The Venezuela Card in the US Election

CAMBRIDGE – It was bound to happen. At some point, Venezuela would enter the electoral debate in the United States. Now that it has, it will likely continue to be an issue. Venezuela, after all, represents the Americas’ biggest economic collapse, the largest increase in poverty, the worst hyperinflation, and the greatest mass migration over the past couple of centuries.

It is also a case where ending the nightmare – and the threat to regional stability – has become a top US foreign policy priority. It is one of the few policies of President Donald Trump’s administration that has ample bipartisan support, as shown by the standing ovation given to Acting President Juan Guaidó during Trump’s State of the Union Address in February.

And yet Venezuela’s tragedy is being used as a partisan political weapon in the run-up to November’s presidential and congressional elections. In Trump’s telling, Venezuela shows the failure of “socialism,” and Democrats are “socialists.” Presumably, if voters replaced Trump with a Democrat, the US would suffer the same fate as Venezuela.

Clearly, this is a bizarre claim. Democrats have held the White House for 48 of the past 87 years, and, overall, the US has had a pretty nice ride.

But Bernie Sanders, the front-runner in the

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist at the Inter-American Development Bank, is a professor at Harvard’s John F. Kennedy School of Government and Director of the Harvard Growth Lab.

Democratic primary, is not a traditional Democrat. In fact, he’s not even a member of the party. He calls himself a democratic socialist, not a social democrat, and his past statements about Fidel Castro, as well as his trips to the Soviet Union and Nicaragua, reflect his decades-long support for the radical left.

Sanders’s supporters stress that the socialism he has in mind is Scandinavian-style social democracy. But Sanders has yet to articulate any ideological or policy differences with the unsavory tyrannies he has supported, and he feels uncomfortable talking about it. Instead, he has tended to respond with the “Mussolini made the trains run on time” defense.

There are of course other political lessons to be learned from Venezuela. The Nobel laureate economist Paul Krugman blames the country’s fate on generous social programmes during the oil-boom years (2004-14). When the price of oil fell, the government resorted to printing money to finance the resulting large budget deficits, leading to hyperinflation. In this narrative, the problem was good intentions and poor macroeconomic management, not “socialism.” By contrast, Moisés Naím and Francisco Toro blame Venezuela’s collapse mainly on kleptocracy.

Both are important parts of the Chavismo story, but neither gives “socialism” its due place. Moreover, like Sanders, they do not explain how “socialism” in Scandinavia is different from the tropical version.

In fact, these two systems are almost polar opposites. The Scandinavian system is deeply democratic: people use the state to empower themselves with rights and autonomy. A thriving private sector creates well-paying jobs, and cooperative relations between capital, management, and labor sustain a consensus that emphasizes skill development, productivity, and innovation. Moreover, given their relatively small populations, these countries

understand that openness and integration with the rest of the world are fundamental to their progress. Taxes have been set high enough to fund a welfare state that invests in people’s human capital and protects them from womb to tomb. Society has been powerful enough to “shackle the Leviathan,” as Daron Acemoglu and James A. Robinson put it in their latest book.

Chavismo, by contrast, is based entirely on disempowering society and subordinating it to the state. The social programs that Krugman cites were not a realization of citizens’ rights, but privileges bestowed by the ruling party in exchange for political acquiescence. Huge parts of the economy were expropriated and put under state ownership and control. This included not only electricity, oil services (oil production had already been nationalized in 1976), steel, telecoms, and banks, but also much smaller firms: dairy producers, detergent makers, supermarkets, coffee growers, cooking gas distributors, ferries, and hotels, as well as millions of hectares of farmland.

Without exception, all these firms were run into the ground, even before the price of oil plummeted in 2014. In addition, the government attempted to create new stateowned firms in joint ventures with China and Iran: none are in operation, despite billions of dollars in investment.

Moreover, price, currency, import, and employment controls made private economic activity almost impossible, disempowering society further. Prices were supposed to be “fair” rather than marketclearing, and hence set by the government, which led to shortages, black markets, and opportunities for corruption and kleptocracy, while managers and entrepreneurs were jailed in large numbers for fair price violations. During the 2004-14 oil boom, as agriculture and manufacturing were being destroyed, the government hid the collapse through massive imports, which it financed not only with oil revenues, but also by massive external borrowing. Obviously, when oil prices declined and markets stopped lending in 2014, the charade could no longer be maintained. And the charade was Chavismo’s version of socialism.

But what is Sanders’s version? A higher minimum wage, universal health care, and free access to public higher education, as he points out, are the norm in most other developed countries, and they are definitely not socialists in the Chavista, Cuban, or Soviet sense of the word.

Then again, Sanders seldom has a nice word to say about entrepreneurs and successful firms large and small. True, he wants to justify higher taxes to pay for his social policies, but he needs companies to be productive and profitable so that they pay more taxes. So, is his socialism about cooperation to empower people while boosting the economy, or is it about empowering the state to exercise more coercive control over business?

This question must be answered for tactical reasons, because the Venezuela card can also be played against Trump. After all, Chavismo has politicized law enforcement and the judiciary, trampled on the free press, treated political opponents as traitors and mortal enemies, and meddled with the fairness of elections. Sound familiar? But Trump’s opponent in November cannot play offense with the Venezuelan card until the “socialism thing” is adequately addressed.

Voters in the Democratic primary season are entitled to know whether Sanders understands what makes Scandinavia different from Venezuela. Moreover, they should want to know whether their candidate will fight, together with the existing coalition of 60 democracies from Latin America and the developed world, to end Venezuela’s dictatorship and restore human rights and freedom. Copyright: Project Syndicate, 2020. www.project-syndicate.org