Re: [OPE] Co-Management and Workers' Control in Venezuela

From: <>
Date: Thu Sep 25 2008 - 10:15:11 EDT

Hi Paula:

A bit old, but this article covers some ground that
the others didn't.

This should be _exactly_ the type of change
that Alejandro (and the
rest of us) should be welcoming!

In solidarity, Jerry

Venezuela's Cooperative Revolution

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

This article is from the July/August 2006 issue of Dollars & Sense:
The Magazine of Economic Justice available at

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

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

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
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

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.

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

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

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.

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

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
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

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.

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

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

SOURCES Many valuable articles
have been collected at, 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 Home
Copyright © 2008
Economic Affairs Bureau, Inc.

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