In the final months of his life, bedridden and unable to speak, Venezuelan President Hugo Chavez began writing letters to communicate with the outside world. Passionately and eloquently written, the letters expressed hope for a continuation of the Bolivarian political project in Latin America, and a conviction that this was the solution to one of the region’s most pressing problems: underdevelopment.

In a letter to his fellow Latin American presidents at a meeting in Santiago, Chavez wrote the following:

Underdevelopment, as the experts now say, is not of a purely economic or productive nature. It has an intensely historic aspect. It is a product of the fragmentation of Latin America… Latin America is not divided because it is ‘underdeveloped’, it is ‘underdeveloped’ because it is divided. Underdevelopment is a product of division, and for that reason it is necessary to resolve the national question in our America in the coming years.

Chavez had never so openly expressed his understanding of the roots of underdevelopment, but it had long been apparent that this was his view. Influenced by the ideas of dependency and world-systems theories, he and his supporters have tended to see the problem in Latin America as one of imperialism, an unequal world system, and the South’s subordinate place in that system. As he wrote in another letter in the final months of his life:

The neocolonial strategy has been, since the beginning of the 19^th century, to divide the most vulnerable nations of the world, so as to subject them to an enslaved relationship of dependence.

In 2009, Chavez famously championed this view when he handed US President Barack Obama a copy of Eduardo Galeano’s The Open Veins of Latin America, one of the most emblematic works from the dependency school of thought. The book is a marvelous account of the historic exploitation of Latin America by imperial powers, and its impact on the continent’s development. But like most work from this perspective, it presents a mistaken conception of the root causes of underdevelopment—a conception that heavily shaped Hugo Chavez’s worldview.

From the dependency and world-systems perspectives, underdevelopment is a product of the way a country is integrated into the capitalist world economy. The world is divided between the rich countries of the “core” on one side, and the poorer countries of the “periphery” and “semi-periphery” on the other, each with a different position in the international division of labor, and each position differentially rewarded by the capitalist world system.

Latin America, having been colonized and plundered by imperialist powers, was brought into the world economy as a primary exporter, exporting raw materials to the rich countries in the North, and importing manufactured goods from them. This historic process, it is argued, relegated Latin America to the “periphery” of the world-system, and assigned it a position in the international division of labor that these weak, fragmented nations have been unable to escape.

The rich countries, on the other hand, occupied the opposite position, financing their industrialization with the resources of the poor countries, and maintaining their dominant position through economic prowess and imperialist force. Thus, the rich countries became rich by exploiting the poor countries, and the poor countries were made poor through the same process.

This view of underdevelopment greatly influenced Chavismo’s development strategy over the last two decades. Chavez believed that to escape their dependent position developing countries should decrease trade relations with the rich countries of the North, and increase trade and strategic alliances with other countries of the South—what has been called South-South cooperation. As he wrote in a letter to the Africa-South America summit:

Our South-South cooperation must be an authentic and permanent link for working together in order to turn all strategies and plans for sustainable development toward the South, toward our nations.

Thus, among the central tenets of Chavismo’s strategy has been to unite Latin American nations politically and economically, to forge strategic alliances with countries like China, Russia, and Iran, and to promote what Chavez called a “multi-polar world”.

Along these lines, the Venezuelan government launched a number of institutions for regional integration. Initiatives like Bolivarian Alliance for the Americas (ALBA), the Union of South American Nations (UNASUR), the Bank of the South, and TeleSUR are just a few of the many projects that bring together Latin American nations around various economic and political endeavors. Numerous bilateral trade agreements have also been signed with countries throughout the region and around the world.

By creating the space for a new kind of integration into the world economy, it was hoped that Venezuela could break free from its subordinate position in the capitalist world-system:

…together we can construct the conditions that will allow us to pull our countries out of the labyrinth that they were thrown into by colonialism and later by neoliberal capitalism of the 20^th century.

But while this may seem like a promising strategy for addressing underdevelopment in the global South, it is based on an inverted view of the problem. Like much of the left in Latin America, Chavismo has held to a theory of underdevelopment that is deeply flawed, and, as such, has led to a failed development strategy.

A Flawed Theory

The problem with viewing underdevelopment as a product of a country’s position in the world economy is that, in fact, this is a consequence, not a cause, of underdevelopment. Countries’ are not underdeveloped because they depend on primary exports. Rather they depend on primary exports because of a failure to industrialize and diversify their economy away from primary goods—in other words, from a failure to develop.

Therefore, by focusing on a country’s position in the international division of labor, the dependency view begs the question of why countries came to occupy their positions, and why those positions have persisted over time. It is not enough to say that the poor countries were integrated into the world economy as primary exporters, and therefore were assigned a certain position in the division of labor. Virtually all former colonies—including the United States, Canada, and Australia—began by exporting primary goods. Yet some saw their economies diversify away from primary dependence, while others did not.

In Australia, for example, economic growth for much of the 19^th century was based almost entirely upon the export of primary goods like wool and gold to the industrializing countries in Europe. Yet, by the 20^th century, the economy diversified with the growth of manufacturing, and the country moved from the periphery to the core.

The Brazilian state of São Paulo is another notable case of economic diversification on the basis of primary exports. For much of the 19^th century, São Paulo was highly dependent on coffee exports. Yet by the early 20^th century, coffee production was driving an important process of economic transformation. By the 1940s, manufacturing had eclipsed coffee, and Sao Paulo became what is still today the most industrialized region of Latin America.

In other words, integration into the world economy as primary exporters cannot explain the development paths of the poor countries, as many primary exporters have been able to build diversified economies on the basis of those exports. Meanwhile, the other side of the dependency argument is equally problematic. The economic development of the rich countries is also not explainable in terms of the world system, or the exploitation of the poor countries.

For example, the principal colonizers of Latin America—Spain and Portugal—did not become rich countries of the core, but rather remained poor and underdeveloped throughout the colonial period. In fact, well into the 20^th century both countries were still poorer than many of their former colonies in Latin America, causing waves of emigrants to flee the Iberian Peninsula for places like Venezuela, Argentina and Brazil.

The only country to significantly industrialize during Latin America’s colonial period was England, and this can hardly be explained by its relationship to the periphery. English trade with the nations of the periphery around the time of the Industrial Revolution never exceeded 10 percent of its total economic output, and profits from this trade never made up even 15 percent of total investment. In other words, England industrialized mostly on the basis of internal rather than external factors, as did most developed countries.

Marx pointed to some of these internal factors when he specified the expropriation of the peasantry and a revolution in agriculture as central to the Industrial Revolution. This has been greatly elucidated in the work of Robert Brenner and others, who have shown that what really accounted for capitalist development in the core was not colonialism and international trade, but rather the emergence of a unique class structure of production in the countryside that compelled producers to maximize productivity and develop the forces of production. This led to expanding domestic markets, which then fueled industrialization.

In Latin America, however, this class structure did not emerge but in a few places, due to the specific way the continent was settled, and the historic appropriation of land. Unlike in Europe and the United States, where land became a commodity that was appropriated through the market, in Latin America land was typically appropriated outside of the market, either through government land grants or the informal occupation of public lands.

Access to land in Latin America is often not mediated by market competition, either because it is appropriated through non-market means, or because it is bought up by elites as a way to store wealth accumulated in other sectors of the economy.

The result is that there is often little market pressure on landowners to maximize output and invest in productivity, and so they adopt low-risk, low-productivity, rentier strategies. Surplus is not systematically reinvested into production, and a process of capital accumulation does not occur. Latin America never experienced the kind of agricultural revolutions that fueled development in the North, and, as a result, did not follow in its path.

Of course, it is a truism that the Americas were colonized, plundered, and exploited by European countries for hundreds of years. But this is not what was behind the economic development of the rich countries, nor was it the cause of the underdevelopment of the poor countries.

It is also a truism that Washington has carried out a long campaign of imperialist intervention in Latin America, destabilizing countries and overthrowing governments. But this was more a result of divergent development paths than its cause. The United States had been industrializing since the early 19^th century, whereas most of Latin America remained an agricultural backwater until well into the 20^th century. The US’s relative strength allowed it to push around a weak, underdeveloped Latin America.

A united continent à la Simón Bolívar might have prevented these imperialist interventions, but it would not have resolved the underlying problem of underdevelopment. As Arthur Lewis once argued, the problem of the developing world is one of agricultural productivity. Latin America failed to follow the path of the rich countries because of its chronically low agricultural productivity, which limited its capacity for industrialization, and prevented the diversification of the domestic economy.

The root cause for this was a class structure in which land was not fully commodified, a legacy of colonialism and the unrestrained appropriation of land. This perpetuated a stagnant agricultural sector—the infamous problem of latifundio and the underutilization of the land—which, in turn, impeded the development of a domestic market that could fuel industrialization. The result was a dependence on agricultural and mineral exports, and a weak industrial sector.

In other words, it cannot be said that underdevelopment is the product of a country’s position in the world economy, as dependency theory posits, but rather the other way around: a country’s position in the world economy is determined by its relative level of economic development. Latin America is not underdeveloped because of its dependence on primary exports; it is dependent on primary exports because it is underdeveloped—underdevelopment being the result of a class structure and productive logic that inhibits growth in productivity and prevents the diversification of the local economy.

A Failed Strategy

This flawed view of underdevelopment has led to a failed development strategy in Venezuela in recent years. Contrary to the views of Chavez and his followers, Venezuela is not underdeveloped because of its subordinate position in the world system. It is underdeveloped because of the productive logic of its domestic economy—a productive logic in which economic agents minimize risk through rentier strategies instead of maximizing profits and investing in productivity.

Wealthy landowners with speculative investments leave vast areas of the Venezuelan plains uncultivated, as they are under little market pressure to make improvements. Meanwhile, business conglomerates with market dominance operate at reduced capacity and with inefficient technology, as they have little need to invest in productivity. All of this results in a systemic logic of low productivity, and limited development of the productive forces.

In other words, rather than seeking to induce development by changing their relationship to world economy, the Venezuelan government needs to focus on the domestic sources of low productivity. Chavez partially understood this, as he was a harsh critic of what he referred to as the “oligarchy”—the wealthy classes that control major sectors of the economy. But his only real answer was for the Venezuelan state—and other states like China and Iran—to fill the void left by the private sector.

The Chavez government spent lavishly on national development projects, nationalizations, and subsidies for various sectors of the economy. Investing the oil money in development, or “sowing the oil” as it is often called in Venezuela, is supposed to drive economic development, diversify the economy, and wean the country from oil.

But past governments in Venezuela have also attempted to do this, and the results have always been dismal. Businesses divert state subsidies and credits towards speculative investments, or into foreign bank accounts, and little is done to improve productivity. The productive logic of the domestic economy makes systematic investment in productivity unnecessary, as most sectors are under monopoly or oligopoly control.

The Chavez government also invested in a vast array of state-owned companies and joint endeavors with foreign governments to replace imports and help diversify the economy. But public sector firms are under little market pressure to maximize productivity or increase capacity, and have operated at low levels of production while bureaucrats skim off investment funds. Most of the new enterprises have remained stagnant, failing to meet production targets, and often operating at a loss.

In agriculture, Chavez declared a “war on latifundio”, and vowed to eliminate the massive landholdings that dominate the countryside. By 2013, his government had expropriated more than 8 million hectares of land, about half of which are now managed by the state. However, this has not gotten to the root of the problem, which is underinvestment and the underutilization of the land.

Expropriated farms that are managed by the state have ended up being produced much like they were under the previous owners, with extensive production methods and little effort to transform the productive process. Because the land remains uncommodified, appropriated outside the market, there is little to compel the new owners to make new investments, and they often lack the resources to do so.

In other words, despite an array of integrationist projects and regional endeavors in recent years, and enormous amounts of oil money flowing through the country, the Chavez government has failed to transform the productive logic of the domestic economy. Agricultural production has remained flat in per capita terms, while consumption has increased since Chavez came to power, leading to major food shortages and a dependence on food imports. Meanwhile, most of the nation’s agricultural land remains uncultivated or underutilized—the vast majority used for extensive cattle grazing, with only a small minority used to grow crops.

Indeed, many of the problems in Venezuela today, such as high inflation, widespread food shortages, and foreign exchange constraints, can be linked back to low productivity in agriculture. This is a central factor not only in the country’s inability to be self-sufficient in food, but also in the high local prices for basic goods.

Low agricultural productivity means the cost of food for the consumer is high relative to wages. This has resulted in the government instituting price controls in an attempt to lower the price of food for the consumer, yet the inability of agricultural sector to raise production has led to widespread shortages, which then drive inflation. The government is forced to cover shortages with imported food, thus putting a strain on dwindling foreign exchange reserves.

High food costs also mean households are left with little disposable income to purchase other goods, which hurts consumer demand in other sectors of the economy. Since Chavez came to power in 1998, the manufacturing sector has shrunk as a percentage of GDP, and in per capita terms has declined by nearly 20 percent, indicating that the country is moving backwards in terms of industrialization.

Thus, there is little sign that the economy is diversifying away from primary exports, and, as a result, the country remains very dependent on oil, its future very much tied to the rise and fall of world oil prices. By 2013, oil as a percentage of total exports had reached the incredible level of 98 percent, meaning Venezuela has become more dependent on oil than perhaps ever before.

This failure to produce economic development will inevitably lead to the demise of the Bolivarian Revolution. Despite important gains for the country’s poor majority over the last decade, there is ever-increasing discontent with the persistent problems of the economy. Even if some of these problems have improved since the 1990s, they are still very present, and the discontent can be seen in Chavismo’s recent electoral losses. Since 2006, the ranks of the opposition have grown much faster than the Chavista ranks, meaning the next presidential election will almost certainly be won by the opposition.

Of course, opposition politicians do not offer many solutions either, as their neoliberal ideology seeks to give the private sector greater freedom to continue with their unproductive rentier strategies, and they oppose much-needed interventionist policies such as land reform or state-led industrial policy. Pro-business governments will not transform the logic of the private sector, but rather will seek to pull back on state intervention and allow business to continue as usual. The channeling of investment away from productivity will continue unabated, as was the case during the neoliberal reforms of the 1990s. Nevertheless, the empty promises of the rightwing opposition are winning an ever-greater share of the votes, and will lead to the end of Chavismo rule in the near future.

Chris Carlson is a Ph.D. candidate in the Department of Sociology at the Graduate Center of the City University of New York. His research is on the sociology of development, with a focus on agrarian relations and structural transformation in the Global South.