The Development of Venezuela's Popular Economy, Pt. 1

May 21st 2009, by Jan Ullrich – Venezuelanalysis.com

Part 1: Experiences and Legislation

Venezuela has experienced five years of continual economic prosperity. Its gross domestic product almost doubled between 2003 and 2008. Poverty significantly declined, and the shift of the GINI-Coefficient represented a large reduction in inequality [1]. While those macro-economic indicators are recognized by most critics of Venezuela's economic policies, the qualitative economic development of the country is the subject of polemical discussions from different scientific, political, and ideological points of views.

Certainly, the Chavez government has broken with the neoliberal agenda of the preceding decades. But has it developed instead a shift toward a participatory and democratic economy as the core of 21st Century Socialism? The new "Law for the Development of a Popular Economy," which I will refer to as the Popular Economy Law in this article, could be counted as a step toward a participatory and democratic economy, because it promotes the democratization of the relationship between communities and production and consumption. The concrete experiences of "Solidarity Exchange Groups" that were defined in this law and established in ten communities across the country illustrate how the relationships of communities to production and consumption could be re-organized.

Apart from the excessively growing consumption of import goods and the expansion of state control over strategic economic sectors that we observe currently in Venezuela, grassroots and community initiatives, as well as government legislation, have established a variety of innovative practices and approaches that aim for a more democratic and participatory economy in Venezuela. Unlike a scientifically determined project, the so-called "Bolivarian Revolution" has been characterized until today as an open process in which alternative conceptions of production and reproduction can be developed.

The Venezuelan government has oriented its economic policies around the principles of desarrollo endógeno, or "endogenous development," as an alternative to the neoliberal development model known as the "Washington Consensus." Endogenous development had already been discussed by leftist and reform-oriented forces in the 1970's and 1980's in Venezuela. The Movement to Socialism party (MAS), which today has converted into a right wing social democratic party, and the Revolutionary Left Movement party (MIR), were the principal promoters of an idea of development that basically proposes the integration of the community's cultural, economic and social potential into autonomous local networks of production and consumption.

In the first years of the Chavez government, newly founded public institutions such as the Women's Bank (Banmujer), the Institute for Rural Development (INDER), the Institute for Cooperative Education (INCE), and others tried to put into practice the idea of endogenous development in Endogenous Development Networks (NUDES). The basic idea of the NUDES was that new cooperatives, founded with support from the government's program for the promotion of cooperatives, the Misión Vuelvan Caras, should integrate themselves into local economic production networks. For example, a cooperative of village herdsmen should be connected with a new cooperative spinning mill and small clothing producers, and transportation cooperatives that collectively organize distribution.

What was envisioned in the early years of the Venezuelan revolutionary process couldn't be sustainably realized in the majority of cases. The participants and also the institutions lacked experience in collective organization, and traditional forms of collective social and economic practices had been lost in the course of decades of external (exogenous) development models.

However, the results should not be evaluated exclusively by the economic performance of the cooperatives, considering that the government programs like the Misión Vuelvan Caras were addressed to sectors of society that have been marginalized from formal work, education, and cultural processes throughout history. Even though cooperatives and their integration into local networks failed in a lot of cases in the years 2004 and 2005, the initiatives produced a variety of new experiences and knowledge. [2-3]

On June 3rd 2008, President Chavez passed a set of 26 new laws using presidential decree power the National Assembly had granted him for eighteen months. These law-decrees were meant to strengthen the legal basis for the socialist transformation of the country. In the field of production and consumption, the "Law for the Development of a Popular Economy," or Popular Economy Law, outlines the principles of a new solidarity-based economy based on community networks. This law is basically an attempt to conclude the Venezuelan experience in the construction of cooperatives and community-based economic development over the last decade.

The Bolivarian Constitution of 1999 introduced new forms of social-productive organizations that were to emerge as community initiatives and receive the support of the state.[4] But until last year there was no specific law that gave a detailed legal definition to these social-productive organizations. Hence, one of the motives of the law is the "regulation of activities of popular economy, [...] giving the Venezuelans tools and social practices for an economic development as an integrative system with the capacity to strengthen social-productive projects by the communities."[5]

The Popular Economy Law is written around a core of eight social-productive organization models (see table in the graphic). These models take into account the experiences and critiques of cooperatives, self-managed factories, and community councils in the previous years.[6]

The first model is called the Corporation of Direct Social and Communal Property and it targets the contradictory experiences faced by cooperatives. Many cooperatives had become a new form of private property in which its members are following profit interests that collide with community interests. To solve this contradiction, Corporations of Direct Social and Communal Property should be owned and run by the communities in which they are based, thus guaranteeing a democratic decision-making process. Also, profits should be socially re-invested in the communities.

The second model is the Corporation of Indirect Social Property. This model obligates state-owned companies or nationalized companies to install worker co- or self management and incorporate the participation of the communities.

Most of the models, all of which will not be described in detail in this article, can be considered an attempt to diversify the legal core of solidarity-based or social production and its relationship to communities.

The eighth model defines Solidarity Exchange Groups, and the ninth model defines Groups of Community Trueques (barter). These models address not only the relation of production and community, but also the relation of production and consumption. The idea of creating local production and consumption networks was already conceptualized in the NUDES initiatives. In the Groups of Community Trueques, communities re-initiate the idea of a fusion between consumer and producer into solidarity-based markets called Trueques, meaning, roughly, barter or alternative currency-based exchange organized on the principle of solidarity. These groups learn from the experiences of social movements in Argentina and Colombia. Small-scale producers and cooperatives have started to create local networks that organize markets where products, services, and knowledge are exchanged, as a simple way to avoid intermediary merchants.

The Popular Economy Law defines the participants in these markets as "Prosumidores," a fusion of Spanish word consumidores, meaning "consumers," and productores, meaning "producers." Prosumidores are "persons who produce, distribute, and consume goods and services and participate voluntarily in alternative systems of solidarity-based exchange to satisfy their needs and those of their community," according to Article 5 of the law.

The function of the Solidarity Exchange Groups is specified in Article 23 of the law as, "to develop practices of solidarity-based exchange of goods, services, and knowledge to stimulate a communal identity and social relations inside the communities, strengthen the communities in their relation to the public institutions, and develop sustainable production projects, especially food production." Membership in such a group is related to a set of rights and duties and bound to a direct democratic decision making process. Members are obligated to produce services and goods and to participate in the internal decision making process, according to Article 17 and 18.

The most innovative aspect of the Popular Economy Law is the introduction of a new communal currency. In contrast to the Argentine experiences, where solidarity-based markets during the crisis of 2001 failed due to the forgery of banknotes, the Central Bank of Venezuela (BCV) supports the Solidarity Exchange Groups in the elaboration of communal money. This communal money only has value inside a local determined area and counts exclusively for the members of the Solidarity Exchange Groups, Article 28 and 29 of the law stipulate.

The modes of exchange in Groups of Community Trueque and Solidarity Exchange Groups are categorized as either direct or indirect forms of community trueque. The direct form is defined as a "direct exchange of knowledge, goods, and services, based on equivalent values, without a system of compensation or mediation." The Indirect trueque is based on the communitarian currency "to establish equivalent relations between different values."

The indirect communitarian trueque has been put into practice by ten Solidarity Exchange Groups in ten different states of Venezuela in the last two years. The second part of this article on the development of Venezuela's Popular Economy will give a view of the practices and experiences of these existing groups, and ask how the approach to reorganize the relation of producers and consumers can count as a contribution to a new democratic and participatory economy.

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[1] Mark Weisbrot, Rebecca Ray and Luis Sandoval - CEPR (2009) The Chávez Administration at 10 Years: The Economy and Social Indicators, http://www.venezuelanalysis.com/analysis/4182

[2] Alberto García Müller (2007) The Big Challenges of Venezuelan Cooperativism Today, http://www.venezuelanalysis.com/analysis/2531

[3] Michael Fox (2007) Venezuela's Co-op Boom, http://www.venezuelanalysis.com/analysis/2393

[4] Constitución de la Republica Bolivariana de Venezuela 1999, Article §236

[5] Ministerio del Poder Popular para la economia Comunal (2008) Ley para el Fomento y Desarollo de la Economia Popular, Caracas

[6] Kiraz Janicke (2007) Without Workers Management There Can Be No Socialism, http://www.venezuelanalysis.com/analysis/2784