It's the inequality, stupid

It struck me yesterday, in the middle of a late-night email back-and-forth with Greg, that this racial debate is a distraction from another, much more important debate we ought to be having about Venezuela. My criticism of the charge of racism is right, but kind of beside the point. Venezuela has its own, home-grown mechanisms for systematic exclusion. It just happens that they’re based not on skin color, but on class.

Racism may be a cannard, but classism is very real, alive and well in Venezuela.

Rich people in Venezuela relate to poor people in deeply prejudicial ways. I’ve seen it, up close, many times – and I haven’t always had the confidence or clarity to object to it.

Venezuela is an outrageously unequal society, there is no debating that. In a way, it’s not surprising that people like Danny Glover or Greg Pallast come here, see the very evident social gap and the very negative attitudes that the rich have about the poor, notice that the rich are mostly light-skinned and the poor normally darker-skinned, and Q.E.D! Racism!

The line of reasoning is wrong, for the reasons I wrote about before, but the social gap is real, the stereotypical negative attitudes the rich have about the poor are real, and the poor are evidently excluded from most of the institutions of a decent society. Their grievances are real, and justified.

If I’m forced to play the game of finding something good to say about Chavez, this is what I’ll fall back on: so far as diagnostics go, I agree with 95% of what he said in 1998. The Chavez of 1998 is a far cry, needless to say, from the Chavez that runs the country now. Back then, it was hard to object to his critique: his style might have been too shrill and pugnaceous by half, but he wasn’t making this stuff up.

What’s more, he put the problem front and center, he burst through layers of upper class denial, he made the social divide the issue – which is a good thing, because the social divide really is the issue. And for all of that he is to be commended.

It’s just a shame his policies in power have made all of the problems concerned far worse.

Social exclusion exists on two levels: the social and the economic. Socially, exclusion is a system of customary ideas and practices about the role of the poor in society, about the institutions and spaces and opportunities are open to them. And there’s no doubt that the poor are excluded, excluded from all kinds of institutions, excluded from access to decent schools and well equipped hospitals, to all basic state services, to things like water and social security and a shot at the army officer corps. And there’s no doubt that this has terrible psychological effects on people: it has to be devastating to not only be poor, but to be poor alone, faced with the contempt of the powerful. The result was a lot of justified frustration, of a deep sense of grievance at those who were not so excluded.

The question is, why are the poor excluded?

To my mind, it’s obvious the reason has everything to do with money. If you’re too poor to live in an area with electricity, water, or gas, if you’re too poor to afford a private school place, if you’re too poor to buy insurance or at least medicine for the hospital staff, if you’re too poor to have time help your children with your homework, if you’re too poor to even eat properly, you can’t even begin to overcome the barriers that keep you excluded from those institutions.

I realize my view here is oddly Marxist. I think the economic substructure determines the ideological superstructure – it’s the fact that the poor have no money that causes exclusion, not the fact that the rich don’t like them. In fact, the economic substructre explains the superstructure: it’s the stress of a deeply unequal society that generates the mutual distrust and negative attitudes. Economic differences cause bad blood – always have, always will – and if you want to build inclusion, you have to start by making positive steps to reduce inequality.

Chavez’s view, seems to be the reverse: that the symbolic exclusion, the negative attitudes, the stereotypes, the use of language the poor could not understand, the callousness of the rich towards the suffering of the poor, that these are the root causes of social exclusion. Therefore, if you want to include the poor, what you do is you forcibly remove the symbolic privilege of the rich – especially their control of any part of the state aparatus – and then talk to the poor for 4 or 5 hours every Sunday making strenuous efforts to pet their collective ego, telling them they’re revolutionary heroes and that the state is there for them and that the most powerful man in the country is singlemindedly devoted to them and to their interests, etc. etc. etc. ad nauseum (for me, literally) You privilege the “social” over the “economic”, which seems to me another way of saying you privilege rhetoric over results.

What Chavez has proposed to his supporters, has never been a poverty fighting strategy. Not a serious one, anyway Ð certainly not one with the least possibility of success. What he’s proposed is a- a hodge podge of ad hoc programs done with no long term planning, no transparency, and no strategic focus, and b- (far, far more importantly) talk therapy. In important ways, Chavez intends to talk the poor out of their exclusion.

That poverty has increased seems to me like a matter of simple common sense: thereÕs no such thing as poverty reduction amidst rising prices, falling formal employment, a shrinking economy and an informal sector that grows and grows.

But even in terms of inequality, the government has made things worse, despite all the rhetoric. As even pro-Chavez observers tacitly acknowledge, a salient feature of Chavez’s five years of management of the economy has been an odd series of giveaways to the some of the richest people in the country.

For 3 years (1999-2002) the government pursued a policy of deliberately overvaluing the currency, in effect selling dollars at a discount to holders of bolivars, as a way of trying to control inflation (the “inflation anchor” of Giordani fame.) The strategy worked in the short term, but it was patently unsustainable: you can’t keep selling 1.2 watches for one watch vouchers forever without running out of watches. That wave had to break sooner or later, and when it did, it was obvious that the result would be higher inflation – which only drove people to trade even more of their bolivars for dollars. Every businessman in the country that had the money to buy dollars, did.

The policy was an incredible giveaway for anyone who had any savings at all to protect – they could buy hard currency at very attractive rates, and escape the hideous country-risk of having your savings in a country Hugo Chavez runs. Of course, the poor didn’t have that benefit – without enough money to eat, much less to save, they remained nailed to the cross that is the bolivar, at the mercy of the terrible price rises that Chavez’s unsustainable forex policy would inevitably spring on them one day.

(Oh no, he’s talking technocrat again! Ugh!)

To translate: the rich got out, the foreign reserves went down, the exchange rate finally collapsed, inflation jumped, the poor got screwed, and the rich got away unscathed. Worse still, this is what VenEconomyVenEconomy, for christ’s sake, that most unremittingly right wing of rags – had been warning consistently for literally years!

They didn’t listen.

The poor got screwed.

Our readers made a ton of money.

The record is even more scandalous when you look at the banks. The government’s strategy to finance itself solely with bolivar-denominated bonds was a boon for the bankers. They got to lend huge portions of their portfolios at very attractive interest rates with minimal risk. The debt came in the guise are government paper: zero risk, if the textbooks are to be believed.

The strategy was a huge giveaway to the banks, many of which did quite nicely for themselves by more or less abandoning the business of providing consumer or small business credit and dedicating themselves mostly to buying government bonds. Again, the fat cat bankers walked off with wads of cash, but the poor sap who owns a textile factory in Aragua and wants to borrow money to buy more sewing machines to employ more people is squeezed out, and the people who might have gotten jobs at that factory got screwed. It’s called crowding out.

All of this was happening against a backdrop of dropping PDVSA production capacity, faltering state finances, a shrinking economy, a huge wave of industrial bankruptcies, a bloody crime wave, growing unemployment, rapidly growing informal sector “employment” (street-hawking and odd jobs), falling average household incomes, and falling food-consumption and calory-intake statistics – which are just sanitized ways of talking about hunger. A bankrupt government ruling over a bankrupt nation. Ideal.

There is no doubt in my mind at all that the gap between rich and poor has widened. There’s no doubt in my mind that for the vast majority of the poor, the material conditions of life have deteriorated. Indeed, due to the extreme polarization of the classes now, there’s no doubt in my mind that the cultural manifestations of the gap, the negative attitudes and stereotypes, have also gotten much worse. If the rich feared the poor before, how much more do they fear them now when they see large numbers of them in a frenzy of hero worship towards an evident charlatan who only makes them poorer.

The conjunction of economic obscurantism, scorn for technocratic expertise, indifference to long term planning and a near-suicidal unwillingness to listen to critics – all liberally sprinkled with corruption – pushed the government to do things that are not just bad for the country, but worse for their own supporters than for anyone else. Ad hoc social programs are fundamentally unable to overcome the force for exclusion that growing poverty and inequality generate. It’s putting the horse before the cart.

The country does need a radical program of long-term reform, one that will change the socio-economic structure permanently, that’ll open opportunities to the poor and the excluded and improve their standard of living slowly but surely over a generation.

Instead, what it’s getting is talk, lots and lots and lots of talk, redemptive talk, stirring talk, but talk nevertheless.

The fundamental problems are not being addressed, and they’re getting worse.