Get Red Pepper's email newsletter. Enter your email address to receive our latest articles, updates and news.
It’s a point of honour for the Venezuelan government that despite the sharp plunge in oil prices and acute shortages of goods, president Nicolás Maduro has ruled out austerity measures. In a recent TV interview conducted by former vice president José Vicente Rangel, central bank president Nelson Merentes explained why, when he asked: ‘Do you remember what happened on 27 February 1989?’ On that date massive nationwide disturbances broke out after the government of Carlos Andrés Pérez announced sharp price hikes and negotiations with the IMF, setting the stage for the 1992 military uprising led by Hugo Chávez. The memory of 27 February and the decision of the formerly left-leaning Pérez to come to terms with powerful economic groups as a way out of pressing economic difficulties undoubtedly weigh on Maduro’s response to the current situation.
Since assuming the presidency after Hugo Chávez’s death in March 2013, Maduro has faced intense economic and political problems. In the first place, he inherited a greatly depreciated bolívar, the local currency, which began to lose value in late 2012, when Chávez was undoubtedly suffering immensely from the cancer that killed him but immediate action was required. Any attempt by Maduro to devalue the official exchange rate later, once he assumed the presidency, would have run the risk of setting off an inflationary spiral.
Additionally, throughout Maduro’s two years as president, opposition forces have engaged in numerous disruptive and sometimes violent protests with dozens of fatalities, including ten security force officers. They have been abetted by an international media that minimises the gravity of their actions, and the US government, which has imposed sanctions on Venezuelan officials for alleged violation of human rights.
In the government’s latest economic policy announcement on 10 February, Maduro took a middle ground between regulated prices that are completely out of sync with the market, or even production costs, and prices pegged to market conditions. On the one hand, in recognition of economic reality, the government legalised and regulated the open market for foreign currency, transactions that had previously constituted a black market. On the other hand, in a deviation from market economics, Maduro retained the exchange rate at 6.3 bolivars to the dollar for the import of basic commodities – 27 times that of the open market.
The ever-widening disparity between official and unofficial exchange rates has generated acute problems of contraband, hoarding, price speculation and money laundering. The government sets artificially low prices not only on foreign currencies, but also basic commodities, a practice that contributes to the problem of a black market for scarce goods. The most blatant example of artificial prices is petrol, which is the cheapest in the world. The policy of subsidised prices undermines the viability of state companies that are forced to sell below cost.
The recent legalisation of the foreign currency open market is designed to check speculation. The main service that quoted the price of the dollar on the black market was the vocally anti-Chavista online ‘Dollar Today’ operating out of Miami, thus indicating that the bolívar’s rapid depreciation may have been at least partly politically motivated. A second motive behind the new measure is the promotion of exports by allowing enterprises to repatriate profits legally at the open market rate.
The government has also sought to avoid extremes in its enforcement of legislation prohibiting hoarding, contraband and price speculation. On the one hand, through the Just Price Superintendence (SUNDDE), it has imposed fines, confiscated merchandise and occupied hundreds of commercial establishments, including large ones. In recent months it took over eight warehouses of Herrera C A, exclusive distributors of the products of Kellogg’s, Nestle, General Mills, Procter and Gamble and Pfizer, and detained leading executives of the oligopolistic pharmacy Farmatodo.
Large companies such as Herrera C A that engage in hoarding have more to lose than smaller ones, and thus political motives most likely enter into play. Their hoarding practices and probable complicity in the black market and contraband lend credibility to the claim that powerful groups are engaged in an ‘economic war’ against the government.
On the other hand, the government has accepted the insistence of the nation’s chamber of commerce, Fedecamaras, that it should proceed according to established legal channels. It has ruled out a fast-track procedure and refrained from publicising judicial proceedings against accused businesspeople.
Maduro has insisted that the political conditions are not suitable for the implementation of drastic economic measures, which an intransigent and aggressive opposition could exploit. In addition, he told José Vicente Rangel that the issue of petrol prices ‘is always a delicate one with regard to the sensibilities of Venezuelans’. He added that given the existence of ‘mafia speculators in Venezuela a decision like this may exacerbate the problem’ and thus the government needs to wait for the right moment to act.
Leftist hardliners ignore the importance of the market and thus write off the black market as the creation of speculators that could be eliminated by efficient government policing. At the opposite extreme, some pro-Chavista economists call for pegging the official exchange rate close to the market rate. The plan, while logical in abstract, ignores the detrimental social effects. The elimination of artificially low prices (which are made possible by an overvalued currency for the import of basic products) would disproportionately hit the poorest sectors of the population.
Getting the problem of scarcities under control is an urgent political imperative. According to the respected polling firm Hinterlaces, the nation’s pressing economic problems and specifically shortages are now the principal source of concern for eight out of ten Venezuelans. The pro-opposition pollsters Datanálisis report that 51 per cent of government supporters consider the situation in the country ‘negative.’ Hinterlaces president Oscar Schemel maintains that the main challenge to the Chavistas does not come from the opposition, which lacks a viable programme for the nation, but rather undecided voters and the likelihood of a ‘punishment vote’ in future elections.
Elections for the national assembly are slated for the end of the year. Just as opposition standard-bearer Henrique Capriles called the previous 2013 municipal elections a ‘plebiscite,’ opposition leaders now announce that a triumph in the upcoming elections will pave the way for regime change and that the appalling scarcity of goods will guarantee such an outcome. This strategy is ironic: political scientists who questioned Chávez’s democratic credentials accused him of establishing what they pejoratively call a ‘plebiscitary democracy’, in which all attention is focused on the nation’s head of state, rather than those running for office.
The government has denounced the radical opposition’s plans to parlay agitation on the long and slow-moving lines outside stores into violent disruptions leading to regime change. Early this year, federal district head Ernesto Villegas warned Chavistas of provocations, saying: ‘When you are in a line and see an infiltrator calling on people to loot, respond with the symbol of peace.’ The danger of disruptions of this type comes from an opposition that for more than a decade has kept open the possibility of the non-democratic road to power. In February Maduro presented alleged evidence of a coup plot for which the mayor of the greater Caracas area, Antonio Ledezma, is currently in jail awaiting trial. The case has further polarised the nation, with the opposition vowing to include Ledezma and other jailed leaders in the list of candidates for the national assembly.
Venezuela finds itself in uncharted political waters after 16 years of Chavista government. The challenges generated by shortages, and the knotty issue of the role of the market, hold implications for all governments committed to socialism. Cuba is currently grappling with similar problems to do with the black market and corruption.
Maduro’s recent measures were a step in the right direction in that he recognised that market conditions must enter into the equation, even while the government cannot renounce its strong interventionist role, which includes the regulation of exchange rates and prices of basic commodities. At the same time he announced social initiatives and made clear that the decline in oil prices cannot be a prelude for austerity measures that affect the least privileged most.
Nevertheless, until the government reduces the colossal disparity between official prices for goods and foreign currency and their value on the open market, contraband and corruption will be virtually inevitable, a problem exacerbated by unscrupulous and politically motivated powerful members of the private sector. Subsidised prices for both currency and merchandise may be perfectly legitimate correctives to neoliberalism, but the Chavista government needs to avoid extremes by staking out a middle ground between production costs and market prices.
Maduro’s strategy is to gain breathing space in the context of extensive discontent and well-organised insurgent tactics. He has thus pushed for a ‘peace dialogue’ to achieve stability, which the opposition has rejected. He also prioritises political objectives out of fear of further destabilisation if the opposition wins the national assembly elections. In light of these political and social considerations a middle ground between radical devaluation, on the one hand, and highly subsidised prices for basic commodities and currency, on the other, represents the most viable formula at this critical time.
Steve Ellner has taught at Venezuela’s Universidad de Oriente since 1977. This article is published in association with Alborada
The police spend little of their time making arrests, and most crimes are not solved, writes Alex Vitale – their real purpose is social control
Many important things happened on conference floor, reports Alex Nunns – but you wouldn’t know it from reading the newspapers
Radhika Desai says Capital by Karl Marx is still an essential read on the 150th anniversary of its publication
The Spanish state is seizing ballot papers and raiding meetings, write Ignasi Bernat and David Whyte – but it is being met with united resistance
The crunch executive meeting ahead of Labour conference agreed some welcome changes, writes Michael Calderbank, but there is still much further to go
Dipesh Pandya speaks to documentary film-maker Sanjay Kak, who for 30 years has been working outside the mainstream to tell a story rooted in the struggles of those excluded by India’s militarism and its narrative of neoliberal growth
Jeremy Gilbert on how radical Labour politics can be inspired by the utopianism of the counterculture
Disasters have unequal impacts – it's the poor and marginalised who suffer most. David Harvey writes on Hurricane Harvey
#MeToo is necessary – but I’m sick of having to prove my humanity
Women are expected to reveal personal trauma to be taken seriously, writes Eleanor Penny
Universal credit isn’t about saving money – it’s about disciplining unemployed people
The scheme has cost a fortune and done nothing but cause suffering. So why does it exist at all? Tom Walker digs into universal credit’s origins in Tory ideology
Meet the digital feminists
We're building new online tools to create a new feminist community and tackle sexism wherever we find it, writes Franziska Grobke
The Marikana women’s fight for justice, five years on
Marienna Pope-Weidemann meets Sikhala Sonke, a grassroots social justice group led by the women of Marikana
Forget ‘Columbus Day’ – this is the Day of Indigenous Resistance
By Leyli Horna, Marcela Terán and Sebastián Ordonez for Wretched of the Earth
Uber and the corporate capture of e-petitions
Steve Andrews looks at a profit-making petition platform's questionable relationship with the cab company
You might be a centrist if…
What does 'centrist' mean? Tom Walker identifies the key markers to help you spot centrism in the wild
Black Journalism Fund Open Editorial Meeting in Leeds
Friday 13th October, 5pm to 7pm, meeting inside the Laidlaw Library, Leeds University
This leadership contest can transform Scottish Labour
Martyn Cook argues that with a new left-wing leader the Scottish Labour Party can make a comeback
Review: No Is Not Enough
Samir Dathi reviews No Is Not Enough: Defeating the New Shock Politics, by Naomi Klein
Building Corbyn’s Labour from the ground up: How ‘the left’ won in Hackney South
Heather Mendick has gone from phone-banker at Corbyn for Leader to Hackney Momentum organiser to secretary of her local party. Here, she shares her top tips on transforming Labour from the bottom up
Five things to know about the independence movement in Catalonia
James O'Nions looks at the underlying dynamics of the Catalan independence movement
‘This building will be a library!’ From referendum to general strike in Catalonia
Ignasi Bernat and David Whyte report from the Catalan general strike, as the movements prepare to build a new republic
Chlorine chickens are just the start: Liam Fox’s Brexit trade free-for-all
A hard-right free marketer is now in charge of our trade policy. We urgently need to develop an alternative vision, writes Nick Dearden
There is no ‘cult of Corbyn’ – this is a movement preparing for power
The pundits still don’t understand that Labour’s new energy is about ‘we’ not ‘me’, writes Hilary Wainwright
Debt relief for the hurricane-hit islands is the least we should do
As the devastation from recent hurricanes in the Caribbean becomes clearer, the calls for debt relief for affected countries grow stronger, writes Tim Jones
‘Your credit score is not sufficient to enter this location’: the risks of the ‘smart city’
Jathan Sadowski explains techno-political trends of exclusion and enforcement in our cities, and how to overcome this new type of digital oppression
Why I’m standing with pregnant women and resisting NHS passport checks
Dr Joanna Dobbin says the government is making migrant women afraid to seek healthcare, increasing their chances of complications or even death
‘Committees in Defence of the Referendum’: update from Catalonia
Ignasi Bernat and David Whyte on developments as the Catalan people resist the Spanish state's crackdown on their independence referendum
The rights and safety of LGBTQ+ people are not guaranteed – we must continue to fight for them
Kennedy Walker looks at the growth in hate attacks at a time when the Tory government is being propped up by homophobes
Naomi Klein: the Corbyn movement is part of a global phenomenon
What radical writer Naomi Klein said in her guest speech to Labour Party conference
Waiting for the future to begin: refugees’ everyday lives in Greece
Solidarity volunteer Karolina Partyga on what she has learned from refugees in Thessaloniki
Don’t let Uber take you for a ride
Uber is no friend of passengers or workers, writes Lewis Norton – the firm has put riders at risk and exploited its drivers
Acid Corbynism’s next steps: building a socialist dance culture
Matt Phull and Will Stronge share more thoughts about the postcapitalist potential of the Acid Corbynist project
Flooding the cradle of civilisation: A 12,000 year old town in Kurdistan battles for survival
It’s one of the oldest continually inhabited places on earth, but a new dam has put Hasankeyf under threat, write Eliza Egret and Tom Anderson
New model activism: Putting Labour in office and the people in power
Hilary Wainwright examines how the ‘new politics’ needs to be about both winning electoral power and building transformative power
What is ‘free movement plus’?
A new report proposes an approach that can push back against the tide of anti-immigrant sentiment. Luke Cooper explains
The World Transformed: Red Pepper’s pick of the festival
Red Pepper is proud to be part of organising The World Transformed, in Brighton from 23-26 September. Here are our highlights from the programme
Working class theatre: Save Our Steel takes the stage
A new play inspired by Port Talbot’s ‘Save Our Steel’ campaign asks questions about the working class leaders of today. Adam Johannes talks to co-director Rhiannon White about the project, the people and the politics behind it
The dawn of commons politics
As supporters of the new 'commons politics' win office in a variety of European cities, Stacco Troncoso and Ann Marie Utratel chart where this movement came from – and where it may be going