World View: The world crisis spreads (1998)

From the October 1998 issue of the Socialist Standard

The dominoes are falling all around: Indonesia, Malaysia, Thailand, Korea, Japan, Russia, and now Latin America. “On Wednesday, Colombia became the first Latin American country in the region to devalue its currency following weeks of intensive pressure, sparking a slide in bond and stock markets in Mexico, Venezuela, Brazil and Argentina. Venezuela, whose currency has been under intense pressure for weeks, launched an immediate round of public spending cuts” (Observer, 6 September).

Venezuela is particularly vulnerable at the present time. It is one of the world’s leading oil producers; it also has vast deposits of iron ore and gold, much of which including other mineral resources have yet to be explored. Twenty years ago, when the price of oil plummeted on the international exchange, Venezuela suffered mass unemployment as well as inflation. In 1988, the price of oil went down further; and in February 1989, the government introduced austerity measures which severely cut working-class incomes. The result was mass rioting, which caused millions of dollars in property damage and the loss of 300 lives.

The 1990s, therefore, opened with Venezuela teetering on the edge of total instability. On February 2 1992, a faction of middle-rank officers tried to overthrow the government in a coup. The army, however, backed the President and soon regained control. On 27 November the same year, another coup was attempted, this time by junior officers of the air force; again it was unsuccessful. Nevertheless, many people wanted change, if only to end the cycle of corruption and instability.

In January I 994, Venezuela’s second largest bank, the Banco Latino, collapsed, and the government had to nationalise it. It had to pump in two billion dollars to cover its losses.The government began an enquiry, but the bank’s assets had been relocated overseas, and it proved almost impossible to get the money back. This caused panic among depositors, and most tried to withdraw their money without success. The effect was to undermine the economy and drain Venezuela’s already dwindling cash reserves. The Venezuelan economy has never really recovered.

What of the working class? It can only get worse for them. And they have always existed in poverty. Caracas, the capital of Venezuela, is a huge city of modern high rise buildings, mixed with many building which are in desperate need of repair. But even the people who live in these dilapidated apartments are “lucky” compared with the people who reside in the ranchos ringing the city, and in the mountains around the city. They only have run-down shacks. As in most of the world, the majority of the people in Caracas are poor.

The present, and the future, is indeed grim unless the workers of Venezuela, as elsewhere, rouse themselves and organise for the replacement of the present system by a new world-wide system of production for use and the satisfaction of individual and social needs. There really is no viable alternative.

Peter E. Newell