Practically nobody in the United States ever hears anything about truly newsworthy stories in Venezuela. Stories about exciting new political and economic initiatives that are dramatically reducing poverty and challenging popular myths about the abilities of ordinary people to make good political and economic decisions for themselves go virtually uncovered. (1)
Like most Latin American economies, the Venezuelan economy deteriorated during the 1980s and most of the 1990s. From 1998 to 2003 real per capita GDP continued to stagnate while the Chavez government survived two general strikes by the largest Venezuelan business association, a military coup, and finally a devastating two month strike by the state owned oil company. However, after Chavez survived the opposition-sponsored recall election, annual economic growth was 18.3% in 2004, 10.3% in 2005, and 10.3% in 2006, and the unemployment rate fell from 18.4% in June 2003 to 8.3% in June 2007. While this impressive growth would not have been possible without the rise in international oil prices, it also would not have been possible had the Chavez government not ignored the warnings of neoliberal critics and pursued aggressive expansionary fiscal and monetary policies.
At the height of the oil strike the poverty rate rose to 55.1% of households. However, by the end of 2006 the poverty rate had declined dramatically to 30.6% of households, which compares favorably with a pre-Chavez rate of poverty in 1997 for households of 55.6%. While much of this decrease in poverty was due to strong economic growth, it was also due to a dramatic increase in social spending by the Chavez government. Social spending per person by the central government and the state-owned oil company, PDVSA, increased by an average of 35% per year since 1998.
The most dramatic increase in social spending was in the area of health care. In 1998 there were over 14,000 Venezuelans for each primary healthcare physician, and few physicians worked in rural or poor urban areas. By 2007 there was one primary healthcare physician for every 1,300 Venezuelans, and many of the new physicians were working in clinics in rural areas and poor barrios that had never had physicians before. (2) There are also now 16,000 stores in poor areas throughout the country selling staples at a 30% discount on average.
Building the social economy
Reforms first. For eight years the Chavez government went out of its way not to threaten the private sector. Despite relentless hostility and numerous provocations from the Venezuelan business association and the privately owned media, there were few nationalizations and the state sector did not grow appreciably. Instead, Chavez concentrated on redirecting profits from the state-owned oil company to social programs to benefit the poor known as misiones, and financing development of what the government called the "social economy."
In addition to increasing spending dramatically on healthcare and food subsidies, the government launched a massive program of adult education. Millions of poor Venezuelans have now overcome illiteracy, and hundreds of thousands have received primary diplomas and secondary degrees studying in store-front schools named Mision Robinson I (literacy), Mision Robinson II (primary), and Mision Ribas (secondary.) But none of this addressed the high rate of unemployment and the most pressing economic needs of those who had voted Chavez into office. Determined not to renege on electoral promises to better economic conditions for his supporters as many populists in Latin America have in the past, Chavez launched a massive program to create worker-owned cooperatives in both rural and urban areas.
Cooperatives. New worker-owned cooperatives not only provided much needed jobs producing much needed basic goods and services, they also featured what was soon to become a hallmark of Bolivarian socialism--popular participation at the grassroots level. When Chavez was first elected President in 1998 there were fewer than 800 legally registered cooperatives in Venezuela with roughly 20,000 members. In mid-2006 the National Superintendence of Cooperatives (SUNACOOP) reported that it had registered over 100,000 co-ops with over 1.5 million members. (3)
Generous amounts of oil revenues continue to provide start-up loans for thousands of new cooperatives every month and the Ministry for the Communal Economy continues to spearhead a massive educational program for new cooperative members. However, the ministry provides more than technical assistance...