Workers at the Evergreen Cooperative Laundry in Cleveland

Worker-Owners of America, Unite!

By GAR ALPEROVITZ
SolidarityEconomy.net via NYT Op-Ed

Dec 14, 2011, College Park, Md.- THE Occupy Wall Street protests have come and mostly gone, and whether they continue to have an impact or not, they have brought an astounding fact to the public’s attention: a mere 1 percent of Americans own just under half of the country’s financial assets and other investments. America, it would seem, is less equitable than ever, thanks to our no-holds-barred capitalist system.

But at another level, something different has been quietly brewing in recent decades: more and more Americans are involved in co-ops, worker-owned companies and other alternatives to the traditional capitalist model. We may, in fact, be moving toward a hybrid system, something different from both traditional capitalism and socialism, without anyone even noticing.

Some 130 million Americans, for example, now participate in the ownership of co-op businesses and credit unions. More than 13 million Americans have become worker-owners of more than 11,000 employee-owned companies, six million more than belong to private-sector unions.

And worker-owned companies make a difference. In Cleveland, for instance, an integrated group of worker-owned companies, supported in part by the purchasing power of large hospitals and universities, has taken the lead in local solar-panel installation, “green” institutional laundry services and a commercial hydroponic greenhouse capable of producing more than three million heads of lettuce a year.

Local and state governments are likewise changing the nature of American capitalism. Almost half the states manage venture capital efforts, taking partial ownership in new businesses. Calpers, California’s public pension authority, helps finance local development projects; in Alaska, state oil revenues provide each resident with dividends from public investment strategies as a matter of right; in Alabama, public pension investing has long focused on state economic development.

Moreover, this year some 14 states began to consider legislation to create public banks similar to the longstanding Bank of North Dakota; 15 more began to consider some form of single-payer or public-option health care plan.

Some of these developments, like rural co-ops and credit unions, have their origins in the New Deal era; some go back even further, to the Grange movement of the 1880s. The most widespread form of worker ownership stems from 1970s legislation that provided tax benefits to owners of small businesses who sold to their employees when they retired. Reagan-era domestic-spending cuts spurred nonprofits to form social enterprises that used profits to help finance their missions.

Recently, growing economic pain has provided a further catalyst. The Cleveland cooperatives are an answer to urban decay that traditional job training, small-business and other development strategies simply do not touch. They also build on a 30-year history of Ohio employee-ownership experiments traceable to the collapse of the steel industry in the 1970s and ’80s.

Further policy changes are likely. In Indiana, the Republican state treasurer, Richard Mourdock, is using state deposits to lower interest costs to employee-owned companies, a precedent others states could easily follow. Senator Sherrod Brown, Democrat of Ohio, is developing legislation to support worker-owned strategies like that of Cleveland in other cities. And several policy analysts have proposed expanding existing government “set aside” procurement programs for small businesses to include co-ops and other democratized enterprises.

If such cooperative efforts continue to increase in number, scale and sophistication, they may suggest the outlines, however tentative, of something very different from both traditional, corporate-dominated capitalism and traditional socialism.

It’s easy to overestimate the possibilities of a new system. These efforts are minor compared with the power of Wall Street banks and the other giants of the American economy. On the other hand, it is precisely these institutions that have created enormous economic problems and fueled public anger.

During the populist and progressive eras, a decades-long buildup of public anger led to major policy shifts, many of which simply took existing ideas from local and state efforts to the national stage. Furthermore, we have already seen how, in moments of crisis, the nationalization of auto giants like General Motors and Chrysler can suddenly become a reality. When the next financial breakdown occurs, huge injections of public money may well lead to de facto takeovers of major banks.

And while the American public has long supported the capitalist model, that, too, may be changing. In 2009 a Rasmussen poll reported that Americans under 30 years old were “essentially evenly divided” as to whether they preferred “capitalism” or “socialism.”

A long era of economic stagnation could well lead to a profound national debate about an America that is dominated neither by giant corporations nor by socialist bureaucrats. It would be a fitting next direction for a troubled nation that has long styled itself as of, by and for the people.

Gar Alperovitz, a professor of political economy at the University of Maryland and a founder of the Democracy Collaborative, is the author of “America Beyond Capitalism.”

War: The Wrong Jobs Program

By Mark Engler
SolidarityEconomy.net via Foreign Policy in Focus

More than 40 years ago, long before anyone had ever heard of Barack Obama, before the collapse of Bear Stearns, and before contemporary debates about bailouts and debt ceilings, two authors, Paul Baran and Paul Sweezy, considered a tricky problem. In times of downturn, the government must spend to stimulate the economy. Yet getting the political establishment to agree on one particular program of spending seemed nearly impossible.

Baran and Sweezy phrased the conundrum as a question: "On what could the government spend enough to keep the system from sinking into the mire of stagnation?"

After assessing the political realities that steer America's power elite, they could find only one response. It was not what typically comes to mind when we think of economic stimulus or government-led job creation.

Their answer: "On arms, more arms, and ever more arms."

The authors did not approve of military spending as a strategy of economic development.

But, even at the very outset of the Cold War, they saw the deep hold that it had on decision-makers in Washington, DC.

We can see the continuing hold it has today. This fall, responding to high and persistent unemployment, President Obama called for a federal jobs act. Among its measures, the act proposed investment in schools and infrastructure. Conservative opponents responded with cries of derision. The critics charged that the plan "doubles down on a failed government stimulus strategy." It means "adding more money to the same broken system" they said. Finally, they insisted, “It comes to a point that you can’t keep borrowing in a futile attempt to stimulate the economy when the increased debt itself is weakening the economy.”

Obama's proposals were considered political non-starters, certain to be stonewalled by the Republican Congressional majority. But for all the right-wing insistence that government should end stimulus spending, cut federal budgets in order to reduce the deficit, and generally leave the market to its own devices, our country already has a massive spending program, and it enjoys strong bipartisan support. America's jobs program is its military—and the immense industry that provides the military with services and armaments.

Our country's existing jobs program goes by many names: The Permanent War Economy, Military Keynesianism, The Iron Triangle, Perpetual War. The real question it raises is not whether the government should spend. It is whether the government has been spending well.

Thanking the Russians for Making Capitalism Work

Scholars have long debated whether massive outlays on the armed forces can pull a country from a recession, or whether ongoing spending of this type is a drain on private enterprise. The views of two thinkers, an economist and an engineer, have come to define opposite poles in the discussion.

Michal Kalecki was a Polish economist, influenced by Marx, who saw Hitler's plunder of Europe from his post at the Oxford Institute of Statistics. Kalecki spent much of the 1930s studying capitalist business cycles and observing the way in which government spending could influence them. In doing so, he arrived at conclusions quite similar to his more-often-remembered contemporary, John Maynard Keynes. In fact, some argue that, based on priority of publication, Keynesianism should not be called Keynesianism, but “Kaleckianism.”

Following World War II, Kalecki sought to understand Nazi Germany's successful rise from the depths of the Great Depression to achieve full employment by the late 1930s. Theories popular at the time—and embraced by many U.S. Republicans of the era—held that military spending necessarily occurred at the expense of other sectors of the economy. The Wall Street Journal would later express this position, stating in 1980 that "'Defense spending…. is the worst kind of government outlay, since it eats up materials and other resources that otherwise could be used to produce consumer goods.''

Countering such ideas, Kalecki examined how military buildup could actually serve as a stimulus to other industry. Starting with his 1943 essay, “The Political Aspects of Full Employment,” he began to theorize what has become known as “Military Keynesianism.” Kalecki argued that private capital preferred military spending over other forms of government investment because it contributed to private profits without competing with business activity in more conventional economic markets.

This would prove an influential proposition. Baran and Sweezy, Harry Magdoff, and other Marxist writers from the 1960s on elaborated on Kalecki's ideas. Conventional economists had regarded war and militarism as aberrations, phenomena external to their models for how commerce should normally function. ("Peace reigns supreme in the realm of neoclassical economics," Magdoff noted in 1970.) But such assumptions did not square with a reality in which war was almost constant. The Marxists showed how vast arms spending, even during "peacetime," had become an essential state support for the economy. As one pair of writers working in this tradition wrote in 1972, "Without militarism the whole economy would return to a state of collapse from which it was rescued by the Second World War."

It was not just voices on the left stating this position. Business leaders themselves acknowledged the advantages of military buildup. In a speech given by Harvard economist Sumner Slichter to a convention of bankers in October 1949 (and cited more recently by authors John Bellamy Foster, Hannah Holleman, and Robert McChesney), the speaker contended that Cold War arms spending made severe depression "difficult to conceive." The prolonged conflict, Slichter said

increases the demand for goods, helps sustain a high level of employment, accelerates technological progress and thus helps the country to raise its standard of living…. So we may thank the Russians for helping make capitalism in the United States work better than ever.

Elevating Inefficiency to a National Purpose

Although Kalecki would influence many with his economic theories, a contrary view would come from an industrial engineer and longtime Columbia University professor. Seymour Melman was raised in the Bronx during the Great Depression. That downturn, he would later say, "made a deep impression on me then and to the present day because whole neighborhoods were clearly made impoverished. Unemployment was rampant, and almost any day if you walked out on the street you'd see, in one or another side street, the belongings of a family out on the sidewalk."

Melman put himself through college by working 15-hour overnight shifts in his uncle's knitting factory. He lived briefly on a kibbutz in Israel as a young man, and he also served two years in the military, getting a first-hand look at the workings an institution he would later criticize in detail. Initially interested in the social sciences, he ended up pursuing graduate studies in industrial engineering at Columbia, where he went on to teach for many decades.

Skilled at examining the industrial operations of different sectors of the economy, Melman became involved in the 1950s in analyzing a newly emerging realm: the Military-Industrial Complex. Subsequently, for more than 40 years, Melman would serve as an outspoken critic of massive public investment in the military, charging it with producing a growing weakness in America's civilian manufacturing capabilities. He would also become a leading proponent of "economic conversion," the idea that defense assets and infrastructure should be converted to more productive non-military uses.

In 2003, near the end of his long career, Melman wrote: "[A]t the start of the twenty-first century, every major aspect of American life is being shaped by our Permanent War Economy." Because he used language similar to that employed by analysts of Military Keynesianism, Melman might seem as if he were part of a similar school of thought. But, in fact, he considered himself staunchly opposed to their line of thinking. The theorists of Military Keynesianism examined how arms spending had been deeply integrated into the economy, providing a government support for business; Melman, in contrast, regarded military expenditures as a crippling drain on the country's economic health.

In a 1991 article in The Nation, he stood by his 1974 assessment of the "economic consequences of military state capitalism":

Traditional economic competence of every sort is being eroded by the state capitalist directorate that elevates inefficiency into a national purpose…. Industrial productivity, the foundation of every nation's economic growth, is eroded by the relentlessly predatory effects of the military economy.

In his analysis, Melman emphasized both the opportunity costs of military spending and the manner in which defense industries take up "economic space," depleting the resources available to the rest of the economy. In 1995, he argued, "The Cold War has bled our civilian economy by preempting capital resources, taking the lion's share of top scientific talent as well as federal research and development funds, and appropriating government funds that would otherwise have been available for the development of our infrastructure."

In an interview from the same period, Melman noted that approximately 30 percent of the country's scientists and engineers worked for the military, directly or indirectly. "The loss to the civilian economy," he said, "is incalculable.”

In 2006, historian Thomas Woods, writing for the libertarian Ludwig von Mises Institute, penned a fascinating tribute to the late engineer. In Woods' view, "Melman’s normative conclusions"—that government should undertake a thorough-going program of economic conversion for the benefit of civilian society—"were altogether conventional and uninteresting, and far removed from libertarianism. But his positive analysis was anti-statist to the core, and provides us with an array of important and typically neglected costs of large military establishments."

As it turns out, both liberals critical of the arms industry and free market enthusiasts wary of big government could agree when Melman paraphrased sociologist C. Wright Mills' wary appraisal of conventional wisdom in Washington: "Military Keynesianism," Melman wrote, "has become the 'crackpot realism'… of the American economy."

The Glamour of Guns Over Butter

In the decades since their debate commenced, neither the intellectual kin of Kalecki nor members of Melman's "depletionist" school have decisively prevailed. Those who have reviewed the evidence point to some weaknesses in each approach. Economists such as David Gold suggest that Military Keynesians may have overestimated the overall stimulus provided by government spending on the military—especially as the American economy has grown ever larger. On the other side, analysts contend that the depletionists go too far in their assessment of how the military saps the private sector.

Yet, ultimately, the differences between Kalecki and Melman may be less important than the common ground they share. Marxist analysts of Military Keynesianism, after all, never argued that arms spending was a particularly productive use of public funds. Nor did they endorse it as a way to keep the capitalist economy afloat. They merely highlighted the political realities that make it the most acceptable form of government spending for monied elites, and to the way in which the strategy becomes entrenched once pursued.

This point has been acknowledged by observers across the political spectrum. Libertarian Robert Higgs points to a 1944 book, As We Go Marching by John T. Flynn, in which the author describes militarism as "the one great glamorous public-works project upon which a variety of elements in the community can be brought into agreement.” Flynn then warns, presciently, that, "Inevitably, having surrendered to militarism as an economic device, we will do what other countries have done: we will keep alive the fears of our people of the aggressive ambitions of other countries and we will ourselves embark upon imperialistic enterprises of our own."

Today's arms contractors are geniuses at spreading production facilities over a wide range of Congressional districts, and they are not hesitant to spend millions for lobbying and campaign contributions. As a result, they have deftly reinforced the loyalty that elected officials feel toward military spending projects in their home states. And they have locked the country into an economically tragic pattern of public spending. For while it is debatable whether the military crowds out more productive activity in the private sector, it is clear that it leaves far less room in government budgets for social programs.

The trade-off of "guns versus butter," now used as a textbook example in economics of an either-or choice that nations face, has been invoked by a wide range of lofty orators. Eisenhower famously remarked, "Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed." Martin Luther King, Jr. added, "We hear all this talk about our ability to afford guns and butter, but we have come to see that this is a myth… [W]hen the guns of war become a national obsession, social needs inevitably suffer."

A "Badly Under-Resourced" Military?

Melman may have had intellectual disputes with economists such as Kalecki, but his true adversaries were not theorists. They were defense hawks who not only agreed with the proposition that the military was propping up the economy, but who advocated for tax dollars to be devoted to this very purpose. Such figures continue to exist today. They include Martin Feldstein, the former chief economic advisor to President Reagan who argued in a 2008 Wall Street Journal op-ed that the Pentagon should be a primary recipient of government stimulus funds.

Also among their number is the American Enterprise Institute's Frederick Kagan, who insists, "Defense spending has long been recognized as one of the single strongest stimulants to any economy." Kagan's view of Pentagon budgeting is extreme enough to exhibit a certain through-the-looking-glass quality. Despite the historic expansion of military spending in the new millennium, Kagan considers today's military "badly under-resourced for nearly two decades by both Democratic and Republican administrations." Therefore, he sees few worthier recipients of public aid. When the military, he writes, "is so severely strained and billions of dollars in stimulus money are being sloshed around, refusing to give some of that money to the best and bravest Americans who need it badly—to say nothing of demanding that their budget be cut—is just wrong."

Although the stimulus debate of 2008 and 2009 brought out some Military Keynesian arguments, the stakes have since been raised. In the wake of the debt ceiling compromise negotiated between President Obama and Congressional Republicans in August, the guns-versus-butter dilemma has become starker than ever.

Eisenhower may have always been right on a metaphorical level about arms merchants stealing bread from the hungry. Yet the trade-off has not always been so direct. In past years, politicians have often chosen both to fill Pentagon coffers and to support a measure of social spending, even if it meant sustaining budget deficits.

Current demands for austerity have changed that. The debt compromise not only mandated an initial round of budget cuts, it also charged a congressional “super committee” with finding between $1.2 trillion and $1.5 trillion in further reductions to the 10-year federal budget. If lawmakers do not meet this requirement by the end of November, the deal will "trigger" an automatic $1.2 trillion in cuts, half of which would come from "defense and security." To avoid these automatic cuts, hawks will be pushing hard to instead put social programs on the chopping block.

Given the Military Industrial Complex's canny instincts for self-preservation and the loopholes included in the compromise agreement, there is some doubt about how severe cuts at the Pentagon would actually be, even in a most extreme case. Nevertheless, the threat of a budget squeeze has been real enough to prompt an aggressive counter-offensive by arms lobbyists.

In mid-September the Aerospace Industries Association (AIA) launched the "Second to None" campaign, designed to "educate the public on [the] impact of indiscriminate budget cuts." According to AIA President and CEO Marion Blakey, the debt agreement "dangles a Sword of Damocles over our national security." Furthermore, he says, "the cuts to defense proposed in the ‘trigger’ deal are so draconian that it’s hard to believe they are even on the table."

Wary of openly embracing pork-barrel politics, politicians and their beneficiaries in the arms industry have traditionally avoided being too overt about touting the economic benefits of a given defense initiative. Hawks have usually been careful to put national security at the fore, and to keep the Keynesian implications of their endeavors in the background. But now, with public concern about unemployment at the center of national debate, arms merchants have increasingly made job creation one of their key selling points.

Loren Thompson, chief operating officer at the industry-funded Lexington Institute, has been a vocal spokesperson in this drive. Writing for Forbes, Thompson warned that "Defense Cuts Could Destroy A Million Jobs." He painted President Obama's jobs bill as especially counterproductive, since "the cuts mandated by the Budget Control Act to reduce deficits could grow bigger if the president’s jobs bill passes." As a result, Thompson writes, "the government could end up destroying many thousands of good [defense] jobs to create lots of not-so-good jobs in areas like construction. What kind of a tradeoff is that?"

Elsewhere Thompson asked, "Does Washington really believe that building a new bridge in Kentucky creates jobs, but a defense plant or military base there does not?"

The Economic Value of a School

In fact, there are good reasons to hold that allocating funds to build a bridge—or to open a hospital, or to staff a school—is a superior path to creating jobs than spending the same amount of money on arms. These reasons are based in morality and public interest, as well as in economics.

First, the moral argument. In the 1960s student activists at MIT were calling for an end to military research on campus, which was consuming an increasing portion of the university's attention. However, as Stuart Leslie relates in his book The Cold War and American Science, not all of their peers were convinced. One graduate student, dismissive of protests, told The New York Times: "What I’m designing may one day be used to kill millions of people. I don’t care. That’s not my responsibility. I’m given an interesting technological problem and I get enjoyment out of solving it.”

Needless to say, building a bridge or hiring an educator has less dubious moral implications than supporting such military research. Bridges and schools also create long-term economic value, something most defense procurements cannot claim. An educated child becomes a more productive member of society. A bridge becomes part of the country's infrastructure, facilitating further commerce. On the other hand, when we build bombs, the best we can hope for is that they are never used.

Melman argued, "whatever else you can do with a nuclear-powered submarine that is almost as long as two football fields… you can’t wear it, you can’t live in it, you can’t travel in it, and there’s nothing you can produce with it.” Author and attorney Ellen Brown elaborates on this point, explaining the many quirks and inefficiencies that distinguish military spending from other economic activity:

Military spending is the very essence of "built-in obsolescence": it turns out products that are designed to blow up. The military is not subject to ordinary market principles, but works on a "cost-plus" basis, with producers reimbursed for whatever they have spent plus a guaranteed profit. Gone are the usual competitive restraints that keep capitalist corporations "lean and mean."… Yet, legislators looking to slash wasteful "entitlements" persist in overlooking this obvious elephant in the room.

Adding to these considerations is what Melman dubbed the "overkill" problem. To a certain extent, one could argue that building up a military arsenal served the economy by protecting private property, deterring foreign invasion, and allowing the nation to conduct its business in peace. But this notion became more and more dubious as the United States amassed ever-greater military might. By the time the U.S. armed forces were able to destroy every possible enemy nation many times over, the continued investment of billions of dollars per year in new military technology ceased to have nearly as much value.

Also worth noting is the fact that our "overkill" investments have a uniquely risky downside: With an army of soldiers and an unmatched arsenal of armaments sitting around, politicians are inevitably tempted to think they should be put to use. And that is an economically costly proposition indeed.

Doing Right On Jobs

What is true for the economy generally is also true in the realm of employment: When it comes to jobs, not only would it be a great day for our kids if the schools got all the money they needed and the Air Force had to a hold bake sale to buy a bomber—this would be a great day for American workers, too.

The most compelling recent study on this point was produced in October 2009 by Robert Pollin and Heidi Garrett-Peltier of the University of Massachusetts, Amherst. Using data from the Department of Commerce, the authors looked at four areas of investment: education, the military, renewable power, and fossil-fuel energy.

"By a significant margin," Pollin writes in a Boston Review article describing the report's conclusions, "education is the most effective source of job creation among these alternatives—roughly 29 jobs per $1 million in spending." This included both direct employment (of teachers and other personnel), jobs created indirectly by investment in this sector (those, say, of suppliers selling photocopiers or paper to the schools), and "induced" jobs (in businesses supported when teachers spend their salaries on other good and services). "Clean-energy investments are second, with about seventeen jobs per $1 million of spending. The U.S. military creates about twelve jobs, while spending within the fossil-fuel sector creates about five jobs per $1 million."

There are several reasons why military spending ends up near the back of the pack. The inefficiency of the "cost-plus" system is one. Pointing to another, analyst William Hartung of the Center for International Policy explains, "more of the military dollar goes to capital, as opposed to labor, than do the expenditures in the other job categories." He cites the example of the F-35 Joint Strike Fighter. With the cost of materials and other overhead high, a mere 1.5  percent of the money spent on each aircraft goes toward labor costs for manufacturing and assembling planes in the F-35's main plant in Fort Worth, Texas.

A third issue is "leakage." Military spending that takes place outside of the country—say, in Iraq, Afghanistan, Libya, or one of the many U.S. bases abroad—has less economic benefit for the United States, since some of the stimulus created instead benefits foreign economies. Green technology, as a counter-example, produces more significant ripple effects at home.

Nevertheless, Pentagon boosters such as Loren Thompson are not persuaded. They argue that military-related jobs tend to pay more, and therefore workers in this industry have a greater impact on the rest of the economy. Yet this is not true compared to education, Pollin notes, where average pay is higher than in defense. Nor is it, in itself, an adequate reason to support a given sector. No doubt, public efforts to spur employment must be attentive to producing jobs that pay living wages. But this cannot be the only measure of value for public spending.

Melman offered a wider vision for doing right on jobs. The years following World War II—when America converted much of its war-making industrial might into civilian manufacturing capability—loomed large in his proposals for a demilitarized society. Through the end of his life in 2004, he pictured military laboratories becoming public hospitals, bases becoming industrial parks and green spaces, and arms factories being retrofitted to make farm machinery or communications satellites. His was the noble prophecy of swords beaten into ploughshares, re-imagined for an America in its industrial prime.

Yet even if we undertake nothing so ambitious as what Melman dreamed, we can be smarter about what we choose to support with our public funds, and what we decide to cut from our government's budgets. "Arms, more arms, and ever more arms" is no path to a just society. And it is no worthwhile strategy for creating jobs.

Mark Engler is a senior analyst with Foreign Policy In Focus and author of How to Rule the World: The Coming Battle Over the Global Economy (Nation Books). He can be reached via the website http://www.DemocracyUprising.com. Research assistance provided by Eric Augenbraun.

How to deal with the police is a point of dispute between Social Democratic Anarchists and Communist Anarchists (photo: Thomas Good/NLN, Creative Commons)

'Social Democratic Anarchists',

'Communist Anarchists' and the

Occupy Wall Street Movement

By Left Eye on Books

SolidarityEconomy.net via lefteyeonbooks.com

Oct 23, 2011 - A division exists within the leaderless communities at the heart of the Occupy protests. I would describe this as a split between Social Democratic Anarchists and Communist Anarchists.

I use these two terms provocatively, knowing that most of those I refer to would not describe themselves as either. Neither the terms Social Democrat or Communist are especially popular in the U.S., and the latter is often associated with small left-wing sects that those I describe as Communist Anarchists have a low opinion of.

It also lately seems that the term “anarchist” is becoming unfashionable again. The terms are meant to indicate both continuity and rupture with the historical left. Since 1917, Social Democracy and Communism referred to two different paths of change. Social Democrats believed in reforming capitalism, so that its benefits would be shared more equitably. Communists believed in overthrowing capitalism. Both created disciplined, bureaucratic organizations to achieve their goals. Both believed attaining state power was crucial, either through elections — usually the path of Social Democrats — or armed struggle — more associated with Communists. Although they often vituperatively denounced each other, they could sometimes work together, as was the case in the 1930s in the U.S., when New Deal reformers, who closely resembled Social Democrats, were strengthened by the organizing efforts of Communists.

Today, we see similar splits, in the U.S. and all over the world, in the context of Occupy Wall Street (OWS) and related movements.  Some — undoubtedly the majority of participants in the U.S. — wish to reform capitalism. Others would like to destroy capitalism.

However, in two crucial respects the participants in the movement–reformers and revolutionaries alike — differ from the old left. They all eschew bureaucratic forms of organization in favor of leaderless modes of organizing. And they all believe that building power from below is more important than strategizing about how to attain and exercise state power. That is why I describe them as “anarchists”, even if they might not adopt that label themselves. Over the next five to ten years, some of these movements may develop electoral wings, but it is difficult to imagine them attaching to these wings the same lofty hopes and dreams that characterized the old left.

So how do these divisions play out in the current movement?

Social Democratic Anarchists are associated with the General Assemblies, including a strong belief that assembly decisions are binding, endorsing practices like “consensus decision-making” and “non-violence”, and shouting slogans such as “oppose corporate greed”,”we are the 99%” and “the police are part of the 99%”. In practice, they have adopted anarchist tactics, such as leaderless assemblies and direct action (i.e. occupying parks) to advance a reformist agenda including re-regulation of the banks and jobs programs. Even as there is uneasiness about signing on to a single list of demands, and no real clue as to how such a leaderless, decentralized movement might endorse such a list, it seems apparent that most demands would be drawn from the left-liberal playbook. I should note that without a large movement out in the street pressuring the administration from the left, it is unlikely if not inconceivable that such reforms will be implemented in the U.S. It is a paradoxical movement, attempting to create a fairly disciplined force without leaders, but largely pursuing state oriented policies. Right wing columnist Charles Krauthammer was not far off when he described OWS, which is dominated by Social Democratic Anarchists, as “big government anarchists”.

The Communist Anarchists are much less visible, and many are ambivalent about OWS.  Some catchphrases associated with them include “autonomous action”, “diversity of tactics”, “anti-capitalism”, and “the police are the tools of the ruling class.” “Autonomous action” and “diversity of tactics” refer to principles that undermine the authority of the General Assembly and its frequent invocation of non-violence and even unease with violating laws. Even though OWS has successfully defied the mayor of New York City and remains in the park,the General Assembly continues to use the “human microphone”, which makes discussion slow and painful. Occupied Oakland, where Communist Anarchists are stronger, just ignores the rules against amplified sound. Rather than advocating a set of reformist laws, Communist Anarchists try to dissolve the system and socialize the wealth from the bottom up, through such actions as squatting abandoned buildings and ignoring copyright laws.  Nevertheless, they are not exactly dogmatically anti-state, inasmuch as they fight to maintain institutions like libraries, and demand free services including higher education and mass transit.

Perhaps predictably, there is not much love lost between Social Democratic Anarchists and Communist Anarchists. The former have been known to tell journalists that they regard the Communist Anarchists as paid provocateurs.  The Social Democratic Anarchists have shouted down those advocating no cooperation with the police at general assemblies. The Communist Anarchists often heap contempt on the phrase “We are the 99%”, which they see as obscuring class and racial differences except for those between the 1% and the 99%, and implicitly prioritizing the needs of the falling middle class over the more genuinely precarious at the bottom. They sometimes intimate that the social democratic anarchists are becoming, if they are not already, tools of the reformist ruling class which seeks to dampen, rather than spur, rebellion.

Yet, and this is not so apparent to either side, they have in some ways productively strengthened each other. Although it is rarely stated, a major inspiration for Occupy Wall Street was the Occupy Berkeley movement of 2009, where Communist Anarchists played a prominent role.  It is hard to see how the occupy practice could have gone national without being toned down, as the Social Democrat Anarchists proceeded to do with Occupy Wall Street, promoted by the magazine Adbusters.  But notwithstanding the seemingly marginal role that Communist Anarchists play in OWS, they have in fact been crucial to the movement’s growth. The unruly marches that produced over-responses from the police, and, as a result, massive publicity and sympathy for the movement, were unruly largely because anarchist communists ignored prescriptions to stay within legal boundaries, i.e. remain on the sidewalk. The swelling numbers attracted to the OWS are largely drawn to the Social Democrat Anarchists, but they’ve also increased the numbers of Communist Anarchists.

And this screw will probably turn yet again in the near future. OWS is about to run into something of a brick wall. No reform measures are likely in the near future in the U.S. The next election cycle will more likely weaken the prospects for reforms (with Republican gains in congress and, possibly, a Republican president) than strengthen them. It is not clear, to say the least, that the Social Democrat Anarchists have any strategy in mind besides calling for more demonstrations. This will start to wear down their supporters.

But in other countries, where this dynamic has already advanced a little further, the Communist Anarchists do have a response. The strategy devolves action away from the cumbersome General Assembly to neighborhood assemblies which take direct action against foreclosures, or hospital closings, or perhaps support striking workers. These “autonomous actions” may prove attractive to those tired of ineffectual demonstrations. We may see something like this in some cities in the U.S.

At one end, efforts to include more and more people in movements can collapse into “everyone ultimately shares the same values” platitudes. At the other, radicalism can plow into the “fight the people”, misanthropic cul-de-sac. Between those, there is some room to simultaneously stake one’s position about the best strategies and tactics for the moment, while recognizing that those who come to different conclusions may be allies, rather than police provocateurs or Trojan horses for the ruling class.

Ultimately, the fate of each wing of the movement will be decided in good part by the ability of the American state to reform itself. To the degree that reforms can be incorporated which dampen inequality and restore some sense of fairness for a substantial majority, the more radical, Communist Anarchist wing will find itself marginalized and isolated. Contrarily, if it is unable to do so, reformist Social Democratic Anarchists will likely find themselves losing the hearts and minds of activists to the more radical tendency. Just to get to this point, however, the movement will need to grow in both numbers and militancy.

Together Let Us Build Working

Class Power in our Communities:

The 2011 Launch of the

SACP Red October Campaign

We are in that time of the year when the SACP launches its popular Red October Campaign. Our Red October Campaign is inspired and seeks to take forward the spirit and the victories of the Great October Socialist Revolution of 1917 in Russia - ushering in the first workers' government in the 20th century.

The Red October campaign has been an important platform in building and strengthening the SACP over the last 11 years. Through our Red October Campaign we have built an SACP that is closer to the workers and the poor of our country. Through this campaign we say to the workers and the poor of our country, take up struggles to change your lives for the better and be the masters of your own destinies. It is only the workers and the poor themselves, in struggle and in solidarity with all other progressive forces that will consolidate and deepen our national democratic revolution, and advance the struggle for socialism in our country.

Through these campaigns we have also exposed the failures of the capitalist system to address the needs of the overwhelming majority of our people, and particularly also the failures of the neo-liberal macro-economic policies pursued since 1996. Our Red October Campaign has also been an important organising tool to recruit more and more members to the SACP. The Red October Campaign has also been an important platform for the ideological development of SACP members, and generally to conscientise and mobilise the workers and the poor to be the makers of their own history.

Since its launch twelve years ago, the Red October Campaign has been an important campaigning platform led by the SACP, and has notched some important victories, including:

a. the roll out of banking services to the poor via Umzansi account

b. the transformation of the financial sector as a whole

c. The passage of the Co-operatives and Co-operative Banks legislation

d. the introduction of the National Credit Act to protect consumers against reckless lending

e. the convening of the Land Summit in 2005, direct as a result of the 2004 Red October Campaign - a summit that resolved that the ‘willing seller, willing buyer' model of land reform must be changed as it is an obstacle to access to land by our people

f. raised the plight of our public transport system and the fact that it needed much improvement and attention in 2006, including the convening of the national transport indaba

g. the introduction of the National Health Insurance (NHI) in which our campaigning in 2007 and 2009 on health matters contributed significantly towards this advance

h. Our campaign against corruption through our Red October Campaign of 2009, and the increase focus by government on these matters including the call for the reform of the government tender system by also making it more transparent

The major lessons from our Red October Campaign include the fact that we must not just satisfy ourselves by becoming professional critics, permanent protestors and lamentors in the face of the many challenges facing our country. But that is essential for the working class to take the lead on concretely what is to be done, through concrete actions and campaigns!

Since 1994, and especially since Polokwane, our country has made some important advances. Today we have an industrial policy, a framework for a new growth path, a proposed NHI, amongst others, and our task should be on how we build on these, to continue to provide leadership in order to change the lives of millions of our people.

Through our Red October Campaign we have deepened our work with the progressive trade union movement, formed important alliances with community organisations, youth and women's groups, faith groups and many progressive NGOs and research initiatives to advance the struggle of ordinary workers and the poor.

The 2011 Red October Campaign is a very special one as it is launched during our 90th anniversary year. It is therefore a Red October also to celebrate the heroic role played by our Party in the national liberation strugggle, and the role we continue to play in the reconstruction and development of our country. It is a celebration done in the best way we do as communists, to continue being in the trenches with the workers and poor of our country.

In 2011 the SACP calls upon all our people to join us in campaigning on the following on the following issues:

1. People's education for people's power - Education with an emphasis on making our schools functional, and also the wider challenges of skills and training, with a particular focus on the girl child and the youth.

2. Building a solidarity economy - Through this to, amongst others, building and strengthenings a people's cooperative banks movement as part of taking forward our campaign to make banks and other financial institutions to serve our people

3. Building local people`s committees for comprehensive rural development - With a particular emphasis on building a women`s rural movement for land, food and infrastructure for rural development

4. Intensifying the struggle against corruption - Through all these struggles we must these to intensify the struggle against corruption and tenderpreneurs

The 2011 Red October Campaign, seeks to build on the many advances we have made in the past, taking these to higher We must use our voting district (VD) based branches to convene community red forums in all our localities around our key areas of focus, engage communities, as well as intensify our work with and inside the trade union movement.

5. People's education for people's power

Education and skills are the most important tools to empower the workers, the poor, our youth and women, our communities, and to lay a basis for a better life for all in our country. Let us mobilise our youth to take up all the opportunities for schooling and skills development. Let us say to them it is cool to be educated, as part of defeating all the attempts to mislead young people to think that their salvation is in tenders, and often ill-gotten monies as a short cut to riches. Education can never be taken away from anybody, unlike a tender that can be given or taken away the next day.

To this end the SACP is calling upon all our structures, including the alliance structures and communities to embark on the following:

Identifying and fixing dysfunctional schools - The Department of Basic Education has provided us with a list of all poorly performing or dysfunctional schools throughout the country. Let us go out and engage school governing bodies, parents, communities, learners and government departments to identify and mobilise for our schools to work. Let us make sure that there is teaching and learning taking place in all our schools, that teachers and learners are on time, teaching and learning. Let us expose all those teacher, principals and government officials who are not doing their work, and let us ensure that there are no shebeens next to our schools. Let us engage SADTU and other teacher organisations to make sure our schools work!

The SACP also says let us not only focus on secondary schools, but let us also make sure that our primary schools are functional, as foundation learning is very important for the rest of our education system.

Let us convene community forums to discuss, and decide on appropriate actions where we live, to make our schools work. Most of the dysfunctional schools are those attendend by the children of especially the black working class and the poor.

Let us form co-operatives and other community initiatives to ensure that it is these co-operatives that are used by government for the school feeding scheme. The school nutrition scheme is now reaching more that 8 million learners, and let us take this away from individual businesses and give them to co-operatives as part of genuine empowerment of ordinary people.

Why package everything into a tender? Why should the local state and local popular capacities not be harnessed jointly so that government and communities work together to build their own housing, their own schools, maintain their own roads and infrastructure?

It is time that the SACP tackles the many challenges facing the girl-child, for the naming and shaming of teachers who sexually abuse girl-pupils, and to conscientise our communities about the need to fight teenage pregnancy and youth suicide. To this end we must support the YCL call to end the publication of matric results in newspapers, so that we reduce the many stresses already placed on our young people at such a vulnerable age.

Infrastructure, books and stationery - Let us mobilise our communities to ensure that monies allocated to building schools and do away with mud schools. The SACP calls for the building of schools infrastructure, maintenance and repairs be part of the expanded or community public works programmes, and take them out of tenders to individuals. Let us also train our communities and use FET colleges to fix and repair school furniture, as part of creating job opportunities for ordinary people. Let us mobilise to ensure that required resources (books, stationery and teachers) are supplied timeously.

Community skills development and strengthening FET colleges - Let us get closer to making sure that our FET colleges are functional and for accessing government resources for community skills development initiatives. Let us make sure that poor youth in particular take up learning opportunities in FET colleges, now that poor student are no longer required to pay fees in these colleges.

Fighting corruption in all of our education system - It is important that our communities stand up to expose and fight all forms of corruption in our education system. Let us defeat the sometimes unholy alliance between some school or college managers, governing bodies and government officials to squander monies meant for education. Let us campaign to end all forms of corruption in the schooling and education systems

2. Building a solidarity economy

A national summit of the financial sector - This pillar of our campaign must be linked to laying the foundations for the revitalisation of our financial sector campaign. The SACP is calling upon the convening of the second national financial sector summit, incuding both the private and public financial sector to assess progress made since the signing of the financial sector charter in 2003. We want to know if banks are investing in low-cost houses; why the exorbitant charges they are still charging?; are they investing in a manner that is creating jobs through investment ninto infrastructure?

Building a co-operative banks movement - Much as private banks must still be pressurised to lend money to the workers and the poor for developmental activities, away from funding narrow BEE, this will not be enough to build the necessary finances to support co-operatives, the informal sector and SMEs. Therefore in the wake of the Co-operative Banks Act, let us engage our burial societies, stokvels and the trade union movement on creating a viable co-operative banks movement, as entities that will support development initiatives in our communities. These must just not be on the periphery but we must work towards mainstreaming them as an important component of a new growth path. This initiaitve is very crucial in building an alternative solidarity economy that is not based on capitalist greed and selfishness.

Our people's monies in burial societies and stokvels can support a lot of secondary initiatives that are owned and controlled by members of these societies themselves (eg micro banking services, coffin making, etc). Let us convene red forums to engage all our people's initiatives in burial societies, stokvels, and co-operatives for these resources to be pulled together in a manner that supports people's own development initiatives.

It is estimated that more than 60,000 people belong to 121 co-op banking institutions (Savings and Credit Co-ops (SACCO), Financial Services Co-ops (FSC); co-op banks.), with total assets of more than R100-million, employing around 100 people to run and manage these co-ops. Notwithstanding the above, the sector faces challenges ranging from inability to grow in membership, assets and services, lack of skills and effective leadership and governance.

3. Building rural motive forces for Land Reform, Food Production and rural development

The struggle for liberation will be incomplete and suffer major setbacks if there is no deliberate programme to restore back to the formerly oppressed people land taken from under colonialism and apartheid. Government alone, without a mobilised people, will not be able to achieve our land and rural development goals. Despite some progress made on this front, land in our country is still in the hands of a minority.

Rural development is more than just land and agriculture, important as these are, but is about rural infrastructure including access roads, the building of bridges, rural education infrastructure, rural clinics and police stations, and many other facilities that are readily available in many urban areas. Let us campaign for infrastructure as the foundation for sustainable rural economic development

In tackling these the SACP, acting together with the people in rural areas will embark in the following activities:

Conclusion of land restitution claims - Let us engage government and our communities for speedy settlement of all land restitution claims. Let us also ensure that all re-claimed land is used productively through support from government and through the mobilisation of financial and other resources in the hands of the communities. Let our co-operative banks support viable, productive agricultural activities in reclaimed land. Let reclaimed land be used for food production and food security.

The SACP calls for the intensification of the struggle against instances of corruption in the land restitution process. Land meant for the people must not be sold back to former owners because our people do not have the means to use it productively. Land meant for the people must be used by the people themselves and not be shared amongst tenderpreneurs or people in leadership or government positions!

Building People's Committees for rural development - Let the SACP convene people's red forums in all of our rural areas in order to form people's committees for rural development. Where various types of committees already exist to fight for access to land and agricultural activities or rural development, let us strengthen them in order to build motive forces for rural development. Let us pay particular attention to the organisation of women in the rural areas, as they are the ones who stand to benefit most

Transform the white agricultural countryside, with and for workers and poor - Working with FAWU and other progressive trade unions in the ‘white' countryside, let us intensify organisation of farm workers and for farm dwellers to have access to decent accommodation, pension funds, trade union rights, and intensify the struggle against evictions, and for access to education to all children of farm-workers and farm-dwellers.

Let us not allow white agricultural bosses to divide and exploit workers by seeking to replace South African workers with foreign, and vulnerable workers. Let us not fight amongst ourselves as workers, irrespective of our country of national origin, but must unite to defeat the white bosses' divide and rule tactics! We must accelerate the campaign for access to decent accommodation and pension funds for farmworkers, and fight against farm evictions.

Let us expose the racist agenda of organisations like the DA and Afri-forum, who never once raise the issue of abuse and the super-exploitation of black farmworkers, but instead oppose all actions of government to try and change our country for the better!

Let us fight to access to farms to organise farm-workers and address the conditions of farm-dwellers, and for farms to be declared workplaces and public residential areas, so that they are accessible. Let us remove the prison-type walls in farms that are seeking to make workers and their communities some kind of ‘prison labour'.

(The Evictions Toll Free Number: 0800 007095

Defend the moral and revolutionary integrity of our movement

In order to achieve many of these objectives outlined in our Red October Campaign it is important that we also intensify the struggle to defend all our organisations in the Alliance and the broader progressive movements from the corrupting influence of money and wealth. This requires amongst other that we intensify the struggle in the following areas:

Exposing, naming and shaming those peddling dirty money - Our movement is faced with a serious threat of attempts to buy our cadres with money, to influence decisions in our organisations through money, and to seek to sell our organisation to highest imperialist bidder through dirty money. Let us name and shame those who are trying to buy us. This is money meant to influence you, but once you accept such money, you will never, ever be part of those dishing out money, but will only use that power to steal our organisations, and to steal our government! Let us name and shame money peddlers, tenderpreneurs and those seeking to steal our organisations for their own personal interests of greed!

‘De-tenderise' the state as much as possible - Worse still, our state is being daily ‘tenderised' - bureaucrats in the state (some of them highly qualified professionals) don't actually DO anything, don't build anything - instead they spend their time writing up tenders and adjudicating on applications. Increasingly the state relates to its popular base by way of these tenders. Instead of uniting popular forces behind a common struggle for transformation, the state divides communities into competing factions all vying for a tender.

This is a source of a great deal of corruption in the state, but also of factionalism within our own organizations which get used as stepping stones to influence the allocation of tenders.

Let us also fight against the latest phenomenon of ‘professional tenderpreneurs', who do nothing but use their political influence to influence tender awards and get cuts from those corrupt proceeds. Let us not allow the relationship between government and political leadership, on the one hand, and our communities, on the other, to be mediated by the tender!

The SACP calls upon all our alliance to cement its unity by focusing on the key challenges facing our country (poverty, unemployment, disease), and UNITE against corruption and tenderpreneurs!

Expose the corrupting influence and failure of the capitalist system - The whole world is in a crisis today, retrenching millions of especially young workers, because of the greed and selfishness of the capitalist system. Let the workers and the poor of our country unite behind ‘Socialism is the Future, Build it Now' to roll back the capitalist system and its corrupting influence.

Let all communists go out in their numbers to mobilise our communities behind our Red October Campaign! We call upon all our communities, the workers and the poor to join us in this 2011 Red October Campaign!

Issued by the SACP, October 2 2011

SolidarityEconomy.net via Cuba’s Socialist Renewal

Cooperatives and Socialism: A Cuban Perspective is a new Cuban book published in Spanish earlier this year. A compilation of essays, it is divided into four parts. Part One introduces cooperatives; Part Two examines the views of Marxist theoreticians including Karl Marx, V. I. Lenin and Che Guevara on the role of cooperatives in a socialist-oriented society; Part Three looks at the experiences of cooperatives in other countries from Spain to Venezuela; while Part Four analyses the Cuban experience of cooperatives as part of its socialist project.

This important and timely compilation is edited by Camila Piñeiro Harnecker. Avid readers of my blog will recall that I translated and posted a commentary by Camila, titled "Cuba Needs Changes", back in January.

Camila, who lives in Cuba, holds a degree in sustainable development from the University of Berkeley, California. She is a professor at the Centre for Studies on the Cuban Economy at Havana University, and her works have been published both in Cuba and outside the island. She is also, incidently, the daughter of Chilean-Cuban journalist and author Marta Harnecker and her late husband, Manuel "Red Beard" Piñeiro, who headed revolutionary Cuba's state security and intelligence service for many years.

Camila hopes her book may be published in English soon. In the meantime, she has kindly agreed to allow me to translate and publish this extract (about a third) from her preface to Cooperatives and Socialism with permission from a prospective publisher. I hope that sharing this extract with readers of my blog will make you want to read the whole book. If it does become available in English I'll post the details here.

At the end of the text you'll find the footnotes, translated from the Spanish.

Cooperatives and Socialism: A Cuban Perspective

Camila Piñeiro Harnecker, Editor

* * *

Preface (extract)

By Camila Piñeiro Harnecker

Translation: Marce Cameron

This book arises from the urgent need for us to make a modest contribution to the healthy “birth” of the new Cuban cooperativism and its subsequent spread. Given that cooperatives are foreshadowed as one of the organisational forms of labour in the non-state sector in the Draft Economic and Social Policy Guidelines of the Sixth Cuban Communist Party Congress, the Dr. Martin Luther King Memorial Centre approached me to compile this book. The Centre has made an outstanding contribution to popular education aimed at nurturing and strengthening the emancipatory ethical values, critical thinking, political skills and organisational abilities indispensable for the conscious and effective participation of social subjects. The Centre considers it timely and necessary to support efforts to raise awareness about a type of self-managed economic entity whose principles, basic characteristics and potentialities are unknown in Cuba. There is every indication that such self-managed entities could play a significant role in our new economic model.

For this to happen we must grapple with the question at the heart of this compilation: Is the production cooperative an appropriate form of the organisation of labour for a society committed to building socialism? There is no doubt that this question cannot be answered in a simplistic or absolute fashion. Our aim here is to take only a first step towards answering this question from a Cuban perspective in these times of change and rethinking, guided by the anxieties and hopes that many Cubans have about our future.

When it is proposed that the production cooperative be one – though not the only – form of enterprise in Cuba, three concerns above all are frequently encountered: some consider it too “utopian” and therefore inefficient; others, on the basis of the cooperatives that have existed in Cuba, suspect that they will not have sufficient autonomy[1] or that they will be “too much like state enterprises”; while others still, accustomed to the control over enterprise activities exercised by a state that intervenes directly and excessively in enterprise management, reject cooperativism as too autonomous and therefore a “seed of capitalism”. This book tries to take account of all these concerns, though there is no doubt that more space would be required to address them adequately.

The first concern is addressed to some extent with the data provided in the first part of the book regarding the existence and economic activity of cooperatives worldwide today. This shows that the cooperative is not an unachievable fantasy that disregards the objective and subjective requirements of viable economic activity. Thus, the experiences of cooperatives in the Basque Country, Uruguay, Brazil, Argentina and Venezuela that are summarised in the third part of the book demonstrate that cooperatives can be more efficient than capitalist enterprises, even on the basis of the hegemonic capitalist conception of efficiency that ignores externalities, i.e. the impact of any enterprise activity on third parties.

The efficiency of cooperatives is greater still if we take into consideration all of the positive outcomes inherent in their management model, which can be summarised as the full human development[2] of its members and, potentially, of local communities. The democratic abilities and attitudes that cooperative members develop through their participation in its management can be utilised in other social spaces and organisations. Moreover, genuine cooperatives free us from some of the worst of the negative externalities (dismissals, environmental contamination, loss of ethical values) generated by enterprises oriented towards profit maximisation rather than the satisfaction of the needs of their workers.

It’s not possible to take up here the arguments of enterprise administration theorists who hold that cooperatives are inefficient. These criticisms are based, in general, on the fact that democratic decision-making takes time, ignoring the fact that this participation is also the principal source of the advantages of cooperatives over other, non-democratic enterprises. In addition, they condemn cooperatives for not resorting to dismissals, as well as for a supposed tendency to undertake little investment due to the maximisation of member incomes and their aversion to risk. However, such behaviour is not revealed in the practices of the cooperatives analysed in this book, practices which also demonstrate the advantages of democratically managed enterprises in terms of the positive motivation of cooperative members. While the negative incentive of the fear of dismissal is undoubtedly effective in eliciting certain behaviours, not even this is sufficient. The tendency of capitalist enterprises to incorporate methods of democratic management suggests that they understand that participation in decision-making is needed in order to achieve the levels of worker motivation necessary for competitive success in the capitalist market.

We hope that those who, on the basis of the Cuban experience, doubt that it is possible for a cooperative to be truly autonomous and democratic will find this concern adequately addressed in the first part of the compilation. Here, when we explain what a cooperative is, we point to the basic differences between a cooperative and a socialist state enterprise. In a genuine cooperative, the participation of the cooperative members in management does not depend on the enterprise management council deciding to involve them more in decision-making; such participation is a founding principle, concretised in the rights of members established in the internal rules of functioning and exercised through bodies and decision-making procedures that are drawn up and approved by the cooperative members themselves. Although the degree of autonomy of the new Cuban cooperatives will depend, of course, on the content of the anticipated legislation on cooperatives and on the implementation of the regulations it establishes, the Draft Economic and Social Policy Guidelines seem to indicate that they will be granted the powers of self-management that characterise cooperatives everywhere, and without which democratic self-management is impossible. We hope the legislation resolves the deficiencies of the current legal framework for Cuban agricultural cooperatives, which are analysed in the fourth part of this book.

The third concern, that which gives rise to the inclination to reject the cooperative as an option for socialist enterprise organisation because it is considered too autonomous and therefore incompatible with broader social interests, takes up the most space in this book. Beginning with the first essay in the compilation we attempt to demonstrate that genuine cooperatives function according to a logic that is diametrically opposed to that of capitalist enterprises. Instead of profit maximisation for the shareholders, the driving force of cooperatives is the satisfaction of the human development needs of their members, needs which are inevitably bound up with those of local communities and of the nation, and even of humanity as a whole. Throughout the book it is suggested that while it’s true that cooperatives cannot be incorporated into the national economic plan or regional or local development strategies though mechanisms of coercion or imposition, it is possible to harmonise and coordinate the orientation of their activities towards the fulfilment of social needs identified through the planning processes, above all if the latter are democratic and respond to the interests of the surrounding communities or those to which cooperative members belong.

However, to argue for the relevance of cooperatives as part of a socialist project we need to begin by clarifying what we mean when we refer to these socioeconomic entities. In the first part of this book, Jesus Cruz[3] and I try to define the cooperative as simply as possible. Here, it is important to stress that in the international context, cooperatives carry out a great diversity of economic activities, and that a not insignificant part of the global population either belongs to one of these organisations or directly benefits from their activities. This should not be surprising if we consider that the form of the organisation of labour that characterises a cooperative, self-management, has existed since the emergence of humanity. The cooperative has persisted as the most common organisational form chosen by groups of people that seek to resolve common problems through their own efforts.

What differentiates a production cooperative (referred to hereafter as “cooperative” since we emphasise this type[4]) from other forms of enterprise organisation is emphasised, based on an analysis of the cooperative principles[5] that have contributed to the success of these organisations since the emergence of the first modern cooperatives. These early modern cooperatives understood the imperative of achieving an effective enterprise management that would allow them to survive within the more savage and monopolistic capitalism of the late 18th and early 19th centuries. To the degree to which cooperatives have observed these principles in their daily practice, they have benefited from the intrinsic advantages of this form of enterprise. These advantages ultimately derive from a democratic management model that permits the harmonisation of individual interests with those of the collective (i.e. of the common interests of cooperative members) and even, though in a less axiomatic way, with the social interests of the local communities with which they interact the most.

The observance of these principles is also what allows cooperatives to reduce the inevitable corrupting effects of the capitalist surroundings in which the majority of them have developed. The capitalist environment privileges individual over collective solutions; makes it difficult to achieve equality by generating and reproducing differences in abilities and social status among cooperative members; denies them the time needed for democratic decision-making; punishes genuine acts of solidarity; and promotes the super-exploitation of human beings and nature. While this undoubtedly limits the horizon of human emancipation – the overcoming of the barriers that stand in the way of us fulfilling our human potentialities – an emancipatory dynamic has always been latent in genuine cooperatives. The capitalist environment is not an absolute barrier to cooperatives becoming spaces in which these principles are put into practice, and in which the values that such practices instill may develop. The experiences of successful cooperatives presented in this book demonstrate the economic and ethical-political potential of these organisational principals, above all when cooperatives that embody these principles are able to link up with other self-managed entities, and when they promote the approval of laws and regulations that undermine the prejudices that exist regarding cooperatives in the legal framework and in the practices of capitalist enterprises and state institutions.

As Julio Gambina and Gabriela Roffinelli argue, the cooperative should be seen as one of the many forms of the self-managed social organisation[6] that will allow us to transcend the capitalist logic of maximising narrow individual interests. Because it takes no account of human nature and its social and ecological constraints, such economic “rationality” is in fact irrational and suicidal. For as long as it pervades our daily practice, the logic of capitalism will not only distance us ever more from the socialist or communist ideal of complete social justice; it is also taking us to the brink of an irreversible rupture in the dynamic equilibrium of the biosphere.

The rationality that drives a cooperative, as with all forms of genuine self-management, is the necessity for a group of people to satisfy common needs and interests. It is based on the recognition that they share collective interests that correspond to some degree with their own individual interests, and that it is collective action that allows them to pursue these interests most effectively. This, together with the recognition that all its members are human beings with the equal right to participate in decision-making, results in democratic management in which the cooperative members decide not only who the leaders are and how revenues should be allocated, but also how to organise the process of production: what is produced, how and for whom.

The managerial autonomy of the collective that makes up the cooperative – the ability of this group of people to make decisions independently – is the key reason why the historical experiences of socialist construction have rejected their relevance to the building of socialism and have relegated them to agriculture or marginal economic spaces. Some see in autonomy a disconnection from, or a wanting to have nothing to do with, social interests and the strategic objectives embodied in the socialist economic plan, and ask the following questions: Is it possible to “hitch” an autonomous enterprise to a planned economy? Can a cooperative respond not only to the interests of its members but also to wider social interests? When one thinks in terms of absolute autonomy and authoritarian (i.e. undemocratic) planning, if the interests of collectives (groups) are considered a priori to be indifferent to social interests, then the answer is obviously negative. The authors of this book are motivated by the certainty that the answer is affirmative. We argue the case here, though we are unable to respond to all of the questions about how this can be achieved in practice.

Here, we must point out that we make no claim to have solved this practical problem which dates back to the times in which socialist theories were first elaborated. It is perhaps more of a conceptual problem than a practical one, since there are examples of collective and even private enterprises that satisfy social needs more effectively, and that have established decentralised horizontal relations that are more socially responsible, than some socialist state enterprises. Our focus here is on the form of organisation of labour within a productive unit and not in the economic system as a whole. The analysis of how a socialist-oriented society should guide the management of enterprises, or of the form in which the fruits of cooperative labour should be distributed in society, are thus topics that we do not attempt to grapple with in this initial approach to the problem. However, we do put forward some ideas in relation to these themes throughout the book.

The “fruits” of cooperative labour that interest us most here are the human beings themselves that are “produced” as a consequence of the particular form in which the productive process is organised in the enterprise: the social subjects that work together as members of a cooperative and who are motivated to give the best of themselves to the success of their enterprise and, potentially, to local communities.

What differentiates a cooperative member from an employee of either a capitalist or socialist state enterprise? In light of the experiences of cooperatives analysed in this compilation, the member of a genuine producer cooperative, or other form of self-managed entity, is the true owner of their enterprise and thus feels like it. He or she, together with the collective they belong to, participate in a conscious and active way in strategic and managerial decision-making, as well as in their implementation and in verifying that decisions are carried out. What characterises a cooperative is not legal ownership of the means of production (premises, land, machinery) by the collective or group of people that comprise it, but the fact that decisions regarding the use of means of production are made by the cooperative as a whole, either directly or by representatives that they elect, in such a way and with such powers as decided by the collective. Albeit limited to the cooperative enterprise and its activity, this is a concrete form of self-management, of the exercise of popular sovereignty.

Given this, for Gambina and Roffinelli the relevance of various forms of worker self-management, in particular cooperatives, to the building of socialism depends on the degree to which they serve as an “an apprenticeship in administration outside the control of capital”. Thus the value of the cooperative lies in the nature of its daily practice, in the social relations of production that are established among its members: relations between associated producers rather than between wage-workers and capitalists. Cooperative members are not obliged to renounce, in exchange for wages or salaries, their capacity to think, be creative and make decisions. They exercise these capacities via democratic mechanisms in conditions of equal rights and duties. There are no bosses and subordinates in a cooperative but an organisational structure and a technical division of labour that have been collectively drawn up and approved.

Thus cooperatives can be valuable weapons in the struggle to build socialism. They are not the only such weapons, they are insufficient by themselves and are not devoid of risks and challenges, but they are nevertheless tools – perfectible and adaptable – for socialist construction. They are tools that we should not allow to be abandoned due to either state-centric dogma or the misconception that only what is privately owned and managed, and operates according to capitalist logic, works. As Gambina and Roffinelli argue, “... there is a dialectical relationship between socialism and cooperativism that is either promoted or discouraged in specific socio-historical conditions.” The extent to which cooperatives contribute to the building of socialism depends on the context in which they arise and develop, and on the relationship they establish with this context.

Footnotes

[1] By “autonomy” we mean the ability to make decisions independently. As we shall see, no social organisation anywhere in the world is completely autonomous since its options are always conditioned in one way or another by its social context.

[2] The term full or integral “human development” is used to make clear our rejection of the progressivist and economistic mythology that reduces development to achieving an abundance of material goods, without taking into account that development also has intrinsic ethical and spiritual dimensions, in which people can achieve professional fulfilment and the realisation of their potentialities as social beings.

[3] A brief biography of each of the contributors to this compilation is included at the end of the book.

[4] Cooperatives can be classified as either production cooperatives, in which cooperative members unite in order to collectively produce goods or provide services; or consumer cooperatives, in which the members acquire goods or services collectively.

[5] Essentially, as is clarified in the first contribution to this compilation, a cooperative must be: (1) open to members joining and leaving and flexible with regard to its internal organisation; (2) run democratically; (3) based on the labour of its members; (4) managerially autonomous; (5) prioritise the education and training of its members and the general public; (6) establish mechanisms for cooperation with other cooperatives; and (7) committed to the community.

[6] Other forms of enterprise self-management are the various forms of co-management (in which the work collective participates in the management of the enterprise together with the legal owners of the means of production, or owns shares in the company); professional partnerships (professional associations in which members provide services on an individual basis, but pool a part of their incomes to acquire services and goods collectively; they are usually limited liability companies); associations, etc. There are also forms of self-management outside the economic enterprise sphere, such as self-management in regions, communities and local governments.

Get a copy of Carl Davidson’s new book on the topic:

 New Paths to Socialism

Contents:

• The Mondragon Cooperatives and 21st Century Socialism
• Mondragon Diaries: Five Days Studying Cutting-Edge People and Tools for Change
• 'One Worker, One Vote:' US Steelworkers to Experiment With Factory Ownership, Mondragon Style
• Green Party Mayor of Richmond, California Signs 'Letter in Intent' with Spain's Mondragon Coops
• There Is An Alternative: Market Socialism with Radical Democracy
• Green Jobs Meets the Solidarity Economy: A Dynamic Duo for Changing the World
• Green Jobs and Class Struggle: A Memo for the Working Class Studies Association
• Alinsky vs. Arizmendi: Redistribution or Control of Wealth In Changing the World
• Eleven Talking Points On 21st Century Socialism
• Jossa: Gramsci, Economic Theory of Worker Cooperatives and the  Transition to a Socialist Economy
• Jossa: Excerpts from ‘Marx, Marxism and the Cooperative Movement’
• Schweickart: Is Sustainable Capitalism Possible? The Case of China
• $15 from Changemaker Publications. http://stores.lulu.com/changemaker

Photo: Bo Xilai

By Peter Martin and David Cohen
SolidarityEconomy.net via The Diplomat

April 25, 2011 - Bo Xilai has a reputation as a rising political rock star. But do his ‘Red Culture’ policies in Chongqing really offer a viable model for China?

As China’s 2012 power transition approaches, politicians and academics are racing to find the theme that will define the country’s direction for the next eight years. The inclinations of Xi Jinping, heir apparent to the presidency, are still unclear, but his recent visit to Chongqing suggests that he’s taking a particular interest in the ‘Red Culture’ policies of municipal Party Secretary Bo Xilai.

Bo is the highest-ranking Party member of the Chongqing Municipal area, an administrative zone four times the size of the US state size of New Jersey. It embraces acity of 10 million, as well as a vast rural hinterland that contains more than 1,200 towns and villages. Over the past few years, Bo has made himself the centre of media attention with eye-catching initiatives such as a ‘red song’ campaign and a ban on advertisements on local TV.

But the significance of Chongqing runs much deeper than socialist gimmicks—Bo has tried to rewrite the social contract of Chongqing with an attack on economic inequality, an expansion of the state role in the economy, and political moves taken straight from Mao Zedong’s playbook.

People often say that politics in China have stood still while the economy has raced ahead. But the placid surface of single-party rule conceals vigorous debate within the Communist Party over China’s future….

…Policy experimentation at the local level provides fodder for arguments that will determine the shape of Chinese socialism during the next administration and beyond. The approach of the 2012 handover has spurred risings stars like Bo, a Politburo member and likely candidate for promotion to the top-rung Politburo Standing Committee, to jockey for top leaders’ attention with striking new policies.

This conversation doesn’t always move in liberal directions. China’s ‘New Left’ has seized upon Bo’s ideas to argue for a radical shift away from the market-oriented policies of the Reform and Opening period, citing Chongqing as proof that China can combine growth with economic equality in a vision of socialism that looks to a more statist past.

New Left proponentsargue that Chongqing’s experience is the beginning of a path for China that will break radically with capitalist reforms begun by former President Deng Xiaoping.Theyhope to restore the state as the centre of China’s economic system with a focus on poverty reduction and to revive Maoist political techniques. In doing so, they claim to have a blueprint for a new era in China’s history.

Socialism 3.0

In a political system where slogans matter, coining a new buzzword is a delicate business, and Bo has been careful to tie himself to the history of the Communist Party. ‘Some people say that “Red Culture” is a move to the left,’ Bo said at a 2009 municipal party meeting. ‘In fact, it’s just about serving the people. That’s why the Communist Party was founded.’

Yet leading members of China’s New Left are beginning to look beyond the theme that has defined Chinese politics for the last 30 years.

Wang Shaoguang, a mainland-born professor of political science at the Chinese University of Hong Kong, has labelled this new period ‘Socialism 3.0’ in an unpublished article focussing on Chongqing, casting it as the successor Mao’s radical egalitarianism and Deng’s reform and opening.

Controversial Peking University political scientist Pan Wei, for his part, describes Chongqing as proof that China is moving into a ‘post-reform and opening era,’ returning to the traditional socialist focus on equality. Arguing that the growth-centred policies of recent decades have created an unacceptable gap between rich and poor, he says the time has come for a radical rethinking of Chinese politics—but he isn’t sure the time has come to say so publicly.

But while Bo’s Chongqing has become a capital for China’s New Left, it’s not the only model competing for the attention of China’s top leaders. Liberals and globally oriented modernizers have also drawn inspiration from local governments, especially reformist policies pursued by the governments of Shenzhen and Guangdong Province.

The city of Shenzhen, which has experimented with Western-style political reforms in a move toward the separation of powers, was the site of Premier Wen Jiabao’s controversial speech last August in which he forcefully argued for political change, while Wang Yang, the provincial leader of Guangdong and Bo’s rival for a seat on the Politburo Standing Committee, has focussed on the catchy theme of ‘Happy Guangdong,‘ calling for measuring growth with a ‘Happiness Index.’

The Post-Reform Economy

So what exactly do New Left thinkers believe the next wave of Chinese socialism is going to look like?

For a start, they say, it’s going to be a lot less like capitalism. They call for a major re-entry of the state into the economy, and point to Chongqing as proof that a large public sector can co-exist with a dynamic market. Over the past few years, as Chongqing has become a popular destination for factories relocating from the more developed coastal provinces, where wages and costs are rising, its GDP has grown by about 14 percent a year—much faster than the national average–providing fodder for left-wing academics to cast it as a model for growth.

The political scientists of the New Left are using Chongqing, which has encouraged the expansion of state-owned enterprises, to respond to the economic argument shared by many market-oriented Chinese economists that state investment ‘crowds out’ private enterprise (guo jin min tui).

However, Cui Zhiyuan, a Qinghua University professor who has spent much of the last year conducting field research in Chongqing, argues that in Chongqing ‘It’s not the state crowding out private enterprise…In fact, the state and the market develop together (guo jin min ye jin).’

Wang agrees, citing the growth of private activity in the city, which has outpaced state investment.  In fact he dismisses the idea of crowding out, writing ‘This kind of idea not only has absolutely no theoretical foundation,but it’s been also been proved absurd by the practical experience of Chongqing…As the state’s absolute role in the Chongqing economy has increased, its proportion of the economy has decreased.’

In the Chongqing model, though, everything links back to the issues of poverty and inequality, and the government of Chongqing has turned the market profits of state-owned enterprises toward traditional socialist projects, using their revenue to fund the construction of affordable housing and transportation infrastructure. It’s perhaps not surprising then that Bo’s biggest policy hit is the affordable housing initiative for the city’s poorest. The massive construction programme aims to provide cheap apartments to a third of the municipality’s 30 million residents, a programme that has received national attention and clearly impressed the central government, which is rolling out a similar plan at a national level as part of the 12th Five-Year Plan.

Bo has tried to cast his programme as a step past the single-minded focus on GDP that has defined Chinese policy since Deng. ‘It’s not about how many tall buildings you have, it’s how happy people are,’ he argued in a 2009 speech to Chongqing Party members.

Such comments have echoes of the Happy Guangdong talk, but the statist raft of policies is a sharp contrast with rival proposals. The export-focussed province’s recent reforms have lookedoutwards, fitting closely with current debates among Western policymakers on improving urban quality of life.

But Bo’s remarks also allow him to set himself apart from the wealth-driven culture of major coastal cities like Shanghai and Guangzhou, flagship cities of the reform and opening era that have accepted significant inequality as the cost of economic growth.

Politics for the Masses

Although the Western media has tended to focus on Wen’s challenge to his colleagues to pursue political reform, proponents of the Chongqing model believe they have an answer that owes nothing to democratic models. Instead, they are drawing on the political thought of Mao.

The wealth of the reform and opening period, they argue, has led cadres to lose touch with the people, and Bo has taken on Party elitism by drawing on the Maoist concept of the ‘mass line’ (Mao’s theory says cadres should live among the people and that they should share the viewpoint of the masses).

With this in mind, Bo has commanded local party members to ‘reconnect’ with poor residents of their districts, including issuing regulations with specific instructions requiring village party secretaries to meet with residents at least once a week for at least half day. At these meetings, party workers are obliged to explain the work of the government, and listen patiently and attentively to their opinions. County leaders, meanwhile, must also visit rural areas at least once a month in order to open up channels for people’s petitions.

But such moral ‘revival’ isn’t only for cadres and bureaucrats. Bo’s Chongqing has also focussed on the ‘spiritual health’ of the people, promoting red culture as an answer to problems ranging from corruption to gambling to social alienation. Chongqing has sought to bring everyone into this campaign with high-profile moves such as hosting a red song competition and sending text messages featuring Mao’s thoughts to each of the city’s 17 million cell phone users.

Indeed, socialist culture has gone hand-in-hand with promotion of Chinese tradition, despite Mao’s animosity toward ‘feudal customs.’ Residents have been encouraged to read Chinese classics and attend traditional storytelling events—but sharply discouraged from the traditional Sichuan pastime of gambling on mah-jong.

The Chongqing model has been hailed by New Left thinkers as a bona-fide example of home-grown political reform—proof that China can improve its government without copying foreign models. Yet Bo, the son of revolutionary elder Bo Yibo, is an unlikely Maoist. He spent much of the Cultural Revolution in prison when his father fell out of favour, and is noted for his own lavish lifestyle, sending his son Bo Guagua to England’s exclusive Harrow school and Oxford University.

With this in mind, Joseph Cheng Yu-Shek, a Chinese leadership specialist based at Hong Kong City University, argues that Bo fears being labelled the privileged son of a major Party leader. ‘Bo is a very typical princeling, and he now adopts rather popular and rather Maoist policies,’ he says.

Red the New Black?

Clearly, it’s impossible to know for sure how the top levels of the Chinese leadership view Bo’s campaign. But he’s clearly got their attention—Xi visited the city in December, praising Bo’s work in a speech as ‘virtuous policy,’ and saying that the red culture initiatives had ‘gone deeply into the hearts of the people.’

Bo has succeeded in igniting a passionate debate about the future of socialism in China. On the question of whether it has won him a seat on the Politburo Standing Committee, though, we’ll have to wait until next October for an answer.

Peter Martin works for a political consulting firm in Beijing. David Cohen is a freelance journalist. They blog at www.sinocentric.net and their writing has appeared in the Christian Science Monitor, the Guardian Online, the Global Times, the China Daily and the Lowy Interpreter among other publications.

OF THE COMMUNIST PARTY OF CUBA

By Raul Castro Ruz

SolidarityEconomy.net

Comrades all,

The opening of the 6th Congress of the Communist Party of Cuba this afternoon marks a date of extraordinary significance in our history, the 50th anniversary of the proclamation of the socialist nature of our Revolution by its Commander in Chief, Fidel Castro Ruz, on April 16, 1961, as we paid our last respects to those killed the day before during the bombings of the air bases. This action, which was the prelude to the Playa Girón (Bay of Pigs) mercenary invasion organized and funded by the United States government, was part of its plans to destroy the Revolution and restore its domination over Cuba in league with the Organization of American States (OAS).

On that occasion, Fidel said to the people already armed and inflamed with passion: "This is what they cannot forgive us…that we have made a Socialist Revolution right under the nose of the United States…" "Comrades, workers and farmers, this is the Socialist and democratic Revolution of the people, by the people and for the people. And for this Revolution of the people, by the people and for the people, we are willing to give our lives."

The response to this appeal would not take long; in the fight against the aggressor a few hours later, the combatants of the Ejército Rebelde, police agents and militiamen shed their blood, for the first time, in defense of socialism and attained victory in less than 72 hours under the personal leadership of comrade Fidel.

The Military Parade that we watched this morning, dedicated to the young generations, and particularly the vigorous popular march that followed, are eloquent proof of the fortitude of the Revolution to follow the example of the heroic fighters of Playa Girón.

Next May 1st, on the occasion of the International Workers Day, we will do likewise throughout the country to show the unity of Cubans in defense of their independence and national sovereignty, which as proven by history, can only be conquered through Socialism.

This Congress, the supreme body of the Party, as set forth in article 20 of its Statutes, brings together today one thousand delegates representing nearly 800 thousand party members affiliated to over 61 thousand party cells. But, this Congress really started on November 9 last year, with the release of the Draft Guidelines of the Economic and Social Policy of the Party and the Revolution, a subject that, as previously indicated, will be at the center of the debates of this meeting that is regarded with great expectations by our people.

As of that moment, numerous seminars were organized to clarify and to delve into the content of the Guidelines in order to adequately train the cadres and officials who would lead the discussions of the material by the party members, mass organizations and the people in general.

The discussions extended for three months, from December 1, 2010 to February 28 of this year, with the participation of 8, 913,838 people in more than 163 thousand meetings held by the different organizations in which over three million people offered their contributions. I want to make clear that, although it has not been accurately determined yet, the total figure of participants includes tens of thousands of members of the Party and the Young Communist League who attended the meetings in their respective cells but also those convened in their work or study centers in addition to those of their communities. This is also the case of non-party members who took part in the meetings organized at their work centers and later at their communities.

Even the National Assembly of People's Power dedicated nearly two work sessions in its latest Ordinary Meeting held this past December to analyze with the deputies the Draft Guidelines.

This process has exposed the capacity of the Party to conduct a serious and transparent dialogue with the people on any issue, regardless of how sensitive it might be, especially as we try to create a national consensus on the features that should characterize the country's Social and Economic Model.

At the same time, the data collected from the results of the discussions become a formidable working tool for the government and Party leadership at all levels, like a popular referendum given the depth, scope and pace of the changes we must introduce.

In a truly extensive democratic exercise, the people freely stated their views, clarified their doubts, proposed amendments, expressed their dissatisfactions and discrepancies, and suggested that we work toward the solution of other problems not included in the document.

Once again the unity and confidence of most Cubans in the Party and the Revolution were put to the test; a unity that far from denying the difference of opinions is strengthened and consolidated by them. Every opinion, without exception, was incorporated to the analysis, which helped to enhance the Draft submitted to the consideration of the delegates to this Congress.

It would be fair to say that, in substance, the Congress was already held in that excellent debate with the people. Now, it is left to us as delegates to engage in the final discussion of the Draft and the election of the higher organs of party leadership.

The Economic Policy Commission of the 6th Party Congress first entrusted with the elaboration of the Draft Guidelines and then with the organization of the discussions has focused on the following five issues:

Reformulation of the guidelines bearing in mind the opinions gathered.

Organization, orientation and control of their implementation.

The thorough training of the cadres and other participants for the implementation of some of the measures already enforced.

Systematic oversight of the agencies and institutions in charge of enforcing the decisions stemming from the guidelines and evaluation of their results.

Leading the process of information to the people.

In compliance with the aforesaid, the Draft Guidelines were reformulated and then submitted to analysis by both the Political Bureau and the Executive Committee of the Council of Ministers, on March 19 and 20, respectively, with the participation of the Secretariat of the Party's Central Committee and the top leaders of the Central Trade Union (CTC), the Young Communist League (UJC) and the other mass organizations, approved at that level –also as a draft—and then delivered to you for its examination during three days in every provincial delegation to the Congress and for its discussion at the five commissions of this party meeting for its subsequent approval.

Next, I will offer some data to illustrate our people on the results of the discussions of the Draft Guidelines, even though detailed information will be published later.

The original document contained 291 guidelines; 16 of them were moved to others; 94 preserved their phrasing; 181 had their content modified; and, 36 new guidelines were incorporated for a grand total of 311 guidelines in the current draft.

A simple arithmetic operation with these numbers avows the quality of the consultation process as a result of which approximately two thirds of the guidelines –68% to be exact—was reformulated.

The principle that guided this process was that the validity of a proposal would not depend on the number of opinions expressed about it. This is shown by the fact that several guidelines were either modified or removed based on the opinion of only one person or a small number of them.

It is also worth explaining that some opinions were not included at this stage either because the issue deserved a more exhaustive analysis for which the necessary conditions did not exist or because they openly contradicted the essence of socialism, as for example 45 proposals advocating the concentration of property.

I mean that, although the prevailing tendency was a general understanding of and support for the content of the Guidelines, there was no unanimity; and that is precisely what was needed for we really wanted this to be a democratic and serious consultation with the people.

For this reason, I can assure you that the Guidelines are an expression of our people's will, contained in the policy of the Party, the Government and the State, to update the Economic and Social Model in order to secure the continuity and irreversibility of Socialism as well as the economic development of the country and the improvement of the living standard of our people combined with the indispensible formation of ethical and political values.

As expected, most of the proposals made during the discussion of the Draft Guidelines were focused on Chapter VI, "Social Policy" and Chapter II "Macroeconomic Policies"; both accounted for 50.9% of the total, followed, in descending order, by Chapter XI, "Construction, Housing and Water Resources Policy"; Chapter X, "Transportation Policy"; and, Chapter I, "Economic Management Model." In fact, 75% of the opinions expressed focused on these five chapters out of a total of twelve.

On the other hand, 67% of the proposals referred to 33 guidelines, that is, 11% of the total. In fact, the highest number of proposals pertained to guidelines number 162, dealing with the removal of the ration book; 61 and 62, on the pricing policy; 262, on passengers' transportation; 133, on education; 54, related to the establishment of a single currency; and, 143, on the quality of healthcare services.

Undoubtedly, the ration book and its removal spurred most of the contributions of the participants in the debates, and it is only natural. Two generations of Cubans have spent their lives under this rationing system that, despite its harmful egalitarian quality, has for four decades ensured every citizen access to basic food at highly subsidized derisory prices.

This distribution mechanism introduced in times of shortages during the 1960s, in the interest of providing equal protection to our people from those involved in speculation and hoarding with a lucrative spirit, has become in the course of the years an intolerable burden to the economy and discouraged work, in addition to eliciting various types of transgressions.

Since the ration book is designed to provide equal coverage to 11 million Cubans, there are more than a few examples of absurdities such as allocating a quota of coffee to the newborn. The same happened with cigarettes until September 2010 as they were supplied to smokers and non-smokers alike thus fostering the expansion of that unsafe habit in the population.

Regarding this sensitive issue, the span of opinions is very broad, from those who suggest dismissing it right away to others who categorically oppose its removal and propose to ration everything, the industrial goods included. Others are of the view that in order to successfully prevent hoarding and ensure everybody's access to basic foods, it would be necessary, in a first stage, to keep the products rationed even if no longer subsidized. Quite a few have recommended depriving of the ration book those who neither study nor work or advised that the people with higher incomes relinquish that system voluntarily.

Certainly, the use of the ration book to distribute the basic foods, which was justified under concrete historic circumstances, has remained with us for too long even when it contradicts the substance of the distribution principle that should characterize Socialism, that is, "From each in accordance with his ability and to each in accordance with his labor," and this situation should be resolved.

In this connection, it seems appropriate to recall what comrade Fidel indicated in his Central Report to the First Party Congress on December 17, 1975: "There is no doubt that in the organization of our economy we have erred on the side of idealism and sometimes even ignored the reality of the objective economic laws we should comply with."

The problem we are facing has nothing to do with concepts, but rather with how to do it, when to do it, and at what pace. The removal of the ration book is not an end in itself, and it should not be perceived as an isolated decision but rather as one of the first indispensible measures aimed at the eradication of the deep distortions affecting the operation of the economy and society as a whole.

No member of the leadership of this country in their right mind would think of removing that system by decree, all at once, before creating the proper conditions to do so, which means undertaking other transformations of the Economic Model with a view to increasing labor efficiency and productivity in order to guarantee stable levels of production and supplies of basic goods and services accessible to all citizens but no longer subsidized.

Of course, this issue is closely related to pricing and to the establishment of a single currency, as well as to wages and to the "reversed pyramid" phenomenon which as spelled out at the Parliament last December 18, is expressed in the mismatch between salaries and the ranking or importance of the work performed. These problems came up often in the contributions made by the citizens.

In Cuba, under socialism, there will never be space for "shock therapies" that go against the neediest, who have traditionally been the staunchest supporters of the Revolution; as opposed to the packages of measures frequently applied on orders of the International Monetary Fund and other international economic organizations to the detriment of the Third World peoples and, lately enforced in the highly developed nations where students' and workers' demonstrations are violently suppressed.

The Revolution will not leave any Cuban helpless. The social welfare system is being reorganized to ensure a rational and deferential support to those who really need it. Instead of massively subsidizing products as we do now, we shall gradually provide for those people lacking other support.

This principle is absolutely valid for the restructuring of the work force, –an ongoing process– streamlining the bloated payrolls in the public sector on the basis of a strict assessment of the workers' demonstrated capacity. This process will continue slowly but uninterruptedly, its pace determined by our capacity to create the necessary conditions for its full implementation.

Other elements will have an impact on this process, including the expansion and easing of labor in the non-public sector. This modality of employment that over 200 thousand Cubans have adopted from October last year until today –twice as many as before– make up an alternative endorsed by the current legislation, therefore, it should enlist the support, assistance and protection of the officials at all levels while demanding strict adherence to the ensuing obligations, including tax payment.

The growth of the non-public sector of the economy, far from an alleged privatization of the social property as some theoreticians would have us believe, is to become an active element facilitating the construction of socialism in Cuba since it will allow the State to focus on rising the efficiency of the basic means of production, which are the property of the entire people, while relieving itself from those management of activities that are not strategic for the country.

This, on the other hand, will make it easier for the State to continue ensuring healthcare and education services free of charge and on equal footing to all of the people and their adequate protection through the Social Welfare System; the promotion of physical education and sports; the defense of the national identity; and, the preservation of the cultural heritage, and the artistic, scientific and historic wealth of the nation.

Then, the Socialist State will have more possibilities to make a reality of the idea expressed by Martí that can be found heading our Constitution: "I want the first Law of our Republic to be the Cubans' cult of the full dignity of man."

It is the responsibility of the State to defend national independence and sovereignty, values in which the Cubans take pride, and to continue securing the public order and safety that make Cuba one of the safest and most peaceful nations of the world, without drug-trafficking or organized crime; without beggars or child labor; without the mounted police charging against workers, students and other segments of the population; without extrajudicial executions, clandestine jails or tortures, despite the groundless smear campaigns constantly orchestrated against us overlooking the fact that such realities are, foremost, basic human rights that most people on Earth can't even aspire to.

Now, in order to guarantee all of these conquests of Socialism, without renouncing their quality and scope, the social programs should be characterized by greater rationality so that better and sustainable results can be obtained in the future with lower spending and keeping the balance with the general economic situation of the country.

As you can see in the Guidelines, these ideas do not contradict the significance we attach to the separate roles to be played in the economy by the state institutions, on the one hand, and the enterprises, on the other, an issue that for decades has been fraught with confusion and improvisations and that we are forced to resolve on a mid-term basis in the context of the strengthening and improvement of institutionalization.

A full understanding of these concepts will permit a solid advance while avoiding backward steps in the gradual decentralization of powers from the Central to the local governments, and from the ministries and other national agencies in favor of the increasing autonomy of the socialist State-funded companies.

The excessively centralized model characterizing our economy at the moment shall move in an orderly fashion, with discipline and the participation of all workers, toward a decentralized system where planning will prevail, as a socialist feature of management, albeit without ignoring the current market trends. This will contribute to the flexibility and constant updating of the plan.

The lesson taught by practical experience is that an excessive centralization inhibits the development of initiatives in the society and in the entire production line, where the cadres got used to having everything decided "at the top" and thus ceased feeling responsible for the outcome of the entities they headed.

Our entrepreneurs, with some exceptions, settled themselves comfortably safe and quiet "to wait" and developed an allergy to the risks involved in making decisions, that is, in being right or wrong. This mentality characterized by inertia should definitely be removed to be able to cut the knots that grip the development of the productive forces. This is a pursuit of strategic significance, thus it is no accident that it has been reflected one way or another in the 24 guidelines contained in Chapter I, "Economic Management Model."

As far as this issue is concerned, we cannot indulge in improvisations or act hastily. In order to decentralize and change that mentality, it is indispensible to elaborate a framework of regulations clearly defining the powers of and functions at every level, from the national to the local, invariably accompanied by the corresponding accounting, financial and management oversight.

Progress is already being made in that direction. The studies began almost two years ago for improving the operation as well as the structure and makeup of the government at the different levels. These resulted in the enforcement of the Council of Ministers Regulation, the reorganization of the work system with the State and Government cadres, the introduction of a planning procedure for the most important activities, the establishment of the organizational bases to provide the Government with an accurate and timely information system supported by its own info-communications infrastructure, and the creation of the provinces of Artemisa and Mayabeque, on experimental basis and under a new structural and functional concept.

To begin decentralizing powers, it will be necessary for the cadres of the State and the companies to redeem the obvious role of contracts in the economy, as expressed in guideline number 10. This will also help bring back order and discipline to making and obtaining payments, a subject in which a good part of our economy has been getting poor grades.

As a no less important byproduct, the appropriate use of contracts as regulatory instruments of relations among the various economic actors will become an effective antidote against the extended habit of "reunionism," that is, calling an excessive number of meetings and other collective functions, often presided by senior officials and uselessly attended by many others, only to enforce what the parties involved recognized as rights and obligations in the contract signed, and whose fulfillment they have failed to demand from those required to do so.

In this respect, it is worth emphasizing that 19 opinions, registered in 9 provinces, claimed for a reduction in the number of meetings and their duration to the minimum indispensible. This issue I intend to take up again when dealing with the functioning of the Party.

We are convinced that the mission ahead of us in connection with this and other issues related to the updating of the Economic Model is full of complexities and interrelations that, one way or another, touch on every aspect of the society as a whole. Therefore, we are aware that it is not something that can be solved overnight, not even in one year, and that it will take at least five years to implement it comprehensively and harmoniously. And, when this is achieved, it will be necessary to never stop and to continue working for its improvement in order to successfully face the new challenges brought up by development.

Metaphorically speaking, it might be said that every now and then, as the scenario changes, the country should make its own well-tailored suit.

We are not under the illusion that the Guidelines and the measures conducive to the implementation of the Economic Model will by themselves provide a universal remedy to all our evils.  It will be required to simultaneously build a greater political awareness and common sense, and to be more intransigent with the lack of discipline and the violations committed by all, but primarily by the leading cadres.

This became all too evident a few months back in the flaws observed during the implementation of some specific measures –neither complex nor of great magnitude– due to bureaucratic obstacles and the lack of preparation of the local governments for the expansion of self-employment.

It is worthwhile reiterating that our cadres must get used to working with the guiding documents issued by the institutions empowered to do so and abandon the irresponsible habit of putting them on ice. Life teaches that it is not enough to issue a good regulation, whether a law or simply a resolution. It is necessary to also train those in charge of its implementation, to monitor them and to check their practical knowledge of the issue. Let's not forget that the worst law is that which is not enforced or respected.

The system of Party schools at the provincial and national level, along with the unavoidable reorientation of their syllabus, will play a protagonist role in the preparation and continuous recycling in these subjects of Party and government cadres as well as the company executives with the aid of the educational institutions specialized in this area of knowledge and the valuable input of the members of the National Association of Economists and Accountants, as it was the case with the discussion of the Guidelines.

At the same time, and with the purpose of effectively arranging in order of importance the introduction of the required changes, the Political Bureau agreed to bring to the Congress the proposal of establishing of a Standing Government Commission for Implementation and Development, subordinated to the President of the Council of State and Ministers which, without affecting in any way the powers invested in the corresponding Central Government Organs, will be responsible for monitoring, checking and coordinating the actions of everyone involved in this activity, and for proposing the insertion of new guidelines, something that will be indispensible in the future.

In this token, we feel it is advisable to remember the orientation included by comrade Fidel in his Central Report to the First Party Congress, nearly 36 years ago, about the Economy Management System that we intended to introduce back then and failed due to our lack of systematization, control and discipline. He said "…that the Party leaders but foremost the State leaders turn its implementation into a personal undertaking and a matter of honor as they grow more aware of its crucial importance and the need to make every effort to apply it consistently, always under the leadership of the National Commission created to that end…," and he concluded: "…to widely disseminate information on the system, its principles and mechanisms through a kind of literature within reach of the masses so that the workers can master the issue. The success of the system will largely depend on the workers knowledge of the issue."

I will not tire of repeating that in this Revolution everything has been said. The best example of this we have in Fidel's ideas that Granma, the Official Party organ, has been running in the past few years.

Whatever we approve in this Congress cannot suffer the same fate as the previous agreements, most of them forgotten and unfulfilled. Whatever it is that we agree upon in this or future meetings must guide the behavior and action of Party members and leaders alike and its materialization must be ensured through the corresponding legal instruments produced by the National Assembly of People's Power, the State Council or the Government, in accordance with their legislative powers and the Constitution.

It's only fair to say very clearly, in order to avoid misinterpretations, that the agreements reached by congresses and other leading Party organs do not become law in themselves. They are orientations of a political and moral nature, and it is incumbent on the Government, which is the body in charge of management, to regulate their implementation.

This is why the Standing Commission for Implementation and Development will include a Judicial Subgroup made up by highly qualified specialists who will coordinate with the corresponding organs –with full respect for institutionalization— the legal amendments required to accompany the updating of the Economic and Social Model, simplifying and harmonizing the content of hundreds of ministerial resolutions, legislative decrees and legislations, and subsequently proposing, in due course, the introduction of the relevant adjustments to the Constitution of the Republic.

Without waiting to have everything worked out, progress has been made in the legal regulations associated with the purchase and sale of housing and cars, the modification of Legislative Decree No. 259 expanding the limits of fallow land to be awarded in usufruct to those agricultural producers with outstanding results and the granting of credits to self-employed workers and to the population at large.

Likewise, we consider it advisable to propose to this Congress that the first point of the agenda of every plenary meeting of the next Central Committee, to be held no less than twice a year, is a report on the status of the implementation of the agreements adopted in this Congress on the updating of the Economic Model, and that the second point is an analysis on the fulfillment of the economic plan, be it from the first semester or from the running year.

We also recommend the National Assembly of People's Power to proceed in the same way during its ordinary sessions with the purpose of strengthening its protagonist role as the supreme organ of the State power.

Starting from the deep conviction that nothing that we do is perfect and that even if it seems so today it will not be tomorrow under new circumstances, the higher organs of the Party and the State and Government Powers should keep a systematic and close oversight on this process and be ready to timely introduce any adjustments called for to correct negative effects.

Comrades,

It's a question of being alert, with our feet and ears to the ground, and when a practical problem arise, whatever the area or the place, the cadres at the different levels must act swiftly and deliberately avoiding the old approach of leaving its solution to time, since we have learned from experience that the problems grow more complicated as time goes by.

In the same token, we should cultivate and preserve a fluid relationship with the masses, devoid of formality, that would allow for an efficient feed-back of their concerns and dissatisfactions so that the masses can indicate the pace of the changes to be introduced.

The attention paid to a recent misunderstanding on the reorganization of some basic services shows that when the Party and the Government, each in its own role, with different methods and styles, act promptly and harmoniously on the concerns of the people providing clear and simple explanations, the people support the measure and their confidence in their leaders grows.

The Cuban media in its various formats should play a decisive role in the pursuit of this goal with clarifications and objective, continuous and critical reports on the progress of the updating of the Economic Model so that with profound and shrewd articles and reports written in terms accessible to all they can help building in our country a culture about these topics.

In this area of work it is also necessary to definitely banish the habit of describing the national reality in pretentious high-flown language or with excessive formality. Instead, written materials and television and radio programs should be produced that catch the attention of the audience with their content and style while encouraging public debate. But this demands from our journalists to increase their knowledge and become better professionals even if most of the time, despite the agreements adopted by the Party on the information policy, they cannot access the information timely nor contact the cadres and experts involved with the issues in question. The combination of these elements explains the rather common dissemination of boring, improvised or superficial reports.

Our media has an important contribution to make to the promotion of the national culture and the revival of the civic values of our society.

Another crucial issue very closely related to the updating of the Economic and Social Model of the country and that should help in its materialization is the celebration of a National Party Conference. This will reach conclusions on the modification of the Party working methods and style with a view to ensure, for today and for the future, the consistent application of article 5 of the Constitution of the Republic setting forth that the Party is the organized vanguard of the Cuban nation and the top leading force of the society and the State.

Initially, we had planned to call that Conference for December 2011; however, given the complications inherent to the last month of the year and the advisability of having a prudent reserve of time to adjust details, we are planning to hold that meeting at the end of January 2012.

Last December 18, I explained to the Parliament that due to the inefficiency of the Government Organs in the discharge of their functions, the Party had spent years involved in undertakings that were not its responsibility, and compromised and limited its role.

We are convinced that the only thing that can make the Revolution and Socialism fail in Cuba, risking the future of our nation, is our inability to overcome the mistakes we have been making for more than five decades and the new ones we could make.

The first thing we should do to correct a mistake is to consciously admit it in its full dimension but the fact is that, although from the early years of the Revolution Fidel made a clear distinction between the roles of the Party and the State, we were inconsistent in the follow-up of his instructions and simply improvised under the pressure of emergencies.

There can be no better example than what the leader of the Revolution said as early as March 26, 1962, by radio and television, explaining to the people the methods and functioning of the Organizaciones Revolucionarias Integradas (ORI), which preceded the Party. He said: "…the Party leads, it leads through the entire Party and it leads through the public administration. An official must have authority. A minister must have authority; a manager must have authority and discuss as much as necessary with the Advising Technical Council (today, the Board of Directors), discuss with the working masses, discuss with the Party cell, but it is the manager who makes the decision, because it is his responsibility…" This orientation dates back 49 years.

There are very well defined concepts that, in substance, remain completely valid regardless of the time that has passed since Lenin formulated them, almost 100 years ago, and they should be taken up again, bearing in mind the characteristics and experiences of our country.

In 1973, during the preparations of the First Party Congress, it was defined that the Party must lead and supervise with its own ways and means, which are different from the ways, means and resources available to the State for exercising its authority. The Party's guidelines, resolutions and provisions are not legally binding for all citizens; it is the Party members who should abide by them as their conscience dictates since there is no apparatus to force or coerce them into complying. This is a major difference about the role and methods of the Party and the State.

The fortitude of the Party basically lies in its moral authority, its influence on the masses and the trust of the people. The action of the Party is based, above all, on the honesty of its motives and the justice of its political line.

The fortitude of the State lies in its material authority, which consists of the strength of the institutions responsible for demanding from everyone to comply with the legal regulations it enacts.

The damage caused by the confusion of these two concepts is manifested, firstly, in the deterioration of the Party's political work and, secondly, in the decline of the authority of the State and the Government as the officials cease feeling responsible for their decisions.

Comrades,

The idea is to forever relieve the Party of activities completely alien to its nature as a political organization; in short, to get rid of managing activities and to have each one do what they are meant to do.

These misconceptions are closely linked to the flaws of the Party's policy with the cadres, which will also be analyzed by the abovementioned National Conference. More than a few bitter lessons are the legacy of the mistakes made in this area due to the lack of rigorous criteria and vision which opened the way to the hasty promotion of inexperienced and immature cadres, pretending otherwise through simulation and opportunism, attitudes fostered by the wrong idea that an unspoken premise to occupy a leading position was to be a member of the Party or the Young Communist League.

We must decidedly abandon such practice and leave it only for responsibilities in the political organizations. Membership in a political organization should not be a precondition for holding a leading position with the State or the Government. What the cadres need are adequate training and the willingness to recognize as their own the Party policy and program.

The true leaders do simply not crop up in schools or from favoritism; they are forged at the grassroots level, working in the profession they studied in contact with the workers and rising gradually to leadership by setting an example in terms of sacrifices and results.

In this regard, I think that the Party leadership, at all levels, should be self-critical and adopt the necessary measures to prevent the reemergence of such tendencies. This is also applicable to the lack of systematic work and political will to secure the promotion of women, black people and people of mixed race, and youths to decision-making positions on the basis of their merits and personal qualifications.

It's really embarrassing that we have not solved this problem in more than half a century. This shall weight heavily on our consciences for many years because we have simply been inconsistent with the countless orientations given by Fidel from the early days of the revolutionary victory and throughout the years, and also because the solution to this disproportion was contained in the agreements adopted by the transcendental First Party Congress and the four congresses that followed. Still, we have failed to ensure its realization.

The solution of such issues that define the future will never again be left to spontaneity but rather to foresight and to the unwavering political intention of preserving and perfecting socialism in Cuba.

Although we kept on trying to promote young people to senior positions, life proved that we did not always make the best choice. Today, we are faced with the consequences of not having a reserve of well-trained replacements with sufficient experience and maturity to undertake the new and complex leadership responsibilities in the Party, the State and the Government, a problem we should solve gradually, in the course of five years, avoiding hasty actions and improvisations but starting as soon as the Congress is over.

This will advance further with the strengthening of the democratic spirit and collective work of the leading Party, State and Government organs as we guarantee the systematic rejuvenation of all of the Party and management positions, from the grassroots to the comrades with the highest responsibilities, including the current President of the Council of State and Ministers and the First Secretary of the Central Committee elected in this Congress.

In this regard, we have reached the conclusion that it is advisable to recommend limiting the time of service in high political and State positions to a maximum of two five-year terms. This is possible and necessary under the present circumstances, quite different from those prevailing in the first decades of the Revolution that was not yet consolidated when it had already become the target of continuous threats and aggressions.

The systematic strengthening of our institutions will be both a premise and an indispensible guarantee to prevent this cadre renovation policy from ever jeopardizing the continuation of Socialism in Cuba.

The first step we are taking in this direction is the substantial reduction of the list of leading positions that required approval from the municipal, provincial and national levels of the Party while empowering senior leaders in the ministries and companies to appoint, replace and apply disciplinary measures to a large part of their subordinated cadres with the assistance of the corresponding Cadres Commissions, where the Party is represented and has a voice but which are presided by the manager who makes the final decision. The view of the Party organization is appreciated but the single determining element is the manager, and we should preserve and enhance their authority in harmony with the Party.

As to the internal functioning of the Party, which will also be examined at the National Conference, we think it is worthwhile reflecting on the self-defeating effects of old habits completely alien to the Party's vanguard role in our society. These include the superficiality and excessive formality characterizing the political-ideological work; the use of obsolete methods and terminology that ignore the instruction level of the Party members; holding excessively long meetings and often during working hours –which should be sacred, especially for the communists– sometimes with inflexible agendas dictated by the higher level in disregard of the context where the Party members develop their activities; the frequent calls to formal commemorations where still more formal speeches are made; and, the organization of voluntary works on holydays without a real content or adequate coordination that cause spending and have an upsetting and discouraging effect on our comrades.

These criteria also apply to emulation, a movement that lost through the years its capacity to mobilize the workers' collectives and became an alternative mechanism for distribution of moral and material incentives not always justified with concrete results, and in more than a few occasions gave rise to fraudulent information.

Additionally, the Conference will analyze the Party's relations with the Young Communist League and the mass organizations to break with routine and schematic approaches and to allow each of them to recover their raison d'être under the present conditions.

To sum up, comrades, the National Conference will focus on enhancing the role of the Party as the main advocate of the interests of the Cuban people.

The realization of this objective definitely requires a change of mentality, avoiding formality and fanfare both in ideas and in action; that is, to do away with the resistance to change based on empty dogma and slogans and reach for the core of things as the children of La Colmenita Theater Company brilliantly show in the playwright "Abracadabra."

It's the only way in which the Communist Party of Cuba can become, for all times, the worthy heir to the authority and unlimited confidence of the people in their Revolution and their only Commander in Chief, comrade Fidel Castro Ruz, whose moral contribution and undisputable leadership do not depend on any position and that as a soldier of ideas has not ceased to fight and help with his enlightening Reflections and other actions the revolutionary cause and the defense of Humanity from menacing dangers.

With respect to the international situation, we shall use a few minutes to assess the predicament of the world at this point in time.

There is no end in sight to the global economic crisis affecting every nation because it is a systemic crisis. The powerful have directed their remedies to protecting the institutions and procedures that originated it and to depositing the terrible burden of its consequences on the workers of their own countries, and particularly of the underdeveloped countries. Meanwhile, the climbing prices of foods and oil are pushing hundreds of millions of people into destitute poverty.

The effects of climate change are already devastating and the lack of political will of the industrial nations prevents the adoption of urgent and indispensible action to avoid the catastrophe.

We live in a convulsive world where natural disasters follow one another like the earthquakes in Haiti, Chile and Japan while the United States wages wars of conquest in Iraq and Afghanistan that have taken the lives of more than one million civilians.

Popular movements in Arab nations are uprising against corrupted and oppressive governments allied with the United States and the European Union. The unfortunate conflict in Libya, a nation subjected to a brutal military intervention by NATO, has given that organization a new pretext to go beyond its originally defensive limits and expand worldwide the threats and war actions undertaken to safeguard its geostrategic interests and access to petroleum. Likewise, imperialism and the domestic reactionary forces connive to destabilize other countries while Israel oppresses and massacres the Palestinian people with complete impunity.

The United States and NATO include in their doctrines the aggressive interventionism against the Third World countries aimed at plundering their resources. They also impose to the United Nations a double standard and use the media consortia in an increasingly coordinated way to conceal or distort the events, as it befits the world power centers, in a hypocritical mockery intended to deceive the public opinion.

Despite its complex economic situation, our country maintains its cooperation with 101 Third World nations. In Haiti, after 12 years of intensive work saving lives, the Cuban healthcare personnel have been working with admirable generosity, since January 2010, alongside collaborators from other countries facing the situation created by the earthquake and the cholera epidemic that ensued.

To the Bolivarian Revolution, and to comrade Hugo Chávez Frías, we express our resolute solidarity and commitment, conscious of the significance of the process undertaken by the fraternal Venezuelan people for Our America, in the Bicentennial of its Independence.

We also share the hopes of the transformation movements in various Latin American countries, headed by prestigious leaders who represent the interests of the oppressed majorities.

We shall continue helping the integrationist processes of the Bolivarian Alliance for the Peoples of Our America (ALBA), the South Union (UNASUR) and the Community of Latin American and Caribbean States (CLACS) currently involved in arrangements for the celebration of its foundational summit on July this year, in Caracas. The establishment of this entity was the most extraordinary institutional event in our hemisphere during the past century, since for the first time all of the countries south of the Rio Bravo were meeting on our own.

We are encouraged by this increasingly united and independent Latin America and the Caribbean, whose solidarity we appreciate.

We shall continue advocating International Law and supporting the principle of sovereign equality among the States as well as the right of the peoples to self-determination. We reject the use of force and aggression, the wars of conquest, the plundering of the natural resources and the exploitation of man.

We condemn every form of terrorism, particularly State terrorism. We shall defend peace and development for all peoples and fight for the future of humanity.

The US Administration has not changed its traditional policy aimed at discrediting and ousting the Revolution. On the contrary, it has continued to fund projects designed to directly promote subversion, foster destabilization and interfere in our domestic affairs. The current administration has taken some positive but extremely limited actions.

The US economic, commercial and financial blockade against Cuba remains in force and intensifies under the current administration, particularly with respect to financial transactions. It ignores the almost unanimous condemnation of the blockade by the international community that for 19 consecutive years has advocated its removal.

Although apparently, as evidenced in the recent visit to the Palacio de La Moneda in Santiago de Chile, the United States leaders do not like to remember history when dealing with the present and the future, it is worthwhile indicating that the Cuba blockade is not something of the past. Therefore, it is our obligation to recall the content of a secret memorandum, declassified in 1991, where Deputy Undersecretary of State for Inter American Affairs Lester D. Mallory wrote on April 6, 1960: "Most Cubans support Castro…There is no effective political opposition (…) The only possible way to make the government lose domestic support is by provoking disappointment and discouragement through economic dissatisfaction and hardships (…) Every possible means should be immediately used to weaken the economic life (…) denying Cuba funds and supplies to reduce nominal and real salaries with the objective of provoking hunger, desperation and the overthrow of the government."

Mark the date of the memorandum: April 6, 1960, almost an exact year to the day of the Playa Girón invasion.

This memorandum was not an initiative of that official. It was part of the policy aimed at overthrowing the Revolution, like the "Covert Action Program against the Castro Regime," approved by President Eisenhower on March 17, 1960, using all the available means, from the creation of a unified opposition, psychological warfare and covert intelligence operations to the training in third countries of paramilitary forces with the capacity to invade the Island.

The United States fostered terrorism in the cities, and that same year, before the Playa Girón attack, promoted the establishment of counterrevolutionary armed-gangs, supplied by air and sea, that robbed and murdered peasants, workers and young teachers, until they were finally annihilated in 1965.

In Cuba, we will never forget the 3,478 dead and 2,099 incapacitated by the policy of State terrorism.

Half a century of hardships and suffering have gone by in which our people have put up a resistance and defended their Revolution, unwilling to surrender or to besmirch the memory of the fallen in the past 150 years, from the onset of our struggles for independence.

The US government has not ceased to give sanctuary and to protect notorious terrorists while extending the suffering and unfair incarceration of the heroic Cuban Five antiterrorist fighters.

Its Cuba policy lacks credibility and moral basis. In order to justify it, baseless pretexts are used, which grow obsolete and then change depending on Washington's interests.

The US government should not have doubts that the Cuban Revolution will be stronger after this Congress. If they want to cling on to their policy of hostility, blockade and subversion we are prepared to continue to face it.

We reiterate our willingness to engage in a dialogue and to take on the challenge of having normal relations with the United States as well as to coexist in a civilized manner, our differences notwithstanding, on the basis of mutual respect and non-interference in the internal affairs.

At the same time, we will permanently give a priority to defense, following Fidel's instructions as expressed in his Central Report to the First Congress, when he said: "While imperialism exists, the Party, the State and the people will pay utmost attention to defense. The revolutionary guard will never be careless. History teaches with too much eloquence that those who forget this principle do not survive the mistake."

In the present scenario and predictable future, the strategic conception of "the Popular War" remains absolutely valid, thus it is constantly enriched and improved. Its commanding and leadership system has been reinforced and its capacity to react to various exceptional situations has increased.

The defensive capacity of the country has reached a higher dimension, both quantitatively and qualitatively. Using our own available resources, we have improved the technical condition and maintenance as well as the preservation of the armament and carried on the production effort and especially the modernization of the military technology taking into account its prohibitive world market prices. In this area, it is fair to recognize the contribution of scores of military and civilian institutions, proof of the enormous scientific, technological and productive potential created by the Revolution.

The degree of preparation of the national territory as the theater of military operations has been significantly boosted; the fundamental armament is protected, the same as a substantial part of the troops, the commanding organs and the people.

A communication infrastructure has been established to ensure the steady functioning of the commanding posts at all levels. All of the material reserves have been raised with better distribution and protection.

The Revolutionary Armed Forces, or put another way, the people in uniform shall continue to constantly improve and preserve the authority and prestige earned with their discipline and order in the defense of the people and of Socialism.

We shall now deal with another no less significant issue of our times.

The Party must be convinced that beyond material needs and cultural interests our people hold a diversity of concepts and ideas about their own spiritual necessities.

Our National Hero José Martí, a man who synthesized that convergence of spirituality and revolutionary sentiments, wrote many pages about this subject.

Fidel addressed this topic quite early, in 1954, when still in jail he evoked Renato Guitart, one of the martyrs of the Moncada: "Physical life is ephemeral; it inexorably passes; the same as many and many generations of men have passed, as our own lives will shortly pass. This truth should teach every human being that the immortal values of the spirit stand above them. What is the meaning of life without the spirit? What is life then? How can death take those that understand this and still generously sacrifice their lives to good and justice!"

These values have always been present in his ideas, and so he insisted on them in 1971, at a meeting with catholic priests in Santiago de Chile: "I tell you that there are ten thousand times more coincidences of Christianity with Communism than there might be with Capitalism."

And, he returned to this idea as he addressed the members of the Christian churches in Jamaica in 1977. He said: "We must work together so that when the political idea succeeds the religious idea is not separate and does not appear as the enemy of changes. There are no contradictions between the purposes of religion and the purposes of socialism."

The unity of the revolutionary doctrine and ideas with regards to faith and its followers is rooted in the basis of the nation, which in asserting its secular nature promoted as an unwavering principle the unity of the spirituality with the Homeland bequeathed by Father Felix Varela and the teachings of Luz y Caballero, who categorically said: "I would chose to see the fall of not only the institutions created by man –kings and emperors—but even the stars from the firmament rather than see falling from the human breast the sentiment of justice; that sun of the moral world."

In 1991, the 4th Party Congress agreed to modify the interpretation of the statutes that limited the admission to our organization of revolutionaries with religious beliefs.

The justice of this decision has been confirmed by the role of leaders and representatives of various religious institutions in the different facets of the national life, including the struggle for the return to our Homeland of the child Elián, in which the Cuba Council of Churches played a particularly outstanding role.

However, it is necessary to continue eradicating any prejudice that prevents bringing all Cubans together, like brothers and sisters, in virtue and in the defense of our Revolution, be them believers or not, members of Christian churches; including the Catholic Church, the Russian and Greek Orthodox Churches, the evangelicals and protestant churches; the same as the Cuban religions originated in Africa, the Spiritualist, Jewish, Islamic and Buddhist communities, and fraternal associations, among others. The Revolution has had gestures of appreciation and concord with each of them.

The unforgettable Cintio Vitier, that great poet and writer, who was a deputy to our National Assembly, used the force of his pen and of his Christian and deeply revolutionary ethic, so profoundly rooted in Martí's, to leave us warnings for the present and the future that we should always remember.

Cintio wrote: "What is in danger, we know it, is the nation itself. The nation is by now inseparable from the Revolution that has been a part of it since October 10, 1868, and it has no other alternative: it is either independent or it is no more.

"If the Revolution were defeated, we would fall in the historic vacuum that the enemy wants for us and prepares for us, and that even the most basic people perceive as an abyss.

"It is possible to arrive at defeat, we know, through the intervention of the blockade, of internal decay, and the temptations imposed by the new hegemonic situation in the world."

After stating that "We are at the most challenging time of our history," he admonished: "Forced to fight the irrationality of the world to which it fatally belongs; always threatened by the sequels of dark age-old blights; implacably harassed by the most powerful nation on Earth; and also a victim of imported or indigenous blunders that history shows have never gone unpunished, our small island constricts and dilates, systole and diastole, as a glimmering of hope to itself and to others."

Now, we should address the recently concluded process of releasing counterrevolutionary prisoners, those that in challenging and distressing times for our Homeland have conspired against it at the service of a foreign power.

By sovereign decision of our Government, they were released before fully serving their sentences. We could have done it directly and take credit for a decision that we made conscious of the fortitude of the Revolution. However, we did it in the framework of a dialogue based on mutual respect, loyalty and transparency with the senior leadership of the Catholic Church, which contributed with its humanitarian labors to the completion of this action in harmony; in any case, the laurels correspond to that religious institution.

The representatives of the Catholic Church expressed their viewpoints, not always coincidental with ours, but certainly constructive. This is at least our perception after lengthy talks with Cardinal Jaime Ortega and the Chairman of the Episcopalian Conference Monsignor Dionisio García.

With this action, we have favored the consolidation of the most precious legacy of our history and the revolutionary process: the unity of our nation.

In the same token, we should mention the contribution of the former minister of Foreign Affairs and Cooperation of Spain, Miguel Angel Moratinos, who facilitated the humanitarian efforts of the Church so that those who wished to travel abroad or accepted the idea could do so with their families. Others decided to remain in Cuba.

We have patiently endured the implacable smear campaigns on human rights, coordinated from the United States and some countries of the European Union that demand from us no less than unconditional surrender and the immediate dismantling of our socialist regime while encouraging, orienting and assisting the domestic mercenaries to break the law.

In this regard, it is necessary to make clear that we will never deny our people the right to defend their Revolution. The defense of the independence, of the conquests of Socialism and of our streets and plazas will still be the first duty of every Cuban patriot.

Days and years of intensive work and great responsibilities lie before us to preserve and develop, on solid and sustainable basis, the independent and socialist future of our Homeland.

So far, the Central Report to the 6th Party Congress

Thank you, very much.

 

Worker-owner in Mondragon coop factory

The Mondragon Cooperatives and 21^st Century Socialism:

A Review of Five Books with Radical Critiques and New Ideas

From Mondragon to America:

Experiments in Community Economic Development

By Greg MacLeod

UCCB Press, 1997

The Myth of Mondragon:

Cooperatives, Politics and Working-Class Life in a Basque Town

By Sharryn Kasmir

State University of New York Press, 1996

Values at Work:

Employee Participation Meets Market Pressure at Mondragon

By George Cheney

Cornell University Press, 1999

Cooperation Works!

How People Are Using Cooperative Action

to Rebuild Communities and Revitalize the Economy

By E.G. Nadeau & David J. Thompson

Lone Oak Press, 1996

After Capitalism

By David Schweickart

Rowman & Littlefield, 2002

Reviewed by Carl Davidson

Solidarity Economy Network

Something important for both socialist theory and working-class alternatives has been steadily growing in Spain’s Basque country over the past 50 years, and is now spreading slowly across Spain, Europe and the rest of the globe.

It’s an experiment, at once radical and practical, in how the working-class can become the masters of their workplaces and surrounding communities, growing steadily and successfully competing with the capitalism of the old order and laying the foundations of something new—it’s known as the Mondragon Cooperative Corporation (MCC).

Just what that ‘something new’ adds up to is often contested. Some see the experiment as a major new advance in a centuries-old cooperative tradition, while a few go further and see it as a contribution to a new socialism for our time. A few others see it both as clever refinement of capitalism and as a reformist diversion likely to fail. Still others see it as a ‘third way’ full of utopian promise simply to be replicated anywhere in whatever way makes sense to those concerned.

The reality of an experiment on the scale on Mondragon, involving more than 100,000 workers in 120 core industrial, service and educational coops, is necessarily complex. It can contain all these features contending within itself at once.

That’s what makes MCC a fascinating story where the final chapters are still being written. But one thing is clear: it continues to grow and provide a quality of life for a participant that is unique in its moral benefits and above average in its material standards. Hardly any concerned would give up their position in the project today for the options of the society around them, even if they are skeptical or dubious about various aspects of MCC’s current practices or future prospects.

One MCC worker, for example recently expressed some cynicism about the coops. “People once took them seriously, but not anymore,” she remarked. “You mean it doesn’t matter to you whether you work here or at a private company?” she was asked. “Of course it matters,” she replied. “Here I have job security, and here I can vote.”

If I had to single out one of the five books listed above to tell MCC’s story, it would be the first one, From Mondragon to America by Greg MacLeod, even if its title is a little misleading and its facts 15 years out of date. The reason? It goes deeply into the structures and values at the core of MCC, as well as discussing the philosophical thinking of its founder, Father Jose Maria Arizmendiarrieta, or known more simply as Father Arizmendi.

A Priest with a Philosophy

The story of Mondragon begins with Father Arizmendi’s arrival in the Basque country of Spain in 1941 following the defeat of the Republicans in the Spanish Civil War. The Basques has been a center of resistance to Franco and the area was devastated by the conflict. Most widely known was the bombing of the Basque city of Guernica, immortalized in the mural masterpiece painted by Pablo Picasso. Father Arizmendi himself had fought with the Republicans, was imprisoned and barely escaped execution.

As a young priest, he was assigned to the Arrasate-Mondragon region, which was suffering from high unemployment and other destruction in the war’s aftermath. Arrasate is the Basque name for the area, while Mondragon is the Spanish name—in any case, the industrial mountain valley received little or no help from the Franco regime and was the target of ongoing repression against the Basques, with the fascists trying to stamp out their language and culture as well as their political organizations.

In reorganizing his new parish, Arizmendi thus had to find a way for the Basques to help themselves. He started by forming a small technical school, and helped finance his efforts by convincing the local Basques with meager funds to form a small credit union. He also formed sports and other family-related organizations that could still allow people to gather under the legal restrictions of the fascists. In addition to being an organizer, Arizmendi was also a deep-thinking intellectual—all the while he was doing a thorough study of Catholic social theory, Marx’s political economy and the cooperatives theories of Robert Owen, the British utopian socialist.

Armed with these ideas, in a few years he selected five graduating students from his technical school and with donations and borrowed funds from the credit union, his team of young workers formed a small cooperative workshop, ULGOR, named from one initial of each of the five students’ names. It brought in about 20 more workers and started to produce a small but very practical kerosene stove for cooking and heating. The single-burner stove was much in demand and the coop thus thrived and grew. Today it’s called FAGOR, and its 8000 current employee-owners in several divisions produce a wide range of high-quality household appliances sold across the world.

But this small startup in 1956 contained the first secret of MCC’s success—the three-in-one combination of school, credit union and factory, all owned and controlled by the workers and the community. Starting a coop factory or workshop alone wouldn’t work; a startup also required a reliable source of credit and a source of skills and innovation.

Typically, an MCC coop is entirely owned by its workers—one worker, one share, one vote. Worker-owners get a salary that is a draw against their share of the firm’s annual profit, and is adjusted upward or downward at the end of the year. By Spanish cooperative law, a portion of the profits has to be turned over to the local community for schools, parks and other common projects, The remainder is set aside for the repair and depreciation of plant and equipment, health care and pensions, and emergency reserves, as well as the workers’ salaries.

Technically, MCC worker-owners are thus not wage labor, but associated producers. There is an income spread, according to skill and seniority, but this is set and modified by the workers themselves meeting in an annual assembly. The assembly also elects a governing council, which in turn hires a CEO and management team. Managers can be removed from their posts but worker-owners cannot be fired. New hires however, can be fired or laid off during their trial period—about six months. But when their trial period ends, they can buy into the coop. If they don’t have the funds for the value of their share—today about 3000 Euros—it’s lent to them by the coop bank, and they repay in small amounts over a few years. MCC coops typically have relatively flat hierarchies, and a much smaller number of supervisors compared to similar non-coop firms.

The Ten Principles

Father Arizmendi’s most important intellectual contribution to MCC, however, was the wider formulation of this structure into ten governing principles, which are firmly held and practiced throughout MCC. There is some flexibility around the edges, but not much. Here’s a brief description:

• Open Admission: This means non-discrimination, that all are invited to join the coops—men or women, Basque or non-Basque, religious or non-religious, or from any political party or nonpartisan.

• Democratic Organization. The principle of ‘one worker, one vote’ is the core here, but it also entails a wider participatory democracy in the workplace and engagement with the management team.

• Sovereignty of Labor. This is the underlying core belief describing the overall relation between capital and labor, primarily that labor is the dominant power over capital, at least within the coops, if not fully in the wider local community.

• Capital as Instrument. This is a corollary of the point above. It defines capital as an instrument or tool to be used, deployed and governed by labor, rather than the other way around.

• Self-Management. This stresses the importance of training worker-owners not only to better manage their work on the assembly line, but also to train those elected to the governing councils or selected for management teams to have the wider educational background to steer the cooperatives strategically in the wider society and its markets.

• Pay Solidarity. Here is where the worker-owners themselves determine the spread between the lowest-paid new hires and the top managers, with various skill and seniority levels in between. Originally it was set at 3 to 1, but that was adjusted because it was too difficult to retain good managers. Today the average is 4.5 to one, compared to 350 to one as the average for U.S. firms. The highest single coop’s range is 9 to one, and only exists at Caja Laboral, MCC’s worker-owned bank.

• Inter-Cooperation. This encourages the various coops to cooperate with each other, forming common sectoral strategies, or for transferring members among coops when some firms’ orders are temporarily too low to provide enough work.

• Social Transformation. The coops are not to look inward and operate in isolation from the community around them. They are to make use of cooperative values to help transform the wider society. In the Basque Country, for many this means seeing MCC’s growth as developing a progressive economy for Basque national autonomy and independence.

• Universal Solidarity. The coops are not only to practice solidarity within themselves, but also with the entire labor movement—and not only in Spain, but across the globe as well. MCC has several projects abroad providing assistance in remote areas of third world nations.

• Education. Just as the first coop was preceded by starting with a school and forming a cadre with a cooperative consciousness, MCC continues to hold education as its core value, seeing knowledge as power—and the socialization of knowledge as the key to the democratization of power in both the economy and the society.

In shaping these principles, Father Arizmendi also discovered what he believed was a fatal flaw in the cooperative theory of Robert Owen, which was the ability of an Owenite worker-owner to sell his or her share to anyone. This permitted external financiers to buy up the shares of the better firms while starving others. Thus in MCC, this is forbidden; a retiring worker may ‘cash out’ on leaving the coop, but he or she is not allowed to sell the share to anyone but a new incoming worker, or to the coop itself to hold until it does. This kept MCC’s capital subordinate to its workers, and is a second secret to its success.

Most of all, these principles have meant that the MCC workers retained control over their own surplus value, using it to provide themselves a modest but above-average standard of living while using their resources for measured and planned growth.

Mondragon has come a long way from ULGOR, the small workshop making the little single-burner kerosene stove. Today MCC unites 122 industrial companies, 6 financial organizations, 14 retailers (including the Eroski chain with over 200 hypermarkets, supermarkets and convenience stores), plus seven research centers, one university and 14 insurance companies and international trade services. Its total sales in 2009 were 13.9 billion Euros and a workforce of nearly 100,000 people.

Less than six of the 120 coops have failed over 50 years. In the most recent economic crisis, MCC weathered the storm fairly well. No coop failed, salary reductions were modest and the only workers laid of were the trial-period new hires. Now things are picking up again. MCC remains a dominant force in the Basque economy, the leading force in Spain overall and is now making waves in high-tech manufacturing worldwide.

Cooperativism and Trade Unionism

What about Mondragon’s wider connections with the Basque and Spanish trade union movement outside the coops? Where do the various parties of the Spanish and Basque left come in?

For some answers to those questions, at least as things were in the mid-1990s, the best treatment is in Sharryn Kasmir’s The Myth of Mondragon. As a sociologist who spent some time in the Basque country, she took great pains to try to discern how workers themselves, inside and outside the coops, viewed MCC. At bottom, she would agree that the MCC workers, whatever criticisms they may have, would not readily trade places with their counterparts outside. She would also agree that the coops have become a powerful and progressive economic force in the Basque country. But in the end, these ‘pragmatic’ concerns are not hers; she wants to view MCC through the more traditional ‘ideological’ lens of the left.

Kasmir place high priority, for example, on trade union militancy and solidarity and examines and celebrates its history in the area in some detail. The Basque are best known for their high-mountain shepherds but they have a long industrial tradition in the valleys and coastal towns, especially in iron and metalworking. The workers in these areas like the Arrasate-Mondragon valley formed trade unions early on and have a tradition of solidarity across industries and trades, often shaped in a lively night life in bars involving entire families.

Kasmir does an excellent job digging out this history and showing how it continues. She also reveals, however, that some of the level of its traditional expression has dropped off in the areas where the Mondragon Coops are prevalent. The MCC worker-owners, she notes, are viewed by other workers as ‘working too hard’ and spending less time in the bars in political discussion. Moreover, when strikes are called and other workers are asked to strike in solidarity, the MCC workers only offer a token presence, or don’t show up at all.

“Ekintza, the Basque concept of ‘taking action,’ is a core cultural value,” Kasmir argues. “Basque towns are centers of political activity. In Mondragon, political discussion takes place in bars, demonstrations are frequent, and town walls are covered with posters, murals and graffiti, making them dynamic arenas for political debate. Far from generating ekintza among workers, however, cooperativism appears to engender apathy.” (p. 195)

Finally, Kasmir gives an example of a small group of young Maoist workers in the ULGOR plant that tried to strike the coop in the 1970s, but failed to win much support. They were expelled from the coop by the other worker-owners, although, after a few years, a good number were brought back in. It was the only strike in all of MCC’s 50 year history although there have been other conflicts over regionalism and inter-cooperation where a few coops split off.

Kasmir seems to hold to a traditional left view that the task of the left is to organize increasing on-the-job militancy while building one’s strength in the political area with socialist political parties, and to work both the arenas of elections and other mass action campaigns. And as she correctly observes, MCC doesn’t fit this mold.

Class: Looking Forward, Looking Back

What Kasmir glosses over or misunderstands, however, is that there is indeed a critical difference between the workers in MCC coops and workers in other firms. The most important, already mentioned, is that MCC worker-owners are not wage-labor, but associated small producers. Most MCC firms are under 500 workers and many quite smaller. Second, the MCC firms are not owned by an external force alien to their production process. The managerial strata and the workers representatives in the governing councils have the same single ownership share and vote as everyone else.

In other words, when workers in a regular firm go on a sympathy strike, they hurt or pressure the interest of external bosses; but when MCC workers go out, they only subtract from their own material interest. They may do so anyway as a matter of solidarity, much as a small store owner may close for the day of a political strike, but the structure of interest is clearly different than the wage-laborer. Likewise when MCC worker-owners spend more time at work, or attending school or training sessions after work, subtracting from time spent in the bars—they are contributing directly to their coop’s growth and their own benefit as well, where on the other hand, forced overtime in a regular firm primarily benefits an external owner.

So the interesting question Kasmir leaves unanswered is whether the class position of the MCC worker-owner is a step backward to a petit-bourgeois past or a step forward to a worker-controlled mode of production of a socialist future. Given the overall picture of MCC’s successful growth since the time of her writing, the latter seems the better answer.

Democracy: Representative and Participatory

But do the MCC firms’ internal practices still stand as well-functioning examples of direct and participatory democracy in the workplace? Kasmir suggests they are not; that they are simply run by the managers and the rest is pro forma. But her ideological presumptions miss a great deal here that is much better treated in George Cheney’s book, Values at Work: Employee Participation Meets Market Pressure at Mondragon.

Cheney is both more in solidarity with the Mondragon project and in some ways, more critical of it at the same time. His criticisms, however, come largely from within. He holds up MCC’s own values as a mirror to its practice, and then examines the realities.

During a recent study tour of MCC, for example, my group had a session with Fred Freundlich, an American who hade been living in the Basque Country for more than a decade and teaching economic theory at MCC’s Mondragon University. We asked for his opinion on how involved the younger MCC workers were with their own governance in the coops.

“Frankly, Basque youth aren't all that active inside the coops. They're into third world global justice issues, environmentalism in general and Basque nationalism. About the coop managers, I'd say a strong minority, maybe 30 percent, have solid cooperative values at heart, another small minority pays lip service to them, and the rest are somewhere in between. We clearly need a new surge of activism to spread cooperativism beyond the factories.”

The highest governing body of each coop, and MCC overall, is its General Assembly or Congress. The average participation is around 70 percent, and attendance is required. (One absence results in a warning; a second results in a fine to be paid.) Issues decided are important, such as overall salary spreads, strategic direction of products and the election of leadership.

“The General Assembly of worker-members is the highest authority in each company,” explains Freundlich in his 1998 paper, MCC: An Introduction.  “It must meet at least once a year to address company-wide concerns (though it often meets twice).  The General Assembly also elects the company's Board of Directors and a President of the Board for four-year terms, based on the principle of one-member one-vote.  The Board appoints the chief executive and must approve his or her choices for division directors. 

“A Social Council,” Freundlich continues, “is elected by departments to represent front line workers' interests and to help promote two-way communication between management and workers.  Pay solidarity and the distribution of profits to all worker-members, as described previously, are other important cooperative policies.

“While the MCC has its share of workforce controversy and apathy,” he concludes, “and perhaps more today than 30 years ago-these structures and policies have contributed to fairly high levels of commitment to the business and to the cooperative idea, which in turn, many believe, have provided Mondragon firms with a difficult to measure, but nonetheless real, competitive advantage over its conventional competitors.”

Other studies of various MCC components, such as Eroski, have placed the average quantifiable advantage self-management has given MCC coops over non-MCC firms in the marketplace at 15%.

“If one enters a Mondragon factory,” writes George Benello in the magazine Reinventing Anarchy Again, “one of the more obvious features is a European-style coffee bar, occupied by members taking a break. It is emblematic of the work style, which is serious but relaxed. Mondragon productivity is very high—higher than in its capitalist counterparts. Efficiency, measured as the ratio of utilized resources (capital and labor) to output, is far higher than in comparable capitalist factories.”

Changes, Large and Small

As for shifting attitudes, Basque society itself has seen major changes over the past 30 years. “Such changes are revealed, for example,” says Cheney, “in the dramatic drop in attendance at Mass in the Basque country, from about 75 percent in 1975 to less than 25 percent today.” (p. 56). What this shows is the Basques were not immune to a weakening of traditional ties and the growing secularism and consumerism prevalent in Europe.

Even so, there is still a considerable degree of participation and debate at the base of the MCC coops, even if it doesn’t take the forms or rise to the level those on the governing councils or management teams would like to see. One ongoing debate is over the salary spread between managers and production workers. According to Wikipedia:

“At Mondragon, there are agreed-upon wage ratios between the worker-owners who do executive work and those who work in the field or factory and earn a minimum wage. These ratios range from 3:1 to 9:1 in different cooperatives and average 5:1. That is, the general manager of an average Mondragon cooperative earns 5 times as much as the theoretical minimum wage paid in his/her cooperative. This ratio is in reality smaller because there are few Mondragon worker-owners that earn minimum wages, their jobs being somewhat specialized and classified at higher wage levels.^[10]

“Although the ratio for each cooperative varies, it is worker-owners within that cooperative who decide through a democratic vote what these ratios should be. Thus, if a general manager of a cooperative has a ratio of 9:1, it is because its worker-owners decided it was a fair ratio to maintain.^[10]

“In general, wages at Mondragon, as compared to similar jobs in local industries, are 30% or less at the management levels and equivalent at the middle management, technical and professional levels. As a result, Mondragon worker-owners at the lower wage levels earn an average of 13% higher wages than workers in similar businesses. In addition, the ratios are further diminished because Spain uses a progressive tax rate, so those with higher wages pay higher taxes.”^[10]

Another key tension and debate arose in the 1990s, when Mondragon transformed itself from a federation of coops loosely connected through their ‘second degree’ coops—the bank, the social insurance agencies, the university and research institutes—into MCC with its ‘sectoral’ structures—industrial, financial, retail distribution and knowledge. The more centralized and unified structure enabled Mondragon’s management teams to develop and pursue common strategies to better compete collectively with their rivals in the marketplace.

While this relatively greater degree of centralization proved very successful, it also increased market pressures on the individual coops in the form of intensity of work and speed of innovation. ‘Finding the balance’, explains Cheney, is the key term used to resolve differences.

Prospects for Coops in the U.S.

Can an experiment like Mondragon find fertile ground in the U.S.? This is a topic addressed in Cooperation Works! How People Are Using Cooperatives to Rebuild Communities and Revitalize the Economy by E.G. Nadeau and David J. Thompson. This work offers a survey of some 50 cooperative ventures in twelve different areas of the U.S. society, both historical and current—including agriculture, housing, business purchasing coops, credit unions, social services and power utilities—as well as worker-owned industrial coops.

The authors reveal two key points. The first is that cooperatives have a long, rich and varied history across the U.S, ranging from wheat farmers banding together to manufacture and market their own pasta products, to home health care providers building their own company to provide decent wages and benefits in an occupation that often suffers from poor conditions. The second is that none of these 50 case studies, successful or unsuccessful, has followed the Mondragon model of a three-in-one combination of school, credit union and factory—even though in a number of areas these three components exist nearby each other. (The book’s appendix lists the top 100 coops in the U.S. which is quite useful.)

That doesn’t mean some of these coop ventures aren’t doing well or breaking new ground. The Cooperative Home Care Associates, based in the Bronx, NY, has grown to include more than 1600 worker-owners, and vastly improved the lives of the mainly Black and Latino women workers involved.

“By transforming part-time home care jobs into full-time positions,” states board member Kim Alleyne, “CHCA differentiates itself from other firms in New York City's home care industry. Specifically, we invest significant capacity in scheduling our home care workers for at least 30 hours each week …. We also allocate 80 percent of our total revenue to the wage and fringe benefits costs of our home care workers - including a comprehensive health and dental insurance benefit that does not require a financial contribution from employees. 

“We also offer our home care continuing education with many opportunities to accumulate assets, including worker-ownership, through which employees can accumulate a $1,000 equity stake in CHCA and receive dividends based on our annual profits, an employer-contribution to their 401(k) account in profitable years; and as an alternative to predatory payday loans, CHCA offers no-interest loans that average $250. We also encourage workers to create savings and checking accounts, instead of relying on expensive check cashing services.”

For another interesting example, one can look to California’s Bay Area. Here Cheeseboard Pizza and five other bakeries have formed a networked cooperative of Arizmendi Bakeries. With some 200 worker-owners, they produce baked goods combined with retail eateries that keep winning prizes for the best foods and best places to eat in the area. Even though the scale is small compared to MCC in Spain, they also include in their network one ‘second degree’ coop that helps them all with financial services.

In North Carolina, however, a project called the Center for Community Self-Help, started by Martin Eakes and Bonnie Wright, highlighted a core problem. They retrained workers displaced by plant shutdowns, and hoped to help them form coops. Cooperation Works!... explains:

“Eakes and Wright discovered that the engine that gave Mondragon its power was missing in North Carolina and was stalling the development of worker coops. That element was access to capital. For the Mondragon Cooperatives, the Caja Laboral (or ‘Workers Bank’) furnished the necessary capital to launch successful ventures. Thus Eakes and Wright concluded their next step was to create a Caja for North Carolina.”

So that’s exactly what the couple did. Starting with a bake sale, within three years they formed the Self-Help Credit Union with several million dollars in deposits from area churches and government grants. In another seven years, this had launched new businesses with some 4000 jobs and 2000 child care spaces.

Cleveland, Ohio has a similar story. The Cleveland Foundation and other nonprofits for years had been repeatedly funding job training programs for the long-term unemployed in low-income neighborhoods, only to find that their newly certified workers still couldn’t find employment. Finally, a core group of funders and allies made the trek to Mondragon, and was inspired on their return to form the Evergreen Cooperatives, with local colleges serving as schools and the foundations serving as sources of startup capital.

Three businesses are now underway: Evergreen Cooperative Laundry, an industrial-scale operation doing laundry for major medical centers nearby; Ohio Cooperative Solar, which leases urban business rooftops and installs solar arrays, providing electric power to the region’s grid; and Green City Growers, and industrial-scale urban agriculture venture producing fresh produce for local markets and restaurants. A dozen more coop businesses are on the drawing boards.

Another project, in Chicago decided to follow Father Arizmendi’s model closely, and started with the design and organization of a new public school in a low-income neighborhood, Austin Polytechnical Academy. With ideas of worker participation and worker ownership built into the school’s mission and curriculum, it will graduate its first class of students with high-tech manufacturing skills in 2011. The school was developed with partners from area trade unions and some 20 high-tech manufacturing firms. A number of the students have gone to Mondragon on study tours.

Agreement with the Steelworkers

What gave a national focus to all these efforts was a recent decision by the United Steel Workers, one of the largest industrial unions in the U.S, to declare a formal partnership with MCC to try to establish worker-owned enterprises in depressed Rust Belt regions. This was soon followed by a similar partnership declaration between MCC and the City of Richmond in the Bay Area to launch a similar effort.

The U.S., of course, continues to face dire economic conditions. Bank credit is difficult to obtain and unemployment is near 10 percent. Government at every level, blocked by a neoliberal budget-cutting resurgence, is slashing funds for community and small business development in favor of tax breaks for the superrich.

This manufactured austerity is a two-edged sword as far as coops are concerned. One edge is that there is little help coming from government which makes new ventures very tough. The other edge is that the solidarity economy, of which MCC is a mother lode of ideas and experience, emerges precisely when government fails and people have only each other to turn to for mutual aid. The harsh conditions become a spur to radical experiments and strategies for structural change.

This is where the last of these five books takes center stage, David Schweickart’s After Capitalism. In this short but lucid book, Schweickart draws on his earlier studies of workers control in Yugoslavia and his own experiences in Mondragon and elsewhere, and raises all of these to a wider working hypothesis for a new socialism for the 21st century. He calls his effort ‘successor-system theory’ and names its project ‘Economic Democracy.’ The core idea is that the workers themselves democratically elect the managers of their firms, which are either leased from the government collectively or owned cooperatively outright. They also share the wealth they create by sharing the profits among themselves. They make their money the old-fashioned way: by finding consumer needs, meeting those needs with decent products, and selling them to satisfied customers at reasonable prices.

We can see the Mondragon model here, but painted on a much wider canvas of an entire nation’s economy. Schweickart’s theory is one of the main variants of what is called ‘worker controlled market socialism,’ and his task in this work is not so much to tell us how to get there, but how it can work once we do get there.

The heart of his argument rests on dividing markets into three—capital markets, labor markets, and markets in goods and services. Capital markets he would abolish or at least severely restrict by government buyouts or takeovers of major banks and corporations in a time of crisis and turning them into public asset funds. Labor markets he would drastically change or restrict by vastly reducing wage labor, turning most workers into owners or leaseholders of their factories. Workers each have one equal vote, and elect their managers. Markets in goods and services, however, would remain, although regulated for ecological sustainability and other matters related to the common good.

Mondragon as a Bridge to Socialism

Even if the Mondragon cooperators themselves don’t speak directly of wider socialist theory, Schweickart does it for them in this work. “The Mondragon complex did not develop as a purely pragmatic response to local conditions,” he explains. “Arizmendiarrieta was deeply concerned about social justice and explicitly critical of capitalism, basing his critique on progressive Catholic social doctrine, the socialist tradition, and the philosophy of ‘personalism’ developed by Monier, Maritain, and other French Catholic philosophers. He was critical of Soviet state socialism and certain elements of the cooperative movement itself. He was particularly sensitive to the danger of a cooperative becoming simply a ‘collective egoist,’ concerned only with the well-being of its membership.”

Schweickart goes on to note the problems of conflict, tension and abstention from participation within the MCC coops mentioned by both Kasmir and Cheney. But he draws this conclusion:

“The presence of worker alienation and of certain practices that cut against the grain of Arizmendiarrieta’s vision should not blind us to two striking lessons that can be drawn from the economic success of Mondragon. First, enterprises, even when highly sophisticated, can be structured democratically without any loss of efficiency. Even a large enterprise, comparable in size to a multinational corporation, can be given a democratic structure.

“Second, an efficient and economically dynamic sector can flourish without capitalists. Capitalists do not manage the Mondragon cooperatives. Capitalists do not provide entrepreneurial talent. Capitalists do not supply the capital for the development of new enterprises or the expansion of existing ones. But these three functions—managing enterprises, engaging in entrepreneurial activities, and supplying capital—are the only functions the capitalist class has ever performed. The Mondragon record strongly suggests that we don’t need capitalists anymore—which, of course, is the central thesis of this book.”

What Schweickart is doing, of course, is dispensing with all the usual arguments capitalist apologists circulate among average workers as to why socialism can’t work. In addition to the intellectual arguments, he simply points to Mondragon, which continues to move forward as the living example of another path. In this sense, what the MCC worker-owners have established is a bridge to a small fortress that serves as a foothold in the future, a powerful example of one not-so-small victory in a Gramscian ‘war of position.’

To a certain extent, many of the MCC workers and managers would agree. MCC itself is officially ‘nonpartisan,’ meaning that it’s not tied to any particular Basque or Spanish political party.

But this does not mean ‘anti-partisan.’ MCC works with a number of socialist and Basque nationalist parties and officials to build up the economy and educational planning infrastructure of Euskadi, the Basque name of their ‘Basque Country,’ for which they are working for a high degree of regional autonomy, if not national independence. In the MCC coops, the workers belong to a range of socialist, communist and Basque nationalist groups ranging from left to center. There have been sharp differences between socialists and some of the more militant nationalist groups in the recent past, but today, the trend is for a wider popular unity and a cessation of any violence.

Not all cooperatives are on the left, of course, and not only in Spain, but elsewhere, including in the U.S. Nor are those that do have progressive politics at their core the only examples of strongholds that can be won in the ‘war of position.’ There are many other ‘strong points’ in need of multiplying and growing—progressive trade unions and labor councils, community-driven schools and civic organizations and coalitions, and, naturally, progressive political organizations and parties rooted in working-class communities. These are all organizational instruments for a range of tactics that will be required in different phases and a variety of fronts in class struggle and popular democratic campaigns. What Mondragon has done for us, however, is to make a major breakthrough in both theory and practice and bring it to scale as a powerful example of what can begin to happen when ‘labor is sovereign’ in a new socialism for a new century.

[Carl Davidson is a national co-chair of the Committees of Correspondence for Democracy and Socialism, a national board member of the Solidarity Economy Network, and a member of Steelworker Associates. He is also the co-author, with Jerry Harris, of CyberRadicalism: A New Left for a Global Age, at http://stores.lulu.com/changemaker. His email is carld717@gmail, and he is available to speak on Mondragon.]

By DAVID HARVEY
SolidarityEconomy.Net via Counterpunch

Does this crisis signal the end of neo-liberalism? My answer is that it depends what you mean by neo-liberalism. My interpretation is that it’s a class project, masked by a lot of neo-liberal rhetoric about individual freedom, liberty, personal responsibility, privatisation and the free market. These were means, however, towards the restoration and consolidation of class power, and that neo-liberal project has been fairly successful.

One of the basic principles that was set up in the 1970s was that state power should protect financial institutions at all costs. This is the principle that was worked out in New York City crisis in the mid-1970s, and was first defined internationally when Mexico threatened to go bankrupt in 1982. This would have destroyed the New York investment banks, so the US Treasury and the IMF combined to bail Mexico out. But in so doing they mandated austerity for the Mexican population. In other words they protected the banks and destroyed the people, and this has been the standard practice in the IMF ever since. The current bailout is the same old story, one more time, except bigger.

What happened in the US was that 8 men gave us a 3 page document which pointed a gun at everybody and said ‘give us $700 billion or else’. This to me was like a financial coup, against the government and the population of the US. Which means you’re not going to come out of this crisis with a crisis of the capitalist class; you’re going to come out of this with a far greater consolidation of the capitalist class than there has been in the past. We’re going to end up with four or five major banking institutions in the United States and nothing else.

Many on Wall Street are thriving right now. Lazard’s, because it specialises in mergers and acquisitions, is making megabucks. Some people are going to be burned, but overall it’s a massive consolidation of financial power. There’s a great line from Andrew Mellon (US banker, Secretary of the Treasury 1921-32), who said that in a crisis, assets return to their rightful owners. A financial crisis is a way of rationalising what is irrational – for example the immense crash in Asia in 1997-8 resulted in a new model of capitalist development. Disruptions lead to a reconfiguration, a new form of class power. It could go wrong, politically. The bank bailout has been fought over in the US Senate and elsewhere, so the political class may not easily go along – they can put up roadblocks but so far they have caved in and not nationalised the banks.

But this can lead to a deeper political struggle: there is a strong sense of questioning why are we empowering all the people who got us into this mess. Questions are being asked about Obama’s choice of economic advisers – for example Larry Summers who was Secretary of the Treasury at the key moment when a lot of things started to go really wrong, at the end of the Clinton administration. Why would you now bring in so many of the characters who are pro-Wall Street, pro-finance capital, who did the bidding of finance capital back then? Which is not to say that they aren’t going to redesign the financial architecture because I think they know it’s got to be redesigned, but who are they going to redesign it for? People are really discontented about Obama’s economic team, even in the mainstream press.

A new state financial architecture is required. I don’t think that all existing institutions like the Bank of International Settlements and even the IMF should be abolished; I think we will need them but they have to be revolutionarily transformed. The big question is who will control them and what their architecture will be. We will need people, experts with some sort of understanding of how those institutions do work and can work. And this is very dangerous because, as we can see right now, when the state looks to see who can understand what is going on in Wall Street, they think only insiders can.

Disempowerment of labor: enough is enough

Whether we can get out of this crisis in a different way depends very much upon the balance of class forces. It depends upon the degree to which the entire population says ‘enough is enough, let’s change this system’. Right now, when you look at what’s been happening to workers over the last 50 years, they have got almost nothing out of this system. But they haven’t risen up in revolt. In the US over the last 7 or 8 years, the condition of the working classes in general has deteriorated, and there has been no mass movement against this. Finance capitalism can survive the crisis, but it depends entirely upon the degree in which there is going to be popular revolt against what is happening, and a real push to try and reconfigure how the economy works.

One of the major barriers to continuous capital accumulation back in the 1960s and early 70s was the labor question. There were scarcities of labor both in Europe and the US and labor was well organised, with political clout. So one of the big barriers to capital accumulation during that period was; how can capital get access to cheaper and more docile labor supplies? There were a number of answers. One was to encourage more immigration. In the United States there was a major revision of the immigration laws in 1965 that in effect allowed the US access to the global surplus population (before that only Europeans and Caucasians were privileged). In the late 1960s the French government was subsidising the import of Maghrebian labor, the Germans were bringing in the Turks, the Swedes were bringing in the Yugoslavs, the British were drawing upon their empire. So a pro-immigration policy emerged which was one attempt to deal with the labor problem.

The second thing you go for is rapid technological change which throws people out of work and if that failed then there were people like Reagan, Thatcher and Pinochet to crush organized labor. And finally capital goes to where the surplus labor is by off-shoring, and this was facilitated by two things. Firstly technical reorganisation of the transport systems: one of the biggest revolutions that happened during this period is containerisation which allowed you to make auto parts in Brazil and ship them for very low cost to Detroit or wherever. Secondly the new communications systems allowed the tight organization of commodity chain production across the global space.

All of these solved the labor problem for capital, so by 1985 capital has no labor problem any more. It may have specific problems in particular areas but globally it has plenty of labor available to it; the sudden collapse of the Soviet Union and the transformation of much of China added something like 2 billion people to the global proletariat in 20 years. So labor availability is no problem now and the result of that is that labor has been disempowered for the last 30 years. But when labor is disempowered it gets low wages, and if you engage in wage repression this limits markets. So capital was beginning to face problems with its market, and there were two things which happened.

The first was the gap between what labor was earning and what it was spending was covered by the rise of the credit card industry and increasing indebtedness of households. So in the US in 1980 you would find that the average household would owe around $40,000 in debts now it’s about $130,000 for every household, including mortgages. So household debt sky-rockets and that brings you to financialisation, and that was about getting the financial institutions to support the household debts of working class people whose earnings are not increasing. And you start with the respectable working class, but by the time you get to the year 2000 you start to find these sub-prime mortgages circulating. You are looking to create a market. And so finance starts to support the debt-financing of people who have almost no income. But if you hadn’t done that what would have happened to the property developers who are building the houses? So you try and stabilize the market by funding that indebtedness.

Crises of asset values

The second thing which happened was that from the 1980s onwards the rich are getting far richer because of that wage repression. The story we are told is that they will invest in new activity but they don’t; most of them start to invest in assets, i.e. they put money in the stock market, the stock market goes up so they think it is a good investment so they put more money in the stock market, so you get these stock market bubbles. It is a ponzi-like system without the Madoff’s organizing it. The rich bid up asset values, including stocks, property, and leisure property as well as the art market. These investments involve financialisation. But as you bid up asset values this carries over to the whole economy, so to live in Manhattan became all but impossible unless you went incredibly into debt, and everyone is caught in this inflation of asset values, including the working classes whose incomes are not rising. And now we’ve got a collapse of asset values; the housing market is down, the stock market is down.

There has always been the problem of the relationship between representation and reality. Debt is about the assumed future value of goods and services, so it assumes the economy is going to continue to grow over the next 20 or 30 years. It always involves a guess, which is then set by the interest rate, discounting into the future. This growth of the financial area after the 1970s has a lot to do with what I think is another key problem: what I would call the capitalist surplus absorption problem. As surplus theory tells us, capitalists produce a surplus, which they then have to take a part of, recapitalise it, and reinvest it in expansion. Which means they always have to find somewhere else to expand into. In an article I wrote for the New Left Review called ‘Right to the City’ I pointed out that in the last 30 years an immense amount of the capital surplus has been absorbed into urbanisation: urban restructuring, expansion and speculation. Every city I go to is a huge building site for capitalist surplus absorption. Now, of course, many of these projects stand unfinished.

This way of absorbing capital surpluses has got more and more problematic over time. In 1750 the value of the total output of goods and services was around $135 billion, in constant values. By 1950, it’s $4 trillion. By 2000, it’s $40 trillion. It’s now around $50 trillion. And if Gordon Brown is right it’s going to double over the next 20 years, to $100 trillion by 2030.

Throughout the history of capitalism, the general rate of growth has been close to 2.5% per annum, compound basis. That would mean that in 2030 you’d need to find profitable outlets for $2.5 trillion dollars. That’s a very tall order. I think there has been a serious problem, particularly since 1970, about how to absorb greater and greater amounts of surplus in real production. Less and less of it is going into real production, and more and more into speculation on asset values, which accounts for the increasing frequency and depth of the financial crises we’ve been having since 1975 or so; they are all crises of asset value.

My argument would be that if we come out of this crisis right now, and there’s going to be capital accumulation at 3% rate of growth, we’ve got a hell of a lot of problems on our hands. Capitalism is running into serious environmental constraints, as well as market constraints, profitability constraints. The recent turn to financialisation is a turn of necessity, as a way of dealing with the surplus absorption problem; but one that cannot possibly work without periodic devaluations. That’s what’s happening now, with the losses of several trillion dollars of asset value.

The term ‘national bailout’ is therefore inaccurate, because they’re not bailing out the whole of the existing financial system – they’re bailing out the banks, the capitalist class, forgiving them their debts, their transgressions, and only theirs. The money goes to the banks but not to the homeowners who’ve been foreclosed on, which is beginning to create anger. And the banks are using the money not to lend to anybody but to buy other banks. They are consolidating their class power.

The collapse of credit

The collapse of credit for the working class spells the end of financialisation as the solution for the crisis of the market. As a consequence of this we will see a major crisis of unemployment and the collapse of many industries unless there is effective action to change that. Now this is where you get the current discussion about returning to a Keynesian economic model, and Obama’s plan is to invest in a vast public works and investment in green technologies, in a sense going back to a New Deal type of solution. I am skeptical of his ability to do this.

To understand the current situation we need to go beyond what goes on in the labor process and production to the complex of relationships around the state and finance . We need to understand how the national debt and credit system have from the beginning been major vehicles for primitive accumulation, or what I now call accumulation by dispossession – as you can see from the building industry. In my ‘Right to the City’ article I looked at how capitalism was revived in second empire Paris because the state along with the bankers put together a new nexus of state-finance capital, to rebuild Paris. That provided full employment and the boulevards, the water systems and sewage systems, new transport systems, and it was through those types of mechanisms that the Suez Canal was built. A lot of this was debt financed. Now that state-finance nexus has undergone a massive transformation since the 1970s; it’s become far more international, it’s opened itself to all types of financial innovations including derivative markets and speculative markets etc. A new financial architecture has been designed.

What I think is happening at the moment is that they are now looking for a new financial set-up which can solve the problem not for working people but for the capitalist class. I think they are going to find a solution for the capitalist class and if the rest of us get screwed, too bad. The only thing they would care about is if we rose up in revolt. And until we rise up in revolt they are going to redesign the system according to their own class interests. I don’t know what this new financial architecture will look like. If we look closely at what happened during the New York fiscal crisis I don’t think the bankers or the financiers knew what to do at all, now what they did was bit by bit arrive at a ‘bricolage’; they pieced it together in a new way and eventually they come up with a new construction. But whatever solution they may arrive at, it will suit them unless we get in there and start saying that we want something that is suitable for us. There’s a crucial role for people like us to raise the questions and challenge the legitimacy of the decisions being made at present, and to have very clear analyses of what the nature of the problem has been, and what the possible exits are.

Alternatives

We need in fact to begin to exercise our right to the city. We have to ask the question which is more important, the value of the banks or the value of humanity. The banking system should serve the people, not live off the people. And the only way in which we are really going to be able to exert the right to the city is to take command of the capitalist surplus absorption problem. We have to socialize the capital surplus, and to get out of the problem of 3% accumulation forever. We are now at a point where 3% growth rate forever is going to exert such tremendous environmental costs, and such tremendous pressure on social situations that we are going to go from one financial crisis to another.

The core problem is how you are going to absorb capitalist surpluses in a productive and profitable way. My view is that social movement must coalesce around the idea that they want more control over the surplus product. And while I don’t support a return to the Keynesian model of the sort we had in the 1960s, I do think there was much greater social and political control over the production, utilisation and distribution of the surplus then. The circulating surplus was put into building schools, hospitals and infrastructure. This was what upset the capitalist class and caused a counter movement toward the end of the 1960s – that they were not getting enough control over the surplus. However, if you look at the data the proportion of the surplus which is being absorbed by the state has not shifted very much since 1970, so what the capitalist class did was to stop the further socialisation of the surplus. They also managed to transform the word government into the word ‘governance’, making governmental and corporate activities porous, which enables the situation we have in Iraq where private contractors milked the possibilities ruthlessly for easy profit..

I think we are headed into a legitimation crisis. Over the past thirty years we have been told, to quote Margaret Thatcher, “there is no alternative” to a neo-liberal free market, privatised world, and that if we didn’t succeed in that world it’s our own fault. I think it’s very difficult to say that when faced with a foreclosure crisis you support the banks but not the people who are being foreclosed upon. You can accuse the people being foreclosed upon of irresponsibility, and in the US there is a strong racist element in this argument. When the first wave of foreclosures hit places like Cleveland and Ohio they were devastating to the black communities there but some peoples’ response was ‘well what do you expect, black people are irresponsible. We are seeing right-wing explanations of the crisis which explain it in terms of personal greed, both in Wall Street and those who borrowed money to buy houses. So they attempt to blame the crisis on the victims. One of our tasks must be to say ‘no, you absolutely cannot do that’ and to try and create a consolidated explanation of this crisis as a class event in which a certain structure of exploitation broke down and is about to be displaced by an even deeper structure of exploitation. It’s very important this alternative explanation of the crisis is discussed and conveyed publicly.

One of the big ideological configurations we are going to have is what is going to be the role of home ownership in the future once we start saying things like you’ve got to socialize much more of the housing stock, as since the 1930s we have had huge pressures towards individualised home ownership as in a way of securing people’s rights and position.. We’ve got to socialize and recapitalise public education and health care long with housing provision. These sectors of the economy have to be socialized along with the banks.

Radical politics beyond class divides

There is another point we have to consider, which is that labor, and particularly organised labor, is only one small piece of this whole problem, and it’s only going to have a partial role in what is going on. And this is for a very simple reason, which goes back to Marx’s shortcomings in how he set up the problem. If you say to that the formation of the state-finance complex is absolutely crucial to the dynamics of capitalism (which it obviously is), and you ask yourself what social forces are at work in contesting or setting it up these institutional arrangements, labor has never been at the forefront of that struggle. Labor has been at the forefront in the labor market and over the labor process and these are vital moments in the circulation process, but most of the struggles which have gone on over the state-finance nexus are populist struggles in which labor has only been partially present.

For example in the US in the 1930s there were a lot of populists who supported the Bonnie and Clyde bank robbers. And currently many of the struggles going on in Latin America are more populist than labor led. Labor always has a very important role to play but I don’t think we are in a position right now where the conventional view of the proletariat being the vanguard of the struggle is very helpful when it is the architecture of the state-finance nexus (the central nervous system of capital accumulation) that is the fundamental issue. There may be times and places where proletarian movements may be highly significant, for example in China where I envisage them playing a critical part which I do not see them having in this country. What is interesting is that the car workers and automobile companies are in alliance right now in relation to the state-finance nexus, so in a way the grand dividing line of class struggle which has always been there in Detroit isn’t there anymore or at least not in the same way. We have a completely different kind of class politics going on and some of the conventional Marxist ways of viewing these things get in the way of a real radical politics.

There is also a big problem on the left that many think the capturing of state power has no role to play in political transformations and I think they’re crazy. Incredible power is located there and you can’t walk away from it as though it doesn’t matter. I am profoundly skeptical of the belief that NGOs and civil society organisations are going to change the world, not because NGOs can’t do anything at all, but it takes a different kind of political movement and conception if we are going to do anything about the main crisis which is going on. In the United States the political instinct is very anarchist, and while I am very sympathetic to a lot of anarchist views their perpetual complaints about and refusal to command the state also gets in the way.

I don’t think we are in a position to define who the agents of change will be in the present conjuncture and it plainly will vary from one part of the world to another. In the United States right now there are signs that elements of the managerial class, which has lived off the earnings of finance capital all these years, is getting annoyed and may turn a bit radical. A lot of people have been laid off in the financial services, in some instances they have even had their mortgages foreclosed. Cultural producers are waking up to the nature of the problems we face and in the same way that the 1960s art schools were centers of political radicalism, you might find something like that re-emerging. We may see the rise of cross-border organisations as the reductions in remittances spread the crisis to places like rural Mexico or Kerala.

Social movements have to define what strategies and policies they want to adopt. We academics should never view ourselves as having some missionary role in relation to social movements; what we should do is get into conversation and talk about how we see the nature of the problem.

Having said that I would want us to propose ideas. An interesting idea in the US right now is to get municipal governments to pass anti-eviction ordinances. I think there are a couple of places in France which have done that. Then we could set up a municipal housing corporation which would assume the mortgages, pay off the bank at so much on the dollar because the banks have been given a lot of money to supposedly deal with this, but they’re not.

Another key question is that of citizenship and rights. I think that rights to the city should be guaranteed by residency no matter what your citizenship is. Currently people are denied any political rights to the city unless they happen to be citizens. So if you’re an immigrant you don’t have any rights. I think there are struggles to be launched around the rights to the city. In the Brazilian constitution they have a ‘rights to the city’ clause which is about the right to consultation, participation and budgetary procedures. Again I think there is a politics which can come out of that.

A reconfiguration of urbanisation

In the US there is the capacity to act at a local level, with a lot going on about environmental questions, and over the past fifteen to twenty years municipal governments have often been more progressive than the federal government. There’s a crisis in municipal finance right now and there is likely to be significant agitation and pressure upon Obama to recapitalise a lot of municipal government (which is proposed in the stimulus package). He has said this is one of the things he is concerned about, especially since a lot of the issues which are happening are local ones, for instance the sub-prime mortgage crisis. As I have been arguing the foreclosure stuff must be understood as an urban crisis not just a financial crisis; it is a financial crisis of urbanisation.

Another important question is to think strategically about how the social economy in some alliance with labor and the municipal-based movements such as Right to the City could also be a component in a strategy. This relates to the question of technological development – for example I see no reason why you couldn’t have a municipal-based support system for the development of productive systems such as solar power, to create more decentralised employment apparatuses and possibilities.

If I could develop an idealised system now I would say in the US we should create a national redevelopment bank and take $500 billion out of that $700 billion they voted and the bank should work with municipalities to deal with neighbourhoods which have been hit by the foreclosure wave, because the foreclosure wave has been like a financial Katrina in many ways; it has wiped out whole communities, usually poor black or Hispanic communities. You go into those neighbourhoods and bring back the people who used to live in those communities and re-house them on a different basis of tenure, residency rights, and with a different kind of financing. And green those neighbourhoods, creating local employment opportunities in those fields.

So I could imagine a reconfiguration of urbanisation. To do anything on global warming we need to totally reconfigure how American cities work; to think about a completely new pattern of urbanisation, with new patterns of living and working. There are a lot of possibilities the left should be paying attention to – this is a real opportunity. But it is where I have a problem with some Marxists who seem to think, ‘yes! It’s a crisis; the contradictions of capitalism will now be solved somehow!’ This is not a moment for triumphalism, this is a moment for problematising. First of all I think there are problems with the way Marx set up those problems. Marxists are not very good at understanding the state financial complex or urbanisation – they are terrific at understanding some other things. But now we have to rethink our theoretical posture and political possibilities.

So there is a lot of theoretical re-thinking that is needed as well as practical action.

Transcribed by Kate Ferguson. Edited by Mary Livingstone.

David Harvey is a Distinguished Professor at the City University of New York (CUNY) and author of various books, articles, and lectures. He has been teaching Karl Marx’s Capital for nearly 40 years. He can be reached through his website, http://davidharvey.org

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