The relationship between inequality and social and economic progress is constantly debated, especially in an era dominated by capitalism, a system which "automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which societies are based1." In their World Development Report, the World Bank states how inequality creates a pattern of domination that stifle mobility and progress2, and argues that the best policies for poverty reduction are those of redistribution.3 Yet, the case of Venezuela is a counterexample to this argument, which in an attempt to close economic boundaries and increase redistributive politics, with its overly dependent economy, has succumbed to the power of globalization and has created a paradoxical13 finding: the decrease in inequality has come with political, economic and social catastrophe.

Years ago, Marx said "the history of all hitherto society is the history of class struggles4." Cardoso, in his analysis of Latin America, reminds us that social structures impose limits on social processes and tension, but also generate contradictions, opening the possibilities for movements and ideologies of change5. Class struggles have transformed Venezuela in the political and economic field, even changing the sense of identity that some Venezuelans have, and that Castells would call "reactive6." To understand where these struggles came from, we must understand Venezuela's economic framework.

Having been a very poor country before the oil boom, Venezuela's economy was transformed in the early XX century, and has since become overly dependent on oil (Figure II), reaching up to 98.8% in 2012. Nonetheless, regardless of the amount of money that petroleum brings to the country, Venezuela is a classic case of the "resource curse", as Rodrik explains: "You become what you produce. Specialize in commodities and raw materials, and you will get stuck in the periphery of the world economy. You will remain hostage to fluctuations in world prices7."

In the 70's and 80's, Venezuela also saw economic booms and crises based on oil prices around the world, but it followed a more capitalist regime, and most of the time saw a positive GDP growth rate (Figure I). Nevertheless, the economy and political system was dominated by a small upper class, with insufficient redistributive policies to help a country in which most of the population lives in poverty, and is a worldwide example of a nation of "slums," that in the future decided to side with a populist regime.8 The Chavista party started implementing a more socialist regime, and increased government spending (Figures VII). These redistributive and socialist policies, came with a "closing of the economy," with measures such as exchange control and a focus on the public sector. Consequently, indicators of inequality, such as the Gini coefficient and the percentage of poor households (Figures V.a and VI) have greatly improved in recent years, with the Gini index reaching one of the lowest spots in all of Latin America (Figure V.b). What I find fascinating is how the government argues for a more national and less dependent economy (and hence, less globalization), but still fails to diversify and has increased debts around the world (Figure VII).

There are many cases of success of welfare states, such as Brazil, but "too little attention has been given to national differences in welfare state structure9."  The non-diversified Venezuelan economy could not sustain its social programs. Moreover, it did not focus its development policies on a "process of expanding capabilities10" but in simple gifts and subsidies that the lower classes enjoyed, but that were not economically feasible. Hence, economic and social misfortune started to show itself. With its focus on exchange control rate, Venezuela has created an informal, unstable and corrupt economy. Venezuela's inflation rate has skyrocketed, reaching official levels of over 150% (Figure III.a), and implied levels of up to 800% (Figure III.b), and GDP growth has reached negative values (FIgure I). Moreover, violence has become a way of life, with studies portraying Caracas as "the most violent city in the world." In the past years, intentional homicide rate has greatly increased from 20 per 100000 in 1995, to 54 in 2012.

    Something that is particularly interesting about the Venezuelan case and the concept of networks6 is that the Chavista regime has sparked a revolution in other countries of Latin America, such as Ecuador, Argentina, Nicaragua and Bolivia, that gave power to its ideology. On a similar note, despite the overflow of information in this network society, Venezuela has been able to manipulate data and control the media. Moreover, there is little that the international community has truly achieved to help. Hence I must ask: up to what point has globalization helped countries such as Venezuela?

    Rodrik poses the trilemma between hyper globalization, democracy and national self-determination.12 Yet in countries which have such bad governance as that of Venezuela I must argue that countries can only choose one of the three. In its search for nationalism and equality, rooted out of years of social struggle, Venezuela has taken measures that impede democracy and freedom of individuals, who are tied to economic and social hardships every day. In the past years, it seems to be a given that we must try to reduce inequalities, but the the international community must take into account cases such as Venezuela, in its debate on inequality and economic prosperity.

Date: Spring 2016

Works cited: 
  1. Piketty, Thomas. 2014. “Introduction,” p. 1 in Capital in the Twenty-First Century. Cambridge.

  2. World Bank. “Overview and Introduction,” p. 2 World Development Report 2006: Equity and Development.

  3. World Bank. “Overview and Introduction,” p. 9-10 World Development Report 2006: Equity and Development.

  4. Marx, Karl. Selections from The Communist Manifesto, p. 225

  5. Cardoso, Fernando Henrique and Enzo Faletto. p. xi. 1979. “Preface to the English Edition,” Dependency and Development in Latin America. Berkeley: UC Press.

  6. Castells, Manuel. The Power of Identity. Oxford: Blackwell Publishers, 2010 (latest edition).

  7. Rodrik, Dani. 2011. The Globalization Paradox: Democracy and the Future of the World Economy, p. 156, New York: W.W. Norton.

  8. Davis, Mike. 2004. “Planet of Slums,” New Left Review 26: p. 29.

  9. Esping-Andersen, Gosta. 1994. “Welfare States and the Economy,” pp. 711 in Smelser, Neil J., and Richard Swedberg. The Handbook of Economic Sociology. Princeton: Princeton University Press.

  10. Kerstenetzky, Celia Lessa. 2014. “The Brazilian Social Developmental State: A Progressive Agenda in a (still) Conservative Political Society in The end of the Developmental State? Ed. Michelle Williams Routledge.

  11. Tait, Robert. 2016. The Telegraph: Caracas, Venezuela named as the world's most violent city. Available online at:  

  12. Rodrik, Dani. 2011. The Globalization Paradox: Democracy and the Future of the World Economy, p. 200, New York: W.W. Norton.

  13. Zubillaga, Verónica. A "Pacific but Armed Revolution", Understanding the Paradox of Bolivarian Venezuela. 2014. Harvard University.