No, Maduro Did Not Become A Capitalist When He Turned Into A Dictator – OpEd

By Marcos Falcone

In recent months, Venezuela has been in the world’s spotlight, unfortunately for bad reasons. Despite international pressure, dictator Nicolás Maduro refused to concede even after it became clear he lost the presidential election on July 29 by over a 30-point margin. He went so far as allegedly forcing his rival, Edmundo González Urrutia, to sign a letter granting Maduro the victory as a condition of his escape to exile in Spain.

Maduro’s rejection at the ballot box has baffled socialists and other supporters of the regime, as the country had been repeatedly hailed as a model for the rest of the world. In that context, some on the American left have suggested that the reason behind Maduro’s failure is not his socialist policies, but rather the fact that he somehow “turned capitalist” in recent years. Spoiler alert: He didn’t.

Right before the election, Socialist Alternative claimed that “capitalist relations” were intact in Venezuela, which would supposedly explain the country’s dire economic situation. The idea went mainstream on the left. In fact, a piece that appeared in the New York Times right after the election read: “In recent years, the socialist model has given way to brutal capitalism, economists say, with a small state-connected minority controlling much of the nation’s wealth.”

What could possibly make anyone think that Maduro, who is the leader of the Socialist Party of Venezuela and publicly upholds socialism for the world to see, has embraced free-market capitalism? This confusion is rooted in two elements: the rise of crony capitalism, which is intrinsically linked to socialist policies, and partial dollarization, which the Maduro regime has been smart enough to allow in order to counter the disastrous consequences of its own administration.

Socialism inevitably involves central planning. However, as both Mises and Hayek explained during the early 20th century, centrally planned economies are doomed to fail. Why? Fully embracing socialism means that the state must take ownership of everything that is to be owned, but doing so eliminates private property and thus markets. The problem is that, because markets convey information to people through prices, nobody knows what is abundant or scarce any longer. If nothing is to be traded and everything is state-owned, how can we be certain that building a bridge out of concrete will be cheaper than using gold? The only way to keep such an economy afloat is by looking at other contexts where prices still exist for guidance, like black markets.

In Venezuela, both crony capitalism and dollarization have mitigated what would have been a total collapse of the economy if the government had just seized all private property. Crony capitalists have emerged because the government elite want to keep their luxurious lifestyle and the rest of the people still need to get fed, so someone has to provide for that. And since the rules imposed by the government make it impossible to run a successful business legally, the regime simply looks the other way while it helps its friends get rich and others barely survive. Just like the Cuban regime learned, tolerating black markets can save an authoritarian regime from total collapse.

Similarly, dollarization is the method through which ordinary Venezuelans avoid the tyranny of the bolívar, the currency printed by the government even after the hyperinflation it caused between 2016 and 2021. It is illegal in Venezuela to trade in dollars, but supermarkets and many other businesses throughout the country do it anyway. If they did not, and if they were forced to use a currency that constantly loses value, they would not trade at all. In this case, the government also looks the other way.

But neither the existence of crony capitalism nor the limited dollarization process means that Venezuela has liberalized its economy. On the contrary, the country is still closed to business both within its borders and abroad. Venezuela is ranked 165th on the Fraser Institute’s Economic Freedom of the World Index, the lowest of all countries measured. The free competition that characterizes free-market capitalism is still nowhere to be found in the Venezuelan economy, and private property continues to exist in name only. In this context, the death of the Venezuelan democracy is unsurprising. All the power lies in the Maduro regime, and no one can counter it.

By looking the other way after destroying Venezuela’s economy, the only thing that the Maduro regime has achieved is to stop the collapse it provoked. The government has been smart enough to understand that the logical consequences of its policies would have caused it to lose the few voters it still retains, but neither Maduro nor his regime has turned capitalist. They despise free markets just as much as they always have.

• About the author: Marcos holds an MA in Social Sciences from the University of Chicago and a BA in Political Science from Torcuato di Tella University.
• Source: This article was published by FEE