Fact check: Socialist policies alone did not destroy Venezuela’s economy in last decade

The claim: Venezuela’s economy was destroyed by socialism 

A Facebook post shared tens of thousands of times since 2019, and recently viral, claims that in only a decade, Venezuela’s once thriving economy was crippled by socialism. 

The post, which shows a photo of Venezuela on a map, claims that 60 years ago the South American nation was twice as rich as China and four times as rich as Japan. It says it had the fourth wealthiest economy in the world and the most thriving country in Latin America. 

It further claims that Venezuela’s currency was the worth the most, second only to the U.S. dollar. It also says it had a thriving health care system.

But all of that was washed away in only a decade due to socialism, the post first shared by Facebook user Katharine Trauger says. She didn’t respond to a message seeking comment on where she found her information about Venezuela. 

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The root of the country’s success and demise: oil  

It’s true that Venezuela once had a thriving economy that fell to deep poverty — but there’s more to it than just a simple explanation of socialism, Stephen Morris explained.

Morris is a professor at Middle Tennessee State University in Murfreesboro, where he teaches Latin American studies and is now researching corruption at the National Autonomous University of Mexico in Mexico City.

“The post is partially correct on the facts, but simplifies things a bit in its conclusion for obvious political purposes,” he said. 

In the 1970s, the country experienced a healthy economy because of its success with oil. Venezuela’s petroleum reserves are recognized as the largest in the world. By the end of 2019, BP’s review of world energy estimated the country had a whopping 303 million barrels of oil. 

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By building an economy on the success of oil prices, “it distorts everything else,” Morris said.

“When the price of oil goes high, the country does well, but when the price of oil collapses, everything goes to hell,” he said. 

The thriving oil reserve caused the country to put all of its eggs in one basket: It focused mostly on oil production, while other industries have seen less interest, like agriculture, which has been the case historically, Morris said. In economics, this is known as Dutch disease.

The country’s economic standing fell when oil prices began dropping in the 1980s. While growth was restored and the economy leveled out, it left poverty in its wake, Morris said. 

Venezuelan President Hugo Chavez holds a Spanish language version of Hegemony or Survival: America's Quest for Global Dominance by Noam Chomsky while addressing the United Nations General Assembly Sept. 20, 2006.

The rise of Chávez 

In the 1990s, Hugo Chávez — who went on to be elected president — made a coup attempt to overthrow President  Carlos Andrés Pérez, who was later impeached. Chávez was imprisoned for his coup attempt. During that, and a subsequent one, over 100 people died. 

And although Venezuela was more stable at the time of the attempted coups than it is today, things weren’t stellar. If they were, Morris argued, why did they vote Chávez to the highest office in the nation in the first place, effectively throwing out the political landscape and ushering in a Venezuelan form of socialism?

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Before Chávez’s election, Venezuela was one of few countries in Latin America considered to be a democracy when other countries had military rule, Morris said. But still, Venezuelans weren’t happy with their current system, and voted in Chávez in 1998. 

“The capitalism of the period really did not serve the masses, resulting in social unrest and the rise of Chávez,” he said. 

Chávez launched the Bolivarian Revolution, which performed “missions” and social programs for the country. These programs, which aimed to reduce poverty, were funded by money earned from the country’s oil trade. They pulled some people out of poverty and began closing the gap of inequality. The economy was doing well, Morris said.

“Chávez was a consequence of the system,” he said. “He was extremely popular.”

But it wasn’t sustainable. 

The missions had a dark underbelly. In the years that followed, Chávez seized individual wealth, including land and companies, put his supporters in positions of power and gave the military broad control.

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Although it may seem sinister, broad military control isn’t unusual in Latin American countries, Morris said. The military does a lot more on-the-ground work there than Americans are used to seeing, he said. The military is often used for disaster relief and food distribution. Latin Americans tend to trust the military more than government leaders, Morris said, so politicians rely on the military to build trust.

But further, according to Foreign Policy magazine, Chávez, and those he appointed to run Venezuela’s oil monopoly, knew little about the nation’s biggest industry.

“He was ignorant about everything to do with oil, everything to do with geology, engineering, the economics of oil,” Pedro Burelli, a former Petróleos de Venezuela board member, told the magazine. “His was a completely encyclopedic ignorance.”

In 2010, ahead of an upcoming election and as the global price of oil fell, Chávez announced he was decreasing the value of the bolivar, the nation’s currency. It was worth more than the U.S. dollar but dropped after Chávez’s decision, then continued to plummet. 

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The move cause even more inflation, as experts warned it would, plunging the country into a spiral from which it has been unable to climb out for the last decade.  

Today the bolivar is practically worthless because of hyperinflation; that has crippled the economy. 

After Chávez died, Nicolas Maduro was elected in 2013. Problems only grew under him: increased poverty, food shortages and a mass exodus of Venezuelans fleeing the country.

Venezuelan President Nicolas Maduro's government is accused of "corruption at the highest levels."

Maduro rewrote the country’s constitution, moved the election and attempted to ban groups of people from voting. Last year, his election win was contested by a political rival who attempted to overthrow Maduro’s presidency, which they found fraudulent. The effort was backed by the United States, but has been at a stalemate for the past year. 

“Whatever problems we see in Latin America and Venezuela, we have to understand those in historical context,” Morris said. “Chávez didn’t come out of nowhere. He was the product of a problem Venezuela was facing in the ’80s and ’90s.” 

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Poverty crisis

According to the United Nations, Venezuela produces only 30% of its food supply. Historically, this has been a problem in Venezuela, Morris said, that was “much more exasperated” under Chávez, even though the large reliance on importing food existed before him. 

This has led to a hunger crisis, which has grown as inflation has surged. In April, Maduro fixed the price of certain food staples, like butter or eggs. They now cost more than a typical monthly salary, Reuters reported, which is equal to about $2.

It’s not uncommon for governments to have food price control, Morris said, but it was much more common in Latin America decades ago than it is today. 

It’s estimated that 87% of people living in Venezuela are impoverished while 61% of the country’s population live in “extreme poverty,” according to the Annals of Global Health. A 2016 study estimated that 75% of the population studied had experienced “involuntary weight loss.”

The limited food resources has created a black market for food. 

“If you put politics aside, people are suffering,” Morris said. “The bottom line is the people are the ones who are suffering considerably. … The sympathy has to lie with the Venezuelan people.”

A man walks past a mosaic depicting late Venezuelan President Hugo Chavez (left) and Venezuelan president Nicolas Maduro in Caracas, Venezuela, on January 30, 2019.

Venezuela’s economy, historically

According to Foreign Policy magazine, “Venezuela was considered rich in the early 1960s: It produced more than 10 percent of the world’s crude and had a per capita GDP many times bigger than that of its neighbors Brazil and Colombia — and not far behind that of the United States.”

But Venezuela’s economy wasn’t better than China’s or Japan’s in 1960, the countries’ GDPs show. Measured in current U.S. dollars, Venezuela’s GDP was $7.8 billion, China’s was $59.7 billion and Japan’s was $44.3 billion in 1960. 

Venezuela wasn’t ranked fourth best economy in the world, either. However, Morris said, it did surpass China and Japan per capita income at that time.

The post relies on “picking and choosing” what parts of Venezuela’s history to latch on to and avoid, Morris said. It overlooks the nuanced history of the country. By latching on to socialist policies as the root of the country’s failing economy is “simplifying the argument greatly.” 

“It’s like someone taking the 1928 to 1938 period in the United States and saying capitalism is a failure,” he said.

Our ruling: Partly false 

We rate this claim PARTLY FALSE because parts of it were not supported by our research. The meme is misleading in its simplicity. It is true Venezuela has socialist programs, but they were not entirely responsible for the country’s economic collapse. The nation’s strong ties to its oil industry led to great success then great failure. Venezuela’s demise did not occur just in the last decade, but has its roots in the Hugo Chavez era, which started in the 1990s, and before. And while Venezuela was more successful per capita than China and Japan in 1960, its GDP and economic ranking as of 1960 are incorrect in the meme.

Our fact-check sources: 

Reach Brinley Hineman at bhineman@tennessean.com and on Twitter @brinleyhineman.

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