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“They’re Running the Economy Into the Ground”


[The following is a slightly revised-and-updated version of an article appearing in the September/October issue of NACLA Report on the Americas.]

 

Washington policy makers and their loyal press corps have a well-developed toolkit for discrediting foreign governments that oppose U.S. policies. One important strategy, which has been increasingly apparent since the global economic crisis hit the headlines in late 2008, is to assail their economic policies as foolish, naive, and devastating. In particular, the U.S. corporate media have taken aim at Latin American economic policies that diverge from Washington’s neoliberal prescriptions—despite those prescriptions’ contribution to the financial crisis.

 

Venezuela is a favorite target. Reporter Juan Forero of The Washington Post wrote in April that while energy blackouts cause problems in Venezuela, “the economy is flickering and going dark, too, challenging Venezuela’s mercurial leader, Hugo Chávez, and his socialist experiment like never before.” The reasons for the flickering economy, according to Forero and his sources—a World Bank official, the president of the Venezuelan business organization Coindustria, an opposition governor, and a regional chamber of commerce president—are the “profligate state spending,” “the nationalization of industries,” and “years of state interventions in the economy” since Chávez was first elected in 1998. “Venezuela’s performance stands in stark contrast to [that of] the rest of Latin America, where some central banks worry about overheating economies in 2010,” Forero asserted. Citing the IMF, he added: “In Peru, Chile and Brazil, all of which embrace globalization [a codeword for U.S.-promoted trade policies], growth could indeed go well beyond 4 percent” [1].

 

Editorial pieces in the Post and other papers have been even more indignant. In February The Miami Herald editors declared that “Mr. Chávez has run the economy, and the country, into the ground.” The Venezuelan government’s policies, according to the editors, have done nothing good for the economy: “Rolling blackouts, currency devaluation and price inflation (the worst in Latin America), water shortages and scarce commodities—this is what 11 years of a Chávez presidency have produced,” they wrote. In May the Herald published an op-ed by Marifeli Pérez-Stable, a historian of Cuba with strong anti-Castro views, who contended that Chávez’s “pathological mismanagement has run the economy into the ground.” Washington Post columnist Jackson Diehl wrote a very similar piece in January, titled “A Revolution in Ruins” [2].

 

In addition to “profligate state spending” and “state intervention in the economy,” another explanation for Venezuela’s recent economic downturn came in an April Post editorial berating the Chávez government for its military spending after Venezuela purchased “another $5 billion in weapons” from Russia. As they have done before, the Post editors sharply criticized the U.S. government’s “nonchalance” toward Venezuela’s defiance of the unspoken rule that only Washington and its allies are allowed to arm themselves [3]. The editors did not mention a plausible reason for the U.S. government’s failure to react to the arms purchase with greater alarm: Venezuelan military spending is 1/600th of that of the United States, as Obama himself told the Post in April 2009 after conservatives protested his handshake with Chavez at the Summit of the Americas [4].

 

Venezuela’s economic reality is quite different from what these images imply. The Venezuelan economy has grown significantly for most of Chávez’s tenure in office, thanks in part—as Chávez’s detractors are quick to point out—to high oil prices on the world market. But government economic policies have also brought results rarely or never publicized in the U.S. corporate media. Economist Mark Weisbrot of the Center for Economic and Policy Research comments that “for five and a half years from the first quarter of 2003, when the Chavez government first got control of the state-owned oil company, the real economy grew by 95 percent.” He adds: “Poverty was cut in half and extreme poverty by more than 70%, social spending per person more than tripled, and access to health care and higher education rose sharply” [5].

 

Increased government social spending, resource nationalization, and tighter regulation of private corporations are the same policies that the U.S. government and international financial institutions like the World Bank and International Monetary Fund have usually discouraged or prohibited in underdeveloped countries. Although rich countries have long relied on extensive state involvement in their economies and massive deficit spending, they have imposed very different policies on poorer nations [6]. The social gains of the past decade in Venezuela have been possible in large part because Chávez’s government has rejected the policy prescriptions of neoliberal economists.

 

Despite routinely being labeled “socialist” by the U.S. press (and by many Chávez supporters), Venezuela is still thoroughly capitalist, and its economy continues to face many serious problems such as state bureaucracy, overreliance on oil, and lack of industrialization. As analyst Tamara Pearson noted recently, the Venezuelan economy is still essentially rentier capitalist, and the state bureaucracy is “drastically slowing down social change.” Similar problems are apparent in Bolivia, Ecuador, and other countries with left-leaning governments [7]. But under Chávez the country has at least started taking bold measures to reduce poverty and inequality, if within the framework of the capitalist system, and has encouraged at least a degree of popular empowerment. Moreover, Venezuela even showed reasonably strong economic growth up to 2008, thus performing well by the standard measure of success used by most Western economists, who fetishize growth and have little concern for equity or popular empowerment.

 

The Post, Herald, and others have been partially correct in pointing out Venezuela’s recent economic woes, but their diagnosis of the causes has been profoundly misleading. In times of recession, carefully directed stimulus spending is usually necessary to facilitate economic recovery. Yet when world oil prices fell in late 2008, the Chávez government in fact refrained from the expansionary spending policy that China and Bolivia used with success. It neglected to utilize its extensive foreign currency reserves to pay for imports, or to take advantage of its low public debt—much lower than the United States’—to borrow from other countries. Rather than financing a sizable stimulus plan as China and Bolivia did, Chávez this time followed the prescriptions of the IMF and the U.S. government, with predictably dismal results [8]. In the last year the Chávez government has taken several steps to reverse this, such as devaluing the overvalued currency and combating speculation, hoarding, and over-priced food products [9].

 

As Weisbrot points out, the Chinese and Bolivian governments both achieved remarkable growth rates relative to other economies (8.7% and 3.7%, respectively) in 2009 through the use of large stimulus spending. The Bolivian case was especially noteworthy, since it was “the best performance in the hemisphere”: While most of the countries that followed standard neoliberal doctrine stagnated or contracted, the government of President Evo Morales used an expansionary fiscal policy to soften the impact of the economic crisis [10]. Given Bolivia’s undeniable economic success in the midst of a world recession, the Morales government is more difficult to malign. Most reports dealing with economic development in Latin America, including the reports on Venezuela cited above, have simply ignored Bolivia’s recent economic growth and the government’s modest success in reducing inequality. In May, for example, The Economist said nothing of these gains in an article on Bolivia, instead focusing on criticisms of Morales from his working-class supporters. Similarly, a January report by Forero in the Post noted only that Morales had “nationalized part of the mining sector and forged ties with Chávez”—both code for poor economic policy and authoritarianism. (Incidentally, claims regarding Bolivian “nationalization”—by both supporters and detractors of the Morales government—are almost always exaggerated; the majority of the major extractive industries remain under firm corporate control, much to the dismay of many among Morales’s progressive support base) [11].

 

The Post editors had already made clear their views of Morales in a May 2008 editorial, writing that “Morales claims to be ruling his country on behalf of an indigenous majority whose rights have been denied for centuries by an evil ‘oligarchy’” (the scare quotes evidently indicate that the oligarchy is just a concoction of the demagogic Morales or a figment of Bolivians’ imagination). The editorial also characterized Morales as a Chávez “acolyte” who has mimicked the Venezuelan leader’s “potted and authoritarian version of socialism,” which the editors called “a sure recipe for economic catastrophe” [12]. Other publications have been a bit more honest regarding Bolivia’s recent economic performance. The New York Times has published several reports acknowledging Bolivian economic growth, even admitting that Morales’s policies “hold wide appeal among Bolivia’s voters, reflected in the election victory here [in December 2009] of Mr. Morales” [13]. A rather anomalous report in The Economist in December acknowledged: “Partly because Bolivia is fairly closed to trade, and partly because of rising public spending, the economy is set to grow by around 3% this year, the strongest performance in the region” [14].

 

In contrast to the “socialism” pursued by Washington’s enemies, orthodox neoliberal policies of the sort pursued by Colombia, Mexico, and Peru are portrayed as successful. In April the Post’s Forero told readers that the Colombian economy has “flourished” in recent years, “more than doubling output since 2002, when [former president Álvaro] Uribe took office.” Forero acknowledged the trend of “rising inequality” in Colombia during this same period but nonetheless portrayed Uribe in a sympathetic light. The Colombian leader “struggles to reduce poverty,” but despite Uribe’s best efforts that poverty remains at “stubbornly high levels.” Venezuela and Bolivia, particularly the former, have witnessed substantial reductions in poverty and inequality in recent years, but Forero evidently did not deem those details relevant (he did, however, applaud Brazil and Peru for their progress in this regard—progress that is considerably more modest than Venezuela’s) [15].

 

Another theme in reporting on the economies of U.S. allies in the region is that free-market fundamentalism is increasingly popular among Latin Americans, presumably because of its supposed wild success. In a January report just before Chile’s election of a right-wing billionaire president, Forero asserted that the election reflected Latin American voters’ growing “preference for moderates rather than firebrand nationalists who preach class warfare and state intervention in the economy.” Instead, the election signified “the rise of the pragmatic centrist.” Forero’s evidence included the assessment of the senior policy director from the New York–based Council of the Americas, an organization of multinational corporations, that “[v]oters are more calculating and rational than we give them credit for. . . . People are making the choice to support market economies and rational leaders.” This increased rationality, Forero emphasized, is apparent in their “growing preference for free-market centrists” [16]. The New York Times’ Alexei Barrionuevo followed Forero several days later with a report that was only slightly less polemical [17].

 

According to this narrative, the only reason that leaders like Chávez and Morales have maintained any popularity is that they have used export earnings to buy support among the irrational, gullible poor, who are “largely blind to results” [18]. The left-leaning governments’ larger economic programs are actually wildly unpopular: Chávez, as Pérez-Stable of The Miami Herald told readers in May, “has been working hard to make Venezuela into another Cuba against the wishes of Venezuelans.” But now, she reports optimistically, “social programs alone no longer sway the Chavista base” [19].

 

Public opinion polls, which offer a closer look at attitudes than national elections, tell a very different story. According to surveys conducted in 2008 and 2009 by the Chilean polling company Latinobarómetro, more than 80% of people in Latin America think that schools, hospitals, water, electricity, and other basic services, as well as major industries like oil and natural gas, “should be mainly in the hands of the State.” Only 34% report “satisfaction with privatized public services.” Although Latin Americans tend to agree that private enterprise should play a role in their economies, they strongly reject the free-market fundamentalism that continues to shape economic policy in much of the region, particularly in Colombia, Peru, Mexico, and other nations closely allied to the United States [20]. The omission of these poll results from the Post, the Times, and virtually all other corporate publications is telling [21]. Journalists like Forero and Barrionuevo have presumably seen the results, since they have both cited Latinobarómetro before. But they cited the reports very selectively and superficially: Although each report consists of 113 pages, they focused on those poll questions which asked people to self-identify as leftist, centrist, or right-wing, while ignoring almost all of the more substantive questions.

 

There is nothing new about this narrative. Shortly after the Cuban Revolution the U.S. press began emphasizing how the “triumph of youth over maturity” and the Castro regime’s “planning ignorance” had produced endemic economic chaos, forcing the Cuban government to invent a false “aura” of danger in order to control the population; little was said of professionals’ flight from Cuba after 1959 or of other daunting obstacles confronting the regime, such as the very real danger of U.S. economic and military aggression (though curiously, U.S. officials sometimes boasted publicly that the U.S. embargo had “substantially eroded the economic foundation on which the Castro regime must depend,” in line with internally-elaborated policy goals) [22]. In similar fashion, a Time magazine article just after the 1973 U.S.-backed military coup in Chile contended that overthrown president Salvador Allende’s “socialist fiscal policy shattered Chile’s economy” [23]. In the 1980s, throughout their decade-long support for the illegal Contra war against Nicaragua, U.S. media outlets likewise argued that “economic mismanagement” was most to blame for the Nicaraguan economic crisis. The title of a typical 1985 column in The Washington Post proclaimed that “the Sandinistas are allowing Nicaragua’s economy to collapse” [24]. Three years later, after the Sandinista government had been forced to adopt a series of neoliberal reforms, The New York Times’ Flora Lewis wrote that “the civil war has hurt Nicaragua’s economy, but not nearly so much as the Sandinistas’ own mismanagement and terrible policy” [25]. The reality, again, was quite different, and very seldom given much serious attention. Although the Sandinista government was guilty of a fair amount of incompetence, dogmatism, and corruption at times, the primary cause of Nicaragua’s economic crisis was the brutal U.S.-funded war that killed 30,000 people, devastated much of the rural infrastructure, and forced the Sandinista government to prioritize military spending over health care and education. In 1980 the Sandinistas spent about half of the national budget on health care and education and 18% on defense; seven years later, the figures had reversed [26].

 

The examples of media attempts to discredit alternative economic policies abound in recent history, but the logic is always simple: Any attempt at economic development that diverges from the strategy prescribed by the United States—a strategy that has historically tended to contribute to further poverty and inequality while benefiting foreign capital and domestic oligarchies—needs to be discredited. Today overt US interventionism is less frequent. When the Cubans and Chileans and Nicaraguans were stupid enough to support leaders with whimsical ideas about education and universal health care, the United States responded both with military force and on the economic front by actively promoting “hunger, desperation and overthrow of government” and by “mak[ing] the economy scream,” in the words of a top State Department official and Richard Nixon speaking about Cuba and Chile, respectively [27]. Today, U.S. intervention is usually more subtle. But the U.S. corporate press nonetheless continues the mandarin tradition, assuring that doctrinal and imperial requirements take priority over reality.

 

 

Notes:

 

1. Juan Forero, “Oil-Rich Venezuela Gripped by Economic Crisis,” The Washington Post,April 29, 2010. See also the recent report by Forero´s New York Times carbon copy, Simon Romero, “Venezuela, More Deadly Than Iraq, Wonders Why,” August 22, 2010. According to Romero, “While many Latin American economies are growing fast, Venezuela’s has continued to shrink”—the latter clause implying that the Venezuelan economy has been in consistent, indefinite decline for many years under Chávez (rather than since 2008, which would be more accurate; see below). Romero also issues a populist critique of Chávez, arguing that “despite proclaiming a revolution that heralds socialist values,” the Chávez government “has been unable to close the dangerous gap between rich and poor”—again, a misleading characterization of reality, as evidence below indicates, as well as a profoundly hypocritical posture from a reporter who over the past decade has consistently vilified all Chavista attempts to reduce poverty and inequality.

 

2. The Miami Herald, “Venezuela Heads toward Disaster,” editorial, February 8, 2010; Marifeli Pérez-Stable, “Chávez Snubs Colombia,” The Miami Herald, op-ed, May 23, 2010; Jackson Diehl, “A Revolution in Ruins,” The Washington Post, op-ed, January 25, 2010.

 

3. The Washington Post, “Mr. Chávez’s Weapons: While the Economy Plummets, Venezuela’s Strongman Splurges,” editorial, April 8, 2010. For more examples of the The Washington Post editors’ sustained denunciation of the Chávez government, see “Venezuela’s ‘Revolution,’” January 14, 2005, and “Cash-and-Carry Rule: Venezuela’s Hugo Chávez Cements His Autocracy With Petrodollars and Another Push For ‘Reform,’” August 17, 2007.

 

4. Scott Wilson, “Obama Closes Summit, Vows Broader Engagement With Latin America,” The Washington Post, April 20, 2009.

 

5. Mark Weisbrot, “Venezuela’s Recovery Depends on Economic Policy,” Le Monde Diplomatique, reposted on ZNet, April 17, 2010.

 

6. On this history of hypocrisy, see Ha-Joon Chang, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (2007; reprint, London: Bloomsbury Press, 2008).

 

7. Tamara Pearson, “The Insidious Bureaucracy in Venezuela: Biggest Barrier to Social Change,” Venezuelanalysis.com, May 17, 2010. See also Steve Ellner, “Chávez Pushes the Limits: Radicalization and Discontent in Venezuela,” NACLA Report on the Americas 43, no. 4 (July/August 2010): 7-12. On Bolivia see Eduardo Gudynas, “El modelo de desarrollo en debate,” Le Monde Diplomatique: Edición Boliviana 3, no. 25 (April 2010), 6-8; Juan Colique and Pablo Poveda, “Hegemonía transnacional en la minería boliviana,” Le Monde Diplomatique: Edición Boliviana 3, no. 28 (August 2010), 4-7; Jeffery R. Webber, “The Rebellion in Potosí: Uneven Development, Neoliberal Continuities, and a Revolt Against Poverty in Bolivia,” UpsideDownWorld.org, August 16, 2010.

 

 

8. Mark Weisbrot, “Venezuela’s Recovery Depends on Economic Policy.” See also Weisbrot, “Venezuela Is Not Greece,” The Guardian, May 6, 2010.

 

9. See Federico Fuentes, “Venezuela’s Economic Woes?” ZNet, May 23, 2010.

 

10. Weisbrot, “Venezuela’s Recovery Depends on Economic Policy.” I have substituted the figure of 3.7% for Weisbrot’s 3%, since the former is the figure given in Simon Romero and Andrés Schipani, “Neighbors Challenge Energy Aims in Bolivia,” The New York Times, January 10, 2010.

 

11. On inequality see the report by the Economic Commission for Latin America and the Caribbean (ECLAC), Social Panorama of Latin America (briefing paper, 2009), 11–12. Quotes from “Power Grab: Another Bolivian Nationalisation,” The Economist, May 8, 2010, and Juan Forero, “Chile Race Reflects Broad Regional Trend: Growing Preference for Free-Market Centrists Seen in Latin America,” The Washington Post, January 17, 2010. On the implicitly (or explicitly) negative meaning of nationalization and Chávez’s name in the U.S. media, see particularly the articles in the November/December 2006 issue of Extra!.

 

Bolivian “nationalization” has been decidedly limited. Although the government has increased taxes on corporations and has started to break with neoliberal doctrine in some important ways, a number of recent analyses have pointed out the many “neoliberal continuities” in recent Bolivian economic policy. See, for example, the valuable analysis in Webber, “The Rebellion in Potosí,” although the case may be slightly overstated since it downplays the modest social gains under Morales, the enormous structural obstacles impeding change in Bolivia, and the powerful symbolic example that Bolivia represents for other countries and social movements.

 

12. “Bolivia’s Rift: President Evo Morales’s Attempt to Impose Venezuelan-Style Socialism Is Literally Splitting the Country” (editorial), The Washington Post, May 6, 2008.

 

13. Romero and Schipani, “Neighbors Challenge Energy Aims in Bolivia”; cf. Romero and Schipani, “In Bolivia, a Force for Change Endures,” The New York Times, December 6, 2009.

 

14. The Economist, “The Explosive Apex of Evo’s Power: Bolivia’s Presidential Election,” December 12, 2009.

 

15. Juan Forero, “Despite Billions in U.S. Aid, Colombia Struggles to Reduce Poverty,” The Washington Post, April 19, 2010; ECLAC, Social Panorama of Latin America, 11–12.

 

16. Forero, “Chile Race Reflects Broad Regional Trend.”

 

17. Alexei Barrionuevo, “Chilean Vote Is another Sign of Latin America’s Fading Political Polarization,” The New York Times, January 20, 2010.

 

18. Jackson Diehl, “Buying Support in Latin America,” op-ed, The Washington Post, September 26, 2005.

 

19. Pérez-Stable, “Chávez Snubs Colombia.”

 

20. Corporación Latinobarómetro, Informe 2008 (Santiago, Chile), 38; Informe 2009, 95–96. For additional analysis, see Kevin Young, “US Policy and Democracy in Latin America: The Latinobarómetro Poll,” ZNet, May 26, 2009, and “The 2009 Latinobarómetro Poll” (blog), ZNet, December 15, 2009. The Latinobarómetro polls, like all polls that I’ve seen, failed to give respondents a third option aside from corporate or state control: that of self-management, in which effective “decision making input” is exercised by each worker, consumer, or other member of the public “in proportion to the degree one is affected” (Robin Hahnel, The ABCs of Political Economy: A Modern Approach [London: Pluto Press, 2002], 40; cf. Michael Albert, Parecon: Life After Capitalism [London: Verso, 2003]).

 

21. See Young, “US Policy and Democracy in Latin America,” n. 1.

 

22. Quotes from C.L. Sulzberger, “When Danger Is Safer than Security,” The New York Times, October 31, 1964. U.S. Assistant Secretary of State Edwin Martin quoted in “Cuba’s Economy Termed a Wreck,” The New York Times, September 21, 1963. The Times editors responded to Martin’s statement with criticism, though not of a moral or legal nature: they argued that “if Cuba’s economy has instead been wrecked by the United States [rather than by the Cuban government’s “mismanagement”], the least we can do is to refrain from boasting about such an accomplishment, which can only cause an unfavorable reaction against us” (emphasis added). The editorial expressed similar misgivings about a report issued by Cuban exiles bragging that “[b]ombings and sabotage by resistance forces have knocked out the water supply in many of Cuba’s cities. The result is epidemics and gastroenteritis and typhoid fever…” See “The Cuban Economy,” September 24, 1963. On internal U.S. policy goals, see below, note 27.

 

23. Charles Eisendrath, “The Bloody End of a Marxist Dream,” Time, September 24, 1973, quoted in Devon Bancroft, “The Chilean Coup and the Failings of the U.S. Media” (unpublished manuscript).

 

24. Joanne Omang, “The Revolution Comes First: The Sandinistas Are Allowing Nicaragua’s Economy to Collapse,” The Washington Post, October 6, 1985.

 

25. Flora Lewis, “One Step Forward,” The New York Times, February 5, 1988.

 

26. Thomas W. Walker, Nicaragua: Living in the Shadow of the Eagle, 4th ed. (Westview Press, 2003 [1981]), 95, 129; William Blum, Killing Hope: U.S. Military and CIA Interventions Since World War II (Common Courage Press, 1995), 302.

 

27. “Hunger, desperation and overthrow of government”: Deputy Assistant Secretary of State for Inter-American Affairs Lester Mallory to Assistant Secretary of State for Inter-American Affairs Roy Rubottom, April 6, 1960, in Foreign Relations of the United States, 1958–1960, vol. VI: Cuba (Washington: US Government Printing Office, 1991), 885. “Make [the] economy scream”: Handwritten notes of CIA director Richard Helms, in “Notes on Meeting With the President on Chile, September 15, 1970,” in Chile and the United States: Declassified Documents relating to the Military Coup, 1970-1976, National Security Archive Electronic Briefing Book no. 8.

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