Tony Boza is a Venezuelan economist, member of the National Assembly (for the PSUV) and well-known television personality. In Part I of this interview, Boza contrasts the nature of the Venezuelan economy when Chávez came to power and the changes he drove by channeling oil profits to the needs of the working class. He also examines the impact of the US blockade, giving some concrete figures. In Part II, Boza examines current economic policies in Venezuela.
Can you help us understand the state of the economy when President Hugo Chávez came to power in 1998?
Over the past 100 years, 98% of the revenue that has come into the country has been generated from the sale of oil. This was mediated by the Venezuelan state, which holds ownership of the country’s subsoil. From a class perspective, this means that the Venezuelan bourgeoisie was (and is) particularly parasitic because its main business was (and still is) hogging the country’s oil profits.
There is a very interesting document from 1939-40. It’s called the Fox Report, an investigation conducted by US researchers and sponsored by the US Congress. The Venezuelan government has approved this research initiative.
The results are surprising considering the origin of the report! In fact, it shows a very true picture of Venezuela’s economic formation. The bottom line is that the Venezuelan bourgeoisie has found a way to appropriate the country’s rent through two mechanisms: taking the rent at source and taking the rent at its destiny.
What does that mean? The Venezuelan bourgeoisie partnered with non-Venezuelan capital in the oil business. So they collected part of the rent “directly”. This is what we call recording the original rent. Then there is another mechanism: the formation of a consensus favoring the “stabilization” of the economy through government subsidies of the US dollar [either setting the exchange rate of the US currency or flooding the exchange market with US dollars].
This offers a very favorable situation for the commercial bourgeoisie, which at the end of the cycle – on the commercial side of the equation – captures that part of the rent that has been distributed through wages to the general population. That’s what we call collecting the rent of destiny.
The authors of the Fox report failed to understand the potential implications of their research. They were technocrats who – unknowingly! — discovered how Venezuela’s economy was doubly stacked against the country’s working class.
Here in Venezuela, however, the implications for the establishment have been crystal clear. That meant the report was filed and would gather dust until 2006, when Venezuela’s central bank [BCV] republished it. Why was it dangerous? Because it shows that the Venezuelan bourgeoisie is parasitic and unable to sustain itself as a class without the oil rent.
Overall, this is the economic arrangement Chávez entered into in 1998.
Chávez in front of a map of the Orinoco Oil Belt. (MPP Petroleo)
How did Chávez go about changing the existing economic order?
Chávez encountered an unjust economic structure, but he also found a good base to work with: the Venezuelan people. For decades, the Venezuelan Pueblo had promoted an emancipatory project. What Chávez did was channel the people’s urge for liberation. He channeled them towards a transformational process.
Functionalistically, Chávez created a new consensus that would break with the old political and economic model. He made the “aluvión popular” [popular flood] into a transformative force.
However, it is important to say that Chávez did not come to power with a socialist economic plan. In fact, he ran for President with a discourse inspired by Anthony Gidden’s ‘Third Way’. However, the class struggle, as he expressed it in the early years of his presidency, led him to question the feasibility of combining capitalism and social justice.
Around this time, Chávez also discovered that the main problem with Venezuela’s unequal distribution was oil rent. At that time he began to renationalize the oil industry, which had been partially privatized and decentralized in the 1990s. Neoliberal technocrats had pushed the privatization with the rationale [state oil company] “PDVSA was not viable.” Mind you, we are talking about one of the largest oil companies in the world and the one that has the largest oil reserves in the world!
That’s exactly what Chávez faced in 1998: a piecemeal, private-interest venture. Gradually, Chávez managed to regain control of the oil industry. He did this through the Oil Law [2001]; the expulsion of the so-called “PDVSA meritocracy” that served the interests of capital; and the reshuffle of OPEC. In short, Chávez took back control of a formerly bankrupt company and placed it at the service of the nation.
Chávez played a key role in reactivating OPEC despite having countries like South Arabia, a close ally of the United States, at home. In fact, the US is OPEC’s main enemy, so this was no small feat! Gradually, OPEC was able to raise oil prices, but it should be noted that during the first seven years of Chávez’s presidency, barrels of oil were well below $50.
Of course, taking over the oil industry and creating sovereign control mechanisms wasn’t easy. In fact, it was a dangerous venture, followed by a coup d’état, several attempted coups, sabotage, etc.
I want to emphasize that because there is a discourse that goes like this: Chávez benefited from an oil boom, he was able to ride the wave. Now things are completely different.
Let’s break this down: Chávez hasn’t ridden any “wave” or found a world tailored for him! Chávez himself has carefully created a new situation with a focus on satisfying the needs of the working class through oil profits. How Venezuela reached the Millennium Development Goals ahead of time!
Without Chávez’s sovereign oil policy, social missions like Barrio Adentro would not have been possible. (Venezuelan analysis)
Fast forward a few years, what kind of context did President Maduro fall into?
I stressed that it wasn’t easy for Chávez and we can say the same for President Maduro. While it’s true that the former came to a country with a robust oil industry, it’s also true that the aggression Chávez endured didn’t stop or diminish with Maduro.
Shortly after Chávez’s death, rating agencies began downgrading the country’s ratings. This negatively impacted the country’s ability to issue debt and increased the cost of servicing debt in general. This situation was followed by the economic war that caused high inflation and other problems. I am always happy to remind you that the Cato Institute, which is no friend of the left, has stated that hyperinflationary processes are always triggered by warlike situations.
All this was followed by the blockade.
The impact of the US blockade in figures: GDP. (Venezuelan analysis)
What are the effects of the blockade expressed in numbers?
The Venezuelan government commissioned a team of experts who calculated that about 40,000 people died over a period of about two years as a result of the sanctions. In addition, funds have been frozen in Portugal’s Novo Banco and other financial institutions, and the Bank of England is holding our gold hostage.
Economist Pasqualina Curcio has put the damage to the oil industry at nearly $200 billion, including lost sales, the confiscation of Citgo, along with the “loss” of Monómeros and a binational company in Argentina.
Add to this the boycott of PDVSA bonds affecting the Venezuelan working class who used to buy bonds to stabilize their savings and you get the picture.
The blockade is having a disastrous impact on the lives of working-class Venezuelans and tying the government’s hands. As others have said, the sanctions are a deadly tool of economic warfare. Restricting a civilian population’s access to medicines and food in order to overthrow their democratically elected government is, in my view, a crime against humanity.
We’ll talk about current economic policy in a moment, but first a question about Chávez’s legacy. Many wonder why, in a country where the majority are struggling enormously, there is not the social uprising that the US would like. Any thoughts on this?
Chávez not only left behind abstract ideas and a future project. He also left behind an organized and politically aware Pueblo. If this were not the case, we would be in the midst of a social uprising, as happened in 1989.
The political awareness of the Venezuelan pueblo is high, and that has a lot to do with Chávez. People today are able to understand the threat that the US poses. They have not lost heart over Chávez’s legacy. Not recognizing this would be foolish.
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