Venezuela: The Political Economy of Inflation and Investment Strikes

This paper adopts a Marxian class analysis to dispute the orthodox critique of high inflation in contemporary Venezuela. It draws a parallel between the 2002-03 oil industry lock-out and the capital strike in the Venezuelan foodstuffs industry today. In each case, capital has suspended production to bid up the price of basic goods and create widespread shortages.


Orthodox economists have cited worsening output and rising inflation in the aftermath of the capital strike to demand fiscal austerity and restrictive monetary policy.

This paper explores how inflation-targeting conceals the class antagonism of capital strikes and highlights the class interests that underpin monetarism. In doing so, it argues for the importance of socialising production as a viable alternative to neoliberal austerity.

* * *

In recent years, the relationship between neoliberalism and crisis has been the focus of extensive discussion. The seemingly paradoxical expansion of finance capitalism through the great convulsions of 2008/09 and the current Euro crisis has led a number of scholars to question the definition of economic crisis as a degenerative moment for orthodox practice. Brenner, Peck and Theodore (2010), and Huw Macartney (2011) have written weighty studies of “variegated neoliberalism” in North America and Western Europe as a way of documenting the restructuring of the neoliberal project through economic turbulence. In the popular press, Naomi Klein (2007) has taken this argument a step further, coining the term ‘shock doctrine’ to explain the pivotal role of catastrophe in providing a blank slate for capital accumulation to expand its scope and intensity.

For Marxist political economists, the contradictory expansion of finance capital through the collapse of financial markets from 2008 has been explained as a function of monopoly class power. John Bellamy Foster (2011) has inaugurated the “age of monopoly-finance capital”, applying Baran and Sweezy’s (1966) seminal critique of monopoly capital to explain the peculiar role of finance houses in neoliberal capitalism. Kotz (2009), Hudson (2010) and, more recently, Panitch and Gindin (2013) have similarly articulated the decisive importance of interest-bearing capital’s monopoly position to the construction and endurance of hegemonic neoliberalism. At the heart of this research agenda, as Alfredo Saad-Filho (2010) has noted, is the importance of distinguishing between the present crisis in neoliberalism (i.e. one in which finance capital remain ascendant) and a potential crisis of neoliberalism.

This paper contributes to this project, highlighting the role of disruption and abstraction in advancing the neoliberal project while simultaneously sketching the shape of successful left resistance. What distinguishes this essay from those focused on the relationship between economic crisis and neoliberalism after the 2009 world recession is the distinct political reality of the Bolivarian Republic of Venezuela. The setbacks suffered by international capital over the last decade are not, as in Western Europe and North America, the need to overcome and conceal crystallising contradictions in capital accumulation but rather the political advance of a coherent left project. In other words, Venezuela offers a rare case study in existential crises of neoliberalism and ruling class responses.

Venezuela’s political economic development under the leadership of Presidents Hugo Chávez and Nicolas Maduro has been marked by the progressive radicalisation of the government and its support base. The socialisation[1] of private industry, comprehensive bans on capital flight, expanded price controls and a move toward endogenous production and self-sufficiency in national food production (i.e. ‘food sovereignty’) have gathered pace over the last decade (Ellner 2011: 250-251). Instead of accepting the neoliberal assumption that governments must respond to threats of disinvestmrnt by guaranteeing opportunities for profitable enterprise to international finance, the Bolivarian Republic has reoriented its economy towards autarky and implemented stringent controls on private producers.[2] While capital has countered controls on production and pricing with a campaign of rolling stoppages and disinvestment, the Venezuelan state has not hesitated to expropriate production either by legally endorsing employees’ occupations of their shuttered workplaces, or by restarting production under national ownership.


The strategies capital has employed to counter challenges to its power reveal a great deal about the tactical role of crisis and reification in advancing neoliberal interests. This paper argues that neoliberal strategy in Venezuela has been aimed at reconstructing reification and commodity fetishism in the consciousness of the working class. In other words, neoliberal strategy has been targeted at presenting social relations as relations between things (i.e. money and commodities). In doing so, neoliberals have attempted to sustain the assumption that capital is a necessary component of production. In Venezuela, neoliberal analysts have focused on the relative fluctuation in the price-level and positied a peculiar economic determinism that comes with oil abundance. By treating money and commodities as having a relationships of their own, rather than simply the product of social labour, neoliberals attempt to deflect attention from ruling class mobilisations and obscure the possibility of socialising the means of production.

The remarkable nature of this case study is that it showcases neoliberals’ rearguard efforts to reassert the purchase of reification in the aftermath of sweeping left-wing reform. For long-time observers of the Bolivarian movement in Venezuela, the dynamic has become a familiar one: shortages have been created by business shutdowns and the consequent spike in CPI has been used as a pretext to dismantle the leftist reforms of the Chávez/Maduro governments. To this end, the inflationary surge produced by a general capital strike in 2002/03 was used as the justification for discrediting the nationalisation of oil rents and controls on prices and capital flight. Similarly, disinvestment and hoarding in Venezuela’s private food industry today have produced widespread shortages in basic staples. Once again, the rise in inflation indices has been used to justify neoliberal interventions, including a removal of price controls on food and the relaxation of restrictions on capital flight.

Problems with the positivist treatment of inflation are therefore particularly poignant to this discussion. A ‘crisis’ of high inflation in Venezuela is neoliberals’ primary argument for intervention in Venezuela today. What De Long (2000: 91-2) has described as “political monetarism” is the particular focus of this discussion.[3] This theory maintains that inflation is a function of increases in the money supply by holding all other variables constant, including the velocity of money. In doing so, political monetarism ignores the possibility of negative supply shocks. The practical difficulties with this theory have been realised in practice. De Long (ibid: 92) claims political monetarism “crashed and burned in the 1980s”. However, as Saad-Filho and Morais (2004) have noted, this rigidly quantitative understanding of the relationship between inflation and money supply was dominant in the 1990s throughout Latin America. It is the crux of the contemporary neoliberal assault on Venezuela’s political economy.[4]

The ruling class interests that motivate political monetarism are well-established in Marxist literature. Michael Perelman (2012) has indicted Paul Volcker, former Chairman of the U.S. Federal Reserve, for waging a class war against labour in the United States. His evocative description of “sado-monetarism” is a reminder of the hidden hand of the bourgeoisie in otherwise prosaic arguments for low inflation. In the Bolivarian Republic, political monetarism has been deployed both to conceal the negative supply shocks produced by investment strikes and to articulate a crisis to which neoliberal prescriptions can be applied.

This paper builds on the Marxian critique of monetarism, arguing that political monetarism is important to neoliberalism because it is constructed using reification and commodity fetishism. Political monetarism re-inserts capital, especially finance capital, into the production process, placing it on equal footing with labour as a component of output. By focusing solely on the stabilisation of the token that represents congealed labour-time, theorists are able to distract from the exclusive role that labour plays in producing surplus value and obscure the possibility of socialising the means of production in the face of capitalist intransigence (Mann 2013; Chari 2010). This tactic has been repeatedly used in Venezuela over the past decade. Neoliberal advocates like the IMF have casually relied on reification to discredit oil rent nationalisation and press investor claims against price and capital controls.

The unique historical conditions that have given rise to neoliberal tactics in Venezuela are anticipated in Lukácsian Marxist scholarship. A number of Marxist intellectuals have raised the obstacle to class consciousness posed by commodity fetishism. Perhaps most comprehensively, Lukács has contemplated the role commodity fetishism as “a relation between persons acquiring a reified character . . ., which through its strict – and to all appearance completely closed and rational – autonomy, conceals every trace of its fundamental essence, i.e. as a relation between human beings” (1988: 170 in Dimoulis and Milios 2004: 6). Thus, Lukács uses the concept of reification to detail how the foundational capitalist cleavage between economics and political/ social life has been constructed in the human consciousness as a passive belief in the autonomy of commodities (Chari 2010: 289). However, whereas Lukács lamented the barriers posed by capitalist influences on human consciousness, the process in Venezuela is occurring in reverse. Re-asserting the purchase of reification is the primary strategy of neoliberals to the progressive socialisation of industry in Venezuela.

This inquiry leads to another question: what shape should left resistance to neoliberalism take? The recent political economic history of Venezuela has highlighted the practical importance of the labour theory of value to developing alternatives to capitalist production. A consequence of realising that surplus value is produced by workers alone is that capital (and world money flows) are not essential to national output. Acknowledging that surplus value is embodied solely in the application of labour-power has opened the possibility that Venezuelan workers might produce a surplus for themselves and their community so long as the means of production are a subsidiary of those two groups. Consequently, Venezuela has adopted a model of endogenous production and socialisation, making redundant investors who seek to appropriate surplus value by controlling the means of production. The possibility of economic sovereignty necessarily results from a class analysis of how surplus value is generated. Venezuela’s ‘socialism in the twenty-first century’ is counterposed with neoliberal arguments against the Bolivarian movement. Although the discussion is preliminary, it points toward the practical importance of contesting private ownership over production. It is only by appreciating applied labour-power as the sole source of surplus value that the irrelevance of international capital (and by association neoliberalism) truly comes into focus.

Political monetarism: a veil for ruling-class interests?

Political monetarist interventions in Venezuela’s political economic debates are designed to roll back to the gains made by labour since the late President Hugo Chávez came to power in 1998. Rising inflation in Venezuela has been frequently cited by neoliberal economists as a sign that the country’s socialist project is in disarray. Orthodox economists hypothesise that inflation is a sign of two major problems: the first is inappropriate price controls and government subsidies for basic staples.[5] It is reasoned that the government’s attempt to control the prices of household goods and essential services has created a disincentive for private industry to continue investing in production, thus creating widespread shortages and a black market for price-controlled goods. The second major problem cited by neoliberals is that use of oil rents to fund social programs as a sign that Venezuela has succumbed to the ‘Dutch disease’ (a variant of the ‘resource curse’). This means that the state’s structural dependency on oil rents has created capacity constraints in the economy that are now showing up in wage-fuelled inflation.

In reality, these claims are motivated by ruling class interests. The International Monetary Fund (IMF) calls for reductions in public spending, including de-coupling oil revenues from social programs, because nationalising oil rents has broken the strength of ruling class opposition to the central government and increased the living standards of low and middle-income Venezuelans. Monetarists call for an elimination of price controls and food subsidies, set up as emergency measures during the 2002/03 oil capital strike, because they want to eliminate competition from the state-run food distribution system. Orthodox economists call for the restoration of independent central banking with a strong mandate for low inflation because this would make the negative supply shocks produced by capital strikes more potent. The policy remedies proposed for high inflation would drive up the price of consumer staples, increase unemployment and undermine the gains made by labour, particularly since oil was nationalised in 2002. Ultimately, it is difficult to conceive of political monetarist interventions in Venezuela as anything more than an intellectual artifice beneath which the interests of the Bolivarian Republic’s privileged elite are advanced.

Oil nationalisation and the resource curse

In the period following Venezuela’s nationalisation of oil rents, the government has been assailed by the business community and their sympathisers in the neoliberal academy. Linking oil nationalisation with high inflation is political monetarists’ chief argument for dismantling the PVDSA’s social spending program. The neoliberal model achieves this connection by assuming that poor countries endowed with mineral resources are more likely to mismanage the rents from the sale of those assets. In short, it reifies the oil deposits to produce a tragic narrative of pre-determined failure.

The ‘resource curse’ hypothesis claims that countries with abundant reserves of natural resources are paradoxically prone to suffer from afflictions associated with poverty. Economic turbulence, corruption, autocracy and a skeletal infrastructure are the likely destiny of a country lucky enough to sit above great deposits of natural wealth. Dutch disease focuses specifically on the interplay between exchange rates and natural resource rents. The sale of mineral wealth, it is reasoned, drives up the price of local currency, tipping the scales in favour of cheap imports over expensive exports. In the long run, this weakens domestic production and undermines industrial diversity. Consequently, when commodity prices decline or reserves deplete, a country that has had an oil or mining boom, is left moribund, with unanticipated deficits and high barriers to securing export income (Hammond 2011: 350-351).

The neoliberal academy has attempted to portray Venezuela’s economy as afflicted by the resource curse and Dutch disease since the Chávez government nationalised oil rents in 2002. Christopher Whalen (2007: 58-59) has put this argument succinctly:

Economically speaking, other than oil, nothing else is happening … Though Venezuela has sharply increased public sector spending in the past several years, the private economy is in dire straits as the Chávez Government repeats old mistakes. The country’s overdependence on oil, the decline in energy prices and the operational problems at PVDSA … have put Venezuela in a vice between rising internal inflation and falling external revenues.

Neoliberals have linked Venezuela’s double-digit inflation rate to the presence of the resource curse. The logic of the monetarist approach to oil rents is fully articulated in a dedicated paper on the interaction between Venezuela’s fiscal and monetary policy by IMF staff writers Mercedes Da Costa and Victor Olivo (2008). The authors argue that the fiscal dominance of oil leaves Venezuela’s central bank powerless to control inflation. They do this in four steps. First, the authors assert, “independence of the central bank from the fiscal authorities is a prerequisite for a successful implementation of any monetary regime.” Then Da Costa and Olivo argue that independence is undermined by fiscal policy that results in high and persistent deficits. The conclusion of such a process is that inflation-targeting must either be abandoned or the government will default on its debt. Third, the authors argue that financing “government consumption or unproductive investment” using oil revenues is equivalent to running regular deficits because it leads to the reduction of a natural asset (i.e. the state’s net worth). Fourth, the problem with expending oil revenues is that the government may still be running a fiscal surplus while selling off its natural wealth. The authors conclude that Venezuela exhibits the symptoms of oil’s fiscal-like dominance in the economy. The upshot of this argument is that oil rent expenditures are the equivalent of monetising the deficit and so uncontrollable inflation is an inevitable consequence (ibid: 4-7, 33).

Following a similar logic, the IMF expresses double-digit inflation in Venezuela as a function of the oil-dependent economy reaching its structural limits and over-spending its export revenues. For example, in its April 2007 World Economic Outlook, the IMF (2007a: 68) argues: “In Venezuela, efforts will be needed to rein in government spending that has grown exceptionally rapidly in recent years in response to the surge in revenues from the oil sector”. Similarly, in October 2007, the IMF used its World Economic Outlook to caution about the inflationary consequences of fiscal expenditure:

[W]ith fiscal revenues being boosted by strong growth and export performance, government spending has also been allowed to accelerate in a number of countries, providing a procyclical fiscal impulse and adding to overheating pressures. Such concerns are particularly salient … in Venezuela (IMF 2007b: 88)

Once again, in 2008, the IMF repeats its assertion that Venezuela has reached its structural limits: “Although nominal wage growth has remained under control in most countries, high inflation expectations are feeding into wage negotiations in countries such as Argentina and the República Bolivariana de Venezuela, where capacity constraints are tight” (2008). These assessments imply that Venezuela’s growth has been a consequence of resource curse and Dutch disease. First, the IMF argues that Venezuela has succumbed to a “procyclical fiscal impulse”, spending too much of its export revenues. Second, the Fund asserts Venezuela is “overheating”, has “capacity constraints” and “wage-fuelled inflation”. These arguments are intended to imply Venezuela has succumbed to Dutch disease, allowing the appreciation of oil revenues to eliminate industrial diversity and mask bottlenecks that only show up in the inflationary data.

The difficulty with the neoliberal argument is that indicators over the last decade contradict the neoliberal hypothesis. First and most importantly, export earnings have not been the sole drivers of economic growth. If Venezuela had succumbed to Dutch disease, we would expect petroleum exports to dominate the country’s growth in real GDP across the 2003 to 2008 period. Oil prices rose steeply during this period, climbing to a record high of $147.27/barrel on 11 July 2008 (Hammond 2011: 349). In fact, after real petroleum sector growth rebounded by 13.7% in 2004, the contribution of the oil sector to Venezuela’s economic growth proportionately declined. While Venezuela’s real GDP grew by 10.3% in 2005, the petroleum sector actually contracted in real terms, falling by 1.5%. Once again, in 2006 and 2007, the Bolivarian Republic’s real GDP increased by 9.9% and 8.2% but the petroleum sector saw a real annual decline of 2% and 4.2%, respectively (Weisbrot and Johnston 2012: 10). In other words, contrary to the Dutch disease hypothesis, the development of other sectors in the economy outpaced growth in the oil sector across this period.

Furthermore, contrary to Da Costa and Olivo’s (2008) assumption that oil financing is the equivalent of monetising deficits, government spending has been used to create lasting fixed investments over the last decade and private consumption has driven economic growth. Between 2004 and 2012, private consumption exceeded government expenditure every year except for the period between 2009 and 2011. After declining by 37% in 2003, gross fixed capital formation, a measure of concrete, non-financial investments in Venezuela, quickly rebounded, growing by 49.7% in 2004. In 2005, 2006 and 2007, the country again recorded real increases of 38.4%, 29.3% and 25.6% in gross fixed capital formation, respectively (Weisbrot and Johnston 2012: 10).

Crucially, the majority of this fixed investment came from the private sector. In 2004, gross fixed capital formation in the private sector grew by 62.7% against 37.6% for the public sector. By 2007, the figures were even starker: Venezuela recorded 39.9% rise in the private sector’s gross fixed capital formation against just 4.4% for the public sector (Weisbrot et al. 2009: 23). Once again, it is clear that private consumption and investment were the key drivers of economic growth across the period, not simply transfer payments from export revenues.

Finally, we turn to the neoliberal claim that capacity constraints drove inflation over this period. This is a particularly weak argument because there is quite patently no correlation between GDP growth, government spending and inflation. During the period 2003 to 2006, when Venezuela’s gross output and social spending were growing fastest, inflation was falling. As Weisbrot and Johnston (2012: 22) have noted, while Venezuela’s real GDP grew by 66.4% between February 2003 and May 2006, annual inflation fell from 38.6% to 10.4%. Moreover, social spending and public investment accelerated during this period, climbing from 31.3% of GDP in 2003 to 40% in 2006. Coupled with the above figures on capital formation, the argument that Venezuela developed structural barriers to real growth is particularly weak. Inflationary data does not point to overheating or excessive money creation in Venezuela’s post-nationalisation political economy.

The 2002 oil lock-out

Outside its political context, the political monetarist assessment of Venezuela’s economy is peculiar. The Bolivarian Republic is quite clearly not experiencing the economic plight it has been characterised as enduring. To fully appreciate the intent of the neoliberal framework, it is necessary to reflect on the political backdrop against which they have been formulated. In November 2001, the Venezuelan government, led by Hugo Chávez, proposed legislation to redistribute unused land and increase the size of royalties collected from the oil industry. Almost immediately, Fedecámaras[6], Venezuela’s peak business body, demanded withdrawal of the bills and called a national strike for 10 December 10 (Financial Times 2001). Having failed to secure adequate concessions, on 11 April 2002, the opposition led a brief coup. Military personnel sympathetic to the opposition took President Chávez into custody and declared that he had voluntarily resigned. Meanwhile, the privately-owned media networks refused to televise reports that Chávez had been detained, cutting feeds when citizens attempted to announce the abduction on live broadcasts (Klein 2003). Pedro Carmona, the leader of Fedecámaras, was installed as President until a mass protest encircled the Miraflores Presidential Palace and the Presidential Guard intervened to remove him from office (Sharma et al. 2004: 68).

After its abortive attempt at political uprising (the coup lasted 47 hours), the opposition once again turned to economic disruption to drive Hugo Chávez and the Fifth Republic Movement from power. Between December 2002 and February 2003, the owners of the oil industry suspended production and the management of PVDSA went on strike. The opposition strike was joined by a legion of small business-owners, mostly in the wealthier districts of Caracas, CTV, the trade union confederation associated with the Puntofijo bipartisan pact that ensured the smooth implementation of neoliberalism between 1989 and 1998, and large multi-national corporations, including McDonald’s and Fedex, who announced an indefinite lock-out until Hugo Chávez resigned the presidency (Gates 2012; Weisbrot 2003). The economy fell into a deep recession: per capita GDP collapsed, poverty skyrocketed and the enormous supply shocks producing by striking capitalists drove a significant spike in inflation (Weisbrot at al. 2009: 27, 29).

Although this chapter in Venezuela’s political history eventually concluded when a 2004 referendum saw a significant majority (58%) of the population vote against President Chávez’s recall, neoliberals relied on reification to revise history (Hellinger 2004). For example, Auty’s review of “rent-cycling” argued that oil price rises in the early 2000s:

eas[ed] pressure to create wealth by economic reform. Extra-parliamentary protest grew as the middle class sought to prevent the government from cutting the commercial independence of the state oil corporation in order to channel more rent into patronage. In summary … Venezuela shows how cycling high rent corrodes checks and balances as part of a negative socio-economic spiral. (2009: 39)

Auty uses the resource curse thesis to paint over class divisions, instead portraying the oil rent nationalisation as a cynical political manoeuvre and an inevitable consequence of Venezuela’s abundant oil wealth. According to the rent-cycling theory, the central fissure in Venezuelan society is between the ‘middle class’ and a cynical, rentier state. By repeating this popular neoliberal hypothesis, Auty is able to advance another falsehood, that of Venezuela’s economic decline. As discussed above, over the 21 quarters from the general capital strike to mid-2008, inflation-adjusted social spending per person more than tripled. Venezuela’s real GDP grew by 94.7%; unemployment fell from 11.3% to 7.8%; foreign public debt fell from 25.6% to 9.8% of GDP and the portion of the population living in poverty declined from 54% at the beginning of 2003 to 26% at the end of 2008 (Weisbrot et al. 2009: 3). The rent-cycling theory is thus a rearguard effort to discredit the unambiguous success of Venezuela’s heterodox economic policies. Importantly, it highlights the use of reification as a strategy for reasserting neoliberal interests in the aftermath of setback.

In a similar vein, the IMF, a vocal advocate of neoliberal austerity in Venezuela, used its World Economic Outlook shortly after the crisis had subsided in April 2004 to argue that misfortune awaited Venezuela if it failed to implement the neoliberal prescription:

Any sustained economic recovery will depend on a resolution of the political crisis in a manner that improves consumer and investor confidence. The immediate challenge of reestablishing macroeconomic stability will require addressing the government’s large borrowing requirement and removing the recently imposed … price controls (2004: 33).

In other words, the IMF echoed the political position of business leaders, who had condemned the proposed redistribution of land and nationalisation of oil rents as a threat to consumer and business confidence (Financial Times 2001). To this, the Fund added the government’s social spending, which had increased as a percentage of GDP because of the recession. Not only are these claims false indicators of economic decline, they reveal a great deal about ruling class strategy in the aftermath of a failed capital strike. The IMF systematically attempts to defend capitalist interests using an intellectual framework based on the reification of international money flows. In doing so, the IMF framework affirms the central role of international finance capital in Venezuela’s national production.

Taken together, these orthodox assessments of Venezuela’s economy demonstrate a collective effort to assert reactionary interests following a major ruling class mobilisation and defeat. These arguments are important because they reveal how the political monetarist framework reifies international money flows to conceal major class divisions in Venezuelan society and to reassert private sector control (especially international finance capital) over the national economy. The success of Venezuela in the aftermath of its oil rent nationalisation, and the implausibility of the resource curses thesis, also point to the importance of public ownership as a genuine alternative to neoliberalism.

Price controls, food sovereignty and capital strikes

The second major plank of the neoliberals’ opposition to Venezuela’s endogenous production model is a claim against price and capital controls. Opposition to price controls has played an outsized role in the neoliberal critique of Venezuela since inflation began to rise after falling between 2003 and 2006. In 2011, The Economist, one of Venezuela’s chief critics in the English language press, two years ago declared, “Eight years after Hugo Chávez’s socialist government imposed strict price controls on basic goods, Venezuela has the world’s highest inflation rate to show for the effort.” The neoliberal framework assumes inflation comes primarily from food scarcity because, it is argued, price ceilings create a disincentive to invest in food production.

As with the neoliberal critique of oil rent nationalisation, however, this approach does not stand up to scrutiny. Focusing on the apparent disincentives created by price controls camouflages private food producers’ hoarding and investment strikes, designed to undermine support for the government’s food sovereignty agenda and overcome price controls. The importance of this case study is that it emphasises how neoliberals have relied on inflationary data as a way of abstracting from the predatory role of capital in the food industry. The significant gap between measures to target consumer price indices and the political economic change required to address widespread food shortages, highlights the reification intrinsic to the neoliberal approach. It is only by extracting inflationary data from the social relations in which the purchasing power of money fluctuates that the neoliberal argument gains its intellectual coherence.

After the oil lock-out: Mercal, price controls and food sovereignty

The contemporary conflicts expressed in inflationary data find their roots in the 2002/03 oil lock-out. The 2002/03 capital strike was a bleak period for working class Venezuelans, particularly those in the barrios. Many were forced into penury as their access to basic goods and services suddenly halted. As the oil lock-out spread into a general capital strike, widespread shortages of food began to appear. Malnutrition spiked Child mortality reversed its downward trend, climbing to 23.4 deaths per 1000 children under five in 2003, before falling precipitously in each subsequent year (Weisbrot et al. 2009: 11). By the first quarter of 2003, the number of Venezuelans living in extreme poverty reached its Chávez-era peak at 30.2% of the population (compared to 8.6% of the population in 2011) (Weisbrot and Johnston 2012: 27). It quickly became clear how dependent Venezuela was on privately-controlled imports. At the time, agriculture accounted for only 6% of GDP, the lowest rate in Latin America (Domínguez 2007: 99). In large part, this was because land had simply remained idle and petroleum revenues had been used to finance food imports. A 1997 agricultural census found that 5% of landowners controlled 75% of the land while 75% of landowners occupied just 6% (Schiavoni and Camacaro 2009: 133).

To alleviate hunger, the government established Mercal, an emergency food distribution network, to sell subsidised food, particularly to working class communities (Webb-Vidal 2003). Between 2003 and 2008, Mercal entered into continuous operation and significantly increased in size. By 2008, Mercal was distributing 1.25 million tonnes of food each year in supermarkets, street sales, domicile services and public cafeterias, up from 45,662 tonnes in 2003 (Weisbrot et al. 2009: 11-12). Additionally, the government introduced lending regulations requiring commercial banks to allocate 21% of their gross portfolio to agriculture (Orhangazi 2011: 10-11) As a consequence of these measures, over the first decade of the Chávez government, agricultural production increased by 24%, including substantial expansion in corn (205%), rice (94%) and milk production (50%) (Rossett 2009: 21). By 2008, Venezuela became self-sufficient in corn, rice and pork production (Schiavoni and Camacaro 2009: 135). Finally, and perhaps most substantially, Venezuela’s average caloric intake has gone from 91% of recommended levels in 1998 to 101.6% in 2007 (Weisbrot et al. 2009: 11). In other words, the average Venezuelan went from being under-fed to exceeding their recommended calorie intake within the space of decade (and notwithstanding the crippling capital strike in 2002/03).

The government’s food sovereignty reforms occurred against the backdrop of substantial changes in world food markets. Starting in 2006, Venezuela, like most of its peers in Latin America and the rest of the Third World, faced an unprecedented spike in food imports because of intense speculation. In April 2008, the New York Times reported $130 billion new investment in commodity futures trading, with almost half of all futures contracts for corn, wheat and live cattle on New York, Chicago and Kansas City stock markets held by major Wall Street Funds (quoted in McMichael 2009: 282).[7] Between the end of 2007 and mid-2008, the global price of rice skyrocketed by 320%, the price of wheat increased by 210% and the price of corn escalated by 250% (Rossett 2009: 18). Food riots erupted across the world, including in Argentina and Haiti (McMichael 2009: 282).

In Latin America, local speculative attacks paralysed food distribution. In late 2006, U.S.-based food giant Cargill, bought a major share of the Mexican corn harvest for 1,650 pesos per ton. Instead of selling its stock, the company hoarded its supply until January, not releasing its inventory until prices had reached 3,500 pesos per ton (Rossett 2009: 16). Haiti became infamous for the ‘dirt cookie’ (salted, dried mud), the sole means of nutrition for its slum-dwelling popular classes when the price of rice doubled year-on-year between 2006 and 2007 (Magdoff 2008: 6). In Bolivia, President Evo Morales was forced to temporarily halt exports of staples, including chicken, beef, corn, rice because the private sector attempted to follow a similar route, hoarding and exporting goods to create artificial shortages (Rossett 2009: 17). In short, capital used its monopoly position to manipulate prices and drive up the cost of basic staples.[8]

Food capital’s price assault on Venezuelans has been significantly blunted by the Venezuelan government’s willingness to expropriate hoarding firms and its development of a state-run food distribution network. At the peak of the world food crisis in 2008, the government referred to its commitment to food sovereignty under the 1999 constitution, legislating to criminalise food hoarding, nationalising companies that broke the law and expanding the state distribution network.[9] In January 2008, 13,000 tonnes of hoarded food was found in two weeks of state inspections. In February, the government threatened to nationalise Polar Foods, the country’s largest food production company following allegations of hoarding (Suggett 2008). At the same time, the state oil company PDVSA established its own supplementary food distribution chain, PDVAL, to bolster the Mercal food network (Rossett 2009: 21). Shortly thereafter, the President of Fedecámaras, José Manuel González, warned the government was “toying with chaos [and] food scarcity” if it proceeded with its agenda (quoted in Suggett 2008). This tension presaged a determined campaign by the food industry to prevent Venezuela’s movement toward food sovereignty.

Between 2008 and 2013, public discourse has been punctuated by regular discoveries of colossal food hoards, followed by expropriations and expansion of the state food network. In March 2009, the Venezuelan government nationalised Cargill’s rice-processing plant after it found 18,000 tonnes of rice hoarded in its warehouses. In October 2010, the government followed its expropriation of aluminium and cardboard food packaging with a nationalisation of Owens Illinois glass manufacturers, the company that produces glass bottles (Reardon 2011). In November 2011, the government confiscated 13,000 hectares of land owned by U.K.-based Agroflora (Boothroyd 2011). In May 2012, the government announced its intention to establish Farmapatria, a network of state-run pharamacies to provide price-controlled medicines following a long capital strike in the pharmaceutical industry (Boothroyd 2012).

Moreover, scarcity moves so closely with the electoral calendar, it is difficult to argue that the disinvestment showing up in consumer price indices is not, at least in part, by political design. Ellner (2013: 68) reports, “the period of greatest shortages was the months prior to the December 2007 referendum on a proposed 69-article constitutional reform, which business perceived as threatening its vital interests, especially because it appeared to undermine the system of private property.” Over the same period, Venezuela’s consumer price index (CPI) jumped from 12.6% in 2006 to almost 20% in 2007 (Nakatani and Herrera 2008: 296).

More recently, the scarcity index rapidly climbed ahead of the October 2012 presidential elections, peaking as news of President Hugo Chávez’s flight to Cuba for cancer treatment in December 2012, and then his death in March 2013, signalled the likelihood of imminent elections (Mallett-Outtrim 2013). In the lead-up to April 2013 elections, scarcity and disinvestment skyrocketed. Between November 2012 and June 2013 (i.e. across two general elections), more than 40,000 tonnes of hoarded food was uncovered, and the inflation rate reached its highest level since the pre-Chávez era (Rosales 2013; BCV 2013).

It is critically important that heterodox economic scholars acknowledge the difficulty of distinguishing between politically-motivated disinvestment and the profit motive. Indeed, both neoliberal and leftist political observers agree on the presence of widespread disinvestment. The difference lies in vocabulary. Neoliberal scholars and journalists acknowledge the likelihood of illicit hoarding and price mark-ups but argue this a rational response to such stringent controls. Price controls, it is reasoned, make profitable enterprise unlikely and thus lead to widespread abandonment by the private food industry. What the Bolivarian government refers to as hoarding, speculation and sabotage is referred to simply as disinvestment by neoliberal analysts. Producers who hoard goods or smuggle them across the Colombian border for sale on the black market are liable for fines and even criminal prosecution in the Bolivarian Republic but to the neoclassical academy, they are simply rational actors responding to the opportunities for arbitrage offered by the isolated application of price controls. Indeed, while stridently laissez-faire publications like The Economist (2007; 2013) mock Venezuela’s President Nicolas Maduro for repeatedly accusing the private sector of sabotage, its authors freely admit that scarce, price-controlled goods can be found at much higher prices on the streets of Caracas.

However, even when we accept the premise of the neoliberal argument (i.e. that businesses are merely responding to price signals), political monetarism still rests on a faulty intellectual premise. This is because monetarists rely on the assumption that low inflation is a universally desirable goal and so acting to reduce inflation is objectively and universally preferable. In fact, the two propositions are not identical. While low inflation may be broadly attractive ceteris paribus, acting to reduce high inflation is an intensely political act. It would be patently absurd to argue that deregulating the prices of food in Venezuela is an apolitical act. And yet this is precisely what the monetarist position posits. The only difference is that it does so in two steps, first arguing for the a priori benefits of low inflation and then inferring that removing price controls are objective pre-requisites to achieve low inflation.

The reason for this logical inconsistency lies in the reality of power structures in Venezuelan class society. The same interests that stand to benefit from the political monetarist policy framework argue that it sits above the poltiical fray. Capital is uniquely capable of flexing market power to produce shortages, whether the decision-making is conscious or systemic. This is acknowledged by neoliberals who argue that regulatory changes need to be made to encourage business investment. In fact, when we inspect the power structures that belie this positivist approach, political monetarism is best explained as not so much a coherent intellectual framework for raising the general welfare as a veil beneath which ruling class interests might be advanced. Monetarism achieves its political purpose by maintaining the artificial distinction between political and economic decision-making that lies at the heart of orthodox economics. It also reifies money flows, positioning prices, and not the owners of production, as the driving force of economic change.

Thus, in the conflict over food production, the articulation between neoliberalism and reification is apparent (McMichael 2009: 284). On the one hand, neoliberals’ concentration on inflationary data points to a strategic reliance on reification. By focusing exclusively on movements in the consumer price indices, neoliberals abstract from the social relations in which production and distribution are determined. The availability of goods and currency then seem to take on a life of their own: distortions in the market produce scarcity, not a determined political campaign by capital to secure a larger share of the surplus. In short, political monetarism provides the ideal structure for asserting ruling class interests by reifying the role of money and commodities in political economic life.

In contrast, Venezuela’s move toward self-sufficiency indicates a potential alternative to investor control. Moving beyond commodity fetishism to satisfying popular needs through self-sufficient, socially-oriented production is a clear, if embryonic, substitute for neoliberal austerity. Significantly, it is only by taking control of the means of production and recognising applied labour-power as the sole source of surplus value that Venezuela has been able to make the practical and intellectual leap from neoliberal, capital-directed production to a system of socialised, autarkic production. Indeed, as McMichael (2009: 293) has concluded, the food sovereignty movement:

brings food to the political center, not simply as a relation of consumption, but also as a relation of cultural production and social reproduction. Insofar as it eschews the subordination of agriculture and food to value relations rather than human and ecological values, it offers insight into the historical roots and political resolution of the world food crisis.

Although this discussion has been brief and the outcome of this project is still unclear, the tension between nationalised production and private owners of food distribution demonstrates the centrality of contesting ownership over production to crafting an alternative to neoliberalism.


What this paper has highlighted is how the reification of commodities and money has been used by neoliberals to manufacture crisis in an attempt to undermine labour’s gains in Venezuela over the last decade. Firstly, neoliberals have asserted apparent curse or disease that accompanies oil abundance. This is an inadequate explanation designed to discredit working-class communities’ prosperity after oil rent nationalisation.

Second, while inflation and scarcity move in tandem, addressing the cause of this problem (widespread shortages) is not the same as targeting the index (inflation). Focusing solely on inflation as a measure of wellbeing is an intellectual variant of commodity fetishism. By focusing solely on the relative movements of the prevailing price-level or assuming pre-determined political economic trajectory from oil abundance, political monetarism has camouflaged the class antagonism of capital strikes and helped rebuild the case for neoliberal austerity. As the period between the oil lock-out and present day capital strikes in the food industry demonstrates, contesting private ownership over production is fundamental to successfully resisting neoliberal austerity.

[Oliver Levingston is a Phd student in political economy at the University of Sydney. This paper was presented at the conference of the Society for Heterodox Economists at the University of New South Wales in December 2013.]


Auty, R. (2009), ‘Natural resource rent-cycling outcomes in Botswana, Indonesia and Venezuela’, International Social Science Journal, 57(1), pp. 33-44.

Azzellini, D. (2009), ‘Venezuela’s Solidarity Economy: Collective Ownership, Expropriation, and Workers Self-Management’, WorkingUSA, 12(2), pp. 171-191.

Banco Central de Venezuela (BCV), Índice de precios al consumidor desaceleró en agosto, Notas de Prensa, Available: http://www.bcv.org.ve/c4/notasprensa.asp?Codigo=10809&Operacion=2&Sec=False [Accessed 21 September 2013].

Baran, P. and Sweezy, P. (1966), Monopoly Capital: An Essay on the American Economic and Social Order, New York: Monthly Review Press.

Boothroyd, R. (2012), ‘Venezuelan Government Creates National Pharmacy Network, Invests in Construction Industry’, Venezuelanalysis.com, May 3, Available: http://venezuelanalysis.com/news/6967 (Accessed 19 October 2013).

Brenner, N., Peck, J. and Theodore, N. (2010), ‘Variegated neoliberalization: geographies, modalities, pathways, Global Networks, 10(2), pp. 182–222.

Chari, A. (2010), ‘Toward a political critique of reification: Lukács, Honneth and the aims of critical theory’, Philosophy and Social Criticism, 36(5), pp. 587–606.

Da Costa, M. And Olivo, V. (2008), ‘Constraints on the Design and Implementation of Monetary Policy in Oil Economies: The Case of Venezuela’, IMF Working Paper, WP/08/142.

De Long, J. (2000), ‘The Triumph of Monetarism?’, Journal of Economic Perspectives, 14(1), pp. 83-94.

Dimoulis, D. and Milios, J. (2004),‘Commodity Fetishism vs. Capital Fetishism: Marxist Interpretations vis-à-vis Marx’s Analyses in Capital’, Historical Materialism, 12(3), pp. 3-42.

Domínguez, F. (2007), ‘Understanding Venezuela’, Soundings, 37, pp. 92-104.

Ellner, S. (2011), ‘Does the process of change in Venezuela resemble a “Permanent Revolution”?’, Dialectical Anthropology, 35(3), pp. 249-53.

Ellner, S. (2010), ‘Social and Political Diversity and the Democratic Road to Change in Venezuela’, Latin American Perspectives, 40(3), pp. 63-82.

Financial Times (2001), ‘Chavez urged to annul laws’, 23 November, p. 1

Foster, J. (2010), ‘The Age of Monopoly-Finance Capital’, Monthly Review, February 2010, 61(9), pp. 1-13.

Gates, L. (2012), ‘Interest groups in Venezuela: lessons from the failure of a ‘Model Democracy’ and the rise of a Bolivarian democracy’, Journal of Public Affairs, doi: 10.1002/pa.1410.

Hammond, J. (2011), ‘The resource curse and oil revenues in Angola and Venezuela’, Science& Society, 75(3), pp. 348-378.

Hart-Landsberg, M. (2009), ‘Learning from ALBA and the Bank of the South: Challenges and Possibilities’, Monthly Review, 61(4), pp. 1-18.

Hellinger, D. (2004), ‘Venezuela’s Revocatorio’, The Latin Americanist, 48(1), pp. 73 – 84.

Hudson, M. (2010), ‘From Marx to Goldman Sachs: The Fictions of Fictitious Capital, and the Financialization of Industry’, Critique: Journal of Socialist Theory, 38(3), pp. 419-444.

IMF (2004), ‘World Economic Outlook: Advancing structural reforms’, April 2004, Available: http://www.imf.org/external/pubs/ft/weo/2004/01/ (Accessed 27 September 2013).

IMF (2007a), ‘World Economic Outlook: Spillovers and Cycles in the Global Economy’, April 2007, Available: http://www.imf.org/external/pubs/ft/weo/2007/01/ (Accessed 28 September 2013).

IMF (2007b), ‘World Economic Outlook: Globalization and Inequality’, October 2007, Available: http://www.imf.org/external/pubs/ft/weo/2007/02/ (Accessed 28 September 2013).

IMF (2008), ‘World Economic Outlook:, October 2008, Available: http://www.imf.org/external/pubs/ft/weo/2008/01/ (Accessed 28 September 2013).

Klein, N. (2003), ‘Venezuela’s media coup’, The Nation, 3 March, p. 10.

Klein, N. (2007), The shock doctrine, London: Allen Lane.

Kotz, D. (2009), ‘The Financial and Economic Crisis of 2008: A Systemic Crisis of Neoliberal Capitalism’, Review of Radical Political Economics, 41(3), pp. 305-17.

Lebowitz, M. (2008), ‘Building twenty-first century socialism’, Canadian Dimension, September/October, 42(5), pp. 37-41.

Lifsher, M. (2003), ‘Venezuela Girds for Price Controls’, Wall Street Journal, 5 February, p. A14.

Lukács, G. (1988 [1923]), Geschichte und Klassenbewußtsein. Studien über marxistische Dialektik, Darmstadt: Luchterhandt.

Magdoff, F. (2008), ‘The World Food Crisis: Sources and Solutions’, Monthly Review, 60(1), pp. 1-15.

Mallett-Outrim, R. (2013), ‘Scarcity and Starvation? Venezuelan Food FAQs’, Venezuelanalysis.com, October 5, Available: http://venezuelanalysis.com/analysis/10071 (Accessed 9 October 2013).

Macartney, H. (2011), Variegated Capitalism: EU varieties of capitalism and international political economy, Routledge: New York.

Mann, G. (2013), ‘The monetary exception: Labour, distribution and money in capitalism’, Capital & Class, 37(2), pp. 197-216.

Marx, K. (1967), Capital: A Critique of Political Economy, vol. 3, edited by Engels., F, New York: International Publishers.

McMichael, P. (2009), ‘A food regime analysis of the ‘world food crisis’’, Agriculture and Human Values, 26, pp. 281-95.

Nakatani, P. and Herrera, R. (2008), ‘Structural changes and planning of the economy in revolutionary Venezuela’, Review of radical political economics, 40(3), pp. 292-299.

New York Times (2003), ‘Venezuela’s inflation reached 5.5% last month, a 7-year high’, 3 March, p. C7.

Lukács, G. (1988 [1923]), Geschichte und Klassenbewußtsein. Studien über marxistische Dialektik, Darmstadt: Luchterhandt.

Orhangazi, Ö (2011), ‘Contours of Alternative Policy Making in Venezuela’, Working Paper Series, Political Economy Research Institute, Number 275.

Panitch, L. and Gindin, S. (2013), The Making of Global Capitalism: The Political Economy of American Empire, Verso: London.

Patel, R. (2009), ‘What does food sovereignty look like?’, Journal of Peasant Studies, 36(3), pp. 663-73.

Perelman, M. (2012), ‘Sado-monetarism: the role of the Federal Reserve System in keeping wages low’, Monthly Review, 63(11), pp. 27-35.

Purcell, T. (2013), ‘The political economy of social production companies in Venezuela’, Latin American Perspectives, 40(3), pp. 146-168.

Raby, D. (2004), ‘The Greening of Venezuela’, Monthly Review, 56(6), pp. 49-52.

Reardon, J. (2010), ‘Venezuelan Government Intervenes in Key Food Sector Company’, Venezuelanalysis.com, 27 October, Available: http://venezuelanalysis.com/news/5741 (Accessed 20 October 2013).

Rosales, A. (2013), ‘The War on the Venezuelan Economy’, Venezuelanalysis.com, 25 June, Available: http://venezuelanalysis.com/analysis/9763 (Accessed 11 October 2013).

Rossett, P. (2009), ‘Food Sovereignty in Latin America: Confront the ‘New’ Crisis’, NACLA Report on the Americas, 42(3), pp. 16-21.

Saad-Filho, A. (2010), ‘Crisis in Neoliberalism or Crisis of Neoliberalism’ in Panitch, L., Albo, G. and Chibber, V. (eds.), Socialist Register, 47, pp. 242-259.

Saad-Filho, A. and Morais, L. (2004), ‘The Costs of Neomonetarism: The Brazilian Economy in the 1990s’ in Arestis, P. and Sawyer, M. (eds.), Neo-liberal Economic Policy: Critical Essays, Cheltenham: Edward Elgar, pp. 158-193.

Schiavoni, C. and Camacaro, W. (2009), ‘The Venezuelan Effort to Build a New Food and Agriculture System’, Monthly Review 61(3), pp. 129-141.

Sharma, S., Tracy, S. and Kumar, S. (2004), ‘Venezuela – Ripe for US Intervention?’, Race& Class, 45(4), pp. 61-74.

Spronk, S., Webber, J., Ciccariello-Maher, G., Denis, R., Ellner, S. and Fernandes S., Lebowitz, M., Motta, S. and Purcell, T. (2011), ‘The Bolivarian Process in Venezuela: A Left Forum’, Historical Materialism, 19(1), pp. 233-70.

Suggett, J. (2008), ‘Largest Venezuelan Food Producer Denies Hoarding’, Venezuelanalysis.com, February 20, Available: http://venezuelanalysis.com/news/3182 (Accessed 9 October 2013).

The Economist (2011), ‘Medieval Policies’, 20 August, p. 38.

The Economist (2013), ‘Maduro’s balancing act’, September 28, p. 33.

Webb-Vidal, A. (2003), ‘Chavez feeds the poor as economy starves: Venezuela’s food programme comes as businesses are suffocating from lack of dollars’, Financial Times, 14 May, p. 12.

Weisbrot, M. (2003), ‘A Split Screen In Strike-Torn Venezuela’, Washington Post, 12 January, p. B04.

Weisbrot, M., Ray, R. and Sandoval, L. (2009), ‘The Chávez Administration at 10 Years: The Economy and Social Indicators’, Center for Economic and Policy Research, Available: www.cepr.net/documents/publications/venezuela-2009-02.pdf (Accessed 6 October 2013).

Weisbrot M. and Johnston, J. (2012), ‘Venezuela’s Economic Recovery: Is it Sustainable?’, Center for Economic and Policy Research, Available: http://www.cepr.net/documents/publications/venezuela-2012-09.pdf (Accessed 9 October 2013).

Whalen, C. (2007), ‘Venezuela’s Oil Trap’, The International Economy, Spring, 21(2), pp. 58-61.

Wittman, H. (2009), ‘Reworking the metabolic rift: Via Campesina, agrarian citizenship, and food sovereignty’, Journal of Peasant Studies, 36(4), pp. 805–26.


[1] Socialisation is used here to encompass the three types of transfer from private to public ownership that have occurred in Venezuela to date: (i) ownership by the state (i.e. nationalisation), (ii) legal recognition of workers’ control in enterprisas socialistas (socialist enterprises) and (iii) communal control (i.e. ownership by workers and their neighbourhood or communal council) through the establishment of empresas de producción social (social production companies). For a more complete overview of Venezuela’s non-capitalist production, see Azzellini (2009), Spronk et al. (2011) and Purcell (2013).

[2] For a full overview of the distinct stages of radicalisation under the Chávez/Maduro governments, see Ellner (2011).

[3] De Long (2000: 85) refers to four schools of monetarism: First Monetarism, Old Chicago Monetarism, High Monetarism and Political Monetarism. This discussion is bracketed to discussion of political monetarism and the terms ‘monetarism’ and ‘political monetarism’ are used interchangeably. Nevertheless, exploring the political economy of different variants of monetarism is a sound basis for future research.

[4] A note on vocabulary: this paper argues neoliberalism is being advanced by asserting reification and commodity fetishism. Political monetarism is an intellectual framework for producing reification and commodity fetishism. It is not equivalent to neoliberalism but rather a tool for neoliberals to advance their interests.

[5] Venezuela’s fixed exchange rate and associated capital controls are also the focuse of neoliberal criticism. Discussion of exchange and capital controls is beyond the scope of this paper. For a full overview, see Weisbrot and Johnston (2012).

[6] Fedecámaras’ full name in Spanish: Federación de Cámaras y Asociaciones de Comercio y Producción de Venezuela (Venezuelan Federation of Chambers and Associations of Commerce and Production).

[7] In fact, the largesse of finance capital’s venture into commodity futures markets may have been substantially higher. Rossett (2009: 20) quotes the New York Times estimate of new investment in commodity futures market as high as $300 billion in 2008 (New York Times quoted in Rossett 2009: 20).

[8] Against this backdrop, McMichael (2009: 284) effectively summarised the purpose of neoliberalism’s ‘world farm’: “comibining the corporate food regime’s (subsidised) price assault on small farmers (predominantly women) with a (monopolised) price assault on vulnerable consumers of wage-foods.”

[9] The meaning of food sovereignty is widely contemplated by Marxist scholars and peasant activists. For the detail of this discussion, see Wittman (2009) and Patel (2009).