"Patriotism is the willingness to kill and be killed for trivial reasons." Bertrand Russell

Tuesday, March 01, 2005

Chavez and the "middle" class

"This year Chavez successfully rebuilt Venezuela's oil company after a devastating management strike and campaign of widespread sabotage at PdVSA plants and pumps. It has to infuriate Bush's oil patch buddies that Chavez restored Venezuela's output from near zero to 2-1/2 million barrels a day." (1.1)

Many who oppose a Venezuelan government under Chavez cite the "fall" of the middle class as ample reason to suggest he is unfit to hold this position. There are several problems with this assumption:

1) Is it true?
2) How many people constitute this class?
3) Is this a fair representation of all his work?

So, how many people constitute Venezuela's middle class?

Well as you may know Venezuela has a high proportion of poor. Recent estimates up to 68% of the total population live below the poverty line. (poverty here here is about $2 a day) (1.2)

With the top 20% taking over 50% of all money. One could presume (fairly accurately) the middle class is quite small (but don't get me wrong, not insignificant). After all, Venezuela is the third most unequal country in the world.

There are a few reasons for the middle class to be angry:

Read: Why is the middle class so opposed to Chavez and the lower class not? (16)

"There are policies that Chávez has promoted that have engendered opposition. Many of these had the effect of pushing some members of the middle class down a rung or two—most of them becoming cab drivers. One of these was to fix the currency, leaving many businessmen who do their buying in dollars and their selling in Bolivares in the lurch. Another policy that alienated middle class Venezuelans was the mass-firing of oil workers suspected of involvement in the oil strike/lock-out and sabotage."

The success Chavez has had has to be taken in context, Chavez took power in a country in a deep depression and a huge debt. The decline of oil prices and capital flight of the early 80's resulted in:

"To deal with this "crisis", President Carlos Andres Perez, elected in 1988, delivered the country over to IMF orthodoxy. Privatization, public spending cuts, liberalization, and deregulation followed. The economy contracted by 8.6% and general poverty went from 43.9% in 1988 to 66.5% of the population in 1989." (2)

However there have been improvements in reducing poverty through redistributive policies such as rural and urban land reform, public education, food distribution, and health clinics.

"According to Wilpert, official unemployment in Venezuela has declined from 18% to 13%. Under Chávez, health care coverage for the poor has been expanded and infant mortality has declined." (15)

Using a method of "trickle up" economics (with the importance of solidarity):

"Development from below means providing opportunities for the poor regarding land, credit, housing, education, health and social security, in a macroeconomic environment of external stability and fiscal sustainability. Small and medium sized businesses, which are close political allies of the new process, and of course big firms, even though belonging to the traditional oligarchies, will benefic from “trickle up” process of increasing demand and human capital formation." (9)

"one million people who learned to read and write, a public health campaign, about 3,000 Bolivarian schools, over two hundred popular markets (Mercal), the missions Robinson, Sucre, Ribas, Miranda, and Zamora" (10)

"in the year of the program’s existence, Plan Bolivar 2000 repaired thousands of schools, hospitals, clinics, homes, churches, and parks. Over two million people received medical treatment. Nearly a thousand inexpensive markets were opened, over two million children were vaccinated, and thousands of tons of trash were collected, just to name a few of the program’s results." (12)

"Laws governing land reform (over two million hectares of land redistributed to peasants), and fishing—in order to reverse the policies that the opposition has tried to impose since late 2002." (11)

"The losses of the oil industry sabotage were enormous and are calculated in billions of dollars (it is estimated at seven billion)."

For graphs showing reserves/stock market figures etc see (11).

The middle class suffered under currency controls, however this was made necessary by "The threat of a steadily devalued currency brought fears of massive capital flight and flight to quality." (3)

The introduction of these currency controls for the purpose of (stabalization) and increasing foreign investment has worked and in 2003 foreign reserves increased "dramatically". (4)

"Private industry is beginning to show signs of economic reactivation despite the negative forecasts of some sectors. Automobile assembly and sales are at present one of the most thriving activities in Venezuela, with a sales record of over 87,000 units between January and September this year, after overcoming the 2003 crisis generated by the oil strike, the decrease in oil income, and the impact of the currency exchange control that restricted the sale of foreign currency within the local market."

"Exports have also recovered significantly by 25.58%, as they rose from 4,641 units (January-September, 2003) to 5,828 in the first nine months of 2004."

"In order to reinforce the reactivation of the automobile industry, the government decided to create a new plan. It decreed the extension, for three years, of the Family Vehicle Program, which offers the benefit of tax (VAT) exemption for the assembly, importation, or sale of the Family Vehicle 2000 to the consumer." (6)

"The Venezuelan government is closing this fiscal year with black figures (a surplus), after several consecutive years of closing it with red figures (a deficit)."

"The scenario for which the 2005 fiscal incomes are calculated is still as conservative as that of 2004.For instance, the price per exported barrel of oil fixed to estimate the oil income was 20 U$. So far, however, the mean price of oil products has been 33.07U$ per barrel." (7)

On reducing corruption:
"Perhaps the most important measure that the government has introduced is the reduction by 80% of “partidas secretas” (secret funds) that ministries and government agencies have." (8)

As far as freedom as a standard of living goes:

"I believe that freedom of speech is as alive in Venezuela as it is in any other country I've visited," former President Jimmy Carter said during a visit there last year (2003)

(Despite what you hear)

When I say context, I mean it. "How can a country work towards growth when it must first work to cancel out the sabotage consistently being imposed upon it?" (4)

"Only last April the Venezuelan president escaped a kidnapping by the Chairman of the nation's Chamber of Commerce." Dec 2003

Huge problems exist, such as corporations attempting to plant genetically modified crops, putting peasant workers out of business (genetically modified crops have been shown to reduce soil fertility, not to mention the harvesting/planting techniques would make small farmers obsolete) who represent 60 million of the population. (5)

The social economy project (13)

"For those who like numbers and data, it is worth reminding them that five years after he became president, Hugo Chavez maintains a level of popularity that has never been reached by any president, not even in their second year in office."

p.s. The HDI does not take into account captital income.

1.1. http://www.venezuelanalysis.com/
1.2. http://www.nationmaster.com/country
2.Julia Buxton, "Economic Policy and the Rise of Hugo Chavez", in Steve Ellner and Daniel Hellinger, eds., "Venezuelan Politics in the Chavez Era", Lynne Rienner Publishers, 2003.
3. Dow Jones Newswires, 12-06-02 "Venezuela Congress Approves VEB41.6 Tln Budget For 2003"
4. http://www.zmag.org/content/showarticle.cfm?
5. http://www.globalpolicy.org/socecon/tncs/2004
6. http://www.venezuelanalysis.com
7. http://www.venezuelanalysis.com
8. http://www.venezuelanalysis.com
9. http://www.venezuelanalysis.com
10. Robinson: literacy campaign; Sucre: scholarships for college education; Ribas: high school equivalency education; Miranda: support for military reservists; Zamora: land reform
11. http://www.venezuelanalysis.com
12. http://www.venezuelanalysis.com
13. http://www.economiasocial.mpd.gov.ve
14. http://www.zmag.org/content/showarticle
15. http://www.zmag.org/content/showarticle
16. http://www.zmag.org/content/showarticle