Federalism and Capitalism

In Venezuela, the main supporters of the current regime are in Caracas, the capital, where the majority of the available electoral vote is concentrated, and the great masses of impoverished people dependent on the popular distribution of handouts.  Meanwhile, the regions languish.

In 2005, still under the presidency of Chávez, we launched the «Rumbo Propio» project from Zulia to rescue Venezuela from Socialism, and the worn out Third World discourse that prevailed in the country.  We copy ourselves from the Asian tigers, which in the 70s had taken off on the path of free market capitalist development, demanding for Venezuela the «Chinese exit» from the special economic zones with autonomous statutes that would allow its integral development.  Why?  Because without Capitalism there is no federalism.

That’s right: Capitalism equates to development from below, from private initiatives and companies that provide wealth, employment and well-being to the regions and the local population, through free markets and respect for private property.  On the contrary: Socialism is equivalent to «central planning», with what it entails of backwardness and Poverty.

Our call fell into a void regrettably.  But what would have happened if our project had achieved the support that it did not have at the time?  That today we would have in Zulia and in two or three regions Special Economic Zones like in China.  We would live in another Venezuela!

Later, in 2013, the book «How China Became Capitalist» appeared, by Ronald Coase and Ning Wang (How China Became Capitalist, palgrave, 2013).  It focuses mainly on the first two decades of Reforms, divided into two parts, by the fact of the Student Movement of Tian An Men Square, 1989.

He explains that the economic forces that really transformed the Chinese economy during the first decade of reform, the 1980s, were four «marginal revolutions», namely: private agriculture, municipal and village enterprises, private businesses in cities, and especially, the Special Economic Zones.

The Zones were established with the idea of ​​allowing them to experiment with the free market economy, importing advanced technology and administrative knowledge, and then selling products to global markets, creating jobs and stimulating economic growth.  First the experiments were limited to a few zones, and later others were established.

The second part of the book begins in 1992, with Deng and his trip to the South.  Regional competition had already existed during the first decade of the reform, but then artificial barriers to trade were created at the borders of the provinces and the economy fragmented.  To remedy the mess, there was the price reform in 1992, the tax reform in 1994, and the state companies began to be privatized in the mid-1990s. The solution to the problem was found in the Regional competition: the 32 provinces, 282 municipalities , 2,862 counties, 19,522 towns, and 14,667 villages entered open competition for investment, technology, and good ideas.  The rest is China’s success story in the 21st century.

In Venezuela we have had a big problem, since the time of Chávez: short-termism or immediacy.  Our 2005 project was to create a powerful autonomist Political Force and in favor of Capitalism: but it was rejected by the power factors of the opposition, because it was not an «immediate» remedy.  They wanted a short-term miracle and magic solution?  So it went.

All the miraculous «quick fixes» have failed.  Let’s remember «La Salida», on January 23, 2014. Let’s remember «Operation Libertad» on April 30, 2019. Just those two, so as not to go too far back, until April 11, 2002.

Now Trump is no longer President and is not on stage.  In the US, the left has returned to the White House with Joe Biden and Kamala Harris.  And the same happens in our America: in Argentina with Peronism and the Kirchners, in Bolivia with Evo Morales and his party, in Ecuador with Correa and his faction.  And in Mexico the net left is the government under López Obrador, while Chile is going to fall in a matter of months.  In Brazil, Bolsonaro has not been able to carry out the reforms.

I do not know how long we Venezuelans will continue to trust «the international community.»  I do not know when we are going to understand that this entelechy does not exist except on paper and speeches.  Not even when international sanctions don’t work.  We recommend reading Christopher Sabatini’s article in the New York Times of July 29, 2019, entitled «Sanctions don’t work, when will the US understand?»

What we do know is that in Venezuela we already have the de facto dollarization admitted by the Maduro Government, and the transfers of certain companies and state assets to certain private sectors, but under the «temporary concession» regime, which many observers see as a disguised semi-privatization.  And we also know that considering these factors, there are three possible scenarios.  Namely:

1.- The Chinese scenario, the Maduro regime is heading towards a progressive liberalization, perhaps with Special Zones, and / or with the other three Chinese «marginal revolutions» according to Ronald Coase and Ning Wang: private agriculture, municipal companies , and Private businesses in the cities.

2.- The Russian scenario, Putin style: the government aims to share power with an «oligarchy» of megamillionaires enriched with official favors, each at the head of a region, a company, or an entire industry, leading a patronage-neo-feudal type scheme.

3.- The Czech stage.  The «Velvet Revolution» of 1989 was the peaceful movement by which the Communist Party lost the monopoly of power in Czechoslovakia, which it had maintained for 45 years.  As a consequence, a Democratic regime developed in the context of a Rule of Law, and an economic system that had already begun its transition to Capitalism.  But it was prepared by a well-structured political party, and well connected with democratic forces from other Communist Bloc countries, since the beginning of the 1980s.  A party that was later called «Civico», and that worked hard in pursuit of a program of reforms and structural changes, which was carried out in the 90s. Personally, I like this one more.

We are not alone in this endeavor and in this arduous task.

That is why for a long time we began to work on the formula of the Five Reforms, which are the Five Remedies for all the Diseases of Venezuela and of our countries.  That they are the same ailments, because our ills come from the same perverse root: the primitive ideological bases of collectivism and anti-capitalism, shared in Venezuela by a worn-out opposition without credibility.  The opposition needs a transformation agenda based on other ideological bases: the Five Reforms program.

Without Capitalism there is no federalism.  There is neither autonomy nor freedom.  Freedom and Autonomy are inseparable.  Liberal or Free Market Capitalism is the true hope of the poor.

We have reached this destruction, because we had not had an ideological counterweight other than Socialism.  The only counterweight or rationally different alternative to Socialism and the nationalization of society is Free Market Capitalism. That would have been the healthiest thing to do.  That is why it is essential to have that first-world alternative project or plan, with a leader trained in that story, and who defends Free Market Capitalism and the construction of a Free society without complexes.History has shown that the countries that fall into the clutches of Socialism enter into very bad economic conditions.  But for that we must have the alternative Plan to Centralization, nationalization and central planning of the economy that Socialism proposes.  That is why we promoted Regional Autonomy.  As in China, where there are capitalist cities and regions in the middle of a socialist country.  We could have that in Venezuela. The only way to limit a central government is precisely with the regional autonomies.  Autonomy goes far beyond decentralization.  We could have our own constitutions in each region.  In Spain there was a great debate when the Franco regime started by the Spanish socialist workers’ party, in a long struggle that ended with the autonomy of each region and the possibility of their own constitutions.  That is why the opposition must have ideological bases rationally different from those of the socialist regime.  without confusion or complexes.

That is why we also ask ourselves the following question: Why a progressive region like Zulia, lover of work, trade, development and well-being, and that has everything in terms of climate, geography and population, that is, natural resources and Humans, lies crushed, poor and defenseless, under the enslaving and impoverishing yoke of a suffocating system such as Socialism?  Because the fight against nationalization and centralization was misdirected.  They aimed at «decentralization», that is, decentralizing statism without changing the system.  Impossible.  Decentralized statism is utopian.  Statism and Socialism cannot be federalist.  Without Capitalism there is no federalism.  That is why what should be aimed at is Autonomy.  Historical free market experiences have not been centralist or statist.  All have been autonomists.

We have to insert Venezuela into the First World.  Create Special Economic Zones of Free Market in several regions, with high technological development, this will offer opportunities to Venezuelan Start Up, through the union between private companies, who know the basic needs of society, the universities forging resources, the investors and entrepreneurs.

The path to true liberation is a Government Program that changes the system for the better.  That program has to be Capitalist and first world.

A program that manages to destatize Venezuelan society and build a Free Market economy

Nestor Suarez: Economist – Msc and Phd in Economics.