What ended this week, with the death of Venezuela’s Hugo Chavez, was a continent-wide experiment in the transformation of human life through politics.
Outside South America, Mr. Chavez was a polarizing figure: His outspoken anti-Americanism and alliances with the dictators of Iran, Libya and Iraq led him to be demonized by many as a Cold War-style threat. For others, he was a hero: a dark-skinned child of the slums who beat down rapacious corporations and gave his country’s oil money to the poor and championed the marginalized.
For the outside world, then, the legacy of his “Bolivarian revolution” is a contest of left and right. But within South America, something much more interesting took place during his 14 years in power – something that offers important lessons.
Mr. Chavez was far from the only leftist to govern a Latin American country in the 21st century: Within a decade of his 1999 election, left-wing leaders had come to office in Chile, Argentina, Brazil, Uruguay, Bolivia, Ecuador, Nicaragua, Paraguay and El Salvador; they now govern about two-thirds of the region’s people.
But they’re not all the same. If the great divide in the 20th century was between pro-American right-wing strongmen and anti-American Marxist autocrats, after 1999, it was between two varieties of left-wing government.
Some countries, notably Brazil and Chile, elected parties that embraced open trade and market economies and used the resulting tax revenues to build social programs and redistribute income. They are the social democrats. Others, notably Argentina and Venezuela, preferred to impose national control of key industries, block trade and foreign investment, control prices and give resource income directly to the poor. They tend to call themselves democratic socialists.
This showdown between social democrats and democratic socialists took place at a fortuitous moment: Oil and natural resource booms were boosting revenues; six decades of intense urbanization had ended in stable populations; and the U.S. had become less confrontational. As a result, poverty declined and the gap between rich and poor narrowed in almost all of these countries. But there was a big difference between the two systems.
A study by economists Darryl McLeod and Nora Lustig found that, in Argentina and Venezuela, inequality was reduced back to early 1990s levels after peaking in the early 2000s. But in social democratic Brazil and Chile, smart policies cut inequality to record-low levels: “Though both regimes reduced inequality and poverty,” once you remove the inevitable effects of rising oil prices, “only the social democratic regimes appear to break with the past, reducing inequality to historic lows.”
The Chavez approach helped the poor by giving them some money and health care. This isn’t to be dismissed: It sharply reduced the worst forms of misery. But neighbouring countries did the same while also creating a sustainable future beyond poverty; they created the business opportunities and economic institutions that make it possible for the poor to enter the middle class.
In Brazil and Chile, according to research by the Washington-based Center for Global Development, the size of the middle class expanded, to a fifth and a third of the population. In Venezuela, during the first half of the Chavez years, it collapsed to 3 per cent from 21 per cent, as the private-sector economy crumbled, and doesn’t appear to have recovered.
Here’s where the difference between Venezuela and Brazil is not simply one of degree, but of a fundamental nature: The populist, highly nationalist socialism of Mr. Chavez did serious damage to the institutions that could give people a path out of poverty. His neighbours spent a decade strengthening them.
Because Mr. Chavez regulated food prices and discouraged commercial farming, slashing agricultural capacity, there are major food shortages and hours-long lineups at government-subsidized supermarkets. Electricity supplies are sporadic, schools teach thin propaganda in place of a curriculum, cities and roads are crumbling, and hospitals are among the worst on the continent. This petroleum superpower has not saved or invested anything. On the contrary, Venezuela has a 20-per-cent deficit and an inflation rate of 30 per cent a year.
The “Bolivarian revolution” was not new politics but rather a copy of Venezuela’s policies of the 1970s and early 1980s, with the same results. Then, it was followed by a post-oil collapse back into poverty. This time, there were other, smarter options. They still exist, just over the border.