Economic Theory

‘Chavismo’ is not just an economic failure – it’s a social failure too

The Left’s enthusiasm for Venezuela has waned significantly of late. As the country is gripped by galloping inflationmassive shortages of food and other essentials, and a steep decline in public revenue compounded by plummeting oil prices, the case that the late Hugo Chávez’ model of ‘21stcentury socialism’ can bring prosperity to the many looks increasingly implausible. On top of that, state repression and violence have become too widespread to ignore. Yet, despite growing signs of impending catastrophe, a favourite claim of chavista apologists remains that the regime’s 15-year rule has ushered in unprecedented social progress for the poorest Venezuelans. Only last year, just when the country witnessed nationwide opposition protests that were brutally suppressed by the socialist government and loyalist gangs, Owen Jones touted Chávez’ “key strategy [of using] oil riches to fund social programmes.” And even among less partisan international observers, the dominant narrative is still that, despite severe economic mismanagement, the Bolivarian administration has brought healthcare, education and better nutrition to the most vulnerable.

Well, it turns out even that was a mirage, as a ground-breaking report from Caracas-based think tank CEDICE shows. Using a wealth of data – which is ever more difficult to obtain due to the government’s obscene manipulation and firm grip on the media – the authors dispel the myth of progress under the socialist administration. Instead, they show that the government’s social spending has failed to improve the health of Venezuelans, their ability to obtain an adequate education, or even their nutrition. The report’s verdict is scathing: Far from pursuing its stated goals, the “goal of spending and social policy was to create a clientelist infrastructure for electoral gain, making the ruling party politically invincible.” No wonder, then, that objective indicators show little improvement.

Consider healthcare. The conventional wisdom holds that the Chávez government’s programme of “missions” to Venezuela’s most deprived neighbourhoods, staffed in large part by Cuban medical personnel under a quaint oil-for-healthcare deal between the two regimes, has made important inroads to improve the health of Venezuelans. But conventional measures of health, such as those used by the UN to monitor achievement of its Millennium Development Goals, give quite a different picture. Infant mortality, after declining sharply in the first part of Chávez’ term, has climbed back up since 2006, reaching 15.2 deaths per 1,000 live births in 2010. Neonatal mortality, i.e. death within 30 days of birth, has seen the same U-turn and is now on track to reach pre-Chávez levels. The picture for maternal mortality is even bleaker, with a steady increase since 1998 which has put the rate (of maternal deaths per 100,000 live births) at 69.7 – a level not seen since the mid-1970s.

Morbidity, the relative incidence of disease, has also performed very differently from popular perception. Taking the example of malaria, the CEDICE report shows an upward trend in prevalence since 1999, from 90.8 cases per 100,000 to 151.9 in 2007 – when, the authors point out, the authorities stopped publishing annual epidemiological statistics. So, instead of the remarkable declines in mortality and morbidity which we might expect given the prevailing narrative, the reality is one of deteriorating health indicators. And this, one should stress, despite consistent improvements in he decades before the socialist government came to power, and in the context of an oil bonanza that allowed a massive expansion of the healthcare budget.

Let’s turn to education. Again, the story we hear from sympathisers and independent observers alike is that chavista policies have improved access to higher education, opening up the country’s universities to hundreds of thousands of poor Venezuelans. Yet, the massive influx of new students into Venezuela’s public university system in a short span of time means that most new entrants lack adequate training to successfully complete their studies. And sharp budget cuts as the country’s economic crisis deepens have left universities – which are rarely granted more than 30 per cent of what they ask for – ill-prepared to cope with the masses of new students. In other words, socialist policies may have improved Venezuelans’ access to higher education, but with little chance to meaningfully benefit from it.

How about nutrition, arguably (to some) the most fundamental, most basic accomplishment of the Bolivarian regime? Through the state-owned Mercal network of supermarkets, the government claims to offer citizens essential foods at subsidised prices, supplanting markets and private exchange. Oil, rice, sugar, butter and chicken are some of the products sold in this way. And the state has drastically expanded its role in this sphere, catering (as of 2013) to 12.5 million Venezuelans, in a country with an adult population of 20 million. Here again, a look at outcomes rather than inputs is sobering: Obesity has increased in the course of chavista rule, with only modest improvements in Venezuelans’ average caloric intake. What’s more, food subsidies and currency appreciation in the oil boom years have critically deepened the country’s trade deficit and rendered domestic food producers and exporters uncompetitive.

How could this happen? How is it possible that the country with the world’s largest proven oil reserves could witness such profound deterioration in key human progress indicators, even as high oil prices allowed an enormous expansion of the public budget? Incompetence and inefficiency have played a role, of course. As has been proven time and time again, attempts to manage centrally such complex processes as the distribution of foodstuffs, the allocation of university places and the treatment of myriad medical conditions are bound to fail. Similarly, replacing market forces with government fiat will inevitably lead to waste and injustice, with long-standing consequences for the many lacking political connections.

However, there is more at play in Venezuela, according to the CEDICE authors. The socialist regime may have set out to improve the health, educational and nutritional outcomes of Venezuelans when it came to power in 1998. But those good intentions quickly took second place to darker political ambitions, namely to establish a comprehensive infrastructure of state dominance of economic and social life, to make the population dependent on the whim of the ruling class. This went hand-in-hand with a comprehensive hollowing out of the existing safety net, which had succeeded in gradually tackling the plight of poor Venezuelans since the 1950s. Thus, the private sector has been driven to the margins of food provision, while a majority of citizens are forced to endure queues and shortages on a daily basis. A well-developed network of universities, many of them enjoying independence charters, has been starved of funds, which have been diverted to the government’s own pet projects where political indoctrination is the order of the day. And healthcare resources have been devoted to the government’s ideologically tainted “missions,” leaving hospitals with a shortage of money, medical supplies, pharmaceuticals, and staff. According to the Venezuelan Medical Federation, 57 per cent of trained physicians have left the country, fleeing economic hardship and insecurity.

There can be little question that, only a few years from now, the experiment of 21st century socialism will be regarded as an utter economic failure, leading to the impoverishment, suffering and displacement of millions of people. Like other attempts at central planning, the chavistamodel will be discredited, with even former proponents conceding that it may have worked “in theory, but not in practice.” However, defenders of the free economy also need to point out the social catastrophe that has accompanied economic decline, with a steady depletion of the social and human capital that had been built in the decades prior to 1998. Thanks to the commendable work of CEDICE on the ground, we now have definitive proof. But the rest of the world must know about it. Otherwise the socialist regime will be given credit it clearly doesn’t deserve.

Diego Zuluaga Laguna is the IEA’s International Outreach Officer. This article first appeared on CapX.

Policy Analyst at the Cato Institute's Center for Monetary and Financial Alternatives

Diego was educated at McGill University and Keble College, Oxford, from which he holds degrees in economics and finance. His policy interests are mainly in consumer finance and banking, capital markets regulation, and multi-sided markets. However, he has written on a range of economic issues including the taxation of capital income, the regulation of online platforms and the reform of electricity markets after Brexit. Diego’s articles have featured in UK and foreign outlets such as Newsweek, City AM, CapX and L’Opinion. He is also a frequent speaker on broadcast media and at public events, as well as a lecturer at the University of Buckingham.

3 thoughts on “‘Chavismo’ is not just an economic failure – it’s a social failure too”

  1. Posted 27/05/2015 at 19:51 | Permalink

    Thank you.

  2. Posted 27/05/2015 at 20:24 | Permalink

    Por favor, hace tiempo que sabemos esto. La verdad no existe en Venezuela y la “oposición” esta encarcelada.

  3. Posted 17/06/2015 at 03:30 | Permalink

    The outdated, ridiculous Stalinist-Leninist model that the Chavistas adhere to blindly (because Papa Fidel said to) is failing again as it always has for the same reasons. You need a market economy and a thriving middle class if you want a good standard of living. The Chinese, the Vietnamese, and even the Indians are proof of this. And the Chavistas are proof of the opposite, guaranteed failure by repeating what has already failed while siphoning off billions of $$$ into their Swiss bank accounts while people stand in line for bread.

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