The Long Venezuelan Depression: A Conversation with Malfred Gerig

A young writer and researcher examines the historical and structural origins of the Venezuelan crisis.

Venezuela entered a profound economic crisis beginning in 2014. There are many heated debates about its origins and causes. Among the most recent contributions to these debates is Malfred Gerig, a young researcher who has written extensively about economic and political issues. His soon-to-be-published book La Larga Depresión Venezolana [The Long Venezuelan Depression], pinpoints the origins of the crisis in a closing cycle of capital accumulation that was based on oil exports.

Venezuela’s role in global capitalism has long been as a supplier of oil. Briefly, explain the country’s place in the capitalist world system.

Venezuela was the world’s leading oil exporter from 1928 to 1970. The Venezuelan economy became part of the international division of labor as a supplier of energy during [what Giovanni Arrighi called] the US’ systemic cycle of accumulation.

This means that the Venezuelan state – as the owner of the oil resource – captures an international rent from the global production process. That rent then gets distributed inside the national economy. As such, the economy is structurally extroverted: it is oriented toward supplying a world market.

Venezuela has a special type of semi-peripheral economy: it has a relatively privileged position as far as the distribution of the surplus that the global economy generates is concerned – based on its possession of a resource that is not the result of work done inside the country – even if overall it has all the structural characteristics of a dependent economy.

Venezuela has an oil-based economy. Above all the nation’s economy is rentier. In other words, not only is the economy dependent on oil for its insertion into the world market but, for nearly a century now, capital accumulation in the country has been driven by the oil rent.

One of the key characteristics of the US systemic cycle of accumulation is what Alfred Chandler called “economies of speed,” which require large amounts of energy. Also, the 20th century was the century of mass production, which required abundant energy supplies. Until the 1970s, Venezuela was generally a reliable and nearby source of oil [for the US]. However, with the Middle East oil boom, the Caribbean nation ceased to be the US’ main provider. Even so, it remained an important provider until the global fracking revolution and the Long Venezuelan Depression that began in 2013.

Domestically, a nationalist discourse tried to legitimize the country’s position within the international division of labor through the thesis of “sowing oil.” The idea was that, by asserting the state’s sovereignty over the resource, one could maximize the oil rent that the country captured [on the international market], which would be directed toward developing the national economy, thereby breaking with dependence on oil.

I have called this “the rentier rationale” and “the anti-natural path to wealth.” In the end, the path was successful in defending the state’s ownership of the oil resource and expanding the rent that was captured, but it failed miserably in building a non-rentier society.


Economists and other analysts often describe Venezuela as having a rentier economy. Briefly, what do “rent,” “rentier,” and “rentierism” mean?

The term “rentierism” is a problematic, moralistic way to refer to a country’s oil culture. However, it’s not the same to talk about “rentierism” as to talk about “rentier capitalism” or about an extroverted, peripheral, and rentier economy. Personally, I tend to avoid the term “rentierism.”

But what does the term “rentier economy” mean? The overall production process has three kinds of revenues. Each kind belongs to a factor of production: profit to capital, wages to labor, and rent to property. When it comes to the latter, it can be the property of land, a natural resource, a building, or even certain financial assets.

The Venezuelan state is the proprietor of the nation’s subsoil, and the revenue it receives from oil sales is what we call “oil rent.” That rent is captured from surplus that is generated elsewhere in the global process of production.

The captured value, which come in the form of money-capital, does not have a counterpart in the national process of work. However, work also adds value to the oil resource. Thus, oil has a productive component and a rent component. It’s basically an absorption of work (which is the origin of all value) toward the Venezuelan economy: the value is produced in these geographic spaces of the capitalist world economy and is captured through the mechanism of state property. The rentier state can use that money-capital to motorize the national economy. In the early years of the oil century, in the 30s, it was decided that the international rent would be internally distributed to promote national development and non-rentier capital accumulation.

In 2008 [Venezuelan economist] Asdrubal Batista estimated that for Venezuela to find a substitute for the international oil rent, it would have to create 890 thousand [non-oil sector] jobs with productivity close to the world market average, thus yielding $89 billion per year.

To sum things up, the oil revenue comes from the valorization of a natural resource in the world market. Of course, Venezuela’s rentier capitalism conditions the nation’s economic policy, its political-institutional fabric, and the moral economy that are at the base of the country’s problems.

In The Long Venezuelan Depression, you examine the collapse of the Venezuelan economy from a historical-structural perspective (longue durée). Could you summarize your analysis?

I begin by stating that in order to understand the Venezuelan economy, we have to overcome theoretical-methodological nationalism. In other words, to understand our “century of oil” we have to analyze it in relation to the US’ “systemic cycle of accumulation.”

Following Giovanni Arrighi’s systemic cycle of accumulation model, I understand the “Venezuelan oil century” as a long century and a full cycle of capital accumulation. That cycle has a material boom phase that goes from 1917 to 1976. During this period, capital accumulation and social wealth roughly coincide. That is followed by a phase of financial contraction from 1976 to 2003, when the agents of capital accumulation withdraw from expanded reproduction. This contraction phase is followed by a brief golden age that brings the long century to its natural limits, since, as Clement Juglar would say, in capitalism the cause of depression is prosperity itself.

In my analysis, the 1970s are of special importance. That is the decade when Venezuela entered what Samir Amin would call a “blocked development phase.” There was an attempt to promote development in line with proposals that were already being criticized at the time. From 1983 onwards, this phase of the signal crisis [Arrighi’s term for a transition from phase A to phase B] saw accumulation agents withdrawing capital from reproduction on an expanded scale. Economic actors in Venezuela shifted from making money out of things, to focusing on a commercial-import capitalism sustained by the oil rent. In other words, accumulation accurred via privatization of the oil rent.

From then on, the social problems caused by the ongoing process of de-ruralization without industrialization began to increase. The economy didn’t generate employment, the relatively successful industrialization process of the 1950s and ‘60s came to a halt, and investment stopped. However, the oil rent allowed for real wages to grow faster than labor productivity.

Venezuela was entering a crisis of overaccumulation: a crisis caused by capital’s inability to find profitable investments through the usual mechanisms of industry and commerce. In the 1980s and ‘90s, the country was unable to cope with its structural problems. It was one of the major losers in the transformations of the global economy best represented by financialization, the monetarist counter-revolution, and the rise of East Asia.

I understand the period from 2013 to the present – what I call “the long Venezuelan depression” – as the catastrophic denouement of the century of oil. The economic and political crisis that began around 2013 snowballed in a way that cannot be explained according to the logic of an “efficient cause,” but instead requires a dialectical logic.

In brief, the crisis blew up in 2013 in the economic headquarters of an economy that is rentierist and deeply dependent on imports and foreign exchange. Better said, it blew up in the center where rent is allotted.

Between 2013 and 2015, the government denied the crisis: it chose to be passive. In our society, the first effects of the crisis were, on the one hand, the impossibility of re-converting money into capital and, on the other, shortages. However, at the macroeconomic level, the crisis started with a series of supply shocks.

When oil prices fell in 2014, the government applied draconian measures on imports that actually paralyzed production, while it continued to pay the foreign debt. In 2015, debt service was 70.9% of export revenues. This “good payer” strategy continued up through 2017, thus generating a crisis of hyperinflation. As is the case with other inflationary episodes in the region’s history, it was preceded by a foreign debt crisis.

The hyperinflationary process destroyed the nation’s currency and its monetary sovereignty. In my opinion, the Venezuelan hyperinflationary process deserves an explanation on at least two levels. One would be a functionalist perspective explaining how it came about. That perspective would highlight the importance of the Central Bank having a spike in its balance sheets, and hence there was an increase in the money supply (thanks to the loans made to PDVSA) in a scenario of collapse of production, falling tax revenues, and continued subsidy to domestic fuel.

However, from a structural perspective, which would examine the why and not only the how, Venezuelan hyperinflation relates to the effects of, on the one hand, a rupture with the fundamentals of the country’s political economy when it met the external challenge of the onerous debt payments – as historians such as the conservative Niall Ferguson have observed in other historical episodes – combined with, on the other hand, the attempt to adapt the monetary system and monetary values to a collapsing supply.


Yours is a historical-structural perspective, but it doesn’t seem to account for another factor in the crisis: the sanctions. Do you consider their effect to be merely secondary?

Let’s distinguish between two phases of the sanctions applied to the public sector: first, an attrition, then a toppling strategy was applied. The first phase goes from the so-called “Obama Decree” in 2015 to the self-proclamation of National Assembly representative Juan Guaidó as ”nterim president,” without any de facto power, in 2019. This phase is characterized by targeted sanctions on the regime that aimed, on the one hand, to isolate the country financially and commercially, while generating the subjective conditions for regime change through personal sanctions on the ruling elite.

The second phase runs from 2019 to the present, when the sanctions program ceases to be selective and becomes sweeping. Regime change is no longer pursued by way of attrition but rather through collapse. An embargo is imposed on the oil industry, while international banks are prevented from interacting with the Central Bank, thus closing doors on all transactions with all Venezuelan banks. I have called this “a weapon of mass financial destruction.” That is how serious these sanctions have been.

However, the sanctions did not bring about the collapse of the Venezuelan economy. They contributed to the collapse, but they were not the determining factor. The central axes of the collapse operated within the framework of national sovereignty.

When sanctions became comprehensive in 2019, the government implemented an orthodox-monetarist adjustment program to deal with hyperinflation: it applied draconian financial discipline. Can we say that sanctions caused a drop of 30% in the GDP between 2019 and 2020? Yes, but we would not be taking into account other variables such as the impact of the adjustment program, the trajectory of dependence, the fuel crisis, the credit crunch, etc.

The long Venezuelan depression catastrophically weaves together many variables; the sanctions are one of them but not the most important one. In any case, the sanctions have failed to achieve regime change, but they have been successful in forcing the ruling elite to make a radical shift in its economic policy. It is now orthodox, monetarist, and neoliberal.


You have analyzed the relationship between the country’s economic collapse and President Maduro’s crisis of hegemony. How do you link these two phenomena?

We can characterize the Venezuelan crisis with the Gramscian concept of organic crisis: a negative reinforcement among a crisis of hegemony and authority at the political level; a collapse of capital accumulation and reproduction in the economy; and an external attack on national sovereignty. Venezuelan society has progressively lost its capacity to create wealth and to recreate authority. At the capillary level of politics, society is totally alienated from political representation. The recovery of confidence in political institutions will be a long and difficult process, but it must begin as soon as possible.

As we know, crises of authority are usually accompanied by an authoritarian response or, what is the same, domination without hegemony. Additionally, the political shift toward commercial or import capitalism lacks, at the economic level, the capital needed to make the shift successfully. And so, domination without hegemony, and capitalism without capital, seem to have reached a marriage of convenience. This marriage revolves around a program of accumulation by dispossession based on the privatization of common wealth, public property, etc.

As you mentioned before, some argue that Venezuela’s economic crisis will be solved with a program of structural adjustments, particularly monetarist ones. What do you think?

I totally disagree with that argument. A draconian macroeconomic stabilization program, such as the one that has been carried out here since 2018, can only stabilize misery. It can’t create solid foundations for a recovery of the GDP, to say nothing of living standards.

The impact of Venezuela’s Long Depression on human life, which is the basis of the economy, has been dramatic. Only by rebuilding that human basis for the economy can one generate wealth in a sustainable way. According to ECLAC data, Venezuela’s GDP per capita in 2017 was $4,459. In 2021 it was $1,794 per capita! That is a reduction of 59.7% in four years.

This, in fact, is the cost of fighting hyperinflation by restricting credit and limiting public spending – it’s killing the hyperinflationary disease by killing the whole economy. It will take a long time to go back to the levels of productivity we had before the monetarist adjustment. This will be the “lasting legacy” [of draconian stabilization].

In fact, there is nothing stable in the Venezuelan economy today. Unemployment, consumption, and investment levels are not stable… Much less stable are income and salaries, whose restriction to sub-human levels has been the basis for the government’s entire orthodox-monetarist adjustment program. Venezuela’s political economy after eight long years of depression is not normal, not even according to the logic of capital.

There has been a recovery in some sectors of the Venezuelan economy. What do you say to those who argue that the restrictive policies worked, because of those successes?

Indeed, the Venezuelan economy has achieved a minimal level of equilibrium. Let’s take some examples. Dollarizing transactions solves the problem of not having a currency that can store value and function as an accounting unit. However, it does not solve the problem of how to generate dollars; it actually aggravates it. That is because, In order to have foreign currency it’s necessary to export, but the overvaluation of the exchange rate, which favors imports, hurts non-oil exports.

The restriction of credit by means of financial discipline serves to contain aggregate demand and thereby devaluation of the currency, so it helped to bring down hyperinflation. But the price for that is a fall in productivity, since companies have no access to credit. Beyond that, underconsumption hampers production – even at its currently low levels – because it curtails effective demand.

Overvaluing the national currency, reducing trade tariffs, and the high purchasing power of the dollar at the international level all work to create a virtuous circle that favors importing. However, this happens at the cost of keeping employment and income levels scandalously low. In turn, a large part of household consumption is financed by relatives who migrated and send remittances.

Generally speaking, this stage of the economic crisis is understood as a time of hope by those who benefit from the economic policies that are in place. For others, however, it is a time of darkness. The problem is that in Venezuela, this latter group represents the vast majority.

We will really be able to talk about economic recovery when well-paid, stable, and productive jobs are created and when the per capita GDP goes back at least to 2017 levels. Other signs would be when financial restrictions are lifted in a way that allows the sovereign currency to work; and, above all, when investment rates are restored.

What we are witnessing now are the effects of a hike in oil prices and remittances accompanied by a mini-rebound in production. We are also witnessing the first steps in commercial-import capitalism, but it has very little power to grow on an expanded scale and generate social well-being.

The alternative to the path chosen, is a great process of restructuring on the supply side, thus redesigning the political economy of the country. The central axes of a plan of this kind would be: (1) an active and ambitious (in terms of GDP) industrial policy accompanied by a plan to invest in physical assets and means of production; (2) a policy for recovering the investment rate that has two central components: one oriented to large company exports and another oriented toward generating employment in small and medium enterprises; (3) a universal basic income program to solve the problem of underconsumption and the crisis of realization; and, finally, (4) a coherent macroeconomic plan capable of giving fiscal and external sustainability to the overall project, with a sufficiently restrictive monetary policy.