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The conventional Western narrative of the current economic mess of Venezuela is that "Socialism" has failed. According to this narrative, the whole socialist experiment of nationalisation and public social spending out of the oil revenues was a failure from the beginning, and the collapse of oil prices since 2014 sealed Venezuela's fate.
Adherents to this narrative say that the downward spiral will continue until the "Chavistas" (followers of Hugo Chávez or Chavism) are removed from power, either through elections or through a coup.
The truth is, however, far removed.
To understand Venezuela's current chaos, one needs to examine its past, in particular the role of oil and the United States in its economic and political history.
OIL CURSE! Venezuela has the world's largest oil reserves, with an estimated reserve of 301 billion barrels as of 2017, accounting for 18 per cent of the total proven global reserves. The United States has long been the biggest market for Venezuelan crude oil - close to 35 per cent of total export went to the US in 2017.
Venezuela's tragedy lies in its failure to use oil revenue to diversify the economy. Oil sales account for 98 per cent of export earnings and as much as 50 per cent of gross domestic product (GDP). Overdependence on the US for exports of its oil both economically and politically has not been in the interest of Venezuela. It links Venezuela's economic fortunes to the ups and downs of the US economy, while politically it constrains Venezuela's policy space, especially in relation to oil production and use.
Since its discovery in the 1920s, oil has taken Venezuela not only on a boom-and-bust ride, but also made it a target for the US meddling. Although annual production exploded during the 1920s, from just over a million barrels to 137 million, making Venezuela second only to the United States in total output by 1929, the vast majority of its people lived in extreme poverty. By the 1930s, just three foreign companies-Royal Dutch Shell, Gulf, and Standard Oil-controlled 98 per cent of the Venezuelan oil, and Venezuela's oil resources benefited the rich - local elites connected to the global finance capital, in particular US multinational corporations.
CORRUPTING POLITICS: From time to time Venezuela's elites tried to capture larger shares of oil rents from the foreign oil companies. The Hydrocarbons Law of 1943 was the first step in that direction, requiring foreign companies to give half of their oil profits to the state. Within five years, the government's income had increased six-fold.
In 1958, after a succession of military dictatorships, Venezuela elected its first democratic government. That year, however, Venezuela's three major political parties signed the Punto Fijo pact, which guaranteed that state jobs and, notably, oil rents would be shared among the three parties in proportion to voting results, thus beginning the process of corrupting the political system.
In 1960, the year Venezuela joined the OPEC (Organisation of the Petroleum Exporting Countries) as a founding member, it established its first state oil company and increased oil companies' income tax to 65 per cent of profits. During the OPEC oil embargo in the early 1970s, oil prices quadrupled and made Venezuela the country with the highest per-capita income in Latin America. Over two years, the windfall added $10 billion to state coffers, creating opportunities for rampant graft and mismanagement. Analysts estimate that as much as $100 billion was embezzled between 1972 and 1997 alone.
OIL NATIONALISATION AND LIBERALISATION: In 1976, amid the oil boom, President Carlos Andres Perez nationalised the oil industry, creating state-owned Petroleos de Venezuela, S.A. (PDVSA) to oversee all exploring, producing, refining, and exporting of oil. Obviously, this was not to the liking of the US as US oil companies which had made large investments in Venezuela's oil industry. Oil nationalisation was salt on a wound for the US coming on the heels of OPEC's muscles flexing.
To appease the US, Perez allowed PDVSA to partner with foreign oil companies as long as it held 60 per cent equity in joint ventures. Critically, PDVSA was structured to run as a business with minimal government regulation. Nevertheless, the US was looking for opportunities to retake Venezuela's oil fields.
The opportunity came with the plummeting of oil prices in the 1980s when Venezuela's economy contracted severely and inflation soared. Along with the rest of the Latin American countries, Venezuela's public debt ballooned as US interest rates steeply rose when President Reagan decided to fight inflation with tight monetary policy.
Perez, re-elected in 1989, launched a fiscal austerity and oil liberalisation package as part of a financial bailout by the International Monetary Fund (IMF). Perez's severe austerity measures and cuts in social spending triggered mass protests and street riots.
CHÁVEZ'S BOLIVARIAN REVOLUTION: Chávez was elected president in 1998 on a socialist platform, pledging to use Venezuela's vast oil wealth to reduce poverty and inequality. He named his expanded social spending programme "Bolivarian missions", after South America's independence hero.
From 2004 -- after Chávez got control over the national oil industry -- until 2014, real income per person grew by more than 2.0 per cent annually. This is a huge improvement compared to the horrendous long-term decline in the 20 years prior to Chávez, when GDP (gross domestic product) per capita declined at an average annual rate of 1.2 per cent under the IMF's neo-liberal structural adjustment program. Looking at the cash income alone, poverty fell by 49 per cent and extreme poverty by 63 per cent during 2004-2014.
This does not include the increased access to health care and education that the poor have gained since the government got control over the oil industry. From 1999 to 2007, the number of primary care physicians in the public sector increased more than 12 times, from 1,628 to 19,571, providing health care to millions of poor Venezuelans who previously did not have access to health care. Access to education also greatly expanded. Some 3.9 million school children-about half of the population between 3 and 17 years of age-received lunches in school, and the number of people over 60 years old receiving public pensions tripled.
Measured unemployment dropped sharply, from 19.7 per cent in the first quarter of 2003 to 8.25 per cent in the first quarter of 2008, whereas the Chávez administration inherited an unemployment rate of 15.6 per cent.
Inequality also declined substantially as measured by the Gini coefficient-from 48.7 in 1998 to 42 in 2007.
But such extraordinary achievements are not reported by major western media.
US ENGINEERED COUP: Immediately after taking office, Chávez launched reforms of Venezuela's oil policy, reversing the previous decade's process of "oil liberalisation". He also launched measures to re-establish OPEC's supremacy in managing the international oil market, resulting in a quick rise of crude oil price from an average of $8.43 for a barrel when Chávez came into office.
Chávez's oil policy reform also re-established a predominant role for the Ministry of Energy and Mining in the design and implementation of oil policy. This challenged vested interests in PDVSA, grown accustomed to taking the lead in defining Venezuela'soil policy. PDVSA became a state within state.
Backed by the country's key business federations, the PDVSA leadership called a strike on April 11, 2002. The protest leaders made their objective clear - "getting rid of Chávez." Pedro Carmona, the head of Venezuela's largest business association, was declared the leader of a transitional government. This served as the platform for the attempted coup.
But the coup failed in just two days as Venezuelans came to streets en masse against the plotters in support of the Bolivarian Missions.
The oil strike (joined by business owners) had a devastating impact, with GDP dropping by 24 per cent from the third quarter of 2002 to the first quarter of 2003. This is comparable to the US economy's worst years during the 1930s Great Depression.
The New York Times (December 03, 2004) reported that the CIA was fully aware of the coup plan. Declassified intelligence documents show that Pedro Carmona had visited the Bush White House several times and US agencies provided training, institution building, and other support to individuals and organisations actively involved in the coup.
The current coup attempt is a re-run of the failed 2002 coup d'état. Almost instantaneous recognition of the self-proclaimed President by the US, and comments by Vice-President Mike Pence, the Secretary of the State Mike Pompeo as well as the national security advisor, John Bolton make it abundantly clear that the latest coup attempt is US engineered.
US SANCTIONS: Having failed to topple Chávez, the US launched economic warfare with sanctions. President Barack Obama continued the Bush era strategies of isolating the Chávez Government and funding opposition political organisations. The Obama administration also refused to accept a Venezuelan ambassador to Washington. Obama imposed new sanctions against Venezuela on March 09, 2015, with executive order 13692, declaring the country a threat to national security, while masked his action with gestures to Cuba. In March 2016 Obama once again declared that Venezuela posed an "unusual and extraordinary threat to the national security" of the United States, and imposed more economic sanctions. The Obama administration also pressured US financial institutions not to do business with Venezuela.
Donald Trump, applying his doctrine of "maximum pressure", simply intensified on-going sanctions, outrageously threatened military invasion and discussed a coup.
According to the UN rapporteur, Mr de Zayas, US sanctions are killing citizens. They are illegal and could amount to "crimes against humanity" under international law.
THE CURRENT PREDICAMENT: These sanctions are certainly timed to exploit Venezuela's weak moment when it has to deal with falling oil prices since 2014. Since August 2017, the Trump administration has prohibited US banks from providing new financing to the Venezuelan government. This was followed by Financial Crimes Enforcement Network warning financial institutions that "all Venezuelan government agencies and bodies…appear vulnerable to public corruption and money laundering," and recommending that some transactions originating from Venezuela be flagged as potentially criminal. Many financial institutions then closed Venezuelan accounts, concerned about the risk of being accused of participating in money laundering.
With lost access to credit, according to Venezuelan economist Francisco Rodríguez, this "handcuffed Venezuela's oil industry", the sector most crucial to its economy. Trump's measures blocked the country from obtaining financial resources that could have been devoted to investment or maintenance. Previously the Venezuelan government raised production by signing joint venture agreements with foreign partners, Trump's sanctions "effectively put an end to this."
Dishonestly, now the Venezuelan government is accused of not investing in oil industry and thereby blamed for the current predicament.
Mark Weisbrot, an economist at the Washington-based Center for Economic and Policy Research, claims that "The Trump administration has made an open and firm commitment to regime change through the destruction of an already debilitated Venezuelan economy."
According to him, the only way a resource-rich country can come to this stage is if it is cut off from the international financial system. Venezuela could easily sell or even collateralise some of its resources to obtain the necessary dollars. The $7.7 billion in gold held in Central Bank reserves could be quickly collateralised for a loan. But the US Treasury department used its clout to make sure that banks who wanted to finance a swap, such as JPMorgan Chase and Bank of America, did not do so.
NOTHING TO DO WITH SOCIALISM: No one can deny that there were some serious policy errors as any government - whether socialist or not - would have. But one thing is crystal clear, the current predicament of Venezuela has nothing to do with the Bolivarian Missions or distributive policies funded from oil revenues.
Anis Chowdhury, Adjunct Professor at Western Sydney University and the University of New South Wales (Australia), held senior United Nations positions in New York and Bangkok.