This is Part III, part I here and part II here
Third Problem: Businesses without businessmen, markets without merchants
If the spine of XXIst. Century Socialism is going to be a whole bunch of large state companies, around which and also around the Ministries, City Councils, misiones, etc. it is expected that all sorts of “social “enterprises” will flourish around them as its suppliers, contractors an subcontractors. There isn’t a single privileged model but you try one and if one fails you try another one. Cooperatives, mixed companies state/workers, various small businesses, communes, “social production enterprises”, have been implemented in larger or smaller degree and scale, with spectacular failures in some cases and basically without any successes that can be replicated which are worthy of mention. Clear widows of all of the types of socialism worthy of a mention arrive daily in Venezuela, with new ideas under their arms, attempting to capture the attention of the Comandante to try out their social experiment, with the meat and the money of the Venezuelan people. Of course, some private companies will be left, special those that “were not signers of the recall” perhaps modified by law to introduce a political commissar next to the Director or Manager or a soviet of workers, peasants and soldiers, specially soldiers, in the Board of Directors. Who knows?
The new forms of businesses in XXIst Century Socialism share three main characteristics: i) They depend financially on the State or a bank forced by the State; ii) they depend on contracts from the state or state companies for their survival; and iii) businessmen in the capitalistic sense of the word are not desired, that is, a person with initiative and capacity for risk that coordinates production elements and promotes as his the success of the company in the market, because he will benefit from it. It is preferred to have some sort of assembly management of the production units, which anyone with a minimum of experience knows turns out to be more complicated that ordinary company management. Of course, if the assembly management fails, as we fear, the bureaucratic management directly by civil servants, the same as in Cuba, probably with the same splendid results, can always substitute for it.
On the other hand, one has to mention in terms of the production model, that the workers that already have a job have not welcomed any of these possibilities with great enthusiasm. With some justification, the workers see more profit in the fact that their rights and job stability will be respected (Caldera’s Law) if they are directly employed by the State, than if they belong to a cooperative that contracts with the State, a city or a State company. That is why they ask if a company is nationalized, that it be nationalized completely (They don’t even want shares). It is a different matter for the unemployed, who probably prefer some backing for their job from the state that none at all and are more willing to participate in this business experiments. Given that in Venezuela there are serious problems to maintain work discipline in conventional businesses, the difficulties could be even larger in these new unit with more complex mechanisms for decision and sanctions, populated with workers who are not accustomed to formal jobs.
These companies, hyper dependent on the State, without a true business vocation behind them, will very unlikely reach competitiveness to stand on their own in open markets. In reality, the competition in which they will participate will be of the political type going after contracts with state entities of various types, something very similar to the old “living off the income capitalism“. Such contracts will be handed out as usual, because of family connections, political connections or for “sharing” economically with the civil servant that hands out the contract. Lacking these contracts, the companies will go bankrupt after using up the initial loan or the contribution from the Ministry, as it has already happened with some cooperatives and some mixed companies. More than simply dissolving themselves, if they have nothing better to do, those involved will argue they have become a social problem and will ask for their fundamental socialist right of having the Government support them.
XXIst. Socialism does not exhaust itself in chaining itself to the State. There is also room to new economic units, which are not part of the State, or are only partially owned by the State, which could then produce directly for the markets. It will be mainly an internal market protected by the Government, because without a business outlook in complete control of the company, there is no way to reach international competiteviness, which others are achieving in Latin America.
In the same manner as the image of a businessmen, markets are also disliked by XXIst. Century Socialism. This can be witnessed by foreign exchange controls, price controls, inspired possibly in Lusinchi (President from 1984-1989), which have already begun to yield their crops of shortages and severe problems for producers. However, controls only make markets more difficult; even more ambitious is the idea of replacing it with barter on the basis of chips, which will be valid only in certain places and times, thus moving it back to an experience-that of the coinage made out of leather for each village-that the West abandoned a thousand years ago, when roads were opened at the end of the Dark Ages and metals began circulating again. As any first year economics students learns, markets are much more efficient the more open, competitive and fluid they become. That is why Europe joins its economies in a large market and its coin becomes the Euro. XXIst. Century Socialism promises the opposite: to fragment markets and to take coinage to the local level.
Blocking entrepreneurial action, segmenting markets in local units for the interchange of plantains for espadrilles, forming pseudo social companies to which you will assign contracts on the basis of politics and the other microeconomic initiatives of XXIst. Century Socialism will have consequences. On the one hand, it will reduce the power and freedom of action of all the non state economic agents, including the poor ones, thus, they will give more control of society to the Government, in such a way that nobody will be able to survive without its approval. On the other hand, it will increase even more the inefficiency of the production-distribution system, which will be uncovered when oil income to finance massive imports to maintain consumption and keep happy the social grassroots of the regime, as long as it can. Then, repression will arrive.