The Paradox of Chavez

The news coming out of Venezuela lately has been of a country racked by a series of scandals; these include: the temporary closure of certain television channels for not showing presidential speeches—this was done because these stations had over thirty-percent Venezuelan content and the communications law states that those stations must show the speeches or face sanction, ergo, it fit well within Hayek’s notion of a just law, as it apply to all equally—; blackouts are becoming more common as a severe drought is starting to undermine the state’s capacity to deliver power and water; Venezuela is still one of the only states in Latin America that is still in recession; the emergence of a dual exchange rate to incentivize exports and industrialization, and dis-incentivize imports—with the exception of certain vital imports, i.e., food, however, this is expected to lead to even higher levels of inflation; etc. With all of this, many ‘business-analysts’ are suggesting that Venezuela is a black hole from which capital does not return, thus, investment should not be going in. This logic is exemplified by the proceeding quote from Mike Percy, Dean of the Business School at the University of Alberta (neoliberal):

"In Venezuela, you can put (money) in, but the odds are, you're not getting it back" he said.*

However, recently ENI S.A., a multinational petroleum company from Italy, and PDVSA, the national oil company (NOC) of Venezuela, intends to invest in $18 billion to develop oil from the world’s biggest reserve of oil, the Orinoco Belt. As the article from Mercopress elucidates:

The Eni/PDVSA agreement involves 18 billion US dollars worth of projects to pump and refine oil from the Orinoco Belt in central Venezuela. The venture expects to pump 240,000 barrels a day after spending 8.3 billion USD to develop the Junin 5 block... Eni also plans to build a 9.3 billion USD, 350,000 barrel-a- day refinery to convert crude oil from the existing Petromonagas project in the Orinoco into higher-value products. Italy’s Eni will hold 40% of the venture and PDVSA the rest.

Never-mind the investments that are planned from Petrobras from Brazil, Gazprom from Russia—“A preliminary joint venture deal on the Junin 6 block was signed in September between state-run Petroleos de Venezuela, or PDVSA, and a consortium of Russian oil firms, including Lukoil Holdings and Gazprom OAO...The Junin 6 block could eventually produce 450,000 barrels a day of heavy crude, and would require investment of some $30 billion, Venezuelan officials have said”**—, and CNOOC from China—“With China, Venezuela looks to develop the Junin 4 block, a $16 billion project with a potential to produce 400,000 barrels a day. The statement said Venezuela is looking to build an electricity-generating plant with China in the Orinoco to be used for refineries.”**

If, as Mr. Percy implies, investing in Venezuela is a metaphorical black hole for capital, why do major producers invest in Venezuela? On the flip side, is Chavez really anti-capitalist, why is he courting so much foreign capital? There are a lot of mixed messages coming out of Chavez. Chavez has stated that he doesn’t want to “expropriate everything”, claiming such claims are “not true.”*** However, Chavez has recently proclaimed himself to be a “Marxist”****, certainly this is ‘contradictory consciousness’ at its height, or is it?

Firstly, I do not think that Chavez is actually anti-capitalist, regardless of what he says or the Western media say. Chavez represents a new, post-1989, ersatz-radical left, one that has come to terms with capitalism—certainly with a more humane face—, but not with American ‘imperialism’. The real enemy for Chavez is not capital, the fundamental conflict is not internal to the polity or the system—as evidenced by his quote that he does not want to “expropriate everything”—, but rather it is external, the United States. Therefore, Chavez is actually playing from the rightist playbook by defining the enemy as external, an external that disrupted the natural ‘course’ of the Bolivarian revolutionary society. Yes, the United States does represent, signify capitalism, but it is not capitalism itself.

However, due to some ‘cunning of reason’, maybe—I emphasize the maybe— Chavez has no choice but to be a capitalist in order to destroy capitalism. Venezuela is not a developed country, by anyone’s account; it has an artificially high per capita income due to the rents extracted from the oil industry. Historically speaking, counter-hegemonic projects have only emerged in the developing world, e.g., Russia, China, Venezuela, etc. Thus, they have been characterized by multiple relations that Marx did not expect a future socialist society would have to face, i.e., underdevelopment, dependency, imperialism, dualistic economies, etc. Chavez is actually pursuing a policy that Soviet Russia and China wanted to or have pursued. As explained by Perry Anderson, in his recent article entitled “Two Revolutions”,

As a fully independent state, in tight command of its territory, it could be confident of its ability to control flows of alien capital by political power, much as Lenin had once hoped to do in the days of NEP; and, with a continuing grip on the strategic—financial and industrial—heights of the economy, of its ability to dominate or manipulate domestic capital.

Thus, within under-developed socialist states, they have little choice to be in favour of capitalist relations to develop their economies. However, as China now shows, this idealism of being able to ‘control capital’ without ‘becoming capital’ is a losing strategy. Indeed, the fetishism with ‘growth’ and ‘development’ may be the achilles heel of socialism. Indeed, China has become the ideal capitalist state, because it is obsessed with growth. What socialism has done historically, because it has been limited to underdeveloped countries, is actually introduce capitalism with a strong-centralized state that is independent of imperialist pressures. Creating the conditions for highly successful capitalist development, but the cost is the loss of the socialist project in the meanwhile. This can be explained by Zizek on the historic failure of Mao’s ‘Cultural Revolution’:

What Mao did was to deprive the transgression of its ritualized, ludic character by taking it seriously: revolution is not just a temporary safety valve, a carnivalesque explosion destined to be followed by a process of sobering up. His problem was precisely the absence of the "negation of the negation," the failure of the attempts to transpose revolutionary negativity into a truly new positive order: all temporary stabilizations of the revolution amounted to just so many restorations of the old order, so that the only way to keep the revolution alive was the "spurious infinity" of endlessly repeated negation which reached its apex in the Great Cultural Revolution.

This lack of a ‘positive order’, or the creation of a new hegemony and new social relations that allowed the rise of capitalism and its logics to reemerge, or arguably speaking, to merely reassert itself after a revolutionary lull. The project in Venezuela is twelve years old, we must see where it goes; indeed, if it even survives. In my opinion, it is going in the direction of Chinese-styled developmentalism, which to much of the modern left is the ‘best’ they can hope for.

Stay tuned...

*http://en.mercopress.com/2010/01/28/canada-confident-of-its-oil-potential-development-in-spite-of-venezuela)

**http://online.wsj.com/article/BT-CO-20100127 707060.html?mod=WSJ_World_MIDDLEHeadlinesAsia

***http://www.bloomberg.com/apps/news?pid=20601086&sid=aoTTUDfS0qNs
****http://en.mercopress.com/2010/01/28/tough-year-ahead-for-venezuelan-president-hugo-chavez

Bai-Bai Liberal Democracy? The Real Crisis of Democracy

The Economist magazine recently published an article entitled, “Democracy’s Decline, Crying for freedom” (http://www.economist.com/world/international/displaystory.cfm?story_id=15270960). The article, informed by Freedom House’s latest report card on the spread of liberal-democracy suggests that for the past half-decade the ‘exonerable’ push towards liberal-democracy has not only stalled, but also has been marked by significant set-backs, i.e., Thailand, Honduras, Russia, etc. The rise of China’s form of authoritarian capitalism, informed by the Singaporean-model, is beginning to undermine the ‘ethical-intellectual’ leadership of Anglo-American hegemony that has been deeply entrenched since 1989.

Russia is a case in point, after the collapse of the USSR in 1991, the Russian government sought to implement neoliberal reforms. It was during this era that the promise of massive aid and investment from the West, along with the ideological fervor of the magic of the ‘free market’ to correct all the ills from the Soviet era were strong—albeit, I would not suggest they were hegemonic, arguably most citizens of the USSR wanted a more democratic-socialism and not free-market capitalism. Boris Yeltsin put it best:

We rule out any subordination of foreign policy to ideological doctrines or a self-sufficient policy. Our principles are simple...the supremacy of democracy, human rights and liberties, legality and morality (qtd. in Donaldson 230).

I think Althusser’s ingenious argument applies here like at no other time, “those who are in ideology believe themselves by definition outside ideology: one of the effects of ideology is the practical denegation of the ideological character of ideology by ideology”(131). Critically, this is the mentality that many liberals hold: that they are not immersed deeply in ideology, that they hold some ‘enlightment’, abstract truth that no one else has; however, the effect has been to delegitimize liberalism as its abstract theories have not panned out as they planned. As Badiou warns, “Without a generalized application there is no testing ground, no verification, no truth. In that case ‘theory’ can only give birth to idealist absurdities” (2005). One such absurdity is the abstract notion that we can organize society in some liberal-utopia, based on human’s being rational, utility-maximizing robots. Therefore, the denegation of ideology by liberals is one the major reasons we have such a huge backlash against liberal-democracy and market-economies today. Not only is it arrogant and wrong, its prescriptions are doomed to failure because it ignores and inverts the core lesson of materialism: “The movement of knowledge is the practice-knowledge- practice trajectory” (Ibid).

Back to Russia, the majority of the parliament, which was freely elected during the Soviet era, understandably, opposed these abstract, neoliberal reforms. Yeltsin, in order to pass the reforms, basically scrapped the Russian constitution and bombed the Duma (parliament) to pass the IMF-US Treasury sponsored reforms; indeed, for all the posturing the United States may make about its defence of democracy, it was clear that “the United States had expressed its willingness to condone the Yeltsin administration's decision to take ‘resolute’ steps against the Duma so long as the Kremlin accelerated economic reforms” (Simes 2007). It should be remembered, this was the apex of neoliberal hegemony, where the very notion of ‘freedom and democracy’ was explicitedly defined as being a ‘market economy’ and that those institutions that prevented the flourishing of the ‘free market’ were anti-democratic and atavistic, according to the logic of the ‘end of history’. As The Economist argues in the aforementioned article, “Another caveat is that democracy has never endured in countries with mainly non-market economies”. Paradoxically, it seems that the market cannot emerge from a democratic society that has not first been ‘liberalized’—the essential lesson learned from C.B. Macperhson in his work on the subject of democracy.

It was this critical juncture in 1993 that set the path for the rise of the oligarchs and illiberal-democracy in Russia, personified by Vladimir Putin. It should be remembered that Putin did not change a letter of the Russian constitution; the ‘original sin’ of Russian democracy was based in the liberal-totalitarian zeal of the 1990s. Unlike in pervious eras, where authoritarian had some redeeming social qualities, i.e., socialism, equality, material security, etc. Today, the market-reforms in Russia has created a new oligarchic class whose interest is to reinforce the capitalist aspects of the 1990s, not necessarily the ‘free-market’ aspects. As The Economist points out:

Today, the idea that politicians in ex-communist countries would take humble lessons from Western counterparts seems laughable. There is more evidence of authoritarians swapping tips. In October, for example, the pro-Kremlin United Russia party held its latest closed-door meeting with the Chinese Communist party. Despite big contrasts between the two countries—not many people in Russia think there is a Chinese model they could easily apply—the Russians were interested by the Chinese “experience in building a political system dominated by one political party,” according to one report of the meeting.

Now this may be, and probably is, liberal propagandizing, since it is based on ONE report of the meeting, but the fact that the two did meet suggests something. It suggests that the core arguments of liberalism no longer bear fruit, the myth has been demystified. The rise of China has undermined just about every-core liberal concept and it shows with the inability of The Economist to defend of liberal-democracy from the onslaught of what Slavoj Zizek calls ‘capitalism with Asian values’, which he describes as follows:

The virus of authoritarian capitalism is slowly but surely spreading around the globe. Deng Xiaoping praised Singapore as the model that all of China should follow. Until now, capitalism has always seemed to be inextricably linked with democracy; it’s true there were, from time to time, episodes of direct dictatorship, but, after a decade or two, democracy again imposed itself (in South Korea, for example, or Chile). Now, however, the link between democracy and capitalism has been broken.

One telling example of this inability lies in the belief that only in a liberal-democratic society, one can have technological capitalism, however, China is disproving that premise and The Economist cannot easily deny this:

Believers in democracy as an engine of progress often make the point that a climate of freedom is most needed in a knowledge-based economy, where independent thinking and innovation are vital. It is surely no accident that every economy in the top 25 of the Global Innovation Index is a democracy, except semi-democratic Singapore and Hong Kong... China, which comes 27th in this table, is often cited as a vast exception to this rule. Chinese brainpower has made big strides in fields like computing, green technology and space flight...And no country should imagine that by becoming as autocratic as China, it will automatically become as dynamic as China is.

Why not? This is not explained, and this is where the ideology comes in. However, now the ideology cannot explain away China, so what is left, this contradiction; indeed, one can, and I will turn the last quote on its head for the liberals: ‘And no country should imagine that by becoming as liberal-democratic as the United States, it will automatically become as dynamic as the United States is”.

Ergo, why is liberal-democracy in the state it is in? Because it doesn’t feel the need to defend itself adequately, it denies its essentially ideological and political character and assumes it is inherently superior devoid of any real, not ‘idealist absurdities’, as a justification.

Well, the world moves on.

Is this the death of the neoclassical paradigm? Part I

I am currently reading Hyman Minsky’s most important work, Stabilizing an Unstable Economy. With the current backlash against the once hegemonic Chicago-School of economics that solely emphasized the microeconomic aspects of economics—the pro-capitalist, uncritical apology for Adam Smith’s notion of the ‘invisible hand’ of the free market. They totally reject the macroeconomic/structural—Keynesian/Marxist—legacy of economic analysis and Paul Samuelson’s so-called “neoclassical synthesis”. Largely informed by the liberal-fundamentalism of Hayek, Friedman--both of whom taught at Chicago--and Mises, they believe that any government intervention that does not apply to all equally leads to totalitarianism and sub-optimal economic outcomes, viz., ‘The Road to Serfdom’; however, it is a thesis that runs contrary to historical evidence (read: http://perspectivos.blogspot.com/2009/12/on-hayek-part-i.html).

They also argue that capitalism is the only true system of freedom where individuals are free to choose to do what they want. However, C.B. Machperson’s critique of Friedman points out that capitalism is built and depends on a inherent inability of persons to be free--the proletariat--and a duality of power between those who lack capital and those who have capital, which relegates those without capital without a choice when it comes to work--exploitation--caused by dispossession and coercion from the state and its ‘structural reforms’; thus, as Machperson states, “Professor Friedman's demonstration that the capitalist market economy can co-ordinate economic activities without coercion rests on an elementary conceptual error”. I will quote Macpherson here at length:

The proviso that is required to make every transaction strictly voluntary is not freedom not to enter into any particular exchange, but freedom not to enter into any exchange at all...What distinguishes the capitalist economy from the simple exchange economy is the separation of labour and capital, that is, the existence of a labour force without its own sufficient capital and therefore without a choice as to whether to put its labour in the market or not. Professor Friedman would agree that where there is no choice there is coercion. His attempted demonstration that capitalism co-ordinates without coercion therefore fails.

This also disproves Hayek’s rather eclectic notion that capitalism and liberalism basically evolved peacefully from the immutable forces of idealism and was not implemented as a conscious, material, program by capital and the liberal-state; however, as Polanyi states that “[the] lassiez-faire economy was the product of deliberate State action” (147).

However, the aforementioned critiques undermine the premises of the their theory, but it is the theory itself that is now under attack. Paul Krugman’s latest blog post entitled “This is the way the Chicago School ends” (http://krugman.blogs.nytimes.com/2010/01/07/this-is-the-way-the-chicago-school-ends/) suggests that we have a Kuhnian ‘paradigm shift’ happening. The Chicago School, as Krguman, et al., suggest cannot explain away the inability of the theory to explain the causes of the financial crisis. This inability is suggestive of ‘anomalies’, which Kuhn describes occurs when “normal science leads only to the recognition of anomalies and to crises. And these are terminated, not by deliberation and interpretation, but by a relatively sudden and unstructured event like the gesalt [sic] shift” (122). This is now happening, running on all cylinders, as the attacks are coming from all sides: the neo-keynesians, institutionalists and marxists and this is starting relentless attack is bearing fruit. The attack, spearheaded by Paul Krugman and Joseph Stiglitz is reversing the neoliberal ‘counter-revolution’ of the 1980s. So wide-ranging is the assault on the traditional neoclassical ideology that Joseph Stiglitz, the anti-Hayek within the pro-capitalist camp, now goes so far as to question many of the basic postulates of the paradigm. The first is the notion of marginal returns and secondly, the invisible hand:

Neoclassical economic theory, which has dominated in the West for a century, holds that each individual’s compensation reflects his marginal social contribution...But Borlaug [inventor of the Green Revolution] and our bankers refute that theory. If neoclassical theory were correct, Borlaug would have been among the wealthiest men in the world, while our bankers would have been lining up at soup kitchens” (Stiglitz, 2009)

—and—

The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith's invisible hand often appeared invisible: it is not there. The bankers' pursuit of self-interest (greed) did not lead to the well-being of society; it did not even serve their shareholders and bondholders well. It certainly did not serve homeowners who are losing their homes, workers who have lost their jobs, retirees who have seen their retirement funds vanish, or taxpayers who paid hundreds of billions of dollars to bail out the banks. (Stiglitz, 2009)

What all these counter-hegemonic ideologies have in common is the belief that the free-market, capitalist system is not perfect and that it is inherently and internally prone to crisis that, if the market is left to its own devices, the economy would likely implode akin to what occurred in the Great Depression. As Minsky writes:

Instability is due to the internal processes of our type of economy. The dynamics of a capitalist economy which has complex, sophisticated, and evolving financial structures leads to the development of conditions conducive to incoherence...But incoherence need not be fully realized because institutions and policy can contain the thrust to instability. We can, so to speak, stabilize instability (10).

This is a radical break, because it essentially proves that Marx was right in regards to the inherent tendency within capitalism to contradict itself and lead to repetitive and  successively worse crises as the contradictions amplify themselves—overaccumulation/underconsumption, which is a mirror of Keynes argument of the crisis of savings/investment caused by a lack of aggregate demand. However, unlike the marxists, they believe that capitalism can be successfully regulated and lead to a essentially crisis-free system, if only one can properly regulate it. What is needed is a ‘visible hand’ to create incentive structures to channel homo economicus to socially optimal outcomes and maintain a relatively crisis free capitalism, and to regulate away the ‘casino’ aspects of finance capitalism in particular. The question is, is this actually possible within a capitalist state?