In the lead up to Venezuela’s presidential election earlier this year, the picture painted in most private media was that of a country falling apart—a corrupt regime drunk on oil money that was attempting to hold onto power after more than a decade of gross mismanagement of the country’s economy and public institutions. The young, energetic opposition candidate was riding a wave of enthusiasm among the tired masses that desired a change from the past and were looking for new leadership to move their country forward.
Of course, the electoral outcome proved that to be false, but if one has paid attention to the international media in recent years, there is constant talk of crime, food shortages, electrical blackouts, and of a long list of failed policies that have supposedly led to a stagnant economy and a country on the brink of collapse. Without providing any context, the impression given is that of a socialist clown clinging to power through populist policies and fiery rhetoric, and a country that is suffering the consequences.
Needless to say, little context is offered on the supposed “new” leaders of the opposition either, whose top three candidates (Henrique Capriles Radonski, Maria Corina Machado, Leopoldo Lopez Mendoza) are all children of the old elite. Their families own three of the country's largest business conglomerates (Grupo Capriles, Grupo Zuloaga, and Grupo Mendoza, respectively), whose ultimate goal is to enact the neoliberal economic policies that serve their interests, despite the continuous denials of their candidates.
But a brief look at the statistics offers a very different story about Venezuela. While there are certain elements of truth to the media campaign—indeed there have been persistent blackouts, some food shortages, and rising crime—understanding the context of the changes that the country has experienced under the Chavez government over the last decade tells a very distinct story. It is a story that helps explain why the majority of the Venezuelan people keep re-electing a government that, according to the private media, is driving the country into the ground.
Poverty and Household Consumption
There are two important indices that are essential starting points for understanding the larger context of what has happened in Venezuela in recent years. These are poverty, and household consumption. As can be seen in the charts below, both of these statistics have seen important changes over the last decade. Poverty has fallen significantly:
With extreme poverty also falling from 23 percent in 1999 to 8 percent in 2011, according to Venezuela’s National Institute of Statistics (INE).
But perhaps more important is the remarkable increase in household consumption:
The sharp increase in consumption began in 2003 once the Chavez government had survived the 2002 coup attempt and 2003 oil strike, and was finally able to carry out its social and economic policies without interruption. In the decade that followed, per capita consumption in Venezuela reached an historic high, even surpassing the 1970s oil boom that is remembered by many Venezuelans as the country’s greatest time of prosperity.
This significant decrease in poverty and the massive increase in household consumption, along with the continual growth in population (which grew by 23 percent from 1999 to 2011), translated into significant increases in demand for basic goods and services. Sectors of society that before had been marginalized and submerged in poverty were now suddenly rising out of poverty and consuming greater and greater quantities of food and consumer goods.
Of course, critics of the Chavez government claim this is all the product of oil prices that have shot up significantly since Chavez came to power in 1999, and thus no credit should be given to the government. But this completely ignores the increases in social spending that would not likely have taken place under the neoliberal governments of his predecessors. It also ignores the important role that the Chavez government played in uniting OPEC nations behind production quotas which resulted in the tripling of oil prices in Chavez’s first 18 months in office, long before the oil boom had occurred. Even without the 2000s commodities boom, it is likely that OPEC would have been able to maintain higher prices by controlling production.
By the late 2000s, we would hear many reports of shortages of basic food items, long lines at supermarkets, and general disarray among the population. The government was forced to drastically increase food imports, something that continues to be a major criticism levelled at Chavez, and media reports portray this as a major failing of government policy. It is often claimed that Chavez’s interventionist policies such as land expropriations and nationalizations of private firms have caused food production to stagnate or collapse, leading to an economic disaster.
The statistics, however, show a different scenario. Regarding food production in Venezuela, two important things have occurred in recent years. As the charts show below, not only has cereal production increased quite remarkably over the last decade, but the land area under production has also increased to an historic high:
And according to numbers from Venezuela’s Ministry of Agriculture, after relatively stagnant food production throughout the 1990s, from 2003 to 2011 milk production increased by 230 percent, beef production by 19 percent, chicken by 60 percent, rice by 25 percent, corn by 116 percent, and beans by 320 percent.
As can be seen, the claims among Chavez’s critics of a decrease in food production are simply false. And while it is true that there have been food shortages, the real reason is quite different from what the media reports. An impressive increase in food production in recent years has simply been outpaced by growing consumption that has increased even more rapidly, creating supply problems in many basic items and the need to import increasing amounts of food. Though often cited as a major failure of the Chavez government, it is actually the result of millions of poor Venezuelans eating better and consuming more than ever before. As one Venezuelan recently said to an opposition activist who insisted that empty supermarket shelves were proof of the government’s failures and demanded to know, “Then where is the milk?”: “The milk,” he replied, “is in the bellies of Venezuela’s poor.”
There is a very similar situation with regards to electricity. The media has been quick to jump on the news of increasing blackouts in recent years as another major failing of the Chavez government. After much of the electrical infrastructure was nationalized by the government in 2007, private media and government critics assured that the problem was a lack of investment, inefficient state bureaucracy and rampant corruption. The government had failed to increase electricity production, they claimed, despite record levels of oil income. During the presidential campaign this year, opposition candidate Henrique Capriles consistently criticized the blackouts as a major failing of the Chavez government and promised to put an end to them.
However, the statistics show once again that the problem is more about the rapid increase in demand than a lack of action on the part of the government. Falling poverty and rising household consumption has translated to a greater consumption of electricity as more Venezuelans can now afford electronic consumer goods like televisions and air conditioning. Not surprisingly, consumption of electricity per capita has increased by more than 20 percent in recent years after remaining flat for most of the 1990s:
Were it not for the government installing thousands of energy saving light bulbs around the country, this figure would likely have increased even more.
The claims of a lack of investment by the government and a failure to increase electricity production also appear to be false. Of the six hydroelectric plants that have been built in Venezuela, three of them have been constructed under the Chavez government, and total electricity production has maintained an upward trend throughout the period:
In other words, the persistent blackouts so decried by the Venezuelan opposition in recent years are actually the result of millions of Venezuelans from the poorest sectors who are now able to afford a better standard of living, and acquire some of the same comforts the rich have enjoyed for years. Electricity production has increased, but consumption has increased faster.
In this context, it is hard to see this negatively. Yet the media and political opposition have done just that by removing the necessary context and focusing only on the side effects of the important social changes that have taken place in the country over the last decade. It seems the opposition would prefer to go back to the days when they governed the country—back when the lights stayed on, and the supermarket shelves stayed stocked because the country was not burdened by the rising consumption of the poor.
Combatting crime has been a major failing of the Chavez government. Critics of the government have long cited growing crime rates as a major problem in recent years, and the statistics confirm this. As can be seen in the chart below, the number of intentional homicides nearly doubled between 1999, the year Chavez took office, and 2009 when there was a total of 49 murders per 100,000 people. The number has remained high, with a reported 48 per 100,000 in 2010, and reportedly even higher in 2011, much higher than the regional average.
The Chavez government has recognized that crime is a serious problem, and has taken various measures to counter the trend, such as the training of a national police force, but the results of these measures remain to be seen. Initially, the government placed little emphasis on the problem, assuming that increased social spending and reduced inequality would reverse the rise in crime rates. But this has not been the case. The government has now recognized that poverty reduction and social programs are not sufficient, and that additional measures are needed to combat what has become a very serious problem.
Finally, there are a few statistics that are worth mentioning with regards to Venezuela’s economic outlook. Although it is often implied in the media that Venezuela’s current economic growth is unsustainable, or that the country is on the brink of economic crisis, this is clearly false as has been demonstrated elsewhere. There are, however, a few statistics that raise doubts about Venezuela’s long-term economic outlook.
Though increased social spending and decreased poverty have drastically improved the standard of living of Venezuela’s poor, these policies will have limited long term effects if Venezuela’s larger economic problems cannot be resolved. Indeed, it is unlikely that the gains that have been made over the last decade will be able to continue improving without profound changes to the primary export dependence that has long plagued the Venezuelan economy.
The first thing to notice is that oil exports have grown as a percentage of total exports from about 80 percent of total exports in the 1990s to around 95 percent in 2010, meaning that Venezuela has become even more dependent on oil exports.
This statistic alone does not necessarily mean that Venezuela’s economy is headed in the wrong direction, since exporting less non-oil goods while also increasing the production of goods for the domestic market would reduce its dependence on imports. But although the Chavez government has placed much emphasis on the local production of manufactured goods with the inauguration of various food processing, transport equipment and electronics factories, manufacturing has not grown as a percent of gross domestic product.
Although these statistics only show up to 2007, the percentage has not changed significantly since then.
Additionally, if we look at gross capital formation, which measures investment in fixed assets and is often a good indicator of a significant process of industrialization, we see that Venezuela’s gross capital formation is not significantly different than the regional average. Indeed, if we compare it to a country that is clearly undergoing a significant “catching-up” process such as China we can see that Venezuela’s gross capital formation is probably not where it needs to be if it is going to diversify its economy away from oil.
Finally, it should be mentioned that although Venezuela’s agricultural production has increased significantly under the Chavez government, more important for economic development in general is agricultural productivity. High productivity in the primary sector played an essential role in the industrialization and diversification of the economies of the developed world. In this respect, the statistics seem to indicate that Venezuela’s agricultural productivity is slowly improving, although it remains far below that of the developed world.
As the statistics show, the reality in Venezuela is far from the picture painted by the media in recent years. The nation’s poor have made important gains, and have significantly improved their standard of living. The social changes have been so rapid, in fact, that despite impressive increases in local production, the national economy has not been capable of meeting the growing demand. This has created an increase in food shortages and blackouts in recent years that have fuelled much criticism of the Chavez government. But the attention given to these problems by Chavez opponents and private media hides the important social reality behind them: Venezuela’s poor are living much better.
Much remains to be done, however, if Venezuela intends to get to the root of its economic problems and diversify its economy away from oil exports. In the coming years, great emphasis will need to be put on growth in manufacturing and investment in domestic industry. An important stimulus for this could be finding a way to drastically improve agricultural productivity.