Analysis: Chávez’s legacy may yet be felt

By ROBERT SKIDELSKY
Published on 21/03/2013 00:00

I remember the exact date of my visit to Venezuela – seeing news of two planes crashing into the World Trade Centre.

I was in Venezuela on 11 September, 2001, to attend a conference on the “Third Way”. Hugo Chávez was very interested in the Third Way – a modus vivendi between American-style capitalism and state socialism. Chávez himself briefly graced the meeting with his presence.

A day earlier, I had had lunch at the Venezuelan central bank, sitting next to the deputy governor, Gastón Parra Luzardo. He told me that all Venezuelans believed that they had been born with a “loaf under their arm” – that is, a right to a share in the country’s oil revenues.

“No-one,” I wrote in my diary, “believes that Chávez will last his full term. They see him as a damaging buffoon, rather than as a dangerous revolutionary.” In fact, he won a second, a third, and then a fourth term.

The debate over Chávez’s political legacy is a posthumous re-enactment of the ideological battles that were fought while he was alive. The battle for his economic legacy is more straightforward: it comes down to how he managed Venezuela’s oil wealth.

Venezuela has the largest oil reserves in the world, and Chávez’s economic strategy depended on harnessing that wealth to address his country’s social problems. The first few years were dominated by his struggle to gain control of the country’s state-owned oil company, PDVSA.

Upon reasserting political control in 2003, Chávez fired 40 per cent of PDVSA’s staff and used the firm as a cash cow; many of his social programmes were funded directly from the company’s budget.

Starved of cash, PDVSA was forced to cut back on maintenance and expansion, which increased the number of accidents and limited production. Thanks partly to Chávez’s policies, Venezuela is still a small player in the global oil market, with less than a three per cent share of world oil production.

Where has the oil wealth gone? The most reliable data suggests that he was successful at reducing inequality during his rule. But one can hardly say that every céntimo was well spent. Cronyism was rife and the murder rate tripled, partly owing to corruption in the police and the justice system. And what about the Third Way? In the aftermath of the collapse of communism, Chávez’s mix of anti-Americanism and state activism seemed merely eccentric. There could be no alternative to free markets and the neoliberal Washington consensus – or so it appeared.

But the rise of China, the relative decline of the United States, the long boom in commodity prices, and the western financial collapse of 2008 have created space for political and economic experiments. Chávez took advantage of that, and Chávezism may well prove to be a significant phenomenon far beyond its homeland.

• Robert Skidelsky, is a member of the House of Lords and Professor Emeritus of Political Economy at Warwick University