Venezuela's Cooperative Revolution

An economic experiment is the hidden story behind Chávez's 'Bolivarian Revolution.'

By BETSY BOWMAN AND BOB STONE

This article is from the July/August 2006 issue of Dollars & Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org/archives/2006/0706bowmanstone.html


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This article is from the July/August 2006 issue of Dollars & Sense magazine.

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Zaida Rosas, a woman in her fifties with 15 grandchildren, works in the newly constructed textile co-op Venezuela Avanza in Caracas. The co-op's 209 workers are mostly formerly jobless neighborhood women. Their homes on the surrounding steep hillsides in west Caracas were almost all self-built.

Zaida works seven hours a day, five days a week, and is paid $117 a month, the uniform income all employees voted for themselves. This is much less than the minimum salary, officially set at $188 a month. This was "so we can pay back our [government start-up] loan," she explained. Venezuela Avanza cooperativistas have a monthly general assembly to decide policy. As in most producer co-ops, they are not paid a salary, but an advance on profits. Workers paying themselves less than the minimum wage in order to make payments to the state was, Zaida acknowledged, a bad situation. "We hope our working conditions will improve with time," she said.

To prepare the co-op's workers to collectively run a business, the new Ministry of Popular Economy (MINEP) had given them small scholarships to train in cooperativism, production, and accounting. "My family is a lot happier—I've learned to write and have my 3rd grade certificate," she said.

Zaida is now also part of a larger local web of cooperatives: her factory is one of two producer co-ops, both built by a local bricklayers' cooperative, that, along with a clinic, a supermarket co-op, a school, and a community center, make up a so-called "nucleus of endogenous development." These nucleos are at the core of the country's plan for fostering egalitarian economic development.

U.S. media coverage of Venezuela tends to center around the country's oil and the—not unrelated—war of words between President Hugo Chávez and the White House. Chávez, for example, likes to refer to George W. Bush as "Mr. Danger," a reference to a brutish foreigner in a classic Venezuelan novel. Somewhat more clumsily, Defense Secretary Donald Rumsfeld recently compared Chávez to Hitler. While this makes for entertaining copy, reporters have missed a major story in Venezuela—the unprecedented growth of cooperatives that has reshaped the economic lives of hundreds of thousands of Venezuelans like Zaida Rosas. On a recent visit to Caracas, we spoke with co-op members and others invested in this novel experiment to open Venezuela's economy from the bottom up.

Explosion of Cooperatives

Our first encounter with Venezuela's co-op movement was with Luis Guacarán, a taxi co-op member who drove us to the outskirts of Caracas. Settled into the rainy trip, we asked Luis what changes wrought by the Chávez government had meant for him personally. Luis replied that he now felt that as a citizen he had a right to share in the nation's oil wealth, which had always gone to an "oligarchy." The people needed health, education, and meaningful work; that was reason enough for Chávez to divert oil revenues in order to provide these things. Two of Luis's five sons are in the military, a daughter is studying petroleum engineering, another has a beauty shop. All were in vocational or professional studies.

Almost everyone we met during our visit was involved in a cooperative. The 1999 constitution requires the state to "promote and protect" co-ops. However, it was only after the passage of the Special Law on Cooperative Associations in 2001 that the totals began to skyrocket. When Chávez took office in 1998 there were 762 legally registered cooperatives with about 20,000 members. In 2001 there were almost 1,000 cooperatives. The number grew to 2,000 in 2002 and to 8,000 by 2003. In mid-2006, the National Superintendence of Cooperatives (SUNACOOP) reported that it had registered over 108,000 co-ops representing over 1.5 million members. Since mid-2003, MINEP has provided free business and self-management training, helped workers turn troubled conventional enterprises into cooperatives, and extended credit for start-ups and buy-outs. The resulting movement has increasingly come to define the "Bolivarian Revolution," the name Chávez has given to his efforts to reshape Venezuela's economic and political structures.

Now MINEP is trying to keep up with the explosion it set off. While pre-Chávez co-ops were mostly credit unions, the "Bolivarian" ones are much more diverse: half are in the service sector, a third in production, with the rest divided among savings, housing, consumer, and other areas. Cooperativists work in four major sectors: 31% in commerce, restaurants, and hotels; 29% in transport, storage and communications; 18% in agriculture, hunting, and fishing; and 8.3% in industrial manufacture. Cooperativism is on the march in Venezuela on a scale and at a speed never before seen anywhere.

Most cooperatives are small. Since January 2005, however, when the government announced a policy of expropriation of closed industrial plants, MINEP has stood ready to help workers take control of some large factories facing bankruptcy. If the unused plant is deemed of "public utility," the initiation of expropriation proceedings often leads to negotiation with the owners over compensation. In one instance, owners of a shuttered Heinz tomato processing plant in Monagas state offered to sell it to the government for $600,000. After factoring in back wages, taxes, and an outstanding mortgage, the two sides reached an amicable agreement to sell the plant to the workers for $260,000, with preferential loans provided by the government. In a more typically confrontational example, displaced workers first occupied a sugar refinery in Cumanacoa and restarted it on their own. The federal government then expropriated the property and turned it over to cooperatives of the plant's workers. The owners' property rights were respected inasmuch as the government loaned the workers the money for the purchase, though the price was well below what the owners had claimed. Such expropriated factories are then often run by elected representatives of workers alongside of government appointees.

There are strings attached. "We haven't expropriated Cumanacoa and Sideroca for the workers just to help them become rich people the day after tomorrow," said Chávez. "This has not been done just for them—it is to help make everyone wealthy." Take the case of Cacao Sucre, another sugar mill closed for eight years by its private owners, leaving 120 workers unemployed in a neighborhood of grinding poverty. The state's governor put out a call for the workers to form a co-op. After receiving training in self-management, the mill co-op integrated with the 3,665-strong cane growers' co-op. In July 2005, this large cooperative became the first "Social Production Enterprise." The new designation means that the co-op is required to set aside a portion of its profits to fund health, education, and housing for the local population, and to open its food hall to the community as well.

With only 700 plants on the government's list of closed or bankrupt candidates for expropriation, cooperativization of existing large-scale facilities is limited, and so far a bit slow. Unions are identifying more underproducing enterprises. But there is a long way to go.

Cooperatives are at the center of Venezuela's new economic model. They have the potential to fulfill a number of the aims of the Bolivarian revolution, including combating unemployment, promoting durable economic development, competing peacefully with conventional capitalist firms, and advancing Chávez's still-being-defined socialism.

Not Your Grandfather's WPA

Capitalism generates unemployment. Neoliberalism aggravated this tendency in Venezuela, producing a large, stable group of over-looked people who were excluded from meaningful work and consumption. If not forgotten altogether, they were blamed for their plight and made to feel superfluous. But the Bolivarian revolution is about demanding recognition. In March of 2004 Chávez called Venezuelans to a new "mission," when MINEP inaugurated the "Misión Vuelvan Caras" program—Mission About-Face. Acting "from within themselves and by their own powers" to form cooperatives, the people were to "combat unemployment and exclusion" by actually "chang[ing] the relations of production."

In Venezuela, "vuelvan caras" evokes an insurgent general's command to his troops upon being surrounded by Spaniards in the war of independence. In effect: stop playing the role of the pursued; turn and attack the enemy frontally. The new enemy is unemployment, and the goal of full employment is to be achieved by groups—especially of the unemployed—throwing in their lot with each other and setting to work together. Vuelvan caras teaches management, accounting, and co-op values to hundreds of thousands of scholarship students. Graduates are free to seek regular jobs or form micro-enterprises, for which credit is offered; however, co-ops get priority for technical assistance, credits, and contracts. But the original spark—the collective entrepreneurship needed for cooperativization—is to come from the people. Over 70% of the graduates of the class of 2005 formed 7,592 new co-ops.

Vuelvan Caras seems to be paying off. Unemployment reached a high of 18% in 2003 but fell to 14.5% in 2004, and 11.5% in 2005. MINEP is planning a "Vuelvan Caras II," aiming to draw in 700,000 more of the jobless. But with a population of 26 million, Venezuela's battle against structural causes of unemployment has only begun.

Economic Development from Within

Cooperatives also advance the Chávez administration's broader goal of "endogenous development." Foreign direct investment continues in Venezuela, but the government aims to avoid relying on inflows from abroad, which open a country to capitalism's usual blackmail. Endogenous development means "to be capable of producing the seed that we sow, the food that we eat, the clothes that we wear, the goods and services that we need, breaking the economic, cultural and technological dependence that has halted our development, starting with ourselves." To these ends, co-ops are ideal tools. Co-ops anchor development in Venezuela: under the control of local worker-owners, they don't pose a threat of capital flight as capitalist firms do.

Democracy: Economic and Political

Alongside the co-op movement, Venezuelans are engaged in building a new form of local political democracy through so-called Communal Councils. Modeled on Brazil's innovative participatory budgeting process, these councils grew out of the Land Committees Chávez created to grant land titles to the many squatters in Caracas's barrios. If a community of 100 to 200 families organizes itself and submits a local development plan, the government grants land titles. Result: individuals get homes, and the community gets a grassroots assembly.

The councils have budgets and make decisions on a range of local matters. They delegate spokespersons to the barrio and the municipality. Today, a few thousand Communal Councils exist, but within five years the government plans to bring all Venezuelans into local counsels. In conjunction with cooperativization in the economy, the Community Council movement may portend the creation of a new decentralized, democratic polity.

The need for endogenous development came home to Venezuelans during the 2002 oil strike carried out by Chávez's political opponents. Major distributors of the country's mostly imported food also supported the strike, halting food deliveries and exposing a gaping vulnerability. In response, the government started its own parallel supermarket chain. In just three years, Mercal had 14,000 points of sale, almost all in poor neighborhoods, selling staples at discounts of 20% to 50%. It is now the nation's largest supermarket chain and its second largest enterprise overall. The Mercal stores attract shoppers of all political stripes thanks to their low prices and high-quality merchandise. To promote "food sovereignty," Mercal has increased its proportion of domestic suppliers to over 40%, giving priority to co-ops when possible. Venezuela still imports 64% of the food it consumes, but that's down from 72% in 1998. By cutting import dependence, transport costs, and middlemen while tapping local suppliers, Mercal aims to wean itself from its $24 million-a-month subsidy.

Displacing Capitalism and Building Socialism

Another reason the architects of the so-called "Bolivarian revolution" are vigorously pushing the co-op model is their belief that co-ops can meet needs better than conventional capitalist firms. Freed of the burdens of supporting costly managers and profit-hungry absentee investors, co-ops have a financial buoyancy that drives labor-saving technological innovation to save labor time. "Cooperatives are the businesses of the future," says former Planning and Development Minister Felipe Pérez-Martí. Not only are they non-exploitative, they outproduce capitalist firms, since, Pérez-Martí holds, worker-owners must seek their firm's efficiency and success. Such a claim raises eyebrows in the United States, but a growing body of research suggests that co-ops can indeed be more productive and profitable than conventional firms.

To test whether co-ops can beat capitalist firms on their own terms, a viable co-op or solidarity sector must be set up parallel to the securely dominant capitalist one. Today Venezuela is preparing this "experiment." More than 5% of the labor force now works in cooperatives, according to MINEP. While this is a much larger percentage of cooperativistas than in most countries, it is still small relative to the size of a co-op sector that would have a shot at out-competing Venezuela's capitalist sector. Chávez's supporters hope that once such a sector is launched, cooperativization will expand in a "virtuous circle" as conventional workforces, observing co-ops, demand similar control of their work. Elias Jaua, the initial Minister of Popular Economy, says, "The private sector can understand the process and incorporate itself into the new dynamic of society, or it will be simply displaced by the new productive forces which have a better quality production, a vision based much more on solidarity than consumption." One could claim that MINEP's credits, trainings, and contracts prejudice the outcome in favor of co-ops. But Vuelvan Caras graduates are free to take jobs in the capitalist sector. And MINEP's policy of favoring employee-owned firms is not that different from U.S. laws, subsidies, and tax benefits that favor investor-owned ones.

Finally, by placing the means of production in workers' hands, the co-op movement directly builds socialism. Cooperativization, especially of idle factories occupied by their workforces, promotes "what has always been our goal: that the workers run production and that the governments are also run by the workers," according to Labor Minister Maria Cristina Iglesias. Co-ops, then, are not just means to what Chávez calls "socialism for the 21st century": they actually constitute partial realizations of it.

Managing the Experiment's Risks

Cooperativization is key to achieving the aims of the Bolivarian revolution. But the revolution's leaders acknowledge that a long struggle lies ahead. Traditional capitalist enterprises still dominate Venezuela's economy. And even if all of the country's current cooperativization programs succeed, will that struggle—and it will be a struggle—result in socialism? Michael Albert of Z Magazine grants that co-ops may be more productive, and he strongly supports Venezuela's experiment. But in the absence of plans for de-marketization, he has doubts that it will reach socialism. For the effect on cooperatives themselves of "trying to out-compete old firms in market-defined contests may [be to] entrench in them a managerial bureaucracy and a competitive rather than a social orientation," leading to a market socialist system "that still has a ruling managerial or coordinator class." Albert's concern is well founded: the history of co-ops from the Amana colonies of Iowa to the Mondragón Cooperative Corporation in the Basque country shows that even when they start out with a community-service mandate, individual co-ops, or even networks of co-ops, tend to defensively re-internalize capitalist self-seeking and become indistinguishable from their competitors when made to compete alone against an array of capitalist firms in a capitalist economy.

Disarmingly, members of Chávez's administration acknowledge these risks. Juan Carlos Loyo, deputy minister of the popular economy, noting that community service has been part of the cooperative creed since its beginning, asks for patience: "We know that we are coming from a capitalist lifestyle that is profoundly individualistic and self-centered." Marcela Maspero, a national coordinator of the new, Chavista UNT labor federation, acknowledges "the risk of converting our comrades into neo-liberal capitalists." In Venezuela's unique case, however, construction of a viable co-op sector is the goal of a government with considerable financial resources, and its aim of thereby building socialism is also a popular national project. In Venezuela, success is therefore a plausible hope. A loose analogy would hold with May 1968 if both the de Gaulle government and the French Communist Party had been in favor of student-worker demands for "auto-gestion" or self-management.

There are problems, of course. Groups may register as "phantom co-ops" to get start-up grants, then simply walk away with the money. And since co-ops are favored in awarding government contracts, there is a significant amount of fraud. "There are cooperatives that are registered as such on paper," Jaua, the former head of MINEP, reports, "but which have a boss who is paid more, salaried workers, and unequal distribution of work and income." SUNACOOP admits that its enforcement is spotty. Many of the new cooperatives have also suffered as a result of inadequate self-management training. Government authorities are attempting to address these problems by increasing visits to local co-ops, augmenting training and support services, and decentralizing oversight to local councils.

Despite the obstacles, the new co-ops, with government support, are building a decentralized national movement with its own momentum and institutions. This May, the National Executive Cooperative Council (CENCOOP) was launched. The council is made up of five co-op members from each of Venezuela's 25 states, elected by their State Cooperative Councils, which are in turn elected by Municipal Councils composed of local cooperativists. CENCOOP will represent Venezuela at the International Cooperative Alliance—the global body embracing 700 million individual members in hundreds of thousands of cooperatives in 95 countries.

The pre-Bolivarian co-op movement at first felt left out, and criticized hasty cooperativization. But its advice was sought at each stage of the planning for CENCOOP, and it finally joined the council, sharing its valuable experience with the new movement. The new state and municipal co-op councils are part of a plan to decentralize MINEP's functions. Having helped organize CENCOOP, MINEP Superintendent Carlos Molina says his office will adopt a hands-off approach to assure the cooperative movement's increasing autonomy. Today, however, many of the new co-ops remain dependent on MINEP's support.

A Movement's Opponents

Whatever success cooperativization achieves carries its own risks, both internal and external. So far, the Chávez government has compensated capitalists for expropriations and has targeted for co-op conversion only firms that are in some sense in trouble. But at a certain point, workers in healthy firms, seeing their cooperativist neighbors enjoying newfound power in the workplace and a more equal distribution of income, may want to cooperativize their firms too. And having for years had profit extracted as a major portion of the value their labor has created—in many cases enough to cover their firm's market value many times over—won't they have grounds to demand transfer without compensation? In short, to further expand and strengthen revolutionary solidarity before new counter-revolutionary efforts take root, won't the revolution have to start a real redistribution of productive wealth—to cooperativize firms directly at the expense of Venezuela's capitalists? Sooner or later, Venezuela's cooperative experiment will have to address this question.

After joining in the World Social Forum in Caracas in last January, we caught some glimpses of the "Bolivarian revolution" moving at full speed, and we've followed it since then. We are convinced that for those around the world who believe "another world is possible," the stakes of this experiment are enormous. Predictably, then, it faces genuine external threats. The short-lived coup in April of 2002 and the destructive strike by oil-industry managers that December were the works of a displaced and angry elite encouraged by the United States at every step. And the campaign continues: State Department-linked groups have been pumping $5 million a year into opposition groups that backed the coup. Yet the democratizing of workplaces proceeds relentlessly, bringing ever more Venezuelans into the revolutionary process. This inclusion is itself a defense since it expands, unites, and strengthens the resistance with which Venezuelans would greet any new effort to halt or divert their revolution.

Betsy Bowman and Bob Stone are on the editorial collective of GEO. They are among the cofounders of the bilingual Center for Global Justice in San Miguel de Allende, Mexico, where they serve as research associates, and are co-authors of many articles on Jean-Paul Sartre. They thank Steve Ellner for comments and invite dialogue through www.globaljusticecenter.org.

SOURCES Many valuable articles have been collected at www.Venezuelanalysis.com, including: C. Harnecker, "The New Cooperative Movement in Venezuela's Bolivarian Process" (from Monthly Review Zine) 5/05; S. Wagner, "Vuelvan Caras: Venezuela's Mission for Building Socialism of the 21st Century," 7/05; "Poverty and Unemployment Down Significantly in 2005," 10/05; F. Perez-Marti, "The Venezuelan Model of Development: The Path of Solidarity," 6/04; "Venezuela: Expropriations, cooperatives and co-management," Green Left Weekly, 10/05; M. Albert, "Venezuela's Path," Z-Net, 11/05; O. Sunkel, Development from Within: Toward a Neostructuralist Approach for Latin America (L. Rienner Publ., 1993); H. Thomas, "Performance of the Mondragón Cooperatives in Spain," in Participatory and Self-Managed Firms, eds. D. C. Jones and J. Svejnar (Lexington Books, 1982); D. Levine and L. D'A. Tyson, "Participation, Productivity and the Firm's Environment," in Paying for Productivity: A Look at the Evidence, ed. A. Blinder (Brookings Inst., 1990); D. Schweickart, After Capitalism (Rowman & Littlefield, 2002); M. Lebowitz, "Constructing Co-management in Venezuela: Contradictions along the Path," Monthly Review Zine 10/05; Z. Centeno, "Cooperativas: una vision para impulsar el Desarrollo Endogeno," at www.mci.gob.ve.