Malfred Gerig is a sociologist from the Central University of Venezuela who directs the Political Economy of Venezuela research program at the Caracas-based Centre of Studies for Socialist Democracy.
Green Left’s Federico Fuentes sat down with Gerig to discuss the United States sanctions on Venezuela in the context of what he terms the country’s “Long Depression”. This is the first of a three-part interview.
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You pinpoint 2013 as the start of what you term a “Long Depression”. Why?
The first thing to understand about Venezuela’s economy is that this crisis is the result of how capital accumulation occurs in Venezuela, along with the way it was inserted into the world capitalist economy during Venezuela’s “oil century” and [what Italian economist Giovanni Arrighi terms] the US’ systemic cycle of accumulation.
Venezuela was inserted into the world economy as an oil supplier. As a result, it became a rentier country, because its state claims sovereignty over this natural resource and collects an international rent or payment for use of its property.
This generates a pattern of national capital accumulation known as rentier capitalism, which is a sui generis national capitalist economy as its metabolisation of capital is dependent on the surplus that the state captures from the world capitalist economy.
I have divided this period of [Venezuela’s “oil century”] into two main stages.
The first was the boom stage, which ran from the start of this insertion in 1914–17 until the 1970s. For most of this period, Venezuela was the world’s leading oil exporter. Its economy expanded at an accelerated rate, taking it from the most backward economy in South America to first in terms of gross domestic product (GDP) per capita.
But the 1970s marked the start of a crisis period that emerged after the 1973 oil crisis and with the first Carlos Andrés Pérez government’s oil nationalisation and “Big Push” project for rapid industrialisation.
After a crisis at the end of the 1970s, the 1980s began with another crisis. This one has a specific date — February 18, 1983, known as “Black Friday” — when for the first time since the 1930s, the local currency was substantially devalued. That date marked a point of rupture and the start of an economic crisis that is yet to end.
The ’80s and ’90s were a period of deep crisis and social marginalisation. By the turn of the century, the social conditions most Venezuelans found themselves in were alarming.
These are the social conditions out of which the pro-poor Bolivarian Revolution lead by former president Hugo Chávez emerged in the late ’90s...
Yes, the Bolivarian Revolution emerged above all with a proposal to invest Venezuela’s oil income in alleviating people’s needs and then transform Venezuela’s economy and its role within world capitalism.
The Bolivarian Revolution benefited from a period I call the “golden age”, which occurred from 2003–04 to 2012. During these years, two major systemic events occurred, which pushed up oil prices: the War on Terror and the US’ crusade to reshape geopolitics in the Middle East; and the rise of East Asia, in particular the boom in oil demand generated by China’s growth.
These two phenomena combined to push oil prices up and briefly paper over the crisis. But with the 2008 Global Financial Crisis, problems began to emerge in the Bolivarian Revolution’s macroeconomic model.
This was followed by another major event that splits this story in two: the death of Hugo Chávez in 2013. His death generated a forced leadership change in the Bolivarian Revolution, amid a rapidly escalating economic crisis specialists knew would require drastic corrections.
So, when Maduro takes office in 2013, not only had the golden era that papered over the economic crisis ended, but this was now intertwined with a political crisis generated by a leadership change in the Bolivarian Revolution...
As I said, this model was already, as we say in colloquial terms, pasando aceite [dripping oil] since 2010–11. While the Venezuelan economy grew in 2013, investments suffered a shock. This is a key indicator of recession.
Then in 2014, the Venezuelan economy went into a recession that ended up transforming into the worst depression ever seen in a Western country that was not at war. The Venezuelan economy shrank by about 80% of GDP.
The result of this in social terms is the mass migration we have seen of Venezuelans who have had to leave the country and the levels of subhuman consumption, malnutrition, lost days of schooling and a host of other issues that the vast majority of the population finds itself in.
Then the crisis clearly started before the sanctions imposed by the US?
We have to say two things. First, that this was not a question of bad economic policy, but profoundly serious structural contradictions in the economy. This was not about a bad government coming to power, but a bad government coming to power and having to deal with a very serious and long standing structural crisis.
Second, that the sanctions came on top of both these things — a very bad economic policy and a very serious crisis — and created a perfect storm. Amid this perfect storm, each factor fed off each other, culminating in a nuclear bomb of dispossession, social marginalisation, deteriorating conditions for production, and so on.
This idea that it was all the fault of the sanctions — which the government has tried to push, above all outside the country because domestically people know it is mainly government propaganda and blame passing — has gained international traction because it is mixed in with the question of US imperialism.
This is not the same as saying the sanctions are a trivial matter; they are absolutely serious. But when they are used as a weapon by the government to exonerate itself from responsibility for its economic policy and its handling of the crisis — which is largely to blame for this social, economic and political catastrophe — it does a disservice to truth and reality.
What has the US government sought with its sanctions?
We have to distinguish between two different sanctions regimes: the comprehensive sanctions regime that starts in 2019; and the sanctions that came before that as part of a targeted sanctions regime. The targeted sanctions regime pursued a strategy of attrition, while the comprehensive sanctions regime sought a collapse of the Maduro government.
There were a lot of sanctions prior to 2019 targeting top-level government officials over allegations of corruption, economic wrongdoing and so on. The strategy here was not really about determining whether these public figures were involved in any crime, but to fragment the ruling elite. What happened was absolutely the reverse.
Prior to 2019, the Venezuelan government was also prevented from obtaining fresh currency through loans via sanctions imposed in 2017. However, by then — and contrary to the government’s belief — the problem facing the Venezuelan economy was not one of liquidity but of fundamentals. Any new debt was only ever going to be paid for by consumers and taxpayers, which is what ended up happening.
From 2019 onwards, a comprehensive sanctions regime was imposed, above all through sanctions on [the state oil company] PDVSA and the Central Bank [of Venezuela, BCV]. I have described these sanctions as a “weapon of financial destruction”.
This sanctions regime was based on: disconnecting Venezuela from the international banking and SWIFT systems; disconnecting the BCV, and therefore Venezuela’s private banking system, from the international monetary system; and halting trade in strategic goods to limit the inflow of foreign currency. It represented a de facto severing of the country’s ties to the global economy.
It is worth asking why the sanctions implemented in 2019 did not end up causing more damage. The answer is because the Venezuelan economy was already destroyed. Venezuela was already six years into its Long Depression before the comprehensive sanctions regime came in.
Why do you think the US has started to ease sanctions?
The answer has to do with the geopolitical effects of Russia’s invasion of Ukraine [which has pushed up oil prices]. And that the US government is reaping the rewards of these sanctions by having set up an oil exchange program in which the US is not paying for Venezuela’s oil.
Under this program, the OFAC [Office of Foreign Assets Control] basically has sovereignty over Venezuela’s oil via remote control. That is why the US government grants a licence to Chevron, which pays PDVSA with debt forgiveness.
In theory, PDVSA receives no fresh currency; what it receives in exchange is a discount on the debt it owes Chevron. There may also be some other benefits for Venezuela; for example, the exchange rate system may benefit from Chevron selling foreign currency in the exchange market as part of its operations in the country.
But in practice, the Venezuelan state’s sovereignty over its oil has been completely suspended. In the past 100 years, the US has never had as much control over Venezuela’s oil as it does right now.