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July/August 2006 issue of Dollars & Sense: The Magazine of Economic Justice Teaser:

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

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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 0706toc.html">July/August 2006 issue of
Dollars & Sense: The Magazine of Economic Justice available at
http://www.dollarsandsense.org/archives/2006/0706bowmanstone.html

This article is from the July/August 2006 issue of Dollars & Sense magazine.
issue 266 cover

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.

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