It's Corruption, Not Socialism, That Brought Down Venezuela

Four scholars explain why the failure of Venezuela is due to corruption—not to universal health care.
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On March 12th, 2019, a woman cooks dinner at her house during a blackout, which affects the water pumps, in Caracas, Venezuela. Over 70 percent of the country was in darkness amid an ongoing political dispute between President Nicolas Maduro and Juan Guaido, who has been declared interim president by the national assembly.

On March 12th, 2019, a woman cooks dinner at her house during a blackout, which affects the water pumps, in Caracas, Venezuela. Over 70 percent of the country was in darkness amid an ongoing political dispute between President Nicolas Maduro and Juan Guaido, who has been declared interim president by the national assembly.

These days it seems you can't talk about socialism without being required to talk also about Venezuela—largely because certain people on the right bring up the failures of Venezuela every time the word "socialism" appears. Right-wing pundits claim incessantly that socialist policies are to blame for the terrible conditions that Venezuelans are now living through.

But this story is fundamentally false.

"It's a cheap rhetorical tactic," says James Galbraith, professor of economics at the University of Texas–Austin.

"No serious person makes this argument," says Richard D. Wolff, professor emeritus in economics at the University of Massachusetts–Amherst.

There are many reasons why Venezuela failed in the way that it did. But it certainly wasn't because Venezuelans got free health care. An over-reliance on oil exports in the years before oil prices plummeted in 2016 was a partial cause of the crisis. Intervention by the United States is another important part of it. Most crucially, it was a government rife with corruption that shattered Venezuela.

"What socialist policy failed in Venezuela?" Noam Chomsky asks me rhetorically. "The policies of allowing virtually free rein to capital for enrichment?"

Anat Admati, a professor of economics and finance at Stanford University, tells me that corruption can devastate any country. Regardless of the ideology that inspires your economic policies, Admati says, if there's too much corruption, the country will fail.

"Both capitalism and socialism can be corrupt," Admati says.

Unfortunately for Americans, the current U.S. presidential administration has established historic levels of corruption. There is nepotism everywhere you look. The people who are supposed to regulate industries are very often representatives of those industries. President Donald Trump is using his position to enrich himself and his family on a daily basis.

The list goes on and on. Corruption, not socialism, is the malignant tumor on democracy worldwide—in Venezuela, yes, but also here at home.

In the past, other largely capitalist countries have experienced the destruction and social breakdown that accompanies corruption and a lack of popular control over industry. Honduras, Haiti, and Guatemala offer clear examples of this reality. Galbraith notes that you can compare these three countries to socialist Cuba using nearly any indicator—education, life expectancy, or whatever else—and find that Cuba is doing better. Cuba is hardly free of corruption, of course, but it's worth noting that Cubans find themselves better off than citizens in these other, non-socialist nations in Latin America.

American linguist, philosopher, and political activist Noam Chomsky delivers a talk at the National Autonomous University of Mexico on September 21st, 2009, in Mexico City.

American linguist, philosopher, and political activist Noam Chomsky delivers a talk at the National Autonomous University of Mexico on September 21st, 2009, in Mexico City.

The U.S., meanwhile, is not, by any measure, a purely capitalist country. Galbraith notes that capitalism in America has faced many crises, such as the Great Depression and the more recent Great Recession. In each case, but much more significantly after the Great Depression, we did what we had to do to restrict industry and have responded to those crises, in part, by adopting arguably socialist policies. As many observers have noted, Social Security and Medicare certainly are not capitalist programs. The bank regulations passed after the Great Depression and Great Recession, which were designed to rein in the financial-services industry, are also not in line with an entirely free market.

"Capitalism can work if the rules are well-designed and effective," Admati says. Further, she rejects the notion that Milton Friedman's ideal of "a free competitive market without deception and fraud" can ever arise, or endure, in nature. Governments must create the rules of the game because markets often fail to produce efficient outcomes, let alone just ones. People and companies acting in their own interest can cause significant harm, Admati says, if governments fail to do their job on behalf of citizens.

The U.S. economy "in no way resembles the almost purely capitalist economy that existed before the 1930s, which collapsed," Galbraith says, adding that no successful economy in the world resembles the American model of capitalism that existed in the 1920s.

Chomsky says that paranoia over leftist policies in America is overblown; he doesn't think Senator Bernie Sanders' proposals "would have surprised [Dwight] Eisenhower." Explaining why social-welfare policies popular in the mid-century are now branded as dangerous socialism, Chomsky says there's been "a serious regression" in fiscal ideology since the 1950s. During Eisenhower's presidency, as many have noted, the top marginal tax rate was over 90 percent.

"Both parties have moved far to the right during the neoliberal period, so New Deal-style policies, many quite familiar in other developed societies, look radical," Chomsky says.

Politicians like Sanders will often refer to Nordic countries like Denmark, Sweden, and Finland in defending their proposals. These Scandinavian social democracies offer things like free college tuition, universal health care, and other programs that help everyone, including the working class. The people in these countries tend to be happier than Americans.

"These countries tend to understand better where markets fail," Admati says. "They also believe in much more transparency, which helps reduce abuse of power. Here [in America] there is a more individualistic culture and more opacity, which can breed abuses of power."

According to these observers, Americans who support capitalism would do well to start addressing the vast and deepening income inequality we see in this country. The longer it goes unaddressed, the more likely it is that we'll see bigger problems than the ones we're already facing. Significant inequality breeds unrest and dysfunction.

"Every society that wants to survive over an extended period of time has to keep its levels of inequality under control," Galbraith says. "There's a very close relationship between inequality and instability. A rise in inequality is generally a sign that you're heading for trouble."

At least some wealthy people are concerned about what might happen if we don't address income inequality: A group that formed in 2010, called the Patriotic Millionaires, is lobbying for higher taxes on the rich, giving the working class more political power, and other policies to reduce inequality. With so many people joking about guillotines and "eating the rich," you can't blame them for being worried.

Adopting a few more social-welfare policies to combat inequality will not doom America to the fate of Venezuela—but more corruption could bring us closer to that calamity. Properly implemented, these policies would make America look more like the previously mentioned Nordic nations. If Americans have anything to fear, it's not Karl Marx hiding under their bed waiting to surprise them with free health care; it's the influence of money in politics.

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