Tuesday, July 16, 2019
Monday, July 15, 2019
China will determine the future of Venezuela
There are a number of reasons
why Beijing continues to back Maduro's government despite suffering financial
losses.
14 Jul 2019
On January 23, when US-backed
opposition leaderJuan Guaido declared
himself interim president of Venezuela, he thought deposing President Nicolas
Maduro from power would be easy.
He had a simple,
three-thronged plan: declare Maduro's presidency illegitimate by exposing the
irregularities in the election that brought him to power, establish a
transition government, and hold new elections that would bring the opposition
to power.
However, almost six months on,
Guaido is not any closer to loosening Maduro's grasp on power. The main reason
behind the 35-year-old opposition leader's failure to bring Maduro down is the
support that some prominent international powers, most significantly China, have
given to the Venezuelan government.
China, a global power with
significant financial and military ties to Venezuela,
refused to recognise Guaido's presidency on the grounds that doing so would amount to intervening in the internal affairs of a sovereign
state.
Guaido's foreign backers, the
US chief among them, interpreted China's stance on the issue as support for
Maduro and his government and even implied that China is responsible for the
ongoing crisis in Venezuela. On April 13, for example, during a visit to Chile,
US Secretary of State Mike Pompeo said that
he believes "China's bankrolling of the Maduro regime helped precipitate
and prolong the crisis in that country." More recently, US Southern
Command Chief Admiral Craig Faller claimed that Chinese support to Venezuela in
the form of surveillance technology has been “used to monitor and repress the
Venezuelan people".
Meanwhile, acknowledging the
important role China has been playing in the ongoing crisis, Guaido started a
campaign to convince Beijing to end its support for the Chavista government.
Only a day after Pompeo's
criticism of China, the self-declared interim president published an
op-ed in Bloomberg titled, Why China Should Switch Sides in Venezuela. In the article,
Guaido argued that the opposition government would protect China's interests
and investments better than the Chavistas and pledged to give China new
financial incentives in Venezuela if it agrees to seize its support to the
current government.
Guaido's article and Pompeo's
statements only confirm a fact many Venezuela watchers have been aware of for a
very long time: China's political stance is the key factor that will determine
the future of Venezuela.
Why is Venezuela important to
China?
While Beijing is an
indispensable economic and political partner to Caracas, the Latin American
nation is also very important to China.
China views the oil-rich
socialist country as a significant trading partner and a geopolitical ally in
its main political and economic rival US's backyard. Moreover, the investments
Beijing made in the country in the last couple of decades made Venezuela an
important component in China's future economic prosperity and energy security.
Cooperation between China and
Venezuela began to grow significantly following Hugo Chavez' ascent to power in
1999. Following Chavez' death in 2013, the good relations between the two
nations continued under Maduro's presidency. From 2000 to 2018, the trade
between the two countries increased more than 20-fold and the value of
Chinese direct investment to the country reached $6bn.
Meanwhile, the total value of Chinese loans to Venezuela surpassed the $60bn
mark.
The majority of China's loans
to and investments in Venezuela have been related to the oil sector. In 2007,
Beijing created the China-Venezuelan Joint Fund (FCCV), which
allowed Venezuela to receive loans from China in tranches of up to five billion
dollars, and pay them with shipments of crude oil. The FCCV allowed the Chinese
government to get involved in oil production in the Orinoco Oil Belt, which is
considered to be the world's largest oil reservoir.
Why is China still standing by
Maduro?
Having accumulated a
significant amount of debt over the past two decades, Venezuela is struggling
to repay Chinese loans, as its oil production continues to decline due to the
ongoing crisis casts. This puts China's economy and energy security at risk.
Meanwhile, the majority of Chinese direct investments in Venezuela have either
been put on hold or completely abandoned due to the unfavourable conditions for
business in the country.
Acknowledging the risk it is
currently facing in Venezuela, China reevaluated its objectives and limited the
issuing of new infrastructure loans in the country. It focused on
financing mixed enterprises that it has created in partnership with Venezuela's
state-owned energy firm Petroleos de Venezuela SA. It has also increased the
mechanisms of control over the final use of the credit issued to Caracas.
Despite these challenges and
the risk of suffering potential economic losses, Beijing continues to stand by
the Maduro government, at least for now. The official reason behind
this position is that the Chinese government is not willing to intervene in a
sovereign nation's internal affairs. However, this cannot explain its
motivation to continue supporting the embattled Venezuelan president at a great
cost to its economy.
Unofficially, there are a
number of other reasons. Beijing is still siding with the Venezuelan government
because it believes having a like-minded socialist ally in the US' backyard is
more important than any costs it may incur as a result of the ongoing
Venezuelan crisis.
Additionally,
"south-south cooperation" is currently one of the mainstays of
China's foreign policy and Beijing does not want to risk its reputation as a
leading trading partner and trustworthy investor in the global south by siding
with a US-backed opposition group and supporting its attempt to unlawfully
topple the legitimate government of a sovereign country.
Moreover, despite Guaido's
best efforts, China has no reason to trust the Venezuelan opposition. For
years, the position of the opposition regarding Venezuelan debt commitments to
China has been ambiguous. Today, Beijing has no reason to believe that after
taking power the opposition would agree to pay back the debts accumulated under
Chavista governments.
The Venezuelan opposition's
close relations with the Trump administration is another reason why China
continues to support Maduro. The Chinese government does not believe Venezuelan
elites who appear to be under the tutelage of the Trump White House would
protect its interests in Venezuela or in the wider region.
China's position, however, is
not set in stone. Guaido and his supporters can still convince the Chinese to
change their mind by distancing themselves from the Trump administration and
providing some form of reassurances that they would honour Venezuela's
financial commitments to China.
If the opposition indeed finds
a way to win the trust of Beijing, it would have a much better chance at
challenging the Chavistas and eventually taking power in Venezuela.
An interview with Yanis Varoufakis
“We have to talk to people in
a way that combines addressing these [economic] anxieties with the issues of
the environment. Unless we manage to do that, we will fail.”
The last few years have been a
bit of a rollercoaster for the European left. Riding up front has been Yanis
Varoufakis, the charismatic economist and former Greek finance minister who
went to war with the troika—the European Commission, the European Central Bank,
and the International Monetary Fund—in 2015 as it sought to inflict brutal
austerity as a penalty for his country’s debts and its decision to elect an
openly left-wing government headed by Syriza. They lost that fight, but
Varoufakis escaped mostly unscathed. Amid Brexit and a wave of Euroskepticism,
he went on to found the Democracy in Europe Movement 2025 (DiEM25), pushing for
a more democratic and inclusive continent, free of austerity. The group mounted
several candidates under the mantle of a European Spring this May, including
Varoufakis himself. They failed to gain a single seat, though his vote total
came in a hundredth of a percentage point below the 3 percent threshold needed
to gain representation. While the center-right faltered in May, so, too, did
the left.
Particularly among young
voters, progressive and social democratic parties—including those in the DiEM25
orbit—seem to have lost many of their votes to the European Greens, which
successfully tapped into the momentum of the youth-led Fridays for Future
protests around Europe and Extinction Rebellion in the UK. Voters across the
continent now rank the climate crisis among their top concerns. The great irony
in left parties’ generally meager showing is that, from La France Insoumise to
Labour in the UK, they are greener than they’ve ever been, in many places
rejecting the old-school productivism that fueled them through the postwar era.
In Europe, all politics is now
climate politics. The question is whether the left can ground the conversation
about rising temperatures in a broader egalitarian vision that can counter
tepid centrist technocracy and far-right xenophobia alike, and the response of
each to the existential threat hurdling toward us. In its push for a Green New
Deal, DiEM25 wagers that it can, but it has hit no shortage of road bumps along
the way. Engaging in the largely symbolic European Parliament elections was one
piece of an effort they’ll continue as the left attempts to craft the kind of
systemic and internationalist climate response that science is demanding.
The interview below was
recorded a few days before voting began.
Kate Aronoff: DiEM25 and many
others are advocating a Green New Deal, something you’ve worked on for several
years. What do you think it is about that framing that is grabbing people’s
attention, despite it being seemingly so American?
Yanis Varoufakis: What is
important about a Green New Deal is that it concentrates the mind on the main
task, which is to swiftly and efficiently find massive funding for a cause that
is in the public interest. The New Deal began with Roosevelt in the 1930s in
the midst of a Great Depression. The innovation of this thinking by Roosevelt,
who wasn’t exactly a radical, was to concentrate on the fact that even during
the Great Depression—when everybody was short of money—there was a mountain of
idle cash, which could be converted into investment. So instead of thinking of
a different social system, like changing property rights, he used the toolkit
of the federal government, and in particular U.S. Treasury bills, to put
billions of dollars into the service of investments in jobs, in building roads
and hospitals, even art projects and so on.
Our version of the Green New
Deal [in Europe] combines the original aims and inspiration of Franklin
Roosevelt. We want governments to use public financial instruments to massively
increase investment in good quality jobs, and technologies and facilities that
are necessary for green transition in the fields of energy, transport,
manufacturing, and agriculture. That is absolutely essential, and this is what
we’ve been working on for years now.
Aronoff: As part of that,
you’ve also called for refashioning the Bretton Woods institutions and
referenced the Marshall Plan, which, as you’ve written, was arrived at for a
mixed bag of reasons, a big part of which was U.S. policymakers’ self-interest
in having allies around the world in the context of the Cold War. What does
refashioning the Bretton Woods institutions look like today? Is there a similar
appeal to be made for the sort of self-interest that propelled the Marshall
Plan?
Varoufakis: The Bretton Woods
system was originally conceived by the New Dealers as the global framework
within which Roosevelt’s New Deal in the United States could prevail.
Today, if we want a European
Green New Deal, or an American Green New Deal, we will have to look beyond the
confines of the borders of our countries to build the circumstances in which
the New Deal can go global. It requires something like a new Bretton Woods. If
you look at the old Bretton Woods institutions that are still with us, the
International Monetary Fund and the World Bank, in the era of financialization,
they have become toxic. They have become detrimental to the interests of the
multitudes around the world. In DiEM25, but also as part of a progressive
international that we are slowly building with our friends and colleagues in
the United States, in Japan, in Iceland, in Africa, and so on, we are
envisioning a new Bretton Woods that will have a very little to do with the old
Bretton Woods, except in the original idea of creating the international
framework and the international institutions that are absolutely necessary to
maintain an international Green New Deal.
Aronoff: How does that get
around some of the problems that have been faced by bodies like the United
Nations Framework Conventions on Climate Change in trying to arrive at a global
solution to this problem?
Varoufakis: The approaches
that you mentioned have so far been approaches focusing on constraints. Now,
this is very important, of course: physical limits to growth and setting
ceilings for CO2 or methane gases is essential. But the problem with these
international agreements is that while all countries around the world would
benefit if everybody stood by those constraints, each one of them individually
has an incentive to find some pretext, either covertly or directly, to break
those commitments. However, if the international agreements on climate change
move into creating public financial tools that allow banks to collaborate to
issue bonds that soak up the excess liquidity, then suddenly the incentive
would be there for countries to opt in. This would be a very large-scale
international investment fund from which to create jobs and from which to do
good things regarding technologies for renewables and so on. A large-scale,
international green investment plan would offer not just sticks, but also
carrots for countries to participate in these international
agreements—something that has never been attempted before.
Aronoff: Adam Tooze responded
to some of your writing on this point by arguing that power isn’t really held
in nations as it was toward the end of the Second World War when those
institutions were created, and is now concentrated among central bankers,
lawyers, and financial economists. How do you respond to that critique in terms
of where power is held today?
Varoufakis: I agree with that.
We should never underestimate the importance of functionaries, both
functionaries who work for the states and functionaries who work for large
corporations. But to say that because they are vested with inordinate power,
the rest of us should simply throw up our hands in the air and surrender to
climate change or to underinvestment or to what Larry Summers refers to as
secular stagnation, that is a non sequitur for me. My assessment of Bretton
Woods in 1944 is that it was driven by a combination of a very powerful moral
commitment by people in the New Dealers’ administration who felt in their bones
the inequities and the wretchedness of the Great Depression, and they didn’t
want to live to see it again. That moral political force, ideology if you want,
was a necessary condition, even though it was not sufficient. As Adam Tooze
points out, it took many lawyers and functionaries, who recognized the
self-interest in participating in this majestic new internationalist project,
to then bring it about. I don’t see why we should not aim to do the same thing
at this juncture. The year 2008 was spectacularly similar to 1929.
Aronoff: There’s this tendency
to treat climate as something that can be walled off from the financial sector
or from issues of immigration. Could you say more specifically about why
massive reforms to the financial system are so important to dealing with the
climate problem?
Varoufakis: If you look at
what’s going on in Wall Street today, it’s as if 2008 never happened. The financial
sector is like a driver who was caught doing 130 miles an hour, gets a huge
fine, and after half an hour forgets all about the fine and starts speeding
again.
As for climate change, in my
own country, we have a feast that is being prepared by the oligarchs of the
eastern Mediterranean, including the Greek ones, and the American multinational
companies that will soon be extracting oil and natural gas from deep sea wells.
All that’s being financed by a financial sector that is going haywire yet again
as if 2008 never happened.
Aronoff: In the 1930s and ’40s
there was this real change in how people were thinking about the role of the
state in the economy and what it is governments should be doing and providing.
There was a similar paradigm shift in the 1970s that created an opening for
neoliberals. Does the climate crisis offer that kind of opportunity today to
folks looking to put a new paradigm into place that can actually deal with it?
Varoufakis: I think that this
shift has already happened. A majority of people in every country realize that
Alan Greenspan’s touching faith in the capacity of markets to self-regulate was
nothing but a particularly toxic form of idiocy. The question now, however, is
this: how do we go from the serious weakening of the libertarian paradigm to
creating a political consensus toward a Green New Deal? This is the task ahead
for all of us.
At the moment, instead of
progressives getting together and planning a new Bretton Woods, what we have is
a neo-fascist international led by people like Matteo Salvini in Italy, Marine
Le Pen in France, the Alternative für Deutschland in Germany, Orban in Hungary,
Steve Bannon—who is traversing the continent spreading his poison—Donald Trump
in the White House, Bolsonaro in Brazil, Modi in India.
We are trying to create a
progressive international but we are just at the very, very beginning. And the
rallying call of the neo-fascist nationalist international is: Make America
Great Again, Make Greece Great Again, Make Italy Great Again. On the one hand
they’re saying they are nationalist, but on the other hand, they’re combining
forces very efficiently across the world. What we need to do is effectively
emulate their success but not by emulating their tactics. They are using
xenophobia: they’re blaming Muslims, Jews, Greeks, and all sorts of categories
and sets of people and nationalities and religions. They claim to be doing it
on behalf of the people, but once in power they employ the worst offenders from
Wall Street. Donald Trump took Goldman Sachs personnel and implanted them in
the Fed and in the Treasury.
We need to use the Green New
Deal as a rallying call across the world. The Green New Deal is a positive
message of realism. We have excess liquidity. The world has never had savings
as high as we have today. So all we need to do is find ways to turn those
savings into good quality green jobs.
Aronoff: There’s this argument
that welfare states were contingent on cheap oil. If we need to actually keep
fossil fuels in the ground what does it look like to build a low-carbon welfare
state?
Varoufakis: I’m not convinced
at all that the welfare state was built on cheap energy. The welfare state was
simply built as a result of the political pressures upon capital to yield some
of its profits in order to stabilize its rule over labor. It was a result of
class conflict. Already we see that renewable energy is cheaper than oil. So
what seems to me a question that would have been very pertinent in the
1970s—because back then renewables were either not available or very, very
expensive—is no longer pertinent. Today all we’re missing is a massive
investment in turning existing renewable technologies and technologies that
come into existence in the next five years into the mainstay of energy
generation.
I reject the argument that we
need to go back to a bucolic existence to save the planet. When we talk to
people who are struggling to make it until the end of the month, telling them
that over the next fifty years we’re going to lose species, they say “I don’t give
a damn! I can’t make ends meet today.” We have to talk to people in a way that
combines addressing these anxieties with the issues of the environment. Unless
we manage to do that, we will fail. But I think we can.
Aronoff: For the last
several decades, GDP growth, has been the main metric by which an economy’s
health is judged. There is a stubborn relationship between GDP growth and
emissions, but it’s also true that GDP growth is not necessarily a great
indicator of human well-being, or of many other things we might think are
important in an economy. Is growth a useful metric? Should there be others?
Varoufakis: GDP is an awful
metric. There’s no doubt that GDP growth is meaningless in terms of human
achievements and happiness and success. You burn down a forest, GDP goes up.
But we don’t just need a new metric, we need a different system of organizing
economic life. We need to transcend capitalism. But as long as we are with
capitalism, what is the point? Let’s say I were to design a fantastic new metric
that puts a great deal of value in trees and poetry and all the other things
that should be valued. If we live in capitalism, it’s irrelevant.
Aronoff: Among economists, the
go-to answer for how to deal with climate change for years has been to correct
the market failure by making the price of carbon dioxide reflect it’s true
value: the social cost of carbon. Do you see that consensus slipping at all?
Varoufakis: Economists are
very funny creatures. When economists look at market value, the complete
disaster in the environment, or for that matter in the financial markets, isn’t
recognized as a market failure. So what are they proposing more of? More
markets. They’re hoping that the market will perform its miracle and an
emissions trading scheme will create a shadow price for carbon that will make
it more likely that humanity will reduce its use of carbon. Now if you are
interested in saving free-market ideology from failure and from becoming
humiliated by the facts, then of course this is what you do. But if you’re
interested in saving humanity, you just remind yourself that you started from
the wrong axiom, and the wrong axiom is that the market knows best. The market
doesn’t know best.
Aronoff: Now we’re talking a
couple of days out from the European elections. However things turn out, what
are the next steps?
Varoufakis: When we announced
a year ago that we’re going to run in the European elections, we were really
clear in saying we don’t consider the European Parliament to be that
significant. What we always savored was the process of elections in the same
week across Europe that allowed us to put the Green New Deal on the agenda in
Poland, Denmark, Portugal, Greece, France, Germany, and Italy. This has been
remarkable. So after the election we will take stock of what happened, how
successful we were in putting it on the agenda and getting some people elected.
We will see what new tools we have, whether we have some new resources as a
result of the election or some of us in the European Parliament, how many of
those resources there are. The next stage will be national elections in
Germany, in Greece, maybe in Italy. This is not going to be an easy struggle,
and it’s not going to end anytime soon, and it’s not a discrete event. It’s a
continuous campaign.
Kate Aronoff is a fellow
at the Type Media Center and a member of Dissent’s editorial board.
Yanis Varoufakis is the
cofounder of DiEM25 and the former minister of finance of Greece. He is the
author of Adults in the Room and The Global Minotaur, among other books.
Sunday, July 14, 2019
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