports, which explains the widespread hunger and malnutrition. Excessive borrowing is not an inherent feature of socialism, but it does seem to follow from the phantom of abundant resources and to be a by-product when socialist economies are no longer able to sustain themselves.

Fourthly, state-directed investment. Chavez established large state investment banks and funds, notably BANDES and FONDEN, through which he channelled huge resources.  Such organisations are commonly put in place by socialist governments, for example the National Enterprise Board set up by the Labour government in 1975 to extend state ownership of industry. By 2012 FONDEN accounted for a third of all investment in Venezuela and half of public investment, having taken in some $100 billion of Venezuela’s oil revenue over the previous seven years. What happened to all the money is unclear.  Many FONDEN projects never started or were half-completed.

Fifthly, centralisation of power in the hands of the ruling socialist party, a feature of many but not all socialist countries.  Chavez put the media and judiciary under state control, getting rid of media outlets and judges that he did not like and packing the supreme court with his cronies. He took control of the once independent electoral commission and financed his party’s election campaigns from public funds.

Mr. McDonnell’s line has been that Chavez was a great socialist, but Venezuela “took a wrong turn when Chávez went and I think unfortunately since then, I don’t think they have been following the socialist policies that Chávez developed. And as a result of that they’re experiencing problems.”

The socialist policies were indeed introduced by Chavez and these caused Venezuela’s economic collapse.  His hand-picked successor Maduro has not changed any of these policies but faithfully continued them.

Finally, and turning to a qualifiedly political aspect, socialist ideology has played a fundamental role in setting political goals and interpreting concrete historical events. Most importantly, to justify the actions of the regime and its costs.

Today, when the revolution results in repression, misery, oppression and crime, socialist ideology is used to justify the outrages of the regime: The people responsible for the political and humanitarian catastrophe – began by Chavez and completed by his followers – turn to socialist ideology to justify the chaos and entrench themselves in the decision to pay any cost to maintain their power.

Venezuelans today immensely regret the mistake they made believing Chavez’s promises of a perfect future under socialism – consider all those people who fall under the spell of an advertisement promising magical results; they end up regretting it.

Chavista policies and socialist ideology have been an unmitigated disaster for my country and I would strongly advise against any attempt to introduce them here.