TOPSHOT - Venezuelans heading to Peru walk along the Panamerican highway in Tulcan, Ecuador, after crossing from Colombia, on August 21, 2018. - Ecuador announced on August 16 that Venezuelans entering the country would need to show passports from August 18 onwards, a document many are not carrying. And Peru followed suit on August 17, announcing an identical measure due to begin on August 25. (Photo by Luis ROBAYO / AFP) (Photo credit should read LUIS ROBAYO/AFP/Getty Images)
Above Credit: The Atlantic
Failed States and Global Security
Nearly 2 million people have fled Venezuela since 2015, making it the most serious refugee crisis in Latin America’s recent history. These refugees are fleeing what has in effect become a failed state, and most are finding refuge in neighboring Colombia, which has emerged from over 50 years of civil war and drug trafficking to become a lauded success story in terms of political stability and economic development (As a side note, this author’s brother has had a wonderful experience living there). In many ways, Colombia is the mirror opposite of Venezuela, which dramatically declined from being an oil rich democracy to becoming the Syria of Latin America, with catastrophic inflation and a murder rate higher than Honduras and El Salvador, formerly the most murder-prone countries in the world.
Many on the right claim the Venezuela crisis is a case study in the failures of socialism, warning that the same disastrous outcome could ensue in the United States if someone like Bernie Sanders was elected president. Venezuela has indeed suffered from the failures of state directed economic planning, but the causes of this crisis run deeper than installing a welfare state. Instead, Venezuela’s ills are rooted in what Foreign Policy Magazine calls, “resource nationalism.”
In Venezuela’s recent history, politics and oil have always intersected. With some of the world’s largest reserves, Venezuela has had a notorious example of a “resource curse“, where high crude prices could translate to high state revenues. This addiction can never last, even though politicians in the moment seem to think so; the allure of oil revenues distracts political elites from other areas of economic development, leaving the country with no other options for economic growth in times of low prices.
When Hugo Chavez took power in the late 1990s-as a result of economic chaos from a glut in oil prices-he saw the workforce and management of Petroleos De Venezuela, the state-owned oil company, as a source of inconvenient political opposition. He fired much of the company’s leadership, replacing them with loyal apparatchiks who had almost no background in geology, or engineering, creating a brain drain that in the long run severely constricted Venezuela’s ability to extract oil.
In 2005, Hugo Chavez’s government admitted that PDVSA had lost at least 15 years worth of technical skills. Moreover, in the short term These internal problems compounded with collapsing oil prices have left Venezuela’s oil sector a shadow of a shadow of its former self, with crude oil in such poor condition, that buyers reject it and it is given to China more or less for free to settle debts. Oil production reached a 28-year low in the fall of 2017, with output dipping under two million barrels a day, a fall so dramatic that it usually is preceded by war or sanctions according to Francisco Monaldi of Rice University.
Chavez’s successor, Nicolas Maduro has proven completely unable to deal with a collapse in oil prices from $100 a barrel to less than $30 a barrel in January of 2015, a year when GDP contracted nearly 6% and hyperinflation began to set it. While Maduro’s predecessor became very popular with the Venezuelan people for diverting oil revenues into social programs, namely food subsidies, education and health care, collapsed oil revenues rendered these programs insolvent, with food prices dramatically climbing without subsidies.
Collapsing oil prices have also depleted Venezuela’s foreign currency reserves, making food shortages increasingly common due to dependency on food imports, another grim reminder ordinary Venezuelans face every day of the arrogant shortsightedness of its leaders in buying into a resource curse.
Amid this instability, the social fabric of Venezuela has all but collapsed, with dystopian forms of control, such as government issued ids determining which day you can go to the market, taking hold in Venezuelans’ everyday life. As of 2017, death tolls from anti-government protests have exceeded 100, with over 1,900 injured.
Venezuela shows no signs of stabilizing anytime in the near or even distant future. The Maduro government has issued a new currency with 100,000 bolivars of the old currency being worth 1 bolivar of the new, but the IMF still predicts an increase in inflation by 1,000,000% by the end of the year.
In what could be described as bizzare, Maduro has seen cryptocurrency as a saving grace. The government bragged that its ICO (Initial Coin Offering) of the Petro raised $735 million, with it being pegged to the new currency and being backed by oil. The cryptocurrency has evoked “a mixture of dumbfoundedness and anger” from cryptocurrency experts according to Alex Tapscott of the Blockchain Research Institute.
The Trump Administration has made its disdain for these catastrophic policies and the Maduro regime well known. Congress has recently proposed legislation coupling humanitarian relief with wide ranging sanctions on the Venezuelan government, just as the US has recently imposed sanctions on top Venezuelan government officials and its first lady.
So far, the Treasury Department has imposed sanctions on $3 billion of Venezuelan assets. The Justice Department also seems to be building a credible case against Maduro’s jailed relatives for drug trafficking charges. Many south American nations are in line with this US policy, effectively isolating Venezuela. Argentina, Chile, Colombia, Paraguay and Peru are petitioning the Hague to investigate the Maduro government for crimes against humanity.
Over the condemnations, the sanctions, and isolation looms the awkward question of regime change. Donald Trump is seemingly open to the idea, though he has not expressed firm commitment either way. “It’s a regime that, frankly, could be toppled very quickly by the military, if the military decides to do that.” This receptiveness confirms earlier reports of Trump asking his aides about invading Venezuela in a private meeting in 2017, and asking latin American leaders for their opinion on the matter the following month at the UN general assembly meeting.
The possibility of invasion, either by the US or its latin American neighbors, is not lost on the Maduro government. When Colombia’s foreign minister predicted his country could see up to 4 million Venezuelans living in the country by 2021, the Maduro government shrugged off the predictions as “fake news” that was meant to sow panic and lay the groundwork for foreign intervention. Moreover, references to America’s past intervention in the region are a constant refrain in the populist left wing rhetoric of the Chavez and now Maduro government.
The “military option” for Venezuela is highly dangerous, as it presents the opportunity to further destabilize Venezuela and leave more displaced. The Council on Foreign Relations estimates 100,000 personnel at minimum would be needed to invade Venezuela, similar to the size of the 2003 Iraq invasion. A majority of Venezuelans, and a plurality of the Venezuelan opposition will not welcome American flags over Caracass. However, an Iraq-style outcome is unlikely given that large scale American land war is increasingly a thing of the past, as detailed here.
The more likely option for regime change is a US-backed military coup, a notorious instrument of American power in the region. Indeed, the Trump Administration had meetings shrouded in secrecy and intrigue with rebel elements of the Venezuelan military in 2017 who were eager to topple the Maduro government. America is also likely to continue a strategy of leaning on regional allies to put pressure on shared enemies. While Donald Trump’s foreign policy is seen as a love letter to American unilateralism, he has enthusiastically given Israel and Saudi Arabia, two traditional American allies, a free hand in fighting a proxy war with Iran. He could similarly give Colombia the green light in duking it out with Venezuela.
Why is Donald Trump deeply obsessed with placing sanctions on Venezuela? Should not greater emphasis be placed on helping Venezuela’s neighbors deal with the humanitarian fallout of this crisis? Will sanctions in the long run end up impacting the Venezuelan people, already suffering, as opposed to the brutal Maduro regime? Indeed, Garth Friesen of Forbes argues that sanctions will hurt the government’s ability to raise foreign currency by inhibiting its ability to sell debt in the US. If it cannot raise foreign currency, it will print more money, continuing what is a death spiral of inflation.
Sanctions at this point seem to be a knee jerk response from the Trump administration. It has been embraced as a means to fight China, Russia, Turkey, North Korea, Iran and even possibly India and the European Union. The Trump Administration initially hinted at a course of withdrawing America’s role in the world. Then-candidate Trump said the American military presence in the middle east was a mistake and that the US had common interests with Russia in fighting terrorism. As president, he has dramatically increased America’s military footprint globally and signed on unprecedented defense spending. His secretary of defense has said that “great power competition” with Russia and China,is the main priority for foreign policy making. The sanctions against Venezuela are a piece of that larger puzzle of combatting states perceived as hostile to American interests, with little room for multilateralism.
Given the questionable effectiveness of sanctions, and the potential catastrophe of military intervention, Venezuela will continue to be a failed state for the foreseeable future. Venezuela is looking to gain friends anywhere it can, and China is eager to fulfil that role. Being a creditor to Caracas since 2008, it signed a $5 billion loan to Venezuela this September. Of course, that will be nowhere near enough to rebuild a country twice the size of Iraq where schools, hospitals, sewage systems and electrical grids no longer function.
Despite this rather demoralizing outlook, Venezuela can still be rebuilt. As initially stated, Colombia, while by no means perfect, is a far safer and prosperous country now than it was 30 years ago. In the long run, Venezuela could use that as an inspiration with multilateral efforts of aid from latin America, the United States and other global powers such as China and the European Union.
With that in mind, Venezuela should ultimately serve as a warning to the type of world we will be facing in the next 30 years. State collapse is becoming increasingly and disturbingly common, with Libya, Syria and Yemen having recently entered that graveyard of nations in the 2010s.
Overconsumption of natural resources and climate change will make states more vulnerable to disasters which could trigger unrest, war and even societal collapse. Nations must be ready to act in a multilateral way to prevent such disasters from occurring and mitigating them when they do. This advice means less reliance on military interventions, which can force vulnerable, fractured states, teetering on stability, into the oblivion of chaos. It means a greater reliance on humanitarian aid and linked economic growth that seeks to promote sustainable, equitable development that stabilizes these nations over time.
Such advice intends to be neither neoconservative, neoliberal nor hyper-interventionist. It is rather realist in the sense of leaning on forms of humanitarian aid which are far cheaper than military interventions according to the Council on Foreign Relations.
It is further realist in recognizing that America no longer rules world affairs in the same way it could in the 1990s after the Cold War, what was deemed America’s “unipolar moment.” With the US economy’s share of global GDP declining by 50% from 1960 to 2014, we must recognize that America cannot act alone in global governance. Still, America as a great power is not going away anytime soon. In the coming decades, we will have to work with the other great powers of China, Europe, India and even Russia in preventing and reversing the global disintegration we have witnessed in the last decade and bringing about some semblance of stability and prosperity that has eluded the liberal global order’s elite policy makers in the post-Cold War era. The rebuilding of Venezuela could serve as an example of what the future of US foreign policy and multilateral governance will become.
