"Justicia Social" Failed Venezuela's Indigenous and Mestizo Populations

“Capitalism is the road to hell, to the destruction of the world.  …it’s the freedom to oppress, to invade, to kill, to annihilate, and to exploit.”  Hugo Chavez, 2009.

“Help me become President and I’ll help you get the land back.”  Hugo Chavez, 1998.

 

The quotes summarize lessons increasingly being taught in U.S. grade schools, high schools, and colleges.  Particularly referenced in “social justice” lessons are indigenous peoples, whose representatives also backed Chavez.  The lessons should be considered with robust reasoning, and compared to data.

My purpose here is to consider the case of Venezuela, where Hugo Chavez was President beginning in 1999, as an alternative to “capitalism” for indigenous peoples and their descendants.  At the time of the above quotes, if not now, two-thirds of the population of Venezuela was mestizo, meaning that each had a mix of indigenous and European ancestry.  A related comparison can be found elsewhere: Cuba and Puerto Rico from 1950 to present.

While many teachers of U.S. students dream about trying something other than capitalism, it became a reality for Venezuelans.  Land was redistributed in the name of equity.  So were petroleum assets, also as promised.

 

Chavez shirts sold well on college campuses.  U.S. intellectuals on the left were “mesmerized” by Chavez.

 

One direct result of land reform was violence.  Food became scarce.  No longer satisfied with the assets of “rich people,” the government came for the small businesses too.  Over 7 million Venezuelans have left the country in the past ten years, when the population was about 30 million.

 

This alternative to capitalism, steeped in “justicia social,” did not go well for people with indigenous ancestry.  My comparison here is not with nirvana, but with the capitalism they had before and the capitalism they will get wherever the migrants end up.

 

“Anti-capitalist” and “de-colonial” teachers today rarely mention Venezuela, Cuba, or other real-world alternatives to capitalism.  With only a few exceptions, there is no attempt examine the mistakes of the past so that next time can be different.  Does the omission reveal laziness, or some interest in repeating such experiences?

 

[Image source: https://twitter.com/venanalysis/status/1447981828254617604]

No More Troubles

 

• The violence seemed like it would never end; bombings, shootings, and kidnappings became so commonplace that they were almost expected, a grim part of the daily news cycle.
• Even simple tasks, like going to the shop or sending the kids to school, were fraught with uncertainty.
• The politicians seemed unable or unwilling to bring about meaningful change, trapped in their own ideologies and the weight of history, if not poorly incentivized.

 

This was Northern Ireland during the three decades of the Troubles, itself preceded by 300 years of conflict between Ireland and Britain.  During the Troubles, about 1/500 (cumulative) residents of Northern Ireland were killed by shootings, bombings, civil unrest, and the like.

 

I have been reading Leon Uris’ Ireland: A Terrible Beauty published in 1978.  Although Uris is known for his fiction, this is a non-fiction travel book.  It has lots of bitterness and anger and would not be easy for a British reader to stomach.  It is difficult to understand from today’s perspective.

 

A peace agreement was reached that has lasted 25 years now, even through Brexit.  Today “No more troubles” is a slight exaggeration, but there has been a reduction of almost two orders of magnitude according to the Global Terrorism Database.

Something worked well in Northern Ireland.  U.S. President Clinton and U.S. Senator Mitchell get a lot of credit for brokering the 1998 Good Friday agreement.  Interestingly, nobody seems to remember exactly which part of Ireland Mitchell’s father was from; perhaps that ambiguity helped the negotiations.

Note: per GTD coding, Israel (country code 97) does not include the West Bank or Gaza.

Image Credit: Generated with AI (Bing Image Creator) ∙ October 8, 2023 at 6:48 AM

Private Property: That Spot

Spot is the dog featured in an eponymous short story by Jack London.  Spot’s owners desperately want to be rid of the dog.  They tried shooting him.  There is an attempt to kill Spot with an axe.  They tie up Spot and leave town.  Spot is set lose on a river ice floe.  Spot always finds his way back.

On several occasions, governments (and others) have tried to eliminate private property.  Yet, it finds its way back.  After the Russian Revolution, most of the urban housing stock was nationalized.  The government used its authority over those properties to punish political opponents as well as those who did not perform well in their state-appointed jobs.  But, as documented in this UChicago History dissertation, still tenants traded apartments, improved them, and passed them on to heirs.

 

The nationalization of agricultural land has yielded similar results.  During China's Great Leap Forward, villagers risked their lives to reallocate communal land into individual plots, a scheme starkly against the official Marxist ideology.  This informal system of property rights helped prevent starvation in the villages that adopted it.  Kate Xiao Zhou calls it How the Farmers Changed China.

 

Private agricultural plots emerged in the Soviet Union too, even with some government approval.  As Nellie Ohr explains in her Stanford dissertation “In 1930 Stalin had declared that [collective farm] members could own a few livestock and use a small private plot of land for personal consumption.  However, these rules were often unclear….”  Economist Gregory Grossman estimated that “the approximately 50 million such tiny ‘farms,’ whose area represent only about 3 percent of the national total of cultivated land, have a gross output which is more than one fourth the gross output of Soviet agriculture.”  [Paul Samuelson was infamously surprised that private agriculture in the USSR, cultivated by uneducated peasants without the benefit of scale economies, would be more productive than government farms.]  See also The Private Sector in Soviet Agriculture.

 

I recently visited some friends working at a major consulting firm in London.  Of course, the firm is a capitalist enterprise, but regarding its office space the management decided that the workspaces would be a common resource for all employees.  The management now has its own Spot moments, as employees use the same workspaces day after day, informally treating them as their own.

Economics Lessons from the Kibbutzim

In March 2023, I visited Ma'agan Michael Kibbutz and had a meeting with a former Israeli government official charged with managing the government bailout of about 200 kibbutzim.  Both offered empirical lessons about the challenges of communal living.

 

Background and Description

Ma'agan Michael was one of the few kibbutzim not bailed out.  It is one of the wealthier and more populous kibbutzim, with approximately 2000 residents. (Kibbutzim is the plural of kibbutz, which is described in more detail below but might be briefly described as a voluntary socialist community in Israel.)

 

In an earlier era, this kibbutz and the others followed a more egalitarian model.  For example, children were once raised communally in dormitories and would visit their biological parents for only three hours each day.  This alone was a big sacrifice for families for the sake of ideology, not to mention harmful actions that adults might occasionally take against children knowing that their parents were not around.

 

Now nuclear families live together in their own residence.  Every family receives an income that varies only according to the age and structure of their family.  As of 2023, that was about $3,500 per month.  Dining and laundry are in common. Rent, healthcare, formal education, and those two services are "free" -- not taken out of the $3,500.  A family can purchase and own household appliances for their residence.  Some get a washer and dryer because the community laundry takes too long.

 

Part of the kibbutz is something like a car rental agency.  They have a fleet of cars.  A central office holds the keys.  A member could pick up a car key and use a car for the day.  I believe that this was charged against their $3,500. Much of the accounting is done on computer with a fab system.

 

Some of the members are employed outside the kibbutz, but nonetheless must surrender all of their earnings to the community.  A partial exception would be earnings during periods of sabbatical.  One three-year sabbatical is permitted per lifetime.

 

Forty-five hours per week of work is required from all adults, with some categorical exceptions.  Mothers are required only 37.5 hours per week.  Retirees do not work at all; their Israeli-government pensions go to the community.

 

More than 90 percent of the land in Israel is government land, including the land allocated to Ma'agan Michael since at least the 1940s.  It is a prime seaside property, as you can see in this photo.  They once fished in the Mediterranean but now operate a couple of different kinds of fish farms on their property.  They also have a couple of factories for manufacturing.  The plastics factory they founded in 1963 has annual sales approaching $100 million, which helped them avoid the financial crises experienced by most other kibbutzim.

 

 

The common areas of the kibbutz can be compared to a college.  The dining room resembles the college cafeterias from my own college days, which are not as upscale as modern college dining facilities.  The grounds are less neatly kept than college campuses are (the beach photo is not typical in that regard).

 

Problems with communal living, even on a small scale

 

As Ran Abramitzky discusses in his book The Mystery of the Kibbutz, and labor economists have observed with employment contracts, work effort can be a problem when pay is not tied to performance.  The kibbutz, where members have often known each other since birth, tries to police this by watching each other.  They can expel a member from the kibbutz for poor performance, which is a serious punishment.

 

The kibbutz also looks hard at the work ethic of persons applying for membership.  However, membership in the kibbutz is voluntary, and individuals cannot be compelled to stay.  The most productive members have a significant financial incentive to leave.

 

Perhaps a more serious problem is occupational choice and human capital accumulation.  With uniform pay, members have little financial incentive to excel in their jobs, particularly in roles they find unfulfilling.  While the kibbutz covers the cost of formal education, much of human capital development in conventional labor markets occurs after formal schooling is completed.

 

Too much is democratized on the kibbutzim.  First, there is the challenge of reaching agreement, leading to significant and frustrating indecision.  Second, incentives are lacking to acquire and utilize information relevant to collective decision-making.  An individual could work hard to determine the right answer, but his vote hardly counts (the paradox of voting).

 

Financial decisions are a prime example.  Few kibbutz members have an incentive to learn about, say, present values.  About fifty years ago, numerous kibbutzim initiated projects that seemed viable if the time value of money were ignored, but were big losers from an NPV perspective.  The abundance of failures among those projects was a major reason that kibbutzim would later be bailed out.

 

Equality, including gender equality, was an important ideal of the early kibbutzim and, to a large extent, still today.  Nevertheless, despite the ideology, gender segregation by occupation seems just as strong as it is off kibbutz.  All but one of the laundry employees I saw were female.  All of the tractors and heavy machinery were operated by men.