Consider the cost before we encourage Venezuela to go down that road
www.vheadline.com Posted: Monday, March 17, 2003 By: Hector Dauphin-Gloire
Date: Mon, 17 Mar 2003 09:44:08 -0500 From: Hector Dauphin-Gloire montonero22@hotmail.com To: editor@vheadline.com Subject: Comments on the Asian Model
Dear Editor: I write to comment on Daniel Burnett's letter suggesting a way out of Venezuela's economic crisis. I would like first of all to compliment him on the article, it was a very incisive and well-thought-out piece and I think it contained a lot of truth. I do however have one or two thoughts of my own to add. While I am not trained in economics, I have read some history ... so my comments are coming more from a historical than an economists' perspective.
Mr. Burnett argues, convincingly, that much attention must be paid to the record of the East Asian countries in developing their economies. One thing to bear in mind, however, is that like every country, the economic development in these countries bore a human cost.
With the exception of semi-authoritarian Singapore, the groundwork of economic development in these countries was laid during periods of extreme authoritarianism. This allowed harsh measures to be pushed through and labor unions, etc. to be suppressed. That is not to say, necessarily, that it was not an acceptable price to pay ... only the people in those countries can answer that question.
It does mean however that we should consider the cost before we encourage Venezuela to go down that road.
A further flaw in the East Asian model is that most of these countries have had low levels of social provision (unemployment benefits, welfare benefits, etc.). On the flip side, Taiwan and South Korea have accomplished something almost unknown in the capitalist world ... extremely low levels of social inequality combined with a capitalist system. For these reasons, despite my criticisms, I do have much admiration for the Asian model, and perhaps it is indeed a good way forward for Venezuela.
My own ideal, however, would borrow some from the Asian model, but also from the idea of cooperative economics. Mr. Burnett describes socialism as a system where the State owns and coordinates economic activity in the interests of social justice and equality. He offers a very lucid and accurate analysis of the strengths and weaknesses of socialist economies in the past.
The great lesson of the second half of the twentieth century, I believe, is that while socialism can do great things for developing countries, ultimately the effort is futile unless they industrialize their economies at the same time ... otherwise it comes down to socializing poverty. (Although one could argue that it is certainly better to be poor in Cuba, where some necessities of life are guaranteed, than in most other countries). But in truth, I believe that socialism depends on SOCIAL ownership, not necessarily State ownership ... and this social ownership can take many forms.
We know, as Mr. Burnett states, that State-owned companies are often economically inefficient, and that therefore a State-run command economy is not the way forward. (Although this is not necessarily always true- PDVSA, Renault, and the Brazilian oil company are all examples of nationalized industries which have continued to run profitably).
But this says more, I think, about the fact that these companies are centralized than the fact that they are non-capitalist.
Centralization produces corruption and sclerosis ... as has been amply demonstrated ... whether the company is public or private, and whether it operates for a profit or for social objectives.
What if factories and industries were owned not by the State, nor by private investors, but rather by the people who worked in those industries themselves?
Such a system would assuredly be more egalitarian than capitalism (since there would be no distinction between workers and capitalists), and more efficient than communism (since ownership would be more decentralized, more responsive to the needs of employees, consumers, and the market, and more flexible).
Cooperative economics, while historically a common form of economy particularly in the great civilizations of South America (witness the Ayllu farms of the great Inca Empire) has in modern times been largely ignored.
The capitalist countries, of course, did not want a challenge to their social hierarchy which has an investor class and a working class; and the socialist countries felt that only State ownership could overcome the anarchy and irrationality (as they saw it) of the market.
Indeed, this was one of the fatal mistakes of the whole socialist movement, and doomed their project ... to rely on State rather than cooperative ownership. However, in the few instances where it has been tried, cooperative economics has been highly successful.
The commonly cited example is Yugoslavia, which during the 1970s and 1980s had a productive, growing economy, with more equality than the West and more freedom and efficiency than the countries of the East.
Yugoslavia had a market economy ... but it was not capitalist because factories were owned by the workers themselves, who then elected their own managers and shared the profits from the industry equally. Yugoslavia had its own economic problems caused by the cooperative model, including high unemployment ... but, on balance, I believe that their model was better than either capitalist or state-socialist ownership.
Other examples of the cooperative mode of production include the Yarur textile industry, and other agricultural or industrial enterprises, during both the Christian-Democratic and Allende years in Chile; the Mondragon cooperative in Spain; the ejido farm system in Mexico; and the farms that are being set up in Brazil by the Landless Workers' Movement.
The important thing to realize about cooperative socialism is that it doesn't rule out the market mechanism. On the contrary, no healthy economy can survive in the modern world without some kind of market. However, for a market economy to serve the common good, people need both an egalitarian social system ... so that they are bargaining with each other on a level playing field ... and a spirit of social solidarity, so that greed and self-interest do not become the driver of all economic relations.
Both of these advances, the social one and the moral one, can be provided by a system in which we have decentralized cooperative ownership. Of course, such a system can be combined with the Asian model, in which there is heavy state investment and export-oriented development.
In fact, that is what I believe represents the best way forward for the countries of the Global South -- the Asian model, within an economic framework of cooperative ownership, where relatively few enterprises are owned either by the State or by private individuals.
I hope that these thoughts have been able to supplement Mr. Burnett's ideas for a new Venezuela, and I conclude by agreeing with him ... the economic development of any nation is always a slow, painful process, with much cost in suffering involved ... but at the end of the road, it is necessary if the countries of the global South are to regain their once proud place in the world.
Sincerely, Hector Dauphin-Gloire montonero22@hotmail.com Environmental Technician