Venezuela’s mixed economy is a petroleum-lead economy, 80% of exports, 1/3 of GDP, and more than half of government revenues are coming from oil every year (venezuelanalysis.com, n.d.). Since oil price in 2008 have fallen more than 70 percent in 2008, the Venezuela’s economy have shrunk about 3.3% annually and the inflation leveled out at 31.4%. From 1998 to 2010, the Venezuela economy experienced a ‘‘V-Type’’ growth in which the lowest point is at 2003. As can be seen in Figure 1 that from 2003-2008, Venezuelan economy grew sharply, real GDP soared from 7% to approximately 15%. The expansion was started when government took over the national oil company: Venezuelan Petroleum Corporation (PDVSA) by the beginning of 2003. Marxist stated, accordingly, only by cooperating with other classes like peasants and unemployed people can the working class transforms the society. Therefore, in Venezuela, Chávez decreed the expropriation of the means of production which use the term ‘‘co-manegement’’ to describe the format of allowing working class to have the ownership of means of production and allying with state (venezuela.elmilitante.org, 21st Jun 2006). Since then, the real GDP have grown almost doubled to 94.7% in 5.25 years, which is 13.5% annually (Weisbrot, Ray and Sandoval, 6th February 2009). Besides, the new constitution which proposed by the supporters of Chávez states that “for reasons of economic and political sovereignty and of national strategy, the state will maintain the totality of the shares of PDVSA or of the entity created to manage the oil industry…” (Wilpert, 30th Aug 2003). In other words, the governments are aiming to meet the public interest and increase the company’s efficiency by focusing on increasing PDVSA’s efficiency and profitability, so that the company can create efficiency uses of resources and benefit government treasury and development continuously (Ibid.).
The actions have not yet stopped. Under the selected growth strategy and central planning system, a number of industries in Venezuela were nationalized, including electricity, communications and even the oil industry (Economywatch, n.d.). On July 31st, Chávez announced to take over a financial institution: Banco de Venezuela, which is owned by Spain's Grupo Santander (The Economist, 7th Aug 2008). The ‘‘new’’ restructured bank will face burdensome objectives, namely, set the interests rate, spend half of subsidized rate of loan on farmers and housing (Ibid.). It can be noted that, the government is extending its control over key public sectors, which led to a hesitation of continuing investment in oil giants, including Chevron, BP and ExxonMobil (Economywatch, n.d.). Although the process of nationalization may likely to result in a significant effect on foreign investment, central planning promotes the efficiency of use of resources and mobility of capital (Millar, 2004). Overall, since in the early part of the recovery, it is rather difficulty for government, and the achievements of Chávez’s government is very successful (Weisbrot, Ray and Sandoval, 6th Feb 2009).
In 2003, by establishing currency controls and set exchange rate at 2.15 bolivars per dollar, the government was about to control capital flight and inflation (Suggett, 3rd Jan 2011). In 2010, a dual exchange rate was introduced, which combined a primary rate of 2.6 bolivars per dollar for necessities and public services like food, education with a rate of 4.3 for non-necessities (Ibid.). As Suggett (3rd Jan 2011) explained that this move was intended to modify the pattern of Venezuelan economy by limiting imports and stimulating investment. Consequently, the adjustments on exchange rate not only have increased government revenues and bond, but also have controlled over 30 percent of banking system so that the investment will flow to domestic markets (Ibid.). However, some economists asserted that the currency is still overvalued and makes imports artificially cheap, Venezuela needs a more competitive exchange rate for diversifying its economy away from oil and development sustainably. (Weisbrot, Ray and Sandoval. 6th Feb 2009). In addition, the inflation rate in Venezuela is another issue, usually named “the highest in Latin America.”, which fluctuated around 20 percent for last seven years (Weisbrot and Ray. 6th Sep 2010). According to Pearson (10th Jul 2010) the inflation which has influenced the real exchange rate in Venezuelan was caused mainly owing to the selected strategy of central planning economy which concentrated on high social spending and imports. Nevertheless, the Economist (May 12th 2009) claimed that Venezuelan economy is expected to shrink by 5% in 2009, and there will be a further recession in 2010 if the government continue nationalize private firms and managing by radical economic policies.
As can be seen all the evidence above, in the aspect of Venezuela’s central policies, the government performances quiet well. Until last year, the Venezuela’s government current account produced US$19.8 billion surplus, which account for about 6.3 percent of GDP (Weisbrot and Ray, 6th Sep 2010). It is important to note that current account surplus is a result of taxation rise that royalty payments was doubled to 30% which reformed after have taken over PDVSA (Weisbrot, Ray and Sandoval. 6th Feb 2009). Wilpert (2003) pointed out that fewer expenses tax deductible is feasible to make the company operate more efficiently and contribute more to government revenues. As well as the contribution of private firms, GDP increased by 2.5 percent to 14.2% from 1998 to 2007 (Ibid.). ‘‘One central aspect of 21st century socialism is that it increasingly meets the needs of the Venezuelan people.’’ which stated by Bohmer (5th Aug 2009) Additionally, based on a report from the UN Economic Commission on Latin America, Venezuela has achieved the sharpest reduction in inequality in the Americas during this expansion which makes it the most equal distribution of wealth in Latin America (Weisbrot, M and Ray, R. 6th Sep 2010).
In conclusion, it can be summarized that on the basis of Marist Political Economics, the government started with nationalize the giant oil corporations so that it enables the company operates more efficiently and accumulating more capital. Then by taking over the financial institutions, the government extends the power in key sectors and allows large deal of capital mobilizing towards investment in domestic markets. More importantly, having control over the exchange rate let the country benefit more on import which led to the achievement of surplus on current account. The Venezuelan economy is predicted to be growing with the condition of high levels of aggregate demand, which based on the improvement in employment, living standards, poverty reduction, and income equality. It is important to emphasis that though the Marxist Political Economics did create some problems, with its guiding, all these government policies have achieved great contribution to enhance the possibilities of working class access to the public life.
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