The Weakening of the Venezuelan State (1920-1999). Economic Absorption and State Model before Chavez


Daniel Castro Aniyar, PhD

Israel Cruz Marte, PhD

1. The State Understood as Relation.

Although it is possible to perceive in this paper some overlap with the idea of state and pluralism according to Robert Dahl, the idea of State developed here is strategic-relational in accordance with the writings of Robert Jessop (Jessop 2008; Jessop, 2009).

Jessop reexamines the critiques of the reification of the State, primarily Prussian, that pit Marx against Hegel. Marx tries to relocate the State in its historical context and as a product of the relationships between subjects. As such, the State as the Capital, “is not a thing, but a social relation between persons, established by the instrumentality of things” (Marx, 1867 in Jessop, 2009:56).

The relational State supposes that what we know as a State depends on “ambiguous” links between all types of organizations that surround it. The more cohesive its internal environment, the more the State is dependent on its micro-political practices. Its nature depends on its social and historic training. Its legitimacy is in constant transformation, so that the hegemonic and anti-hegemonic discourses become the cornerstone for political practices, where violence is rarely useful and often counterproductive (Jessop, 2009:11).

Understood in this way, the relational State is not an object outside of societal relations that can give the illusion of having a “strong” or “weak” government. Rather, it is a tributary of interdependent forces within its society that historically permit the existence of stability and legitimacy.

This article examines the problems of interdependence caused by the economy and political practices that weakened Venezuela´s social fabric before Chavez, often in the name of the State itself. It will be shown how the enormous oil revenues and the Venezuelan government’s commitments to maintain, increase and administer those revenues provoked the conditions leading to the dissolution of the relational fabric of the State.

2. The Relationship between the State and Oil in Venezuela.

“To live the present we must constantly change the past.
The past is our present imagination.”
-Immanuel Wallerstein

As is the case in most of Latin America, the process of republican modernization in Venezuela has fueled the dependence on one or more export products that provide resources to the State but prevent the development of society as a whole.

It seems to be the consensus that the single-product model establishes an uneven playing field and growth conditions that promote the productive elite and other types of vertical power structures self-contained and relatively isolated from the rest of society by culture, family, economy and even legal (Karl, 1997; Coronil, 1997, Malamud, 1999; Sosa Barajas, 2002, etc). There also seems to be a consensus that possession of significant natural resources can negatively affect growth (Amin, 1974; Karl, 1997; García Larralde, 2005).

With the government of Juan Vicente Gomez in the early twentieth century, oil became the backbone of the Venezuelan economy. Since then, oil has given the impression of making a difference when compared to the experiences of other countries in Latin America.

Unlike coffee and cocoa in Venezuela’s economic past, oil is public property and does not belong to the private sector. Agreements made between the State and large multinational corporations during the 1940s channeled the resources derived from oil-related economic activity directly into the hands of the State, thus creating a complicated situation.

Hence it was the State that held in its hands the power to make all decisions regarding oil, such as the resources created by oil activity. It was the State that, at first, served as licensor/concessioner between production and the market. Then it went on to serve as production co-player, and later, after nationalization, it served as the only formal productive player. The whole political and economic subsystem became increasingly focused on the Venezuelan political class’ ability to manage the resource.

The nature of the State, different from the elites in civil society, allowed the premature channeling of democratic transformations and fomented liberal participation by civil society. It was in this way that Venezuela would explore, prematurely for the region, ideas that were all linked to the expansion of public space, from grassroots development to forms of socialism.

The liberal State is susceptible to civic participation, the pressure of political parties, transnational elites, “excluded masses”, social corporations, etc … In Venezuela’s case, where the State very early in its modernization process assumed the roles of regulatory actor and economic actor (both as judge and as part of the economy), government control allowed important access of the civil society to the national political system.

It is in this context that the ability of State – from its leaders, to its parties, officials and institutions-, to provide benefits for the social sectors corresponds to the same ability to provide and create the conditions for government’s political dominance.

We propose that the State´s weakening is the result of political and economical models created as a consequence of the peripheral role of the Venezuelan economy. While oil revenues became bigger than the economy´s ability to absorb them, oil stopped being the pipeline of development and became the source of the State´s weakening. In fact, the Venezuelan government´s expenditures from 1973 to 1999 didn´t strengthen the State, relationally understood, but instead empowered conjunctural political models, which are called in this paper governability pacts.

3. The Venezuelan State, from Colonial Times to the Republic.

The aim of this section is to consider the weak foundations the Venezuelan State was built upon, before the advent of oil.

Carrera Damas suggests that the problem of “political and social disintegration and integration” in Spanish American societies can be blamed on nineteenth-century Latin American thought itself. A problem such as this has its roots in the colony, extends to the twentieth century and “relates… to the period that begins with the breaking of colonial ties, the initial formulation of the national project and the resulting displacement of the internal power structure “(Carrera Damas, 1986:12).

The author avoids talk of independence. Instead he uses the term “breaking of colonial ties” in order to discredit the local historiography that has always insisted, without rigorous proof, that “Venezuelans were patriots before there was a Venezuela”. Quite to the contrary, “the break” would be better described as the result of political forces that surpassed the American oligarchies:

“… Most of the Creoles (natives) fought for fourteen years, and until they could not anymore, in defense of the King, many preferring exile to living under the Republic and harboring monarchical dreams until the end of the century “(Carrera Damas, 1986:13).

For Carrera Damas and other authors, such an adherence to the King cannot be explained by the existence of two opposite models – the revolutionary and the monarchist. It is explained by a very specific situation that existed from the early nineteenth century: the absence of a solid colonial power as a result of the Spanish economic crisis and the French Invasion (Carrera Damas, 1986:13; Vallenilla Lanz, 2004; Arráiz Lucca, 2010; Calzadilla in Asamblea Nacional, 2010).

During a prolonged crisis of the monarchy (understood as the absence of metropolitan power), and influenced by slaves and mulattos’ desire for equality, the ruling classes “… were guided to an autonomic determination that culminated in the breaking of colonial ties “(Carrera Damas, 1986:14).

Seen this way, the national project that emerged from the break would be more than a new political model that seeks to overcome the Spanish domination. It would be a response to the power vacuum underscored by problems related to socioeconomic exploitation.

There were two ideas in the “marketplace for forms of social political organization… the monarchy and the American republic “(Carrera Damas, 1986:14). So the ruling classes used the symbolic energy still emanating from the Revolution and the Republic to legitimize a national project.

Brito Figueroa describes the economic context that would give body to the existence of a nation as a materially sustainable project:

“In the Spanish colonial period, integrated social and political elements of Venezuela were developed and formed, and considered to be a stable community bound by land, socio-economic life and a common language”… “However”… “dominant sources of wealth had not matured into a national economic enterprise. This indicates that for the 18th century, just as the introduction of livestock by the Welsers, there were required production costs that were not worth the effort” (Brito Figueroa, 1972:2).

The arrival of slaves and the increase of their traffic by British vessels (which made ports like Liverpool prosperous and famous) stimulated the production of cocoa, developed the merchant sector and financed the colonial regime. Slave trafficking itself was an important underground business declared illegal in Europe but practiced and tolerated in this region of the Americas or Dutch, British, Spanish and Creole interests and the Guipúzcoa Company itself (Brito Figueroa, 1972:75).

These conditions developed the character of a colonial structure that was highly dependent on the port and on smuggling. They impeded the foundations for a more modern, centralized system on which to build a nation that would be articulated inwardly both economically and politically (Brito Figueroa, 1972:99).

Caracas was not yet predominant in the country’s design when colonial ties were severed. The absence of a center, or, “of a significant network of currents of goods and people that interconnected the provinces, and aided geographic factors of isolation, led to the recovery of provincial autonomy” (Carrera Damas, 1986:15).

As the power structure was weak, social structures were dislocated “by the overflow of social conflicts with dominated classes” (Carrera Damas, 1986:16). The idea of “nation” replaced, with much difficulty, the ideas of a King and religion as a source of hegemonic cohesion over a disintegrated economic and social structure.

Warlords –caudillos- subjected Venezuela to a persistent civil war until they achieved a lasting social pact, the Treaty of Coche and the Constitution of 1864, 34 years after the national foundation, and after the bloody Federal War.

So, the breaking of colonial ties from 1810-1811, and the consequent emergence of the Venezuelan nation after the breakup of Grand Colombia in 1830, was “the frustrating experience of a transient politician… who thought all was possible in an orderly and peaceful fashion, but that once unleashed is overburdened with its furies and even with its warmest spirits” (Carrera Damas, 1986:18).

According to Carrera Damas, Gomez allowed the emergence of an oil industry, the capitalist world market entry into Venezuela and thereby the foundations of a modern State (Carrera Damas, 1986:29).

Understood this way, Carrera Damas gives extreme importance to the maturity of the social, political and economic forces from which the social fabric is constructed, and not the simple authority of the government. Only this fabric makes it possible to create the perceptual and sociopolitical resources necessary to generate the legitimacy of the State. From there, it is important to understand the Gomecista State as a generator of the first fabric of the modern State.

4. Oil Brings no Economic Diseases (1920-1956).

Even though there had already been production of asphalt, brought from the State of Tachira beginning in 1878, the real start of the oil industry began in 1917 under the rule of Juan Vicente Gómez (1908-1935). At this time, production amounted to 21,194 tons per year. It continued to climb up significantly to 4 million tons in 1926, then 15 million tons. in 1928 (Bethell, 2000). As a matter of convention, the Hydrocarbons Law of 1920 is seen as the beginning of the oil era in Venezuela because it establishes the State’s legal control over production (Mommer 1990:167). Production continued to rise for many decades because of the automobile boom that defined American capitalism, and because Venezuelan oil became a key agent in the strategic victory of North America in the Pacific.

Gomez was witness to and co-architect of the transformation of Venezuela from coffee producer to oil producer, and, along with generous oil concessions to the Americans, British and Dutch eventually making her the first exporter of petroleum, with 8% of the world’s production (Bethell, 2000: 326).

Carrera Damas (1983) called Gomez a “rural bourgeois” who kept meticulous accounts, prioritized the payment of foreign debts, opposed foreign loans, provided infrastructure, moved in small personal power circles, and engaged in the persecution and cruel treatment of his political opponents (from regional leaders to leaders of the so-called “28’s generation”, the country’s future political class). It is for this these reasons that historian Manuel Caballero (1993) called him “the liberal tyrant.”

In this way, Venezuela entered into one of the first expressions of the modern State: the appearance of a unified army, an interconnected financial system, healthy debt, productive infrastructures, and hegemonic social classes in the shadow of the important foreign sector. Venezuela became a State economically sustained by capitalist production methods integrated with modern world markets.

Before dying, Gomez appointed as his successor (drawn from the most illustrious ranks, and in the context of a new oligarchy created in his shadow) General Eleazar Lopez Contreras. The latter began the process of modernization of the State channels of participation through the first general call for elections and the legalization of the Communist Party of Venezuela. The opening of this public space allowed new political processes until, at least, 1999.

Caballero (1993) and Carrera Damas (1983), although ideologically very different, agree that the Gomecista and post-Gomecista periods were marked by the emergence of new social fabrics that transformed Venezuelan society and its relationship with the State from the point of the new productive context.

Until the period between 1943 and 1945, multinationals and concessions for petroleum dealers were left with large surpluses of exploited oil. The process of negotiation for oil utilities accelerated State control over the resource beginning in 1945.

During no part of this process, from the 20’s until at least 1956, was it possible to identify the inability of society to absorb the wealth generated by the country. Perez Alfonzo thought that the first signs of inabsorption of the oil revenues emerged in 1957 as an important factor in Perez Jimenez’ fall from power (Perez Alfonzo, 1976). According to Garcia Larralde, oil revenues consistently elevated non-oil national income until the early 70’s (Garcia Larralde, 2005:121).

The effect of the influx of major revenues on a relatively poor society did not automatically result in a Dutch Disease, or in some other perverted characteristic as has happened in other countries with high income and a low-productive fabric, like the Potosí effect (Karl, 1999). It was possible to distinguish a certain balance between new economic forces, new immigrants, and a shift in potential from the rural Venezuela to the capitalist Venezuela, with a private productive response. While not completely focused on development, the moment seemed to be responding relatively to the requirements of domestic demand.

Another research study, “The Distribution of the Oil Rent” showed that, from 1936 to 1972, oil rent was higher than in the 80s, but its development was growing and was relatively parallel to the non-oil production (Mommer, 1990).

This indicates that the Venezuelan oil rent didn’t produce economic independence to the mono-productive model, but it didn’t destroy productive fabrics.

As of 1973, everything changed. Oil revenues far surpassed Venezuelan society´s ability to absorb such wealth. Since1973, it has been easy to observe that the non-oil economy´s growth hasn´t matched the rising price of oil and consequent wealth. On the contrary, agriculture and industry fabrics have collapsed several times through 2012. From 1973 the dependence to oil is not symbiotic but depredatory (1).

Figure 1 shows the characteristic indicators of Dutch Disease, such as the evolution of oil exports (blue), non-oil exports (red) and imports (green), from 1950 to 1978, at current prices. Note that instability between imports and exports responds to the crisis that occurred in 1973 (the war of Yom Kipur), where Venezuela received, without preparation, significant revenues derived from the reduction of production quotas proposed by the Arab petroleum-producing countries.

In relation to the figures prior to 1950, one can see in the data between 1920 and 1935 that the increase in oil exports from 1.8% to 91.2% calculated in Venezuelan Bolivars (Bs.), displaced non-oil exports such as coffee, decreasing from 98.2% to 8.8%, which, according to Bernard Mommer, is a signal of the destruction of the pre-capitalist apparatus by a “normal capitalism” (1990:168). However, Alberto Adriani discusses the global crisis in the 1930s in a famous article “The Crisis, the Changes and Us” and recognizes that high prices for coffee and other non-oil exports, along with oil, led to an increase of domestic production and generated “large sums for concessions, royalties, taxes and operating expenses” (Adriani, 1990 [1937]: 32).

According to Figure 2 it is possible to observe the progressive growth of manufacturing (red) and agriculture (blue) along with oil from 1951 to 1968, which also indicates social and economic fabrics growing. Because it’s a fact that the total GDP grew continuously, multiplying itself by 4 at the end of this period, the lines really show an absolute expansion of agriculture and manufacturing. It was convenient to show the GDP’s percentage of these sectors to indicate that non-oil performance is persistent and homogeneous with the GDP growth pushed by oil. Agriculture and manufacturing didn’t advance by themselves but were not destroyed by oil revenues.

In Figure 2 it is possible to perceive that oil production is decreasing, but it is necessary to add the rise in oil prices, the same prices that permitted the GDP to multiply by 4 in the aforementioned period (Antivero-BCV, 1994). Real oil income is shown in Figure 3. If both figures are compared, it is possible to observe that oil doesn’t predate non-oil production.

As a result, it cannot be said that petroleum income from 1920 until at least 1965 destroyed national production. On the contrary, we agree and support with facts Garcia Larralde’s argument (2005:121) that there is evidence that national production grew at the same rate as oil revenues.

5. From Triennium to Perez Jimenez (1943-1948). The “Right to Oil” Discourse of the Venezuelan Political System.

The democratic transition period after Gomez and its culmination in the so-called “Octoberism” or adeco Triennium introduced an important narrative: the existence of an elitist State privileged because of petroleum that, as a result, is obliged to provide the economic and political means for all of its citizens (Coronil, 1997).

There seems to be some agreement among Venezuelan historians regarding the similarities between the “Triennium Adeco”, the developmentalist and populist Pérez Jiménez’ period, the democratic populism of the Fourth Republic, and Chavez’ bolivarian process, as if they were all recipients of the same political tradition (Coronil, 1997; Camero, 2000; Castro Aniyar, 2010).

The blow from the Democratic Action political party through Medina Angarita marked the beginning of the “Triennium” or “Octoberism” in 1945. From then on, all processes were discursively maintained in parallel stories from the twentieth century to the twenty-first: 1. The oil infrastructure must modernize the country, and such modernization supposes the extension of education, culture, political and economic benefits to the national majorities, 2. An ambiguous political system (democratic or not) that does not completely socialize the benefits of a rich State, needs to be intervened by an even more radical movement that will accelerate the conditions of the social democratization (Baptista and Mommer, 1992; Coronil, 1997). This is how it is described by Ysrrael Camero (2000):

“The October Revolution [of 1945, or ” Octoberism “] opened doors and tore down the dyke of Venezuelan politics those that had always been excluded. The triennium that ran between this date and November 24, 1948, was the breaking of the popular dam that the elites had prevented for centuries.

“… The State Democratic Party [if it were possible to name all venezuelan populist parties like that], which assumed most of the responsibilities, from education and health to oil, is an Octoberist legacy. From this moment, all political organization that wanted to play a role in Venezuela had to be multi-class, national, popular and of the masses. This is an Octoberist legacy.

“… Mass and popular politics took over, not just in the streets but also in the halls of the Legislative Palace and at Miraflores. The people felt represented by their leaders.

Regular and common popular mobilization filled the streets of the cities and politicized the population, making the population participate in the construction of its own destiny.”

In 1959, almost ten years after the coup against Octoberism, its same actors, Betancourt and AD, won the first elections in what would become known as the Fourth Republic.

6. The Developmentalist Populism Incorporated the Ideas of Order and Economic Development (1948-1957).

Invoking the experience of the Gomez period, the new government presided over by Marcos Perez Jimenez tried to reorient public policies toward the need for order and development.

As has been previously described, the economic and geopolitical context was propitious. In the words of Perez Jimenez:

“Our entire management obeyed complied with the New National Ideal and can be summed up by three unquestionable measures of success: Venezuela was the first economic power in Latin America. Venezuela was the country with the most industrial growth in Latin America. Venezuela was the country with the highest rate of population growth in the world” (Perez Interviewed by Angulo Rivas, 1964: 44).

Other studies conducted in Mexico (Lopez Portillo, 1986) emphasize a transcendent aspect of the New National Ideal: a cultural policy in which the State and “the people” (body of society, subject and object of development) appeared together in the same image: a notion of modernity, industrialization and development, alongside the historic and racial glories of Venezuelans: the heroes of independence, the indigenous resistance to the conquerer, the vigor of the plains people, the advantages of the mestizo, the joropo, etc.

The new body of meanings did not make the economic elites disappear (for example, corporations and oligarchies, central to the discourse of Accion Democratica at the time), but they presumed, behind the general representation of a State, the total historic and ethnic relief of their society. This exercise, described as such, is not another of the experiments of nationalist modernization of the State in Latin America. Instead, it is itself the precursory model for these experiments, later applied in Brazil, Mexico and Peru (López Portillo, 1986).

For Dr. Manuel Egaña, one of the most prominent intellectuals of the perezjimenistic decade, the New National Ideal was an “obligation”, a consequence of the oil excesses whose disproportion was spoken about without modesty. According to Cartay (1998:14-15).

“Egaña estimated in 1947 that government revenues would, in the next decade, reach an average of 1000 million Bs every year beginning in 1948. With such an income, Venezuela, said Egaña (Egaña, 1947:164):

‘…is obliged to develop a spending program for public works to improve its physical environment so that its men can use it with more intensity.’

Of the 1000 million, Egaña recommended using an annual amount of Bs 250 million for the implementation of “material, large, long-lasting” projects, acting directly on nature and addressing the weaknesses of the Venezuelan physical environment and to facilitate its optimal use by
Venezuelan citizens. It would act directly over mankind (who has not done its job) ”

‘…750 million Bs per year are left to the men of the government to control our flow of tropical demagoguery’ (Egaña, 1947:169)”.

Egaña understood that the national project corresponded to an experiment, facilitated by sociological doctrine, whose fundamental constraint – the lack of money – did not exist. So there was no other reason than the ‘obligation’ to make the experiment work.

Neither Egaña nor Vallenilla, nor Pérez Jiménez himself, stopped being conscious of cultural considerations, nor of the impact of Venezuelan oil on the economy or culture, which in the best of cases was seen as a ballast:

“We have a number of defects that we must correct (…) If we do not change our way of being we will remain a backward people (…) Therefore, according to the New National Ideal, the first priority was to mix our race with the component of European peoples (…) accustomed to work (…). [It has to be formed in people] a spirit of work, giving them the capacity to understand what their true functions as a citizenry are, that is, their rights and duties (Pérez Jiménez interviewed by Blanco Muñoz, 1983 in Cartay, 1998:168).

7. The First Adjustments against the Perverse Effects of Income.

As it was said, according to Figure 2, the Perezjimenistic period (1949-1957) and the first years of democracy (1958-1968) did not show many of the perverse effects of the income on the new social and productive fabric that was expanding in Venezuela.

While non-oil sectors by themselves did not excel driven by the oil revenues, as Egaña and Perez Jimenez had hoped, neither is it possible to say that the income eroded the productive apparatus, replacing it with imports.

However, at the time, there were some warning signs regarding this balance. Perez Alfonzo notes that an increase in the price of oil at the end of the Perezjimenezist period created expectations that turned into flight capital and more imports that shook the national industry. The author mentions this cycle as a trigger of Perez Jimenez´ downfall on January 23, 1958, and as an preview of the problems that came with the increase in prices in 1973 (Perez Alfonso, 1976).

After Perez Jimenez, during the first Democratic governments (1958-1972), oil prices tended to weaken, exposing the fragility of the whole system, especially spending. To reduce the fiscal deficit the government went into debt and reduced salaries and wages. It is possible to say that in this period the characteristic signs of the Dutch Disease, such as flight capital (Crazut, 2006:404), began.

8. Romulo Betancourt: The System of Pacts Predates the Possibilities of Interdependence.

Romulo Betancourt is perhaps the most important figure in contemporary Venezuelan politics, after Chavez.

Betancourt recognized early on the pitfalls of industrialization that the Venezuelan bourgeoisie came from a comfortable (wealthy) system within the oil usufruct – a system in which there was little attempt to innovate and take risks. This problem was understood at that moment as part of the productive culture of the elites. According to his speech, the answer to this problem would be to denounce the parasite millionaires and to increase public space. This had been said by Betancourt in 1937, that is, before the Triennium:

“Our capital frankly tends to be parasitic. We don’t have captains of industry, but we have landlords and moneylenders. Companies that are bold, far-reaching, take risks and are adventurous don´t come to a mere dozen out of millions. These companies tend to have a one-hundred percent safe investment when they are very bold. They prefer to fill store their wealth in the vaults of banking institutions in the country or abroad. We, in making these statements, do not proceed with empiricism or passion. We rely on solid statistical data. We have not invented a theory to accuse the small group of millionaires in the country of being parasites” (Betancourt, 1937).

In this way, Betancourt points out the inability of the private sector to absorb wealth and lead the economic recovery expected from oil income as a problem of culture and will.

Over twenty years later, after the overthrow of Perezjimenezism, Betancourt and Accion Democratica sealed several strategies to prevent the return of the dictatorship and some of its economic sectors. In this case, Betancourt responded with the argument that has been marked as common practice in Venezuelan politics from the Triennium: widen public space, distribute the money that naturally belongs to the pisatarios [“those that put their feet over the petroleum”], and distribute it for winning the support of political and economic sectors.

To accomplish this, Betancourt inaugurated the use of big pacts in Venezuela in 1958.

Betancourt denounced the absence of innovative and risk-taking productive networks. However, in their place, he promoted political agreements to guarantee the governability of the device, with the argument that dictatorship, or the socialist Cuba example, could put an end to the institutionalization reached. But, as it is argued here, this did not make the productive sectors become more brave, it only put them at the service of the pacts of governance.

For a democratic leader to achieve this,(particularly with so few similar cases across the whole subcontinent), it was necessary to offer the Cold War-era U.S. a viable model of integration into the socioeconomic and political system that would guarantee it a supply of stable oil.

Four movements were particularly visible: 1) the call to general elections, that included the Communist Party of Venezuela (PCV), 2) the call for an Inter-institutional agreement (between the State, the Armed Forces and the Church, fundamentally), 3) the Pact of Punto Fijo, also called “the soursop pact” [el pacto de la guanabana], among the white AD party, the green COPEI party, and to a lesser extent the yellow URD party, excluding the PCVor red political party; and 4) the parliamentary drafting of a new constitution in 1961.

Thus, Betancourt relaunched a national pact between “live” actors that represented an electoral scenario in which new oil brokers and the public concentrated on access to different forms of social power. This agreement explicitly excluded Perezjimenezists and the important communist movement and also excluded implicitly other actors. The Pact of Punto Fijo founded what is today called the Fourth Republic.

Given its status as oil manager, the government, representing the State, created an exclusionary political scene apart from which it could operate the complexity of the country’s economic and social initiatives. In this scenario, representations would replace organic relationships and would be maintained by the monopoly of the resource called petroleum.

The problem with this plan is not only that it excluded oppositional political sectors from the plan of governance, but that it was also sold as a substitute for political reality. In fact, it created an almost exclusive bridge for obtaining credit, legislation, academic prestige, political influence, professional advancement, construction of pipelines in neighborhoods, roads, electrical connections, licenses, imports, remission of debts, etc….The government financed, with petroleum funds, a scenario that monopolized social and economic political practices for the entire society. It had an ideological impact:

“Both the ideologies of the left and of the right were assimilated into a system of centrist parties… After 1974, ex-guerrillas began to appear as members of Congress and even in ministerial cabinets. Regardless of partisan loyalties, Venezuelans could say, truthfully or not, ‘Now we are all adecos’ ” (Hellinger, 2002).

The system of pacts between the then-called “live forces” (a predetermined selection of political parties and elites, sometimes supported by groups of “notable people” and other prestigious institutions…) formed part of the governing machine for 42 years until the pact system changed with the Bolivarian Constitution, in 2000.

The goals achieved in international affairs were also reflected in this new capacity of Venezuelans to re-establish, by way of the persuasive power of petroleum, new pacts with emerging actors, and direct innovative and defensive policies for these actors in the system.

The Fourth Republic (1958-1999) would repeat these pactist strategies for 41 years, as sub-variations of the Pact of Punto Fijo, the macro-pact of Venezuelan politics of that period: “The Pacification” of the first government of Caldera (1969-1974); in the first government of Carlos Andres Perez, called “The Great Venezuela” [La Gran Venezuela] (1974-1979); in the government of Jaime Lusinchi, called the “The Social Pact” (1984-1989); in the second Perez government, called “The Concert” [La Concertación] (1989-1993); and in the second Caldera government, known as “Convergence” (1994-1999).

The strategy of pactism helped to recognize Romulo Betancourt as the political architect of Venezuelan democracy between 1958 and 1999.

His model, far from the confrontational style of the Triennium, was simple: the popular vote and oil prices had the capacity to feed renewable agreements, as long as the changes occurring were among the operating agents of the subsystem. It was a sustainability model for the short, medium and long-term political subsystem, but not for the economic or the social system.

By prioritizing governing agreements over a long-term development strategy, Betancourt and the leaders who followed him, systematically expelled the endogenous forces of the economy and social entrepreneurship.

Thus, it was through this model that the systematic depredation of enormous economic resources eclipsed the possibility of regeneration. Social welfare would also respond to these principles. Once the model was exhausted (simply from a drop in oil prices, for example), social cohesion would unravel, as occurred in 1989 (the massacre of February), 1994 (attempted coup) and at the end of 1998 (Chavez’s electoral victory).

The system of pacts represented the impossibility of a healthy social or economical fabric because these were constantly threatened by the financial power of the dominant political scene. In other words, pactism was the political monopoly´s way to express itself in this period, but was not the origin of the problem.

Of course, constraints imposed by the IMF at the beginning of the 1980’s and neoliberal formulas played the same role in Venezuela as in the rest of the global periphery. These forces preyed upon, Latin American industrialization and its social welfare. But it is important to note that the inability of Venezuela to overcome these conditions also corresponds to the Venezuelan political subsystem, which, to make itself “stronger” had become too dependent on its role as manager of oil and the consequent political pact.

To mark the nationalization of the oil industry in 1976, Betancourt made a speech before the Venezuelan Congress (Parliament) that pointed to the nature of the pactist model. Betancourt spoke of the model´s darker side, where ideas’ debate is a dead space and Congress is a scenario devoid of politics. Betancourt referred to the Chinese practice of climbing on the roofs of houses to yell the most horrendous improprieties, “all of the imaginable horrors” [sic] that can’t be said every day. It was called the practice of “cleaning the chimney”. Then Betancourt asked the representatives of congress: “the time to clean chimneys has passed, impose an era of responsibility before the challenge we face as a nation” (Betancourt, 1976:39)

This somewhat offensive image characterized political leaders as having, not rational differences, but almost child-like impulses at the edge of reason. It revealed a demagogic concept of politics and underscored the role of the political pact. Venezuelans increasingly shared this perception. It was known by many names in academia, including the “depolitization of Venezuelan society “:

“The people only recognize the political parties but these parties arbitrarily recognize the people. The lack of recognition of the citizens by the parties led them to rebel against the latter, resulting in a special sanction against some actors who do not know the exact origin of the political” (Madueño, 2008:116).

Thus, in political terms, the system of accords, from the Pact of Punto Fijo in 1959, until the Convergence in 1994-1999, hindered the possibilities of interdependence with the Venezuelan political system and weakened the State as a relational institution. By weakening the social entrepreneurship and economic aspects of society, the foundations were laid for a system incapable of confronting changes or of generating real stability.

As mentioned previously, in October 1973, a war broke out on Yom Kippur and, in February 1974, when Carlos Andrés Perez became president of Venezuela, the price per barrel of oil rose from $3 USD to $10 USD. This was a result of production cuts driven by Arab OPEC members and Iran against U.S. support for Israel (Vallenilla, 1998:85).

As it will be described in next chapter, 1973 Venezuelan economy would define the economic sustainability of pactism as a model of fictional political stabilization, and, at the same time, mark with full clarity the predatory role of petroleum income on the economic fabric of the Venezuelan subsystem for the next years.

9. Great Venezuela (1974-1979)

Carlos Andrés Pérez inherited a government with unprecedented reserves in oil revenues and the relative longevity of Venezuelan industry. He had the resources to follow the successful path of his Mexican counterpart, Lazaro Cardenas: with oil nationalized and under the influence of the boom, the country filled with the good omens of development and the prospects of international leadership.

However, Juan Pablo Perez Alfonzo, founder of the Democratic Action party (AD), Minister of Development during the Triennium, Minister of Petroleum for Betancourt in 1959, and also the same architect and driving force of the collective project of OPEC, got off the vehicle of optimism and resigned.

Perez Alfonzo studied what some Norwegian Academics called the Venezuela Effect (mostly known then as The Dutch Disease), and assured that “in ten, twenty years, oil will be the ruin of Venezuela” (Perez Alfonzo, 1976).

He called it “the excrement of the Devil” (in relation to the manner which the Spanish were named surface deposits of oil, asphalt and bitumen). Finally, he also left the government of Carlos Andres Perez, as well as the Accion Democratica party when he perceived the political will was not to re-convert the developmental model to an appropriate scale.

His son, the economist Juan Pablo Perez Castillo, updates his vision of the so-called Venezuela Effect:
… “Our oil industry uses very few national resources as inputs for domestic investment, production and marketing of oil, as proven by the scarce organization of input / output (very low net ratios of imports that reflect trading relations between sectors of the national economy), low national components of investment, the inputs used by the sector and the low multiplier of the net import sector. ”

“These indicators (among others) confirm that income produced by oil money does not have a significant domestic counterpart, making negligible the amount of organic wealth derived from the same economic growth” (Perez Castillo, 2006).

Perez Castillo reaffirms his father’s troubling idea that incorporates the economic system into the Venezuelan Problem, it means, not just by attaching responsibility to the productive agents.

“… When the economic system injects more liquid external resources than it can productively absorb, the surplus puts pressure on prices and to the inadequate domestic supply to meet the inflated monetary demand. The accumulated earnings allow importations to relieve inflationary pressure preferably of goods and end services, contributing to the decapitalization of the country” (Perez Castillo, 2006).
In Figure 1 again it can be noted how, in 1973, imports grew disproportionately to levels shown to be relatively stable since 1950. The price effect of oil offset the precariousness of non-oil exports in relation to the new consumer-power society.

At the dominant narratives at that time the economic climax that began in 1973 was not too contested. For a long time it was only spoken of as waste and corruption, and too few times from the perspective of the economic subsystem itself. The views of Perez Alfonzo, even if it was not the norm to disrespect them, did not provide an interpretive framework. The most critical discourses were almost always assimilated into the diatribes that looked capable of resolution in the political electoral campaigns. The following is an example of the dominant discourse for the next 20 years.

“But the oil euphoria did not hide reality. Critics raised concern before the end of the presidential period, and pointed to the government´s disordered, ill-advised and frivolous management of the millions of dollars that flowed into the coffers of State. Perez’s voluntarism and developmental daring became mired in bureaucracy, the lack of human resources and greed-based corruption. In the non-State sector, investments had a speculative character. Real estate and finance and even the president himself gave in to tinged populism, stimulated by subsidies and privileges. The president launched a pharaonic public works program and purchased industrial equipment of questionable utility” (CIDOB, 2010).

Note in the discourse how problems of disorder, waste and corruption are framed as if they come from an original evil in the corrupted souls of Venezuelans or are a matter of civic culture. The text fails to explore these ills and the unbridled ambitions of political leaders in a larger historical framework. It is possible to trace this attitude to a widespread academic tradition (Quintero, 1972; Malavé Mata, 1980: 263; Crazut, 2006: 265; Mieres, 2010).

The above text made it difficult to put statements by Perez Alfonso regarding the impossibility of the sowing of petroleum in context, translating again into simple problems on the political stage.

The text demonstrates a classic argument, and it is possible to recognize its inflections throughout the discourse of the Fourth Republic. The inability to see the problem as one of the subsystem, that is, neither as a replacement of political relations, virtues or political actors, nor as a problem of the great historical capitalist system, as highlighted by certain leftists and during the Bolivarian period (Malavé Mata, 1980; Rodríguez Araque and Muller Rojas, 2009; Mieres, 2010) seems to mark the discourse from The Grand Venezuela to Chavez’ Fifth Republic. The notion of an economic perversion that is independent from the ideology of the government or from the virtues of the political leadership is absent from the rhetoric since the disease established in 1973. Perez Alfonzo recognized this discursive problem during his life and thought that it was the result of the same government agents’ interests:

“It is used to ascribe the general waste to vices or failures among government’s responsible agents, or among private sector that profit from oil. In that way it is possible to maintain illusory hopes for continuing the sowing of oil” (Perez Alfonzo, 1976:144).

Such a problem is revealed in The Great Venezuela, the other pact governance re-established on the basis of the Pact of Punto Fijo for the instrumental management of the problems caused by the avalanche of petrodollars. Pactism dominated the political will and deflected questions about the subsystem by focusing answers on the political electorate.

With this flow of money, the government bought the illusion of political strength. But in fact, it was impoverishing the fabric of social and economic entrepreneurship, as much with the country’s currency-absorption as with the political and social spaces of development through pactism.

It is no coincidence that Fernando Coronil identifies precisely three periods in Venezuelan history – Gomecism, the Perez Jimenez and Great Venezuela – as evidence for what he called the “Magical State” – a State that had the need and ability to draw on its abundant land and endless resources in order to provide for its citizens. But only during the Great Venezuela period does Coronil detect the the growing perception that a giant web of political corruption built around the State dominated the whole country (Coronil, 1997: 352).

In any case, deep, subsystem vulnerability was brewing in the face of an impending crisis that the pact model, though seemingly unbeatable, could not control. This vulnerability permeated the whole institutional and moral structure, and resulted from the deterioration of the fabrics that pactism and imports falsely replaced, outside of which Perez Alfonso seemed to stand alone.

During the oil boom that lasted from 1973 to 1983, oil revenues largely exceeded the country’s ability to absorb capital. The strength of the government soon converted into the structural weakness of the State. Then, after the so-called “Black Friday” (February 28, 1983) the distributive capacity of the apparatus of government declined with the devaluation of the bolivar.

Paradoxically then, the model of pacts and imports that had maintained the illusory political stability of the subsystem was extended to project the same the illusion over the growing social crisis. The process accelerated the depletion of the fabrics produced by the country’s social and economic enterprises, leaving them even more rapidly impoverished and dangerously marginalized.

10. The Social Pact (1984-1989). The Extension of the Predator Model on Crisis.

Carlos Andrés Perez had been Betancourt’s designated successor and Minister of the Interior. But Betancourt opposed what he perceived as signs of greed and personal tyranny during the presidency of Perez, and ultimately promoted his party opponent, Luis Piñerúa Ordaz for the presidency. However, AD lost the election to Copei’s candidate, Luis Herrera Campins, whose election marked the party´s second victory in national elections (González Medina, 2007). It was at this point that Betancourt said the famous words “We Will Come Back” (originally in English).

The Herrera Campins period coincided with falling oil prices and the first historically recognized major currency devaluation, or “Black Friday”. The crisis developed into what was called the “over-sizing of the State” (foreign currencies did not allow for the maintenance of bureaucracy nor its budgets, and there was talk of reducing the public sector´s size, though not really of restructuring it). The result was the emergence of a growing deficit in the strength of pact’s political parties as key mediators between civil and political society.

So Betancourt saw the conditions for redesigning a new, two-part pact called “The Social Pact”:

“There shall be an agreement between the union bureau and Jaime Lusinchi that would promote him as the next presidential candidate and immediately take over the direction of AD throughout the country, placing in the general secretariat an union bureau member, plus the guarantee that the unions would have a high number of members on the lists of candidates for deliberative bodies. Additionally, in winning the elections Lusinchi would designate regional secretary generals [AD] as State governors who would occupy both positions simultaneously, combining the political and the official for the first time. This was necessary to produce what at that time was perceived as an attempt to return AD to its lost origins” (González Medina, 2007).

In 1984, at the end of the Luis Herrera Campins period, Lusinchi won the elections (the AD and Betancourt “came back”) and achieved the inclusion of the CTV (The Confederation of Workers of Venezuela, the main union for the Fourth Republic, dominated by AD). Then began the Social Pact’s second phase: to convene the bourgeoisie for a tripartite pact. State, bourgeoisie, unions:

“[The Social Pact] … poses the feasibility of an alliance between workers and small to medium entrepreneurs in a synchronized effort of social strata that includes university groups, neighborhoods, etc. In a political context, the premise can be read to reunify progressive political forces for redistributive purposes long awaited from the State” (González Medina, 2007).

The Social Pact´s agenda did not hide that it was an anti-crisis covenant based on the creation of new instances of power and distribution. Its aim was to regenerate political legitimacy to promote the participation of new “forces” (political operative scriptwriters) as a resource against the economic crisis (3).

Also born from The Social Pact was COPRE, or the Commission for State Reform, in which diverse sectors of public life, including the left, academics, and the cultural sector, gather to guide and promote reform. It is often argued that this effort generated more discourse than it did real transformation, as was established by a report on the subject, “The Penelope’s Fabric ” (Gómez Calcaño and López Maya, 1990).

However COPRE promoted the idea that regions could choose their representatives from regional government representatives and made possible the transfer of administrations and budgets (and deficits) to the regions of some of government’s institutions.

The articulation of a renewed political map, again, was accompanied neither by substantial changes on a macroeconomic level nor conscious policies from the subsystemic level, nor by participation policies directly from the organized public. The model now blocked the possibility of sociopolitical changes by way of sending power quotas to other actors. The Social Pact’s economical results moved away again the development of inner fabrics:

“In the late 1980’s, the Lusinchi government achieved the illusion of growth based on the level of expenditures that exceeded available, and managed to contain the distortions, for some time, through price and exchange controls. The scheme collapsed in January 1989. A maxi-devaluation struck, inflation shot up to 81% and the economy shrank 10%.” (Bottome, 2008).

Figure 4 shows the breakdown of international reserves under previous leaders who increased imports, destroyed domestic enterprise, and under whose leadership social and political ventures succumbed to the closed governance of The Social Pact. Notice in the graph that Foreign Exchange Reserves descended from 1981 to 1982 due to the effects of falling oil prices. With devaluation in February 1983, the government of Herrera Campins acquired reserves for the country. In 1984, Lusinchi won the election and activated The Social Pact. Note that as of 1985 reserves are reduced below pre-devaluation levels until the end of his term in 1988. The State sought to maintain the governability pact financed with the money saved by the devaluation, putting the country at risk of a further devaluation and a new economic contraction.

The result was more visible in 1989 with the departure of Lusinchi and the entrance of the new government of Carlos Andrés Pérez.

“Although they all worked, more or less, for a time, the controls of the Lusinchi government failed in early 1989, triggering a profound recession (the non-oil economy fell 9.6%), a massive devaluation (from Bs.7.50 per USD to Bs.14.50 per USD to Bs. 43 per USD) and galloping inflation (81%). Moreover, the Central Bank could not honor the bulk of the letters of credit for an amount of $ 6.9 billion that were pending at that time, and saw many businesses forced into bankruptcy.

It could have been worse had it not been for the quick implementation of program of orthodox adjustments approved by the International Monetary Fund (IMF)” (Bottome, 2008).

With the Foreign Exchange Reserves depleted, the IMF was at the head of the national economic policy.

Carlos Andres Perez won the elections in 1988. The story that follows is well known in Venezuela´s political environment. Weeks after taking office in February of 1989, a new social pact was announced, The Concert Pact, which would be accompanied by a crude package of neoliberal measures based on the illusion of peace created at the pactist stage, but that could not really be achieved until the Venezuela Agenda from Caldera’s second mandate in 1995: Just the announcement and the raising of the price of gasoline in 1989 caused reactions and violent demonstrations in Caracas. What followed is what has been duplicated almost as a long-term model by many other Latin American countries like Bolivia, Argentina or Brazil in response to the IMF’s “neoliberal package”: mobilizations, looting and political repression (Kozloff, 2008: 5).

On February 28, 1989, the Venezuelan military was deployed to the streets to suppress daily riots and murders and to crack down on anyone for “disobeying the curfew”. The death toll still has not been determined, and varies depending on the source. The official number is 276 or, according to popular commentary, 3000 citizens (4).

The neoliberal plan was halted, but the country was adrift. Until then, the latest pact, The Concert, foreseen for its “irremediable” neoliberal context, had not crystallized.

In February 1994 a military revolt in the hands of institutional actors, such as then-Senator Caldera, turned into an escape valve of discontent.

“López Maya (1999) showed that the subsequent period was marked by several protests claiming that ‘party politicians and unions had been losing their dynamism and capacity for popular representation and mediation, evident in the way they exercised power in the context of abundant money and resources of the Petro-State of the 1970’s ” (1999: 212). Having said for 50 years that the country was rich and completely sovereign over its oil, how could Venezuelans not to guilt the elites who seemed t represent them so closely [through the pacts of governability]? During the stormy parliamentary session before the military uprising of feb. 4, ex-president and senator-for-life Caldera, dared to say that the emperor was naked. Among the growing speeches condemning the coup, he revealed that the people had not taken to the streets in defense of Democracy, a striking contrast to events in Eastern Europe, the southern cone of South America, the Philippines, and Tiananmen Square (See his speech reprinted in El Universal, February 4, 2001). Congress finally removed Perez from office, but the relatively inconsequential criminal charges against him were only an attempt to remove a highly unpopular president from his office, before the collapse of puntofijismo” (Hellinger, 2002).

11. Convergence. The Last Pact.

The 1993 elections made latent the harvest of the macroeconomic crisis, the collapse of traditional parties, the massacre of 1989, the military coup led by Commander Chavez in the 1992, the services crisis and growing poverty. From the ranks of the anti-CTV union rebels who had revolutionary influences arose a party that seemed to have won the election, Causa R.

Whole electoral acts were canceled due to “irregularities” in areas where Cause R gained strength. Ballot boxes containing votes in support of Causa R were found in the trash. Julia Buxton, who studied those elections closely, concluded: ‘This exclusion was not due to failure on the part of the electorate, it was due to the politicization of board members who insisted that the normal task of counting votes was conducted fairly and neutrally ‘(2001: 89)” (Hellinger, 2002).

Caldera won the elections with the support of the chiripero, a large group of small parties that ranged from the PCV (the traditional communists) to the Perez Jimenezists. The party also included regional leaders, Caldera´s party, Convergence – a division of Copei that had taken its founder and historic leader. Among the small parties was MAS, the division of PCV in which Perez Alfonzo had participated. MAS had the right to, by electoral proportion, a voting board member (unlike Causa R), which ensured agreements on the sharing of counted votes that were not yet entered on the tally sheets.

Convergence, more than a political party, was Caldera’s new pacification project, the pact articulator of many new political forces that seemed to better represent society than in past experiments of the Social Pact and Conciliation. Numerous analysts believe that the specific step of the leader and the context of Convergence managed to calm the political crisis during that period. However, the situation worsened.

“… the electoral forecasts of Caldera were not fulfilled, in the political – institutional sense, though a certain peace was reached. Nor was the situation of deterioration remedied by the fundamental institutions of the State or by the delegitimization of the political system … ”

“…With an accumulated inflation of more than 800 %, which had been the highest of any constitutional period, the Caldera government’s principal social indicators continued their trend toward deterioration. For June, 1997, of the total of 4.740.250 homes, 2.122.016 were in a situation of poverty; of these, 895.542 were in a situation of extreme poverty (Revista Sic, 1997). Or, 44,76 % of Venezuelan homes did not possess the income to satisfy their basic needs, and 18,89 % could not manage to cover their food needs. The Venezuelan Program of Education Action in Human Rights (Provea) calculates that in 1998 15 % of Venezuelans were found to be living in conditions of atrocious poverty, understood as those who live in the open air (homeless) and are thus excluded from any social policies. Relative to the labor market, close half of the population that was economically active worked in the informal economic sector (IESA 1998) …”(Lander and López Maya, 1999).

However, the drama didn’t just disguise the political atmosphere. It had already turned it into a social time-bomb:

“Moreover, according to social indicators provided by Provea, between 1993 and 1997 mortality due to malnutrition doubled, settling in the last year to be 993 per 100,000 inhabitants. In terms of deteriorating public services such as education and health, 70% of students who enter primary school fail to complete ninth grade, and 8 out of 10 students that enter college come from private education. In areas where the poorest part of the population is located, the child mortality rate is 2.5 times higher than national rates, life expectancy at birth of stratum V, the poorest, is 12 years less than that of layers I and II; the Ministry of Health and Welfare estimates that 30% of the population has no access to health services” (Lander and Lopez Maya, 1999).

After two years, the search for new paths was exhausted. The government had avoided restoring the economic agenda prescribed by the IMF that had been the death sentence for The Concert, and at this point turned toward Monetary Fund neoliberalism and created the Venezuela Agenda in 1995 under the leadership of Planning Minister Teodoro Petkoff (paradoxically, symbolic leader of MAS, the socialist part that splintered off from PCV). Not very different from The Great Shift of Perez’s Concert, the Convergence began the “petroleum opening”, while Luis Giusti, leader of PDVSA, followed the path of Sosa Pietri, and betrayed OPEC agreements to lower world market prices and develop a sales plan for the principal assets of the oil company (Potellá Mendoza, 1995).

The Convergence met the failure of the public expenditure as a development model. However, according to the prevailing wages of privatization in that period, the answer of the government was to produce more incomes from selling PDVSA’s assets and to increase the oil production. In other words, the Convergence, as the other pacts, didn’t seem to be able to study and wait for other productive, inherited or in development sources of wealth.

12. The Extreme Weakening of the State before Chavez.

In Figure 5 it is possible to recognize the aforementioned pacts of governability throughout Venezuelan democracy from 1958 to 1999. The economic centrality of the Venezuelan State constantly fed by meaningful oil incomes taught Venezuelan State agents that a pact could substitute participation and entrepreneurships.
Meanwhile, in the Venezuelan academic world it was common to find concepts like “institutional crisis” (Lander and López Maya, 1999, Molina and Perez, 2004); “split between civil society and political society” (Arenas, 2001); invocations of the “Disillusionment of Democracy” (Arenas, 2001; Molina Álvarez Díaz, 2002), or “crisis of the State as public servant ” (Molina and Alvarez Díaz, 2002).

In truth, the conditions that led to Chavez´ rise to power revealed a much deeper dimension that did not form part of the model of expectations for that time. The radical change to come was predicted by only a few analysts at that moment. Two graduate students at the University of Zulia decided to describe it making use of Marx. These two young researchers introduced what then seemed like a simple nuance: it was not a crisis in the generality but a crisis of the illusory generality (Garrido and Montilla, 1999). At a time when international organizations spoke of governance, political utility, institution-oriented analysis or governability, these kinds of proposals were not easily visible (5).

For Marx, illusory generality was the result of a balance between historical forces that have not yet revealed the reality of the process of accumulation and exploitation. When illusory generality is in crisis, it is because there has been an outright split, not only in the operation or legitimacy of the institutions, but the very idea of civilization. If the source of this breakdown is economic, its true and most powerful outcome occurs in the cosmos, heralding a historical transformation as described by the Marxian paradigm. Foucault had explained this process as the idea of “epistemic change”, a process visible in archeology of speech that produces the gap between knowledge and language (Foucault, 2005: 56). In other words, when the language of a society indicates a world that does not correspond to its knowledge, there is a change in the structure of knowledge that can barely be covered by categories such as “problems of governability” or “Disillusionment of Democracy.”

The nature of events from 1989 to 2003 (riots, massacres; attempt of a coup d’etat; a sudden new populist leader; a new Constitution in 1999; Chavez’ radical laws; hundreds of peasants killed; a new coup d’etat and a 3-month general strike) point to a serious misinterpretation by academics at the time. The Bolivarian revolution was more of a breaking point from illusory generality, than a disenchanted split with institutions, procedures and actors, as important as they were. In terms of the proposed analytical frame, the Bolivarian revolution tried to steer a path to a new generality, the success of which is not evaluated here. However, the 5th Republic’s destiny also depends on the understanding of how and why the past Republic failed down, how conditions shaped by the renter Venezuelan subsystem affected, and how not to move away autonomous and wealthy entrepreneurships.

The Venezuelan governments before Chavez, understood as components of a relational State, had failed in 1998 and prepared for the transformation of its political and civilizing foundations, at least ideologically. The same invisible fabrics to the operators of the government, whose dissolution in turn weakened and annihilated the State, were regenerating new political forms through the new republic and the Bolivarian Constitution.

With disproportionate flows of money, Venezuelan governments since 1973 had bought the illusion of political strength and State fortitude when they were actually impoverishing social and economic entrepreneurship. The currency absorption problems, related to excessive public expenditure, created economically dependent social sectors, while pactism depredated the natural space for political and social development.

Of an oil-rentier economy´s inability from 1973 to 1999 to transform disproportionate expenditures into development, Asdrubal Baptista concluded:
“In fact, it is not about only a temporary suspension of the investment decision, which could last some years. There is something deeper here associated with an irreparable rupture produced by the normal rentistic condition, whereby one can see the infeasibility of a historically localized economical structure, let’s say, its incapacity to still work according to its own and established patterns” (Baptista, 1997: 155).

Therefore, the sources of the Venezuelan State´s institutional weakness should not refer only to the evil practices of political operatives or failure in the design of specific policies. Dramatic narratives about the evils of political practitioners, the failures of public policy or the monopolistic role of imperialism, betray a perspective that doesn´t fully grasp the reality of the State as a dimension in societal relations.

The relational State is not an object external to the relations of society, as the illusion of a “strong” government sometimes projects, but instead is a tributary of the forces of interdependence within society, that allow it to exist as a historical, stable and legitimate entity.

The progressive dissolution of social fabrics that provided, albeit slowly, social, economic and State-policy interdependence conditions, was reversed in its disappearance. The dissolution of critical social fabrics thwarted conditions for social, economic and State-policy interdependence.

The same weakened social fabrics, invisible to the operators of the governments and some academic circles, ultimately regenerated new political forms through the new republic and Bolivarian Constitution at the end of this period. Civil society was preparing itself for an ideological transformation of the State’s political and civilizing foundations, for better or worse.


1. When Mommer cross-referenced the Public Expenditure with the Oil Rent data from 1973 to 1990 he observed a strong descent of the latter. As a result, he erroneously predicted the end of Venezuelan rentier capitalism (Mommer, 1990:175-234). Mommer showed that higher prices and the strong variations in the price of oil exposed the economy’s oil dependence. Thereby, lower prices, lower Public Expenditure and production increasing should mean the rentier capitalism’s decline. He didn’t consider that the political part of the puzzle, as the governability pacts, could continue the failed model until the next rising oil prices.
2. In other references, economist Carlos Mendoza Potellá also tracked Venezuelan and Norwegian theories pre Dutch Disease (Mendoza, 1994), and Terry Lynn Karl (1997) also proposed to understand the “Paradox of Plenty”. Alberto Adriani had already described the effects of oil in the 1930’s: “… by nature and in particular by the structure offered in Venezuela, the industry is, from an economic view, an overseas province located in our territory … But the production of vernacular export items, which truly enhance the country’s wealth, has remained stationary” (Adriani 1990 [1937]: 138). About the Dutch Disease, journalist Ernesto Peltzer supposed that “… the author of the term was the Norwegian economist Erling Eide, who has speculated about the inflationary effects of the Scandinavian country’s sudden wealth” and added the term “Potosi Effect” to describe changes in the Spanish economy during the sixteenth and seventeenth centuries that were outside the reach of politicians (Peltzer in Mendoza Potellá, 1994: 138).
3. In the plans of the new planner graduated from MIT, Matos Azócar, in charge of designing the Social Pact, the importance of entering into small and medium industries was underlined, but did not occur (González Medina, 2007).
4. COFAVIC, the Committee of Relatives of Victims of events of February and March 1989, which then played a benchmark role, talks about it on their website: “However, the official number of victims remained undetermined after the discovery of mass graves like The Plague, where another 68 unidentified bodies of victims not on the official list appeared. We may never know the exact number of civilians killed in these events (COFAVIC, 2012).
5. In the “Report to Club of Rome” commissioned to Yehezkel Dror in 1993, the author warned that there is
“[…] the misleading tendency to talk about ‘ungovernability’, rather than facing the real problem –incapacity to govern. The use of the term ‘ungovernability’ is not only incorrect but also dangerous: incorrect because so-called societal ‘ungovernability’ is frequently a result of governments’ failure to adjust to changing situation; and dangerous because it provides an alibi governmental inadequacies, putting the blame instead on societies. True, there are situations that are genuinely ungovernable without radical social transformations which no indigenous government can realize […]. But in most cases efforts should concentrate on improving capacities to govern rather than on blaming societies for being ‘ungovernable’” (Dror, 2002 [1993]:9).

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Figure 1. Relation between oil exports (blue), non-oil exports (red) and imports (green). Current prices in thousands of millions of bolivars. 1950-1978. Since Antivero-BCV, 1994

Figure 2. GDP’s percentage of Agriculture (blue), Manufacture (red) and oil/gas (green). 1950-1968. Since Antivero-BCV, 1994.



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