Tuesday, July 28, 2020

WILL THE U.S. BECOME VENEZUELA? (the writing on the wall)

On February 4th 1992, the president of Venezuela was nearly assassinated. For the previous two years the president had been struggling against his party, dinosaur politicians and entrenched economic interests, to bring Venezuela into a market economy; to transform the centralized command economy of the past 30 years that was driving the country into financial ruin.

To get rid of President Carlos Andrés Pérez (known popularly as CAP), a few generals and business leaders had put up a patsy to assassinate him in an attempted coup so they could then launch a counter coup to “rescue democracy” restore order and eliminate the patsy. This patsy was chosen because of his misguided ambition, open disdain for democracy, oratory skills and charm; not for his military prowess. It was by that lack of prowess that he failed miserably in the primary objective, assassination, throwing askew all the original plans. President Pérez ordered Lt. Colonel Hugo Chávez arrested and tried, as befits in a country ruled by laws, but the populist spark was lit and the “failure” of his government blamed for the conditions leading to the coup was used politically to lead the country down a path of increased populist fervor. CAP was finally dropped by his own party and impeached. Ensuing events led to the ascendancy of Hugo Chávez to the presidency, under the convenient banner of “socialism,” which would net him an estimated fortune of $1 Billion by the time of his death while he was, effectively, president for life (I document all of this in more detail in one of my books, “La Venezuela Imposible”).

Why should Americans care? What does this have to do with the electoral cycle of 2020? It is critical to understand that what led to the events described above was not a conflict between capitalism and communism or socialism. It was a conflict between leading a country as a market economy or leading it as a command economy. Transforming a country from the legacy systems of monarchies and autocracies to a country embracing a system from the Age of Enlightenment. The reaction against this attempted change led Venezuela to be among the world’s first elected populist autocracies, a new ruling model recognized now as a precursor to modern illiberalism.


In 1948 the victors of the most devastating war the world has ever known had to reconstruct it, and two models of economic development were at the table, so to speak. As the least scarred nation, the U.S. supplied many of the goods needed and offered its economic development model, racking up a trade surplus which was reinvested around the world as U.S. based multinational corporations boomed.

The opposing economic model offered, communism, attracted many thinkers indulging in its promise of a just society, quicker and more effectively than the contrasting model promoted by the U.S., capitalism. The first model relies on central planning by an elite group of leaders that believe they know and have more information than anyone else and are able to manipulate the production levers of society to make it better. Call it a “Type-A” model, seeking more and more control in order to achieve its goals. The second model is not as satisfying to those who want to control outcomes, because it believes that individual initiatives and behavior will lead to an aggregate of better, spontaneous outcomes for society; and you can’t really predict individual behavior. Call it a “Type-B” model.

As the world sifted the ashes of war, an economist partial to the Type-A model became influential in one of the main organizations focused on Latin America: The U.N. Economic Commission for Latin America and the Caribbean, known in the region as CEPAL. Raúl Prebisch was a promoter of the idea of Import Substitution Industrialization (ISI): placing tariffs on imported goods to promote and protect local industry and create well-paying jobs. A need to choose industries (and companies) follows by the nature of this model, leading to an executive department, the “Promotion Ministry/Office,” most often a cabinet level position with control and influence over the economy; five year development plans with fantastic names ensue. The idea is that the executive knows better and can plan the economy from its vantage point as the leader of the country. Influence peddling, smuggling networks and rampant corruption sprout left and right– as well as a concentration of extremely rich oligarchies well connected to a government protecting the monopoly power of the chosen ones. The consequences are explosive growth of income inequality and economic stagnation, as opportunity is stifled and innovation withers.

The Type-B model, with its foundation on capitalism, has as its primary driver the force of renewal and innovation. Joseph Schumpeter called it “creative destruction” more popularly known as “out with the old, in with the new.” Friedrich Hayek compared a market capable of such creativity as a super computer more efficient than any single human mind, much less a collective of minds in a bubble. This penchant for renewal makes the Type-B model more conducive to democracy, which is also a mechanism of elite renewal at its ideal best. As I wrote in a new introduction to a Brazilian edition of “The Latin Americans: Their Love-Hate Relationship with the United States” (written by my father, Carlos Rangel), capitalism is the economic manifestation of democracy, while mercantilism (command economies led by autocrats) is the economic manifestation of totalitarianism.

But renewal goes against most people’s self-preservation instincts. No one wants to get “renewed.” That is why capitalism as well as democracy are constantly distorted, fragile and in peril. Entrenched political leaders and entrenched economic interests want to stay entrenched. If they are powerful enough they will do so. Power sees democracy as a threat and the more powerful, the more it will do anything to self-preserve by stifling innovation and opportunity to potential future rivals. Markets dominated by oligarchs and tycoons, ever more powerful as they reach worldwide, want to ensure that domination continues. No renewal or innovation needed here, we know what is best for you.

In Venezuela, CAP was an old style, chicken in every pot, populist. President for two terms, but with ten years in between, in his first term he nationalized industries, such as iron and oil, and promoted many civil construction and infrastructure projects. His charismatic leadership concentrated even more power in the presidency. His profligate deficit spending increased the per capita GDP substantially, creating a sense of bonanza; but his most significant lasting investment was in education, the foundation of opportunity and innovation, including sponsoring bright youths to study abroad. By the time he was reelected (a period known as “CAP II”), the populist/command policies he had fueled in his first term had led the country to the brink of economic disaster. He realized the errors of his populist past and tried to rectify. With the help of the new generation of foreign trained professionals that his education programs had fostered, he started to dismantle command economy structures, such as subsidies, tariffs, price and wage controls, centralized/big government, etc. And with such dismantling, the protections to powerful figures in politics and the economy. This would lead to his attempted assassination and political demise.


Venezuela is not the only country to be destroyed by populism and command economy principles. In the U.S. this is a present threat, which comes from the most unexpected source: Donald J. Trump. Trump uses as a model for governance his experience as the tycoon of a privately held company focused on win-lose propositions – a command structure. Trump’s economic policies embrace Import Substitution Industrialization as a way to “bring jobs back to America;” apply industrial policy to protect and subsidize industries such as fossil fuels and steel, as well as agriculture—in blatant populists ploys; and seek to concentrate unaccountable power in the federal executive so as to deepen the command structure. Trump rules with the A-Type model and uses the populist authoritarian playbook to do so.

A common trait of a populist is self-identification with “his people” leading to phrases such as “El pueblo soy yo” (“I am the people”) affirmed in different variations by AMLO, Chávez, and Fidel, to infer that opposition to the leader is antipatriotic opposition to the country, a common assertion we see in Trump and his supporters. Of course this comes directly from the sense of entitlement of powerful monarchs of mercantile economies, such as Louis the XIV, the Sun King: “L’Etát c’est moi.” And if the leader is the people, what benefits the leader benefits the people – the rationale for self-centered corruption.

By revolving around a command economy to preserve and protect entrenched political and economic power (whether of existing or new elites in power through “revolution”), populism uses the tools of government to do just that. This includes bending rules, violating civil liberties and cronyism, as well as discrediting or censoring any information that may shed a negative light on the administration and its allies. Control and distortion of information is a key way to consolidate power. Attacks on the press and journalists, either physical or reputational, become a frequent tool of command economies seeking to concentrate power. As far back as 1859, John Stuart Mills argued liberty of the press as a fundamental check against tyrants. Any leader in power that continuously rails against the media as its enemy is suspect of aspiring tyranny. Of course, particular members of the press can be relentless in their attacks against a leader they dislike, but blanket and consistent attacks by a government against the right to have an informed citizenry are signs of tyranny.

In Venezuela during CAP II the press ran rampant with attacks against the president, sowing the eventual coup and rise of Chávez. The lack of an ample relationship of mutual respect and trust was part of the problem, but CAP’s intention to change the command economy into a market economy fueled the animosity driving such attacks. Even so, his government did not attack members of the press in the manner of oppressive tyrannies. Certainly not in the way Chávez would later, choking it economically, accusing it of lying, inciting persecution of journalists, crowding out information airwaves, and outright closing of media outlets. Not to mention sponsoring propaganda and partisan outlets to spread the government’s view on its enemies: an opposition by “scrawnies” intent on nullifying the regime.

Populism relies on grievances, offering a redress to those grievances by scapegoating a perceived weak group which is blamed for the people’s woes. It is based on a sectarian mindset that feeds animosity. In an interview I gave to the Brazilian magazine Crusoé, I exemplify this common trait between populists in Venezuela, Cuba, México and Bolivia where the president’s opponents are branded to cleave society as escuálidos (scrawnies), gusanos (worms), fifís (fussies) and colonialistas internos (internal colonialists). Such labeling to dehumanize the opposition and separate it from the mainstream has its lexicon cousin in ethnic and anti-Semitic epithets, and feeds on the same base emotions. The Chávez regime was eventually successful in making "adeco," the name given to those affiliated to President Pérez's party (Accion Democrática), into a common slur.


Two more alarming indicators of populist “democratic” tyrannies are attacks on civil liberties and on the right to vote. Democratic institutions strive on free speech, and free speech includes protest marches. It is inherently democratic to have marches protesting against policies or leaders. Freedom of the press, freedom of speech and freedom of assembly lead eventually to free opinions in a ballot box. Thus, because voting is in essence a form of free speech, the former is a consequence of the latter. It is the role of a democratic government to protect peaceful protests from opportunistic individuals who may take advantage of a difficult-to-control situation for personal gain. It is not the role of a democratic government to suppress peaceful protests; its role is to protect them. Protecting peaceful protests is as important as protecting the right to vote. Suppression is what the regime has been doing in Venezuela since 2002, and unfortunately seems to be occurring here now, in the U.S.

In addition to unlawfully suppressing protest, the threats, harassment and outright jailing of perceived enemies or “disloyals” is a chilling aspect of tyrannical power. The retaliatory jailing of Michael Cohen, because he is writing a “tell-all” book about his relationship with the president, is a clear example. By the same token, the treatment of Roger Stone and Michael Flynn by the president and the DOJ is a challenge from the rule of men to the rule of law.

Finally, the rise of private militia and mercenary groups is a telltale indicator of a burgeoning populist tyranny. To circumvent the established rule of law, populist governments will use the emotional force of sown grievance to raise and encourage armed and repressive groups to intimidate and attack the populist leader’s targets. In Venezuela these were called the “colectivos.” In the U.S. they are sometimes called “very fine people” exercising their gun rights inside State Houses, for example.

The reported use of mercenary forces in the escalating repression of protesters in cities around our country is disturbing if true. But just the blatant use of federal forces to suppress local problems is problematic in itself. Federalizing repression, taking away the local control by local police forces, was one of the first things Hugo Chávez did, with the assistance of mercenary forces from Cuba, after massive protests against him in 2002. Let us hope that “Operation Legend” is not such an attempt – and that it is not a dress rehearsal for potentially violent voter suppression or results dispute in November.


Apostle Matthew says “a city set on a hill cannot be hidden” (5:14, Sermon of the Mount). In 1630, the pilgrim John Winthrop used the image from that verse in a speech on a boat’s deck to his fellow settlers as a foundational ideal for the New World they were sailing towards: “wee shall be as a Citty upon a Hill, the eies of all people are uppon us.” With all eyes upon that city, the new colony should be humble before those of God or risk His wrath and be doomed to oblivion. In 1961, J.F. Kennedy used Winthrop’s words as a call for self-aware responsibility in government: “Today the eyes of all people are truly upon us--and our governments, in every branch, at every level, national, state and local, must be as a city upon a hill--constructed and inhabited by men aware of their great trust and their great responsibilities,” a view of a public servant in a democracy (listen here). But it was Reagan who used those words to usher in the idea of American Exceptionalism by adding the word “shining” and frequently during his presidency alluding to that image of the Shining City, all the way up to his farewell address:

“I've spoken of the shining city [upon the hill] all my political life, but I don't know if I ever quite communicated what I saw when I said it. But in my mind, it was a tall proud city built on rocks stronger than oceans, windswept, God blessed, and teeming with people of all kinds living in harmony and peace - a city with free ports that hummed with commerce and creativity, and if there had to be city walls, the walls had doors, and the doors were open to anyone with the will and the heart to get here.”

I have lived and observed the transformation of Venezuela into a nation ravaged by gaping inequality, crushed opportunity, misery and lawlessness. In 1992 I saw the signs of the creeping acceptance of totalitarianism which would lead to that condition and tried to warn anyone who would listen about the instincts of Chávez and his supporters –but a frog cannot feel the rising temperature of the water until it is too late. I do not like what I have been seeing for the last few years in the United States. The core values of this country are fighting against the challenges of illiberalism and totalitarian forces, especially after the populist spark lit during the 2016 campaign. It is possible that on November 3rd the electorate will deliver a temporary answer and reprieve, but the dark forces are relentless and capitalism and democracy are always under attack. After 1992 it took 10 years for Venezuela to realize it was late in the game in this fight. The following 18 years brought that country to its current condition. November 3rd will not be the end of the fight to restore the Shining City. It will mark the beginning.

Image credit: budastock

No comments:


We celebrated in a recent event held to commemorate the 75 th anniversary of the adoption by the United Nations of the Universal Declaratio...