The Petrostate that was and the petrostate that is, part I

caracaschronicles.blogspot.com By Francisco Toro

I've been wanting to write a longer set of essays exploring some of the deeper reasons for the current crisis. So rather than focusing so narrowly on the here and now, this essay and the next one will try to take a longer-term view of the structural factors that underpin the crisis.

The Petrostate that was and the petrostate that is, part I

Seven years ago I was doing field work for my thesis on the Venezuelan labor movement in Cabimas, a crappy little town in on the eastern shore of Lake Maracaibo. (Apologies to any Cabimians who might be reading this.) One day, I met a bunch of guys playing basketball at a municipal court and thought I'd hang out with them for a while - not that I'm any good at basketball, but I thought they might offer a different perspective on things.

Later, when I told my labor movement buddies what I'd done, they were shocked. "What, you were hanging out with the adeco basketball players? Oh Jesus, did you give them any information?" I was shocked. Adeco basketball players? I'd always heard about how much political parties had penetrated Venezuelan society, but the notion that even the dudes playing basketball had a party affiliation struck me as deeply weird.

Undaunted, I went back to ask them about it. "So, you guys are from AD?" They kind of smiled awkwardly and one of them said, "well, we needed a court and..." He went on to tell me the story about how they'd always wanted a proper court to play in, and money for shoes and balls and uniforms and such. The mayor of the town when this was happening was an Acción Democrática politician, and one of their uncles was a party member, so they asked him for help. The uncle pointed them to their neighborhood party official, and they asked him if he'd press their case with the mayor. The organizer said he would, but told them the mayor would be far more likely to listen to them if they'd sign up to become party members. The bargain was pretty simple - a chunk of the municipal recreation budget in return for joining the party and helping out with election campaigns and get-out-the-vote drives. This didn't strike the guys as such a bad deal, so they signed up, pressed their case, and after a year or so they'd gotten their court built, and a few balls to play with...with the slight inconvenience that the whole town started to think of them as "those adeco basketball players."

I love the anecdote because it encapsulates neatly the entire structure of the Venezuelan petrostate, the old-regime Chávez has built a career out of railing against.

The petrostate trick is to turn oil money into power - control of the state’s oil money into control of the state - in a self-perpetuating cycle. The way you do that is by building a huge web of patron-client relationships.

The party organizer in my little tale was able to use his influence over a small share of the state’s oil money – just enough to build a basketball court - to fund a miniature local patronage network. His clients - the basketball players - would reciprocate on election day...not due to any sort of ideological affinity, but simply to keep their access to his influence over funds open. And he would use his influence over them, his ability to mobilize them for political purposes, to bolster his position in his role as client to the next patron up the line, the mayor.

This basic reciprocal pyramidal system was replicated all throughout the country, in every imaginable sphere of life, from multi-billion dollar infrastructure programs to things as petty as a municipal sports facility. The mayor - who played the role of patron in his relationship with the neighborhood organizer - was in turn client to the next patron up the line, probably the governor of Zulia state. And the governor played client to his higher up, probably a politician or faction within AD's National Executive Committee - the much-feared CEN, after its Spanish acronym. And that politician in turn played client to the party secretary general, or to the president of the republic...one neat string of patron-client relationships running from the dusty backstreets of Cabimas all the way up to the presidential palace in Caracas.

And, of course, a parallel (if somewhat smaller) pyramidal structure existed within Copei, the second largest party, and a much smaller one within MAS, the nominal left-wing party.

This, basically, was the system Chávez was elected to dismantle. By the time the 1998 election came around people resented it acutely and were desperate to see it replaced. But before launching into a (by now redundant) critique of the system, it bears stopping to notice a few of its features.

For one thing, it's important to realize that the system was not totally non-performing - the basketball court did get built. No doubt the funds that made it possible were mercilessly stripped at every step of the ladder from presidential palace to dusty street, but the court did eventually get built and used. So while it was inefficient, bloated, antidemocratic, and everything else, the system was not totally useless - and in its own amoral way, even the corruption served as a rough-and-ready way to spread the oil money around, to make sure its benefits reached many hands, not just a few. In a sense, even the recipients of the final product - the basketball players - were part of the sprawling corruption scheme: it's just that they got paid off for their services in courts and basketball gear rather than cash.

It’s also important to note that the Petrostate is not simply a system of social relations - a huge pyramid linking everone who's on the take - it's also a cultural system, an interlocking set of beliefs, a state of mind. The kids I met had no doubt that if they wanted a basketball court, it was the state's job to build them one - after all, wasn't the country awash in oil money? Insofar as the Petrostate has a culture, that is its founding myth - the notion that the government has so much oil money that it can, and should, bankroll the needs and desires of the entire society.

Within the petrostate mental model that, in fact, is the state's purpose, and governments are to be judged by how well they deliver on that promise. And that's not just me saying it - polls consistently find that over 90% of Venezuelans think this is a rich country, with over 80% calling it - incongruously - "the richest country on earth."

Those beliefs didn't just appear in the popular imagination by accident...the petrostate's founding myth was at the center of the AD political program from the 1950s onward. Rómulo Betancourt wrote at length on the subject. And for a while, the idea worked. So long as the population was relatively small, the state relatively efficient, and the oil money relatively plentiful, a simple redistributive strategy went a long ways.

Throughout the 50s, 60s and into the mid 70s, the petrostate led to a huge improvement in Venezuelans' standards of living. Infrastructure got built, people got jobs, and each generation could reasonably expect to live better than the one before. The country got universal schooling, free universities, hospitals, public housing, sewers, phones, roads, highways, ports, airports, all these signs of modernity decades before other Latin American countries had them. Less tangibly but just as importantly, the petrostate also bankrolled institutions such as paid maternity leave, unemployment benefits, old age pensions, statutory vacation pay, all the way back in the 1960s.

Another key part of the petrostate model that's often overlooked is that by creating this huge patron-client networks, the political parties became big and strong enough to make democracy viable. The web of social relationships created by clientelism - now such a reviled word - were actually healthy for society back then. Those relationships ensured that enough people were socially and emotionally attached to democratic institutions, that enough people felt they had a personal stake in the political system, to keep the whole society stable and democratic. And it worked, the system worked. There were elections every five years, parties routinely and peacefully alternated in power, Venezuela was an island of democracy and stability in a continent torn apart by Marxist insurgents and coup-plotting reactionary generals.

But there was also much to dislike about the model. For one thing, it was built entirely on vertical social linkages, on relationships of dominance and subservience, rather than on the kinds of egalitarian, horizontal links that serve as the backbone of truly vibrant democracies. As Robert Putnam has been arguing for three decades, social systems dominated by vertical, patron-client links are anathema terrible for “social capital,” a fancy term to describe societies marked by a high level of diffuse, generalized trust. Without social capital, it’s difficult to build democratic institutions that ultimately work the way they’re supposed to. In a social system built on dominance/submission relationships, it’s very hard for citizens to come together as citizens, as equals who can deliberate, argue towards a common position on the basis of their ideas rather than their position within a hierarchical structure. So a social system based on patron-client relationships could support democracy in the narrow, formal sense of having an independent media and elections and a diversity of free political parties. But everyday social relations were very far from being democratic and egalitarian – in fact, they were just the opposite.

Now, there are many reasons why the relatively benign clientelism of the 50s and 60s devolved into the kleptocratic lunacy of the 80s and 90s. Corruption is the typical reason cited, but the truth is both more complex and less morally satisfying than that. The real reasons, in my view, have everything to do with the increasing volatility of the world oil market, together with good old demographics. Until 1973, oil traded in a relatively narrow price range, making Venezuela's revenues more or less predictable from one year to the next. The petrostate model worked rather nicely under such conditions.

But starting with the oil embargo in 73 - the oil bust if you're in North America, the oil boom if you're here - the world oil market started to gyrate wildly, making it impossible to plan ahead. With each new boom, huge torrents of petrodollars would pour into the Venezuelan economy, only to be followed by busts that were just as marked and unexpected.

This boom and bust cycle was destructive on a number of counts. From a merely macroeconomic point of view, it's clear that economies don't do well under that sort of instability. More destructive than the market cycle itself, though, was the chronic government mismanagement of the cycle. The politicos seemed to believe that high prices would last forever, and so they would take out huge new debts even as money poured in at record rates. When prices fell, the boom-time excess would only fuel increasingly acute recessions, made all the worse by the new debt burden that had to be financed.

But the most pernicious effects were cultural rather than economic. The huge influx of oil dollars in the 70s shifted public morals in this country. Amidst the abundance of oil dollars, graft became accepted in a way it had never been before. The perception was that only a pendejo, a simpleton, would miss out on the opportunities for easy riches that proliferated in those days for the well-connected. This culture of easy-going racketeering, of matter-of-fact robbery, penetrated deep into the Venezuelan psyche.

At the same time, population growth was diluting the oil wealth among a bigger and bigger pool of recipients, making the notion of petrodollar-funded prosperity for all ever less feasible from a purely arithmetical point of view. Today, state oil revenue works out to about $1.35 per person per day. Even if the state redistributed all its oil rents in cash equally to everyone, most Venezuelans would not stop being poor.

By the late 1980s, the system had broken down irretrievably. Even if the politicians of the day had been a gaggle of angels gifted with Prussian administrative efficiency, there just wasn't enough oil money to go around. But the politicians were anything but angels - and the habits of graft had become so ingrained they wouldn't let them go, even when oil prices were low.

Beyond the purely financial incentives, though, patrons at every level became deeply enamored of power, of political power, social power, the power and prestige that came from having clients, from being a "big man" in town, a cacique, someone of prestige and authority and influence, someone who gets to boss underlings around.

This infatuation with interpersonal dominance made the entire system exceedingly difficult to reform, and particularly deaf to calls for reform from the outside. Never particularly suited to ideological debate, the system became ossified completely...power itself became its only ideology. The drive to amass more of it, to climb higher in the pyramid, to gain access to ever more lucrative hotbeds of corruption - these preoccupations came to dominate the political system entirely. And as they did, regular people's resentment at the petrostate model became ever stronger, though very few within the state seemed to recognize that.

So the late 1980s were a critical moment in the country's history. Venezuela needed massive reform, it needed to reinvent itself, it needed to leave behind a hopelessly outmoded model of governance, a model that was well beyond its sell-by date, and find a way to integrate itself into the world economy, shedding its reliance on oil, not just as a source of money, but as lynchpin of its socio-political and cultural systems. It needed to ditch clientelism, reinvent social relations at every level, pry apart the networks of client-patron relations that had defined its interpersonal relations for so long. Venezuelans needed to learn to come together as equal, in horizontal rather than vertical social structures, structures that allowed for the creation of social capital and an egalitarian model of interpersonal relationships. And they needed to ditch the notion that the state could bankroll everyone's way of life just by distributing the oil money. They needed to invent a whole new idea of the state from scratch, to create a new state that would help citizens create wealth instead of distributing it to them...a radical notion for the times. What the country needed was nothing short of a total rethink of society, the state, and the relationship between the two: a very tall order.

And we failed.

That failure, in essence, in the reason Hugo Chávez is in power today. His political success is the inevitable logical outcome of our inability to reform petrostate model. posted by Francisco Toro | 10:00 PM