Did this decrease in inequality have any effect on growth? Adjusted for inflation, average incomes in Venezuela fell until 2003, then began to rise again until hitting a plateau around 2009. The turnaround began before income inequality started to shrink, again coinciding with the upward turn in oil prices. Indeed, about a third of Venezuela's GDP comes from oil, and per capita income tracks the oil price fairly closely.
A more interesting gauge of Chávez's success is to look at how much the non-oil portion of the Venezuelan economy expanded. Based on a rough calculation of oil revenue -- Venezuela's annual production multiplied by the average price of a barrel of crude -- sales accounted for only about 20 percent of GDP in 1999, yet by 2005 they were already peaking at 37 percent. After taking a big knock during the global financial crisis, sales settled at about 25 percent of GDP in 2011. (Note that this measure does not include refining and other oil-related industries.)
The size of Venezuela's non-oil economy also fluctuated during this period. From 1999 through 2005, just before inequality started to fall, per capita income not from oil sank by 16 percent, adjusted for inflation. It's likely that these were dark days for those who neither worked in the oil industry nor benefited from social programs funded by oil revenue.
Starting in 2006, the non-oil economy began to grow again. It, too, suffered during the global financial crisis, but by 2011 non-oil income per capita was 11 percent higher than when Chávez took office. That was progress, but 11 percent was still a pretty mediocre figure; on an annual basis, non-oil income per capita grew just 0.9 percent during the majority of Chávez's presidency.
The numbers look even worse in comparison to Venezuela's neighbors. Peru's oil production is about 6 percent of Venezuela's, but its per capita income managed to grow by almost 60 percent between 1999 and 2011, according to the IMF's estimates. The pie also expanded much more quickly in Ecuador and Colombia.
Venezuela certainly reduced inequality, but it hardly seems to have resulted in more economic growth. It's not hard to guess why. Chávez's moves to reduce inequality weren't the only relevant parts of his economic strategy. His hostile attitude toward wealthier countries, combined with the threat of nationalization, undoubtedly discouraged foreign investment. While neighboring countries modernized their regulations and improved their business climates, Venezuela maintained a reputation as one of the toughest places in the world to run a company.
Economic growth and rising incomes aren't everything, however. Economists are taught to care most about wellbeing, which can and should be gauged in other ways. And here's the kicker: If there is one area where Chávez appears to have succeeded, it is in enhancing human development as measured by the United Nations. Even though Peru's incomes grew much more quickly between 2000 and 2010, Venezuela passed its neighbor in the U.N.'s favored metric.
Could Chávez have done even better with higher economic growth? Perhaps, but we'll never know for sure. Instead, we'll see whether Venezuela can cement its progress in human development atop a rather shaky set of economic foundations.
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