In August 2004, President Hugo Chavez won a recall referendum allowing him to retain the presidency of Venezuela, an office he has held since 1998. Ironically, however, his popularity has caused tremendous conflict in Venezuela, and Chavez finds himself in the midst of severe instability—a crisis derived from the extremely polarized state of the social classes in Venezuela and the government’s inability or unwillingness to reform civil systems.

After many years as a remarkably stable democracy, Venezuela began a trend of economic deterioration in the 1980’s that had a serious effect on the social structure of the nation. Former presidents Carlos Perez and Rafael Caldera, whose tenures spanned the emergence of the economic crisis and the election of 1998, were unable to improve the economic conditions or assuage the sharp division between the lower and upper classes; the Venezuelan people began to lose faith in their democratic and economic institutions, which had failed to supply the expected relief.

In the 1998 election, Chavez took advantage of the poor conditions in Venezuela and launched a populist campaign aimed at the lower classes, promising to renew the republic by ending corruption and social inequality. Chavez gained support among this large segment of voters, and his promises gave him his first presidential victory.

Instead of uniting the country, however, Chavez’ victory caused greater friction between the upper and lower classes. As the new government’s projects were aimed mostly at the poor—the core of Chavez’s support—they alienated the upper and middle classes, increasing their bitterness towards Chavez and strengthening the barriers between classes.

The worsening state of Venezuela’s economy has become a vicious cycle. Venezuelan businesses refuse to invest in their country, where the risks are high and the government portrays business as the cause of the nation’s poor economy. This has alarmed the upper and middle classes who, along with foreign investors, now take their business and investments elsewhere, where they can find political stability and a government willing to protect their capital. Because Chavez and his government hold the businesses and their upper and middle-class associates responsible for poverty, they have increased their own support from the lower class.

This creates polarization between the country’s classes, as the lower class turns against business’ supporters while the upper and middle classes try to fight against the government. Members of the lower class do not realize, however, that Chavez is not helping the economic situation; rather, his populist projects are inevitably causing a decrease in the country’s per capita income, and his negative attitude toward businesses is decreasing the number of efficient, profitable companies in Venezuela. As a result, the Venezuelan economy cannot lift itself out of recession.

Strictly speaking, Chavez and his government have failed to keep their political promises even to the lower class. The economy’s decline has resulted in lower standards of living for all, and the drastic polarization between socioeconomic groups has increased the violence in Venezuela with a growing number of strikes, killings, and protests. A worrying report by the Inter-American Commission on Human Rights, for example, stated that more than 40 people were killed and 750 injured as a result of street protests between March 2002 and March 2003. This is clearly not the path toward renewing the republic or bringing an end to corruption. Nevertheless, Chavez distracts the lower classes from what is happening by placating them with populist projects, including his most recent program in which he uses money from the current rise in oil prices to increase social services, including education, food, and health care for the country’s poor.

The political polarization between the rich and poor may also lead to the collapse of democratic institutions in Venezuela. Although the recall vote resulted in Chavez’s victory, this latent intensity could spark increased violence as was seen over 2003, especially as both sides have called for armed action during public speeches. Moreover, if both sides take to armed violence, the civil unrest could result in the destruction of Venezuela’s remaining democratic stability. According to Chris Sabatini, director of the National Endowment for Democracy, which provided funds for Chavez’s opposition, “If you want to pull people back from the brink of conflict, you have to work with people at the brink.” Venezuela’s government should consider this useful suggestion before the nation’s stability erodes and chaos ensues.