In an extraordinary intervention, the US forces struck Venezuela and captured the incumbent head of state, Nicolas Maduro, and his wife, Cilia Flores. | File Photo
In an extraordinary intervention, the US forces struck Venezuela and captured the incumbent head of state, Nicolas Maduro, and his wife, Cilia Flores. Much has been written and spoken about the capture of a sitting president of a sovereign country by a superpower and the many violations of international law and the United Nations Charter. Let us examine the lessons of Venezuela that are relevant to all nations, particularly India, with our collective vision of a developed nation over the next quarter century.
Let us take the military intervention itself first. Clearly, it was a great tactical success. The meticulous planning based on reliable intelligence, the absolute secrecy of the mission, and the flawless execution testify to the power of the United States. But does this tactical success lead to meaningful strategic gains?
There are three strategic goals we can discern from the statements of the voluble Trump and the US administration. First, minimise the flow of addictive drugs into the US and curb substance abuse. By all accounts, Maduro is not the kingpin of drug supply to the US, and it was an exaggerated claim to offer a feeble excuse for the unusual military action.
Maduro’s removal is unlikely to stem the flow of drugs. There is a lot of documented evidence and past experience suggesting that without curbing demand, strong law enforcement alone will only increase demand, jack up the price and profits, bring organised crime into drugs, and promote massive corruption at all levels.
The second stated objective of Trump is to boost oil production, enhance supply, and give the US oil corporates privileged access to the oil fields of Venezuela and the spoils of war. But the US got it wrong on several counts. Oil demand is flattening and will decline in the long term. The next two decades will see further rises in solar and wind power and biofuels. The era of oil cartels and abnormal profits holding the global economy to ransom is over. Only temporary disruption of supply chains (war, piracy on the high seas, terror attacks at choke points, etc.) will see a significant price escalation in the next decades. After that, much of the world’s energy needs will be met by renewable sources. Technology is marching ahead of politics in the energy sector. In any case, Venezuelan oil is very heavy, and it is costly to extract and difficult to refine. It is unlikely that major oil companies will invest massive resources to extract meagre profits when other opportunities are more attractive.
Trump’s third major objective is the projection of American power globally without significant military or economic costs. In particular, Trump believes in the Monroe Doctrine and wants to establish the unchallenged US hegemony in the American continents. But the crude exercise of military power to abduct a serving head of state only makes many nations fear America and be wary of US interference. Resentment, not influence, will grow. When such a crude display of power is not backed by a roadmap to enhance liberty and promote the prosperity of the people, it will only lead to an eventual decline in influence. Fear is not respect, and any gains based on fear with no consent and mutual benefit will only be transient. It may well be that this Venezuelan intervention will be a pyrrhic victory and will be regarded as a strategic failure in the long run.
We, in India, have a lot to learn from the Venezuelan experience. Reckless expansion of welfare without enhancing productivity and growing the economy is doomed to fail. Despite sitting on the world’s largest proven oil reserves, Venezuela failed spectacularly over the decades. As long as enough oil was extracted from Mother Earth and global oil prices were ruling high, the going was good. Hugo Chavez became the poster boy of all would-be socialists and champions of redistribution. But mere individual welfare without economic growth and enhanced earning capacity creates an illusion of prosperity until the system collapses. At one time, Venezuela spent about 14% of the GDP on welfare. Infrastructure was neglected. The market was distorted by foolish price controls, and the producers—farmers and factory workers—lost heavily, and most production shut down. The careless design of welfare only boosted imports and emptied the treasury. Everything from food to pharmaceuticals was imported once the incentive to produce disappeared. Corruption and cronyism became rampant. And in a spectacular self-goal, the oil companies were nationalised, competent professionals were sacked en masse, and, as a result, production declined precipitously. Once oil prices plummeted, the economy was in shambles, the society was in ruins, and the country could only be controlled by brute force and co-option of armed forces in the national plunder. If this is the cautionary tale of a country with enormous oil wealth, we can imagine the potential dangers of reckless fiscal management in our country with no such good fortune of floating on oil.
The recent debate on the gig economy clearly demonstrates the challenges we face. Even now, nearly 85% of our workers are in the unorganised sector with low skills and wages and no job security. About 46% of the workers are still in agriculture, which only accounts for about 16-18% of the GDP. Our greatest challenge is the creation of productive jobs for our workers and giving dignity and opportunity to all. And we need to create a viable social security system for all workers, not merely for the well-paid, unaccountable, under-performing, and rent-seeking government bureaucracy. Government has the luxury of forcibly collecting taxes without providing commensurate services and distributing power and patronage to the vast bureaucracy. The market has to function on principles of competition, economic efficiency and productivity. Let the government do its job to promote inclusive growth by providing services vital for productivity and opportunity. Let not the government be the Leviathan that gobbles up everything the people produce without adding value to their lives.
The author is the founder of Lok Satta movement and Foundation for Democratic Reforms. Email: drjploksatta@gmail.com / Twitter@jp_loksatta
