The Venezuela Myth Keeping Us From Transforming Our Economy

Bolton does not even pretend that it’s all about restoring “democracy.” He said on Fox News, “It will make a big difference to the United States economically if we could have American oil companies invest in and produce the oil capabilities in Venezuela.” As President Nixon said of US tactics against Allende’s government in Chile, the point of sanctions and military threats is to squeeze the country economically.

Killing the Public Banking Revolution in Venezuela

It may be about more than oil, which recently hit record lows in the market. The US hardly needs to invade a country to replenish its supplies. As with Libya and Iraq, another motive may be to suppress the banking revolution initiated by Venezuela’s upstart leaders.

The banking crisis of 2009-10 exposed the corruption and systemic weakness of Venezuelan banks. Some banks were engaged in questionable business practices.  Others were seriously undercapitalized.  Others were apparently lending top executives large sums of money.  At least one financier could not prove where he got the money to buy the banks he owned.

Rather than bailing out the culprits, as was done in the US, in 2009 the government nationalized seven Venezuelan banks, accounting for around 12% of the nation’s bank deposits.  In 2010, more were taken over.  The government arrested at least 16 bankers and issued more than 40 corruption-related arrest warrants for others who had fled the country. By the end of March 2011, only 37 banks were left, down from 59 at the end of November 2009.  State-owned institutions took a larger role, holding 35% of assets as of March 2011, while foreign institutions held just 13.2% of assets.

Over the howls of the media, in 2010 Chavez took the bold step of passing legislation defining the banking industry as one of “public service.”  The legislation specified that 5% of the banks’ net profits must go towards funding community council projects, designed and implemented by communities for the benefit of communities. The Venezuelan government directed the allocation of bank credit to preferred sectors of the economy, and it increasingly became involved in the operations of private financial institutions.  By law, nearly half the lending portfolios of Venezuelan banks had to be directed to particular mandated sectors of the economy, including small business and agriculture.

In an April 2012 article called “Venezuela Increases Banks’ Obligatory Social Contributions, U.S. and Europe Do Not,” Rachael Boothroyd said that the Venezuelan government was requiring the banks to give back. Housing was declared a constitutional right, and Venezuelan banks were obliged to contribute 15% of their yearly earnings to securing it. The government’s Great Housing Mission aimed to build 2.7 million free houses for low-income families before 2019. The goal was to create a social banking system that contributed to the development of society rather than simply siphoning off its wealth.  Boothroyd wrote:

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Gary Anderson 4 months ago Contributor's comment

I have mixed feelings about Venezuela. People are fleeing the nation. Things are bad. But Abrams is a very dark regime change figure.

As far as MMT, it would likely bring out bond vigilantes who want the bond market to behave. If MMT resulted in high interest rates, margin calls in the bond world would be staggering. Ocasio-Cortez, who has a point taxing the wealthy, has pretty much washed up on the rocks in wanting to ban airplanes and cars. Adding MMT to her anti economics thinking just makes her more irrelevant. aoc #aoc