Revolutionise or Compromise? What Venezuela’s Maduro Could Be Doing (And What Is He Actually Doing)

Venezuela has been in a state of political crisis since the right-wing opposition coalition, the MUD took control of the National Assembly (AN) in early 2016. Socialist President Nicolas Maduro is now presiding over a sharply divided government, while a deep economic crisis has wreaked havoc on Venezuelan society. In response, Maduro has adopted a defensive, obstructionist stance aimed at mitigating MUD efforts to exert legislative power, and maintain control of critical arms of the Venezuelan state apparatus. However, there are at least two other alternatives open to Maduro for addressing the political crisis. These include a re-radicalisation of the revolution begun under his predecessor Hugo Chavez, or compromise with the MUD to resolve the country’s most pressing issues. The only other roads for Venezuela are indefinite political stalemate, or yet another right-wing coup. So what’s the best path for Maduro?

Well, I’ll let you decide.

A Brief Note 

As Venezuelanalysis.com founder Greg Wilpert once argued, Venezuela is facing a “double confrontation” – a kind of perfect storm of intertwined economic and political crises. In the past, I’ve tried to explain the economic dimension of this double confrontation. However, the raison d’etre of this piece is to discuss the political dimension. Therefore, throughout this piece I don’t take into account the very real possibility of an economic recovery in the near future.

I’m also very well aware that I’m about to totally ignore the agency of players other than Maduro in Venezuela’s political landscape, ranging from the MUD to the Bolivarian grassroots. Undoubtedly, I’ll be criticised for focusing my critique on Maduro, and brushing over the MUD’s obvious efforts to destabilise Venezuela at almost every turn. Rest assured, I have plenty of far more abrasive critiques reserved for the MUD; but an in depth exploration of these is simply beyond the scope of this piece, and perhaps a topic for another day. Moreover, these possible avenues of inquiry listed above would distract us from the point I hope to make here: that Maduro isn’t the victim of history, but rather, has clear options for mitigating the current political crisis.

I hope to show that although Venezuela is facing a dire political situation, any future failure of Chavismo can never be shrugged off as an mere historic inevitability. Nobody can say the left in Venezuela is totally powerless. Nor can we say that Maduro was left with no choice thanks to the cunning and overwhelming power of Empire, and domestic reactionary forces. Maybe I’m excessively optimistic, but again, I’ll let you be the judge of that.

Option 1: Maduro Should Deepen the Revolution

For most of us on the left, there’s only one thing we’d really like to see from Maduro: a deepening of the Bolivarian revolution. Without dedicating too much time to starry-eyed leftist tropes, I’d summarise that reinvigorating the revolution would (among other things) involve turning over state enterprises to worker control and devolving greater power to the communal councils and their national bodies. As president, Maduro’s role should ideally be to facilitate and defend the emergence of the communal state, which should eventually render the capitalist state apparatus superfluous. The economy should be brought under the democratic control of the workers through a process of nationalisations and the enforced transition to full worker control. The ultimate aim should be for neither the capitalist class or state bureaucracy to violate the sovereignty of the democratically organised workplace. Meanwhile, communities should be empowered through their own democratic organising. This was the dream of the Bolivarian process, and Maduro should put these ideals at the front and centre of public policy.

In the late 2000s, huge progress was made on these fronts, with the commune movement flourishing, and a supportive government willing to protect and dedicate resources to a wide range of community projects. The reality today is much different, though this isn’t to say the commune movement has ground to a halt; in fact, the opposite is true. Despite this, right now the government really doesn’t have the ability to beef up its support of the communes. Despite this, right now the government is choosing not to strengthen the communes in any significant or structural way. 

Meanwhile, the conversion of state enterprises to worker cooperatives hasn’t accelerated in recent years. The only major company to be collectivised in years was Kimberly Clark – a private firm that sought to fire its roughly 1000 workers at a Venezuelan plant. The government’s decision to allow workers to take over the factory was a major achievement for the worker control movement, but shouldn’t be interpreted as part of a broader effort by the Maduro administration to create a worker controlled economy. In fact, workers at the state owned Diana Industries were arguing the exact opposite case in August 2013. Just a few months after Maduro came to power, his government tried to impose a new manager on Diana, despite the enterprise supposedly being worker run. The government went as far as even freezing the bank accounts of workers who protested against the government’s apparent attempt to usurp the rights of workers to democratically appoint their own leaders. In the end, Maduro agreed to a compromise with workers, and appointed a former military officer who vowed to continue to honour worker control.

Of course, similar disputes between workers and the government took place under Chavez as well, the last of which was a similar attempt to impose managers on workers at steel manufacturer Sidor. Nonetheless, it’s clear that issues of worker control and communal organising simply haven’t been key priorities of the Maduro administration, which (rightly or wrongly) since late 2014 has primarily focused its efforts on avoiding financial default, while at the same time trying to counter efforts by the opposition to exert legislative power. Meanwhile, before late 2014, the government’s main objective was defending the revolution from the MUD’s repeated efforts to instigate political violence and instability. Throughout both these periods, Maduro’s initiatives to deepen the revolution have been short lived. Case in point: does anyone even remember the government of the streets?  

None of this is to suggest Maduro is the sole actor of any political agency here. A socialist revolution is more than just a decree from a president, and requires a holistic transformation of the state, involving the mobilisation of popular forces, and the battle against reactionaries both inside and outside the state apparatus. But it’s clear the president has de-prioritised efforts to deepen revolution, in favour of a defensive posture. We can debate the reasons; maybe a great plan is in the works and Maduro is biding his time, maybe the boli-bourgeoisie has grown detached and complacent, maybe the government is simply overwhelmed with headwinds, maybe there’s some combination of all three. Whatever the reason, it’s always possible this stagnation will change in the future, but for now government priorities are evident: socialist revolution just isn’t Maduro’s focus right now. It’s worth emphasising this isn’t merely my personal opinion: it’s the opinion of the vast majority of Venezuelans, and the polls prove it beyond a doubt. Maduro’s approval ratings are among the lowest in the region at around 22 percent, yet a whopping 79 percent support socialist policies like a planned economy and the broad provision of social services. In other words, Venezuelans don’t think they have too much socialism – in fact, the opposite may well be true. 

Option 2: Maduro Should Compromise with the MUD 

If Maduro is unable to deepen the revolution, the most obvious policy alternative is to compromise with the MUD controlled AN. 

This case was recently made by economist Mark Weisbrot.

“I think it’s important to understand that dialogue is really the only solution. You have a divided government. You have—the executive is controlled by the Chavistas, and the National Assembly is the opposition. And so, they have to reach some compromise,” he told Democracy Now on October 28. 

Negotiations should focus on stabilising the economy. In my opinion, monetary policy is the most pressing area to focus on. Indeed, at the time of writing, the BsF had just undergone yet another lurch downward, proving the currency is still far from stable. Recent Vatican mediated talks with the MUD had begun to address one of the opposition’s few concrete political demands, the release of so-called political prisoners. Goodwill gestures on the side of the government were a positive step forward, even for those of us who are apprehensive about the idea of releasing suspects in cases of serious violent crimes. Nonetheless, Maduro clearly had some hope reserved for the talks, as evidenced by state media enthusiasm. Unfortunately, at the time of writing the MUD had announced it had frozen talks, after accusing government negotiators of failing to respond to its demands. Undoubtedly, the MUD’s apparent decision to ditch talks (at least temporarily) is yet another setback for anyone hoping for concrete political action in Venezuela, though perhaps talks will resume in the future. Of course, for any future negotiations to be successful, neither side has to like each other, or even agree on the long term trajectory of the country. The point of compromise should exclusively be to ease the immediate suffering of Venezuelans struggling with the economic crisis, while at the same time guaranteeing institutional stability.

No compromise will ever be perfect, but the argument in favour of negotiation is bolstered by the fact the new, divided government has failed to make any deep reforms (either to the left or right) since the MUD took over the AN at the start of 2016. All major pieces of legislation passed by the AN have been stifled by the Supreme Court. All the while, after almost a year in power, the MUD has barely formed a coherent economic policy, let alone devote itself to proposing meaningful solutions to other issues it has long accused Chavismo of neglecting: crime and corruption being perhaps the most permanent. Likewise, as I have argued in the past, there’s a good argument to be made that Maduro himself has failed to address these issues in an effective manner. A prime example of this emerged in in mid October, when Maduro managed to pass his 2017 budget without the approval of the AN. The president achieved this by appealing to the Supreme Court, which had already ruled the AN “void” after MUD legislators swore in three members suspected of winning their seats with the aid of some electoral “irregularities”. If the MUD had abided by the Supreme Court’s original ruling in January ordering those three members to remain suspended, then the AN would have retained full legislative power, and Maduro wouldn’t have been able to pass his budget. But again, the MUD was totally outmanoeuvred. So what did Maduro do with his power? He passed a budget worth BsF8.5 trillion, despite the fact the previous year’s budget was only a mere BsF1.55 trillion. If we convert those figures to dollars, that means the 2017 budget is somewhere between three and four times the size of 2016’s. [fn](To be precise, 3.4 times larger based on the highest official exchange rates at the times of announcement. For the 2016 budget, BsF1.55 trillion at the government’s strongest rate at the time of BsF6.3=US$1 was $247 billion, while 2017’s budget of BsF8.5 trillion is worth US$850 billion at the current controlled rate of BsF10=US$1. At the black market rates, the 2017 budget is actually 3.8 times larger than 2016’s. This is based on a black market rate of BsF814=US$1 which persisted throughout much of late 2016, making the value of the budget at the time of announcement around US$1.9 billion. Comparatively, on the day of the announcement of the 2017 budget, DolarToday had the black market rate sitting at BsF1167=US$1, which would mean it was worth just under US$7.3 billion.)[/fn]

This should raise eyebrows, because the government’s income hasn’t quite tripled over the past year. Actually, the government’s revenue is barely a fraction of what it was 12 months ago, and foreign reserves are at their lowest levels in over a decade. Maduro’s explanation is that the budget will somehow be funded primarily through tax revenue – an interesting proposal in a country where most ordinary people pay little or no income tax. Part of the picture can be explained by a massive fall in imports. At the start of the year, the government vowed to slash imports from US$37 billion down to US$15-20 billion. In the first nine months of 2016, imports of everything from food to spare parts may have fallen as low as a third of what they were three years ago. This has probably helped government coffers to some extent, as one awkward by-product of Venezuela’s Byzantine exchange controls is massive de facto state subsidies of imports. 

Returning to the budget, it’s important to remember this annual ritual doesn’t even determine the huge chunk of state expenditure, made through discretionary spending typically approved by the AN or the president.

This is far from the only example of a recent economic policy from Maduro that doesn’t seem to take reality into consideration. Take his latest wage increase, which was announced on October 27, and would boost the minimum salary by 40 percent. Between that announcement being made and the increase coming into effect on November 1, the BsF lost a third of its value. Likewise, during October the central bank (BCV) increased the money supply by 4 percent, presumably in anticipation of the wage increases. This probably wasn’t helped by the fact that a month earlier, Maduro slashed the BCV’s reserve requirement ratio from 21.5 percent to 16.5 percent for agricultural investments. Put simply, the lower this ratio goes, the more money banks can lend. To summarise, in a two month period the government did the following:

1. Increased wages

2. Printed money waaaaay beyond GDP growth 

3. Allowed banks to go on a lending spree 

Remember: all this happened during a year when Venezuela is widely expected to see GDP contraction. It’s at this point though that the government will argue the inflationary crisis is the result of an “economic war”. Assuming this is true (which of course, it almost certainly is to some extent), that doesn’t change one time tested, basic rule of economics: if you increase the money supply without increasing the size of the economy, then the value of the currency goes down. Let me put it this way: growing money supply + shrinking economy = more inflation. 

So if Maduro is fighting an economic war against inflation, why did he go ahead pull every lever known to humanity to increase inflation, then act totally surprised when inflation increased?

By the end of the November, the bolivar reached the historic low of BsF4000=US$1, rendering the highest denomination note, the BsF100, worth around 2 cents. By this point, that wage increase was well and truly meaningless. If this was a war, then Maduro just carpet bombed himself.

The story doesn’t end there though, with Maduro making a surprise announcement that the BsF100 note would be yanked from circulation over a 72 hour period in early December, and replaced with a coin. This note represented an estimated 50 percent of all hard currency in circulation. Venezuelans initially were given an additional 10 days to change their notes at the BCV, though this was suddenly reduced to five days on December 15. While the government has announced the snap swap was a success, it’s not hard to find Venezuelans complaining of the short time window. At the very least though, in the short term the black market value of the bolivar has seen a rare rally, and was trading at BsF2506=US$1 by the time the 72 hour period ended.  

Unfortunately, simply invalidating half of all money in circulation isn’t something Maduro can afford to do on a regular basis, meaning an alternative solution is needed to his current policy of simply printing money and lifting wages. Many government supporters will no doubt argue that the wage increases are essential to keep workers’ heads above water, but a wage increase doesn’t mean much if the increase is almost immediately swallowed by inflation. It’s like a dog chasing its tail, and something needs to be done to escape the cycle of inflation. 

Moving on, I have no explanation for why the decisions of September, November and December were made; nor can I say for sure whether any form of compromise with the MUD could have produced better outcomes.

In fact, it’s worth noting much of the western media from Foreign Policy to the Wall Street Journal have already dismissed any attempt at negotiation between Maduro and the MUD as a waste of time. I’m confident many on the left hold similar sentiments, and would view any compromise with the MUD as a deal with the Devil. They no doubt have a point. Through the AN, the MUD has already sought to deepen the misery of the Venezuelan people by trying to privatise public housing, and undo Chavez-era land redistribution policies. The former proposal should send shivers down the spine of anyone who remembers how Thatcher’s privatisation of public housing guaranteed generations of Britons to come will never be able to afford their own homes. The impacts of the latter proposal would have been even worse, resulting in the forced evictions of thousands of impoverished small scale farmers from their plots, just so Venezuela’s super rich would have a little extra land for country clubs and weekend horse rides.

It’d be a disaster for Maduro to reach any compromise that would fulfil the MUD’s dream of returning Venezuela to its roots as a society of champagne for the lucky few, and cardboard roofs for the masses.

However, if the revolution can’t be deepened, then some kind of political stability could pave the way for economic stability. 

Option 3: Maduro Should Maintain the Current Political Stalemate

Between waiting for the great leap forward or  compromising with the MUD there’s a third option: nothing. The AN continues passing legislation that’ll be cut down by the Supreme Court, while Maduro devotes his time to passing laws with limited meaning. For the PSUV, the benefits of this are obvious: the MUD will never be able to impose its neoliberal agenda, and the party can basically retain power. Most of the ministries and state enterprises remain effectively controlled by Chavistas and their allies. 

The downsides of this option are also self evident: neither side has the space to try to resolve Venezuela’s economic and social problems, and both sides of the political divide are likely to suffer huge losses in support in the long term. However, the stalemate will have a particularly severe impact on Maduro and the PSUV. For now, the stalemate can be maintained through Chavismo’s effective control of the Supreme Court, and the MUD’s inability to prioritise rational self-preservation over emotion and simply remove the three barred legislators from the AN. Indeed, most MUD legislators don’t even have the stamina or inclination to show up to work on a regular basis, let alone try to fight back against Maduro’s obstructionism.

Wait, What is Maduro Obstructing? 

As an aside, it’s worth noting that Maduro isn’t obstructing serious social, political or economic reform. As previously stated, very little in this vein has been proposed by the MUD. Some examples of AN action or MUD initiatives that has been blocked, ruled unconstitutional, postponed or otherwise obstructed by Maduro or the Supreme Court include:

 1. An broad amnesty bill that would have released prisoners convicted of violence linked to political events like the 2002 coup, and 2014 unrest.

2. An AN investigation into allegations US$11 billion has pretty much disappeared from the coffers of state oil firm PDVSA. 

3. One of the key premises of the MUD’s impeachment attempt, which was the claim that Maduro is actually a Colombian, and not fit to hold office. For anyone scratching their heads over this one, just think back to the US birther movement of yesteryear that supposed Barack Obama was a Kenyan national. Thankfully though, Maduro hasn’t faced an inquiry into what he was doing at the time of the Benghazi attack.

4. AN efforts to overthrow the Supreme Court.

5. A bill that would have forced Maduro to automatically accept any international aid deals.

6. Another bill that would have privatised public housing.

7. Finally, of course, the recall referendum. 

This is far from an exhaustive list, but it’s a good cross section illustrating what the AN has at least tried to do since the start of 2016. Only once piece of attempted legislation even seemed related to the immediate economic crisis. All of these initiatives have ultimately failed so far, though the current political impasse can’t last forever. Eventually, Maduro will have to face new elections. This problem was temporarily resolved in mid October, when the CNE announced the postponing of regional elections slated for December. No explanation was offered, and the CNE didn’t even bother to give a solid date for the new elections. Unsurprisingly, supporters of the right-wing point to this as evidence Maduro is becoming increasingly authoritarian. As I’ve argued myself, hyperbole labelling Maduro a “dictator” is hardly helpful or accurate, to say nothing of the shriller voices that seemingly dismiss any and all left political discourse on Venezuela as morally equivalent to child prostitution.

While brushing sideshow alley and clowns aside, Venezuela is undoubtedly facing a serious political crisis – and it could get worse. Assuming all factors remain the same (eg: the economy and political climate), then Maduro (or any future PSUV president) will be in a tight spot when his term ends in 2019. The options on the table will be to either accept the very real possibility of a MUD candidate winning the presidency, or resorting to more of the same obstructionist tactics we’ve seen over the past year. Perhaps the CNE will uncover a reason to postpone elections indefinitely. Maybe the Supreme Court will find a way to bar the MUD candidate from taking office. Whatever the justification, it’ll inevitably be quite a change of pace for a country once praised for having one of the most transparent and inclusive democracies in the world. 

Option 4: The Wildcard 

Lastly, any discussion of Venezuela’s political situation would be remiss to neglect mentioning the very real possibility of an attempted coup. This fact is often downplayed by supporters of the opposition, who argue Maduro has become the boy who cried wolf – that is, the boy who claims to have uncovered more than a dozen coup attempts since 2013. Yet these critics tend to forget the twist at the end of that old fable: the wolf eventually did show up. For a decade, Chavez was safe from coups as he presided over a fairly stable economy, with solid PSUV control of the government, and the firm support of the military. None of those things can be said about Venezuela today. Chavez himself was saved from a coup in 2002 by a massive public uprising, and the loyalty of the military. It’s unclear whether Maduro could muster the same support in such a situation. I’m not arguing he can’t, I’m just pointing out there’s a very big question mark here. One fact that is irrefutable is that the longer the current stalemate continues, the more likely it is that factions of the MUD will increasingly view a coup as a political option. In fact, we’ve already started to see some not–so–subtle signs of this. Nonetheless, the military itself is a very different beast today compared to 2002. Under Chavez, the military was totally reorganised, and is today widely considered overwhelmingly loyal to the memory of Chavez. A betrayal of Maduro is unthinkable – but hey, this is Venezuela, where the unthinkable happens everyday. 

So to summarise, Maduro has four options: a deepening of the revolution, political compromise, stalemate or face a possible coup. If we had to guess which path Maduro is currently taking, it’d have to be the stalemate option, with signs of efforts at compromise. This strategy has succeeded in frustrating MUD attempts to exert power through the AN, though it’ll be impossible to maintain beyond 2019 without degrading Venezuela’s representative democracy. However, Maduro isn’t inevitability consigned to this path. He could change tack and deepen the revolution, or try to reach a serious compromise with the MUD. Whichever path he chooses, we must remember it wasn’t inevitable.