Workers’ Control and Nationalization

Comrades, we have spent a lot of time discussing the Venezuelan revolution over the last few days, and one of the most important elements we have discussed is the question of cogestion, or co-management.

Cogestion can mean many different things to many different people, but it is clear that for the Venezuelan working class the struggle for co-management is a struggle for genuine workers’ control and workers’ management, and the socialist transformation of society.

The developing struggle for workers’ control in Venezuela marks the decisive intervention of the Venezuelan working class in the Bolivarian revolution. Because of this developing struggle in Venezuela, it is imperative that we discuss these important questions within our own ranks to give the comrades a clear picture of developments in Venezuela and to explain our position and slogans in preparation for revolutionary struggles in other countries around the world.

Principles of Workers’ Control

Workers’ control means exactly what it says: the working class and its representatives in the factories have the right to inspect the books of a company or industry etc., to check and control all ingoings and outgoings, and the actions of management.

In The Transitional Programme, Trotsky explains that the first step towards actual control of industry is the abolition of “business secrets”. Business secrets, the accounts and the books, are of course used to justify all manner of attacks on the working class such as wages reductions, lay-offs, sackings and increases in working hours.

When the bosses claim bankruptcy, or claim they are losing profits, and demand such things, workers’ control allows the workers to inspect the books and ascertain the real situation. The idea is to lift the veil, to show the working class the detailed workings of the capitalist system as a step towards its elimination.

The immediate tasks of workers’ control should be to explain the debits and credits of society: looking first at individual enterprises to determine the share of the national income of individual capitalists and of course the ruling class as a whole. Another task of workers’ control should be to reveal to society the squandering of human labour and the naked pursuit of profits, as well as to expose secret deals, swindles, and corruption inherent in the system.

Trotsky also explains that workers’ control of industry is a “school for planned economy”, allowing the workers to gain a scientific understanding of how the economy functions so that mankind can consciously and democratically plan production and the economy as a whole. Through the experience of workers’ control, the working class prepares itself for direct management of nationalized industries.

Thus, workers’ control of industry is generally not long-lasting, is not stable, and in fact implies dual power in the factory or enterprise, and cannot last indefinitely unless this control is transformed into direct management.

Here we can see the difference between the revolutionary, transitional demand for workers’ control and management, and the reformist, half-way measure of workers’ participation.

Trotsky explained in the 1930s that, under capitalism, if the participation of the workers in management of production is to be long-lasting, stable, and “normal”, that it must rest upon the basis of class collaboration, and not class struggle.

Such collaboration will always be realized through the upper layers of the trade unions and management. Even in the 1930s there were examples of workers’ participation in Germany (“economic democracy”), and in Britain (“Mondism”). However, as it was later in the 1970s in Europe, this was not a case of workers’ control over capital, but the subservience of the labour bureaucracy to capital. In essence, the labour bureaucrats are used to shore up capital, and to divert the struggle of the workers into “safe” channels.

And what about this idea of workers’ participation in Europe? Workers’ participation, or so-called industrial democracy, was widely discussed and implemented throughout Europe in the 1970s. This was largely in response to the growing militancy of the labour movement expressed in the events of May 1968 in France and elsewhere, the 1972 and 1974 miners’ strikes in the UK, the general strikes in Italy and Denmark, and the wave of strikes that swept West Germany.

The ruling class was desperate to contain these movements through “social partnership”, and to direct workers’ unrest into “safe” channels. By incorporating the top layers of the unions in the office and the shop floor, the bosses hoped to increase the efficiency and raise the level of profits.

In fact, examples of this could be seen as far back as the 1920s in Britain, when Sir Alfred Mond of ICI, the big chemical monopoly, sought to create “industrial democracy” in his factories.

Workers’ participation allowed these labour bureaucrats to provide management with information and suggestions from the workforce. As we all know, and as any shop steward knows, it is the workers – the people who actually do the work – that know best how to get things done. At the same time, through workers’ participation, management can also pass instructions safely to the workforce, and discredit the labour bureaucrats by making it look like they are responsible for unpopular decisions.

The committees of bureaucrats, the organs of workers’ participation, were essentially powerless committees where workers’ could let off some steam. Workers’ participation also created the illusion that the workers had an influence in decision-making – this is in order to avoid the workers and their organizations taking independent action. For example in Germany, these committees cannot call strikes. This allowed the bosses and the labour bureaucrats to by-pass and undermine the trade unions. In fact, these workers’ council were constantly counterposed to the trade unions in an attempt to weaken them. The bosses simply used the age-old tactic of “divide and rule”, playing one organization against the other.

The experience of workers’ participation created a new stratum of industrial functionaries who shared the interests of management – in short, it created a privileged stratum of the working class.

And where has all of this led? I read an article in Thursday’s Independent (July 28) about a corruption scandal at Volkswagen. A massive scandal has just been exposed in VW which involves slush funds, prostitution, sports cars, etc, and workers’ council directors. Some of them spent millions of Euros of company money on houses, trips, and cars for secret lovers all over the world. This is what The Independent had to say:

The main beneficiaries of Mr. Gebauer’s ample entertainment budget were not the average German, but a handful of lucky VW workers’ council directors. Every major German company is required to make space for these men and women voted in from the shop floor who take part in investment decisions. It is a key part of Germany’s consensus model and helps to keep strikes at a minimum in a country where unions still wield serious power…

This is where workers’ participation ends up. Trade union bureaucrats, who no longer have any connection with the rank file, rubbing shoulders with management and executives. The interests of the workers are sold down the river in exchange for prostitutes, viagra, and trips to Brazil.

On the other hand, workers’ control through factory committees, or workers’ councils is possible only on the basis of sharp class struggle. Under “normal” conditions, the bourgeoisie will never tolerate genuine workers’ control, will never tolerate dual power in its factories. The ability of the working class to impose control over production is determined by the strength of the overall drive of the proletariat against the bourgeoisie. Genuine workers’ control must be imposed on the capitalists, and thus corresponds to the period of the revolutionary crisis of society – it corresponds to the proletarian offensive and the retreat of the ruling class. Therefore, genuine workers’ control corresponds to the period of the proletarian revolution.

This is why in Venezuela, although there are tensions and problems around the question of workers’ control, which we will come to later, we see the extension of workers’ control. This or that struggle may be defensive in Venezuela, but the extension and growth of cogestion relates to the overall offensive drive of the working class and the overall retreat of the ruling class. The country finds itself in a revolutionary situation, the workers are driving forward, and everywhere the bosses are on the retreat.

In the struggle for genuine workers’ control, the working class inevitably moves forward in the direction of seizing power and seizing the means of production. Individual factories or enterprises under workers’ control, or workers’ management, can only operate within the confines of the economy as a whole, i.e. within the confines of capitalism. It is not possible to build an island of socialism within a sea of capitalism.

A good example of this, in a negative sense, is the Alcan smelter in Jonquière, Québec. Alcan is the world’s largest producer of aluminum. The big smelter in Jonquière was scheduled to close in 2014. In early 2004, Alcan suddenly announced they were going to close the smelter. As part of a defensive struggle, the workers’ occupied the plant. They soon became painfully aware of sabotage on the part of management, and removed the supervisors and managers from the smelter. After this, they reported that production was higher than it was before the workers had taken control.

But the entire capitalist system aligned to defeat the workers. The media and the state put enormous pressure on them. Other companies refused to sell them the raw materials needed to produce aluminum and the smelter was starved. Unfortunately, in the end, the struggle was lost. (See Workers in Québec seize Alcan smelter)

Factories or enterprises under workers’ control, such as the Alcan smelter, or those companies under workers’ control in Venezuela today, must interact with, purchase products from, and sell their products to the private sector. They must interact with the market. They are therefore at the mercy of capitalism. This logically leads the workers to struggle against the power of capital.

This question of credits, raw materials, and markets, immediately shows the need to extend workers’ control beyond the confines of individual companies. A good example of this, in a positive sense, is ALCASA, a state-owned aluminum plant in Venezuela, currently experiencing the most advanced form of cogestion. During the bosses’ lockout in 2002-2003, saboteurs had cut the supply of gas to the smelter, halting production. The ALCASA workers, along with workers from a neighbouring steel works, armed themselves, marched to the gas works, broke through the opposition police and forced the restarting of production to guarantee the supply of gas.

With the crushing domination of the world market, and every nation’s dependency on world trade, the question of imports and exports raises the need for workers’ control on a national level. This immediately counterposes the central organs of workers’ control to the organs of the ruling class.

We cannot of course be mechanical or formal in our conception of the development of the socialist revolution, but we can see how workers’ control of industry, or dual power in the factories, generally corresponds to, or leads into the period of dual power in the country. Dual power in the factories, and dual power in the state will not always be born on the same day. In some cases, workers’ control will develop before dual power in the state, and in other cases it will be the opposite.

The irreconcilable contradictions inherent in the regime of workers’ control, inherent in the regime of dual power, will sharpen and reach a critical state where these contradictions become intolerable to both sides. Dual power is a stage of the class struggle where the class contradictions have become so acute that society is split into two hostile camps, two hostile powers, one old and out-lived and reactionary, the other new, in its ascendancy and revolutionary. The only way out of this situation is for the working class to take power and claim victory for the revolution, or it ends in the crushing of the revolution and the victory of the counter-revolution. One only has to look at the difference in the outcome of the Russian Revolution and the Italian and German Revolutions to see this.

As in Venezuela today, workers’ control of industry implies control not only over operating, but also over partially operating and shutdown, locked-out or idle industries. The task of re-opening these idle companies under factory committees, within a sea of capitalism, implies the beginning of an economic plan. These factories must be provided with raw materials and be able to move their finished products on. This leads directly to the question of the state administration of industry. As we can also see in Venezuela, these state-owned companies face sabotage, and are still at the mercy of capitalism, both nationally and internationally. This will in turn lead directly to the question of the expropriation of the capitalists.

What this all means is that workers’ control is then not a prolonged, “normal” condition. It is indicative of a heightening of the class struggle, and the question of dual power in industry must be resolved. As a transitional measure existing under the highest tensions of the class struggle, workers’ control is a bridge to the revolutionary nationalization of industry, corresponding to the transition from the bourgeois regime to the proletarian.

It is important that we understand the difference between workers’ control and workers’ management. This has been a source of historical confusion, and we must be clear about this issue. Workers’ control means that control lies in the hands of the workers, but that ownership remains in the hands of the capitalists. Workers’ control may be dominant, and all embracing, but it remains control.

Trotsky explained:

"The very idea of the slogan [of workers’ control] was the outgrowth of the transitional regime in industry when the capitalist and his administrators could no longer take a step without the consent of the workers; but on the other hand, when the workers had not as yet provided the political prerequisites for nationalization, nor yet seized the technical management, nor yet created the organs essential for this. Let us not forget that what is involved here concerns not only taking charge of factories, but also the sale of products and supplying of factories with raw materials, and new equipment as well as credit operations etc." (Vital Questions for the German Proletariat, Part Three)

The actual management of nationalized industries requires new administrative and state forms, and above all requires knowledge, skills, and proper organizational forms. For this an apprenticeship is required. In the period of this apprenticeship, whether it occurs before or even after the seizure of power, the working class has an interest in leaving the management in the hands of an experienced administration, under workers’ control. This period only prepares the elements of an economic plan.

Workers’ management of industry, however, proceeds from above, because it is bound up with state power and the economic plan. Whereas control comes from below and is executed by factory committees, the organs of management are centralized workers’ councils, centralized state power. It is important to point out that the factory committees do not disappear, that their role, though changed, is still important.

We are not syndicalists. We do not believe that the ownership of individual factories should pass to the hands of the workers in those factories. One of the key tasks in the socialist development of society is the collective, social ownership of the means of production and the elimination of industrial competition within society – this begins with the state ownership of the means of production.

In 1917, Trotsky was asked in an interview whether the workers in each factory should own the factory they worked in, and whether the profits should be divided amongst the workers. He replied by saying: “No, profit sharing is a bourgeois notion. The workers in a mill will be paid adequate wages. All the profits not paid to the owners [who were to receive 5% - 6% yearly of their investment] will belong to society.” (In Defence of the Russian Revolution, Workers’ Control and Nationalisation by Leon Trotsky).

In a workers’ state, unless the ultimate management of industry is in the hands of the workers’ councils representing the state and the working class as a whole, industries and companies would compete with one another, it would be impossible to coordinate a national plan and essentially we would still have capitalism. This is why we are opposed to the Anarchist and syndicalist idea that the workers in each industry should own their own industries. This idea of “local” ownership, where the workers in a factory own the factory, does not change the productive and social role and nature of the company. It is still an individual company and not owned socially. A company owned by the workers, through a cooperative or self-management committee would still be a capitalist company, dependent on profits – whether it is owned by a workers’ cooperative of 12, 250, or 1 man. This is not social ownership. It is the nationalization of industries, under state ownership and workers’ control that guarantees both the social and nationalized character of industry.

The programme of the Marxists in relation to workers’ management and for the democratically planned economy is for the boards of management of all nationalized industries to be composed of the following: 1/3 should be made up of workers in the industry through their trade unions to safeguard the interests of the workers on the ground and to harness their creativity, knowledge, and skill. 1/3 of the board should represent the working class as a whole and be elected through the TUC or the central trade union body, and the other 1/3 should come from the workers’ state to represent the national plan of production.

The Soviet Experience

Control and planning of the economy can only take place within certain limits – limits determined by the level of technique when the new social order takes over.

In Russia 1917, given the crushing backwardness of the country, the low cultural level and illiteracy of the working class and peasantry, the level of technique was very low. In fact, even after the October Revolution, management of industry was to be left in the hands of the capitalists until the workers had acquired the necessary expertise to take the helm into their own hands.

Again, in late 1917, Trotsky was asked whether it was the intention of the Soviet government to dispossess the owners of industrial plants in Russia. His reply was lengthy, and I apologize for reproducing most of it, but it is important because it highlights the general plan for the economy of the Soviet government.

"No, we are not yet ready to take over all industry. That will come in time, but no one can say how soon. For the present, we expect out of the earnings of a factory to pay the owner 5% or 6% yearly on his actual investment. What we aim at now is control, rather than ownership

"[By control] I mean that we will see to it that the factory is run not from the point of view of profit, but from the point of view of the social welfare democratically conceived. For example, we will not allow the capitalist to shut up his factory in order to starve his workmen into submissiveness or because it is not yielding him a profit. If it is turning out economically a needed product, it must be kept running. If the capitalist abandons it, he will lose it altogether, for a board of directors chosen by the workers will be put in charge…

"Again, 'control' implies that the books and correspondence of the concern will be open to the public, so that henceforth there will be no industrial secrets. If this concern hits upon a better process or device, it will be communicated to all the other concerns in the same branch of industry, so that the public will promptly realise the utmost possible benefit from the find. At present, it is hidden away from other concerns at the dictate of the profit motive, and for years the article may be kept needlessly scarce and dear to the consuming public…

"‘Control’ also means that primary requisites limited in quantity, such as coal, oil, iron, steel etc., will be allotted to the different plants calling for them with an eye to their social utility…

"[This will be done not] according to the bidding of capitalists against one another, but on the basis of full and carefully gathered statistics." (In Defence of the Russian Revolution, Workers’ Control and Nationalisation by Leon Trotsky).

The character of workers’ control during the Russian Revolution was very explosive. The slogan of control over industry was first issued on a wide scale by the Bolshevik Party in 1917, however, it was not invented by the Party. Similar to the Soviets, the factory councils and workers’ control were the result of a spontaneous movement of the working class, as a method of struggle born out of the class struggle itself.

Of course, workers’ control really began as a defensive struggle against the sabotage of the bosses. Many factories had been shut down and locked out, or left idle. The workers in many cases, defending their jobs and the revolution, occupied their factories. During this period workers’ control was largely passive.

Of course, after the victory of the October Revolution, the Soviet government passed a decree on workers’ control based on Lenin’s draft. The actual decree recognized the factory committees as the organ of control in each individual enterprise, and attempted to reorganize them on a regional level, and in an All-Russian Council of Workers’ Control.

The Bolsheviks, aware of the impossibility of backward Russia immediately passing to socialism, and aware of the inexperience of the workers in administration, wanted to set up a regime of workers’ control until assistance could come from the revolution in the West, namely from Germany, with its strong, highly educated working class.

Even so, the Bolsheviks did nationalize the banks – one of the most important measures taken by the young Soviet state. This robbed the owners of big business, both foreign and Russian, of one of their most effective tools to organize sabotage, and gave the Soviet state a powerful economic tool, as well as a vital and effective statistical and accounting centre for the whole economy.

One of the pressing issues facing the Bolsheviks was the need to re-organize Russian industry and to raise the productivity of labour. If this could not be done, then the young Soviet state was doomed.

After the decree on workers’ control was passed, workers’ control attained a convulsive, chaotic character. As Paul Avrich writes: “The effect of the decree was to give powerful impetus to a brand of syndicalism in which the workers on the spot rather than the over-all trade union apparatus controlled the instruments of production – a brand of syndicalism bordering on total chaos." (Paul Avrich, The Russian Anarchists, pg 162). More and more bosses were leaving Russia, and the workers were more and more forced to take the reigns of management. The Russian economy was smashed after four years of war and revolution. Russia was itself on the verge of collapse.

The bosses naturally resisted workers’ control. Workers’ control was met with further lockouts and sabotage. This was in turn answered with punitive nationalizations. As Trotsky had explained, if the bosses attempted sabotage or abandoned the factory, they lost it.

The Bolsheviks also faced the disintegration of central authority. In fact, between November 1917 and June 1918, many factories and mills were run under “workers’ self-management”, that is the syndicalist idea of self-management. This particularism and parochialism reflected the backwardness of Russia, her low level of development, and a largely rural petty-bourgeois economy.

Many Bolsheviks and other labour leaders recognized that the local pride of individual factory committees might damage the national economy beyond repair, and that many were selfishly absorbed in the needs of their own enterprises, and as one labour leader said “this could result in the same sort of atomisation as under the capitalist system”(Avrich, The Russian Anarchists, pg 164).

Another labour leader wrote, “workers’ control had turned into an anarchistic attempt to achieve socialism in one enterprise, but actually leads to clashes among the workers themselves, and to the refusal of fuel, metal, etc., to one another” (Avrich, The Russian Anarchists, pg 164).

Trotsky had explained some of the dangers inherent in this set-up in late 1917. When asked whether the workers’ committees or elected managers of a factory should be free to run the factory as they saw fit, he replied, “No, they will be subject to policies laid down by the local council of workmen’s deputies… [and] their range of discretion will be limited in turn by regulations made for each class of industry by the boards or bureaux of the central government.” (In Defence of the Russian Revolution, Workers’ Control and Nationalisation by Leon Trotsky)

He was then asked about the idea of Kroptkin and some of the Anarchists, which was that each centre be autonomous with respect to the industries carried within it.

"Kroptkin’s communalism would work in a simple society based on agriculture and household industries, but it isn’t at all suited to the state of things in modern industrial society. The coal from the Donets basin goes all over Russia and is indispensable in all sorts of industries. Now, don’t you see if the organised people of that district could do as they pleased with the coal mines, they could hold up all the rest of Russia if they chose? Entire independence of each locality respecting its industries would result in endless friction and difficulties in a society that has reached the stage of local specialisation of industry. It might even bring on civil war. Kropotkin has in mind the Russia of 60 years ago, the Russia of his youth." (In Defence of the Russian Revolution, Workers’ Control and Nationalisation by Leon Trotsky)

Both Paul Avrich (in The Russian Anarchists) and E.H. Carr (in The Bolshevik Revolution vol 2) report that some factory committees sought alliances with owners. Sometimes owners were begged to return to help profiteer. In some cases, the factory committee simply appropriated the funds of the factory or sold its stocks or plant for their own advantage, dividing the spoils between themselves.

A British trade union report explained that the workers had been transformed overnight into “a new body of shareholders”. Paul Avrich wrote that,

"Individual factories sent ‘pushers’ into the provinces to purchase fuel and raw materials, sometimes at outrageous prices. Often they refused to share available supplies with other factories in direct need. Local committees raised wages and prices indiscriminately, and on occasion cooperated with the owners in return for special bonuses." (Paul Avrich, The Russian Anarchists, pg 163).

Many of the committees were concerned with their own enterprise, not the general economic interest of the country. A.M. Pankratova wrote,

"We were building, not a Soviet Republic, but a republic of working class communities based on the capitalist factories and mills. Instead of a strict ordering of production and social distribution, instead of measures towards the Socialist organization of society, the existing state of affairs reminded one of the autonomous communes of producers the anarchists had dreamed of." (as quoted by Victor Serge in Year One of the Russian Revolution from The Factory Committees of Russia in the struggle for the Socialist Factory by A.M. Pankratova).

There were, of course, some success stories (such as the Moscow textile mills), but the overall trend of the economy was downward and increasingly chaotic. In fact, the Russian economy was heading towards total collapse. Obviously the situation was not conducive to the re-organization of production, to the elimination of competition, or to the planning of the economy.

The young Soviet Republic also faced other problems, such as the sabotage of the specialists and technicians. These specialists and technicians were hoping for, and certainly expected, that the Soviet government would fall within a matter of weeks. As a result they either left Russia or refused to work. The specialists in Russia 1917 were not like the specialists and technicians today. We will come to this more in a minute when we discuss Venezuela, but the technicians and specialists, lower-level managers and white-collar workers today have become more and more proletarianized. They face the same attacks, cuts and wage reductions as the workers do. It will be possible to bring them onboard, to convince them of our ideas and to win them over, as is happening in some cases in Venezuela today.

However, in Russia 1917, the specialists and technicians were very privileged. They were the sons and daughters of aristocrats and the bourgeois. They were well educated, which in itself was a massive privilege. They were well-paid, and had powerful positions. They were insulted by the very idea of a workers’ state and workers’ control. They refused to work en masse, crippling Soviet industry.

Hence the Soviet state was forced to make a series of compromises, beginning by paying the technicians more than the average worker. Of course, a political commissar was put at their side to ensure their loyalty as they were sent to the factories to help in their operation, itself a brilliant measure of workers’ control, but nonetheless it was still a compromise. The Soviet state was faced with no other option – without the specialists industry would not run.

As the country rapidly descended into civil war in the summer of 1918, the sabotage of the former ruling class picked up. Russia faced famine as the rich peasants horded grain. When the Soviet government was desperate for fuel in preparation for the coming war, the oil bosses threatened a lockout, confident that the workers could not run the industry. All the forces of reaction on a world scale were eagerly anticipating the collapse of the young Soviet state.

As a consequence, the Soviet government nationalized the commanding heights of the economy in June 1918. All industries engaged in mining, engineering, textiles, electrical goods, wood and lumber, tobacco, glass, ceramics, leather, cement, rubber, transport and fuel were nationalized. These were vital industries, and it was necessary to protect them from the sabotage of the bourgeois and to reorganize them for the war effort.

The Congress of Economic Councils, which had been formed in December 1917, decided to establish management boards of all nationalized industries composed of the following: 1/3 of the board came from the regional Economic Councils or the Supreme Economic Soviet, 1/3 came from the trade unions, and the other 1/3 from the workers of the enterprise itself. The factory committees were in turn transformed into the base cells of the trade unions, and began to manage and administer industry. These measures were taken to ensure the democratic planning of the economy and the socialized nature of the economy. It ensured the democratic control over the economy of the working class as a whole and not just of the workers in individual factories. This form of syndicalism and “local self-management”, which had dominated from before October until the summer 1918, had been causing friction and competition as well as hording and profiteering, and was ultimately crippling the economy. These new measures of the Soviet state reversed the chaotic trend in the economy and were a major part of why the Soviets were able to win the Civil War.

Now I don’t want to get into the whole question of Stalinism and the degeneration of the Soviet Union, as that is not the point or the topic of today’s discussion, but suffice it to say this: that workers’ democracy, that is workers’ control and workers’ management of industry did not develop under ideal conditions in Russia. But even so, even in a country faced with crushing backwardness, facing the general sabotage not only of the Russian bourgeoisie but also of the technical personnel and the imperialists, the young and inexperienced Russian proletariat, surrounded by enemies on all sides, was able to organize the management of industry. This is a testament to the creativity of the working class and its ability to transform society.

However, the Soviet Union emerged from the Civil War absolutely shattered. In 1921, industrial and agricultural production were only 13% of their pre-war levels. Seven full years of war, revolution, and civil war had taken their toll on the economy and the country as a whole. Everything that was left had been submitted to winning the Civil War. The working class emerged from the Civil War, as Lenin said, “de-classed”. Most of the advanced workers had given their lives on the front. Peasants, hostile to the cities and the factories, and angry from their experiences of the war, were brought into the cities to fill the factories. In many ways, it was the bureaucracy and not the working class that emerged victorious from the Civil War.

With the introduction of the NEP and the growth of bureaucracy, workers’ democracy was replaced by the will of the growing, and increasingly self-aware, bureaucracy. Workers’ management of industry was replaced by the bureaucratic mis-management of industry.

The Yugoslavian Experience

I wanted to spend a few minutes on Yugoslavia and the question of workers’ cooperatives and so-called market-socialism. This is an important topic and very relevant to the question of workers’ control in Venezuela. Much of this also applies to ideas that are being put forward by the so-called New Left in China today as well.

In Yugoslavia enterprises were state-owned and were officially entrusted to the workers to run through their workers’ councils or self-management committees. The most important thing to realize and to keep in mind when discussing these self-management committees is that they functioned in the market – they competed both nationally and internationally. These firms and companies were advertising, competing, and doing anything they could to increase profits. It was this pursuit of profits that led to the domination of the enterprise managers and specialists over the workers.

It was the Tito-Stalin split that sparked off this development of so-called self-management in Yugoslavia. Until 1948, Yugoslavia had a system very similar to that in the USSR. In fact, the Yugoslav party was the most loyal to Stalin. But Tito had led the armed struggle against the Nazis and had come to power on his own as it were, without the assistance of the Soviet Red Army. He had his own power base, and this led to a series of disputes with Stalin and the Soviet bureaucracy. After the Tito-Stalin split the Yugoslav leadership suddenly announced that the Soviet Union had degenerated into “State Capitalism”.

In an attempt to find an ideological justification for the split with Stalin, the Yugoslav bureaucrats further argued that state ownership was only a precondition for socialism – which is broadly correct. What they argued was that in order to build socialism, socialist relations of production needed to be developed, which is, of course, also correct. However, they believed that socialist relations of production would be fostered by self-management, believing that otherwise the system would degenerate into bureaucratic despotism (this was a clever means the Yugoslav bureaucrats used to gain the support of the working class in the struggle against the USSR and for the proposed “reforms”). They attacked the central control of the economy in the USSR. However, it was not central control that was the problem, but the lack of workers’ control. Market reforms were also proposed as a means of boosting the sluggish economy and finding other sources of trade now that Soviet assistance was cut off (Trade with the USSR and other Eastern Bloc countries accounted for 50% of both imports and exports. By 1950, this was reduced to 0%).

In 1950, Yugoslavia introduced a new law on workers’ self-management. They argued that the decentralization of workers’ self-management was the beginning of the withering away of the state. In reality, real power was in the hands of the state bureaucracy. The First Five Year Plan (1947-1952) did not achieve its targets. The quality of products was low, and by 1949 the productivity of labour was decreasing. The Yugoslav bureaucrats began to search for an “automatic procedure” to regulate the economy – similar to how the market functions under capitalism. In the absence of genuine workers’ control as a means of controlling the quality of production, the Stalinists were forced to search for “market mechanisms”. From the outset it was clear that these measures would unleash a whole series of contradictions. The Stalinists were trying to square the circle in trying to open up to market and yet trying to maintain central control at the same time.

The management of enterprises became the responsibility of the workers’ councils of the enterprise rather than of the state ministers. Detailed plans for production were shifted to basic planning for investment. Wage levels were set centrally, but supplemented and augmented by bonuses in the individual enterprises, tying higher wages to the pursuit of profit. However, this was only on paper. The self-management committees were controlled by the enterprise managers, who were close to the state ministers and bureaucrats. These committees were strictly subordinate to Party and trade union control. Managers were often appointed on the basis of political loyalty to state ministers, and of course received wages higher than those of the workers they commanded.

The other important thing to keep in mind is that these companies were now taxed (as opposed to revenues being transferred to the state), and these funds were used by the state for new investment and the creation of new enterprises. These new enterprises were quickly turned over to the “workers’ councils” to run. Profit made by these companies was not redistributed by the state, but remained within the company.

It is important to realize that the workers only had formal control of their workplaces. Under self-management, the workers supposedly ran the factories and were free to make their own production and marketing decisions. However, it was actually the state that still controlled the economy and the enterprises under workers’ self-management. The state had the power to appoint factory directors and allocate money for each enterprise. Although production did boom, state control of investment led to continued funding and survival of inefficient enterprises funded by the state, particularly those politically favoured by the state bureaucracy.

This system did enjoy a brief period of success, as Yugoslavia had the most rapidly growing economy in the world in the 1950s. However in 1957, the Congress of Workers’ Councils (the first and only meeting of the Workers’ Councils) demanded more power. It is important to understand that these councils were bureaucratic bodies under the control of the managers and specialists in the enterprises rather than the workers themselves. They wanted state regulations relaxed and taxes lowered. These firms wanted more money left to them so that they could invest individually rather than have the State making investment decisions.

The self-management committees were becoming increasingly self-aware of their own interests, which they counter-posed to the interests of the state bureaucrats and ministers. It was argued that these measures were a move away from “State Capitalism” towards socialism. In reality it was the introduction of the market and a move towards capitalism, or more correctly it was preparing the transition to capitalism. Under a genuine workers’ state, in the condition of isolation, it would not be wrong to introduce limited market reforms, such as the Bolsheviks did with the NEP. Market reforms were used to sort out irregularities and inefficiencies in the economy, and boost production (particularly agricultural production). This would have been the case in Yugoslavia with its bureaucratic plan, where inefficiencies and low productivity were obvious, especially after they had been isolated by the USSR. However, market reforms under Stalinism develop their own internal logic, as we eventually saw in Yugoslavia and we see in China today. Rather than the market being used to develop the state sector and the plan, the state sector and the plan can end up funding the market. It also creates the conditions whereby the bureaucrats and managers become interested in legitimizing and formalizing their power and control – by becoming bourgeois.

The high growth of the 1950s collapsed in the early 1960s, and as a result the reforms proposed by the workers’ councils were introduced. This represented a greater shift towards the market and the growing power of the managers. However, in 1962 the Third Economic Plan was abandoned after only 1 year due to economic crisis. Industrial production plummeted to half of the level in 1960, imports spiralled, exports collapsed, and inflation increased massively.

The response of the state bureaucracy was to move further towards “market socialism”. The state wanted Yugoslav companies to be competitive in the world market and the state monopoly on foreign trade was removed and the currency was made convertible. The Yugoslav bureaucrats argued that if the workers were not making the key investment decisions through the workers’ councils, then they were not really in control. It was all summed up in the saying: “He who rules over expanded reproduction rules society”.

And here is the question: does the working class rule society when it is the atomized working class, through individual enterprises and firms that control investment and reproduction, or is it when the working class as a whole, through the state, controls investment and reproduction? Obviously it is the latter. Under the Yugoslav model, it was the individual firm in pursuit of profits that ruled, and not the working class. It is the nationalized, state-owned, democratically planned economy that guarantees the workers’ control of the overall economy and not just one industry or factory. It also safeguards the socialized nature of the economy and the development of socialist relations of production. Socialism means the centralized, democratic control of the overall economy by the working class, to develop the economy as a whole and guaranteeing the interests of the working class as a whole – not just guaranteeing the individual self-interest of a given factory or industry. The problem in Yugoslavia was not so much that power over the factories was handed to the self-management committees, this would have actually been a very progressive and democratic step forward as long as the economy was organized into a centralized democratic plan, under the control of the working class, involving a genuine workers’ state. The problem was that control of the economy was decentralized, and the economy left to the interests of individual firms. This pursuit of profit and the self-interest of the enterprises resulted in the control of the managers and specialists over the self-management committees.

The result of these reforms was predictable. Inequality increased in the 1960s, between firms in the same industry, between different industries, between town and country, and between regions. By the mid to late 1960s income levels in Slovenia were six times greater than those in Kosovo. The rich got richer, and predictably the influence of the workers fell in relation to the experts in the enterprises, because if the aim was produce for profit, then the workers tended to rely more and more on the specialists and managers to make that profit. Had the economy remained centralized, and the economy democratically planned for the benefit of all, then the influence of the workers would have risen in relation to the experts, as the expertise and knowledge of the specialists would have been used to the benefit of the economy as a whole rather than to fulfill their narrow self-interest. Workers’ democracy could have replaced the market as a means of regulating the economy.

Another major step towards capitalism was the dismantling of state investment and the central state bank. Accumulated state investment funds were dismantled and invested in self-management banks, which then lent money to enterprises on a profit-oriented basis.

All of these measures led to rebellion against the market in the late 1960s and early 1970s, led by the students and youth and the people in the poorer regions. There was a general attack on the market, the growth of inequality, and on the significantly growing power of the banks and the managers over the enterprises.

By 1974 “market socialism” had been abandoned in the face of massive worker unrest, which culminated in a seven-day occupation of the University of Belgrade under the slogan “down with the Red Bourgeoisie”. Eventually planning was brought back, but it was neither the bureaucratic Soviet model, nor genuine democratic planning. Individual firms negotiated Five Year investment “deals” with the state.

Looking at the history of Yugoslavia, one can see there was always a struggle between centralization and de-centralization, as well as a struggle between the managerial caste and the state bureaucratic caste. Stalinism fundamentally failed to solve the regional disparity in Yugoslavia. When decentralization and the market reforms were introduced in the 1950s, it was seen as a victory for the various national bureaucrats. Their narrow national interest meant that they were interested in developing their own national economies as against the others. This also put more power into the hands of the mangers. When the central state attempted to re-introduce measures of centralization in the 1970s, it was resisted by the national bureaucrats and the managers (especially those in Slovenia and Croatia). It was a struggle between the different sections of the bureaucracy, representing different interests. On the one side the national bureaucratic cliques and the managerial caste pushed for further de-centralization in order to further their interests and power, while the central state pushed for centralization (in the 1970s). The abandoning of “market socialism” was an attempt by the state bureaucrats, who realized that market reforms now threatened their power, to re-assert their control over the managers and regional bureaucratic cliques. For example, if by the mid-1960s wages in Slovenia were six times greater than in Kosovo, it is easy to see why the Slovenian bureaucrats, whose narrow national outlook dominated all their decisions, would have an interest in decentralization – so that they could reap the benefits of their regional wealth rather than see it go to their neighbours.

The Yugoslav model of self-management had major problems – problems that played a significant role in the brutal break up of the country. Because each individual firm competed on the market, the self-managed firms were self-interested. They were interested in maximizing the profit of the company, so that part of the profit (the part not earmarked for expenses or further investment) could go to increase the income of the workers. This placed all power in the factory not in the self-management committees of the workers, but in the managers and specialists. We will see these same problems when we discuss workers’ control in Venezuela. The cooperatives there, because they still operate under a capitalist economy, are under pressure to maximize profits. This creates contradictions in the company and tends to place control in the hands of the managers rather than the workers’ committees. The pursuit of profits sets firms against one another in competition, sets workers against workers in competition, and also leads to internal differentiation in the individual factory, where the managers and specialists look to tighten their control in order to gain power and access to profits. This is precisely why it is imperative that nationalized industries be integrated into a democratic plan, and essential that all nationalized industries are placed under the control of the local workers, the trade unions, and the state.

To combat this inequality between firms in Yugoslavia, the poor companies attempted to raise wages. This left them with less money to invest if they wanted to meet their wage bills, which in turn hurt their economic growth, thereby hurting wages. As a result they began borrowing from the self-managed banks, became heavily indebted, and increased the inflation rate.

There was also the problem of unemployment. In general, the self-managed enterprises did not sack people or lay people off. However, they also did not create many jobs. Why? Because the income of the workers was directly tied to profits – so the more workers that were hired, the less wages everyone would receive. This meant that poor people from the countryside ended up going to Western Europe to work. In 1971, the unemployment rate in Yugoslavia stood at 7%, however, an incredible 20% of the workforce was working outside the country.

The other major problem was the atomization of the working class. The Yugoslav leadership argued that their model of self-management would lead to the development of socialist relations of production. However, if socialist relations of production are the goal, then investment decisions cannot be left to individual companies, because they have no sense of the needs of society or the economy as a whole. Again, it was the interests of the individual firm, not the working class that ruled. In fact, the interests of the workers were submitted to the interests of their firm. They were interested in investment to make further profits. As the proportion of wages to profits was fixed, the only way to raise wages was to increase profits, which meant the increased exploitation of the working class. This, along with the fact that the workers could see the contradiction between what they were told workers’ self-management was supposed to be, and what it really was, led to demoralization and disinterest on the part of the working class, with notable increases in absenteeism by the 1970s.

This system, again, resembled the anarchy of capitalism more than the harmony of socialist relations of production. The Yugoslav bureaucrats also dismantled the state monopoly on foreign trade, which put the individual Yugoslav enterprises in direct contact with the world market. This allowed for the direct intervention of capitalism and imperialism in the Yugoslav economy with no central control or monitoring.

During the 1970s, self-managed companies borrowed heavily from Western banks. The original idea was that they would borrow, sometimes extensively, and invest this money in the expansion and modernization of the individual firms with the hope that they would be able to export to Western Europe and pay back the loans. However, the international recession of 1979 shattered these hopes. The individual firms found it difficult to repay their loans. Furthermore, because there was no state monopoly on foreign trade, no one knew the total amount of foreign debt. In the end, Yugoslavia had to assume the debt as a nation. The standard of living collapsed. Between 1982 and 1989 it fell by 40%. Inflation skyrocketed – in 1987 the inflation rate was 150%, by 1989 it reached 1950%.

In 1988 Yugoslavia had the highest per capita foreign debt in all of Europe, totalling over US$ 20 billion. Between 1984 and 1988, Yugoslavia paid some US$ 14 billion in interest on its debt, crippling the economy.

By the 1980s the IMF had slapped on strict conditions for loan renewal. Of course, this meant the reduction of the “social sector”. The IMF forced self-managed banks to become private banks, and self-managed enterprises to become companies with clear ownership status – i.e. into capitalist corporations.

It is important to underline that all of this was a direct result of the policies of “market socialism”, and that this led directly to the brutal disintegration of Yugoslavia. In fact, from self-managed companies and banks, it was not a big step to move to private, capitalist companies. The managers of the so-called self-managed firms assumed ownership of the enterprises, now making profits rather than receiving higher wages.

The economic crisis that hit Yugoslavia in the 1980s is what led to the political crisis. The ruling bureaucratic cliques in the different regions turned to nationalism and the old policy of blame your neighbour. Faced with the possibility of a genuine workers’ revolution, they turned to rabid nationalism – and we all know the result.

What are the lessons of the Yugoslav experience? It seems obvious that what is required is state ownership of the commanding heights of the economy and a state monopoly on foreign trade. The withering away of the state does not occur simply by handing over nationalized industries and enterprises to the workers and the managers and making them shareholders. In Yugoslavia, where the managers controlled the self-management committees anyway, this simply led to the atomization of the working class. Simply making the workers owners of individual companies is not social ownership: the self-management committees (controlled by the managers) functioned like private owners and this led directly to the full restoration of capitalism. The key to the socialist transformation and the withering away of the state in the deformed workers’ states was genuine workers’ control. Socialism is not simply about looking after the interests of the workers in local, individual enterprises. Socialism is looking after the interests of the working class, the economy, and society as a whole. For this, state ownership is required. State ownership defends the socialized character of the economy, but does not signify social ownership. A nationalized economy, centralized into one democratic plan, where each factory has a board of directors composed of 1/3 local workers, 1/3 trade unions, and 1/3 state representatives (or some variation thereof), defends the interests of the workers, the class as a whole, and is capable of recognizing the needs of the economy and society as a whole in a way that atomized self-management committees were not. It is on this basis that productivity can be increased and the potential power of the economy, liberated from the straightjackets of private ownership and the nation state, can be unleashed. The inequalities in society can be overcome, such that state-ownership becomes genuine social ownership.

Another important lesson of Yugoslavia is internationalism. The break-up of the Soviet Union and the collapse of the Eastern Bloc was a result of the narrow national outlook of the ruling bureaucracy in each country. They were left to organize their own backward economies and trade amongst themselves. On the basis of genuine Bolshevism and internationalism it would have been possible to integrate the different national economies and build an integrated, democratically planned economy using the resources and labour power of all countries from Havana to Beijing. This would have unleashed the productive forces of these countries, fostered the socialist development of the economy, and led to the development of socialist relations of production and genuine social ownership of the means of production.

Workers’ Control and the Venezuelan Revolution

And this brings us to Venezuela. What does all of this mean for the Bolivarian Revolution and the movement for cogestion? What the events in Venezuela show is that the workers can run industry. The old saying is true: the bosses need the workers, but the workers don’t need the bosses. Of course, technicians, experts and specialists are needed, but they must be placed under workers’ control. The experience of the workers at PDVSA clearly demonstrates this. PDVSA is no small company. In fact it is one of the largest in Latin America and involves incredibly high-tech coordination, involving computers, satellites and so on.

This is one advantage that Venezuela has over Russia in 1917. The development and extension of capitalism since the Second World War has led to the strengthening of the proletariat on a world scale. The workers today are much better educated now than in 1917. They work with complex machines, computers, satellites, etc, and require a relatively high degree of education. PDVSA shows that workers can assume management of industry much more easily than in Russia 1917.

Another important thing to bear in mind is that the idea of cogestion is included in the Venezuelan constitution. Although the form of cogestion is not always clear, and although the language used can appear confused to us and the law not very clear, these things are not decisive. Workers’ control is not what the law makes it, but what the workers make it. As Trotsky explained, “At a certain stage the workers dislocate the framework of the law or break it down, or else simply disregard it altogether. Precisely therein consists the transition to a purely revolutionary situation”.

It is clear that by cogestion the working class in Venezuela means workers’ control and workers’ management. If you visit the ALCASA website, an aluminum smelter where the most advanced co-management is taking place, you can see a poster the workers have created with the main slogans, “Workers’ Control” and “All Power to the Working Class”.

The struggle for workers’ control and management finds its beginnings with the bosses’ lockout of 2002-2003. The workers in PDVSA, the state-owned oil company, took over their installations and ran them on their own, overcoming sabotage organised by the managers. The workers of CADAFE, the state electricity company that provides 60% of Venezuela’s electricity, implemented contingency plans to prevent sabotage by reactionary managers from taking place. The workers at these companies effectively prevented the sabotage of the industry. The oil workers at first did not think that they could run the installations, but quickly realized that they could. They realized that management was often on holidays or away and that they had really run the company on their own before.

After the lockout workers’ control disappeared in PDVSA. However, the workers are aware that the company is again being run along capitalist lines. After the lockout the PDVSA workers had a number of discussions on the issue of workers’ control. As a result of these meetings, Pedro Montilla from the La Jornada movement of oil workers drafted a proposal for a decree on co-management in PDVSA. Unfortunately, these proposals were never ratified. As a result, tensions are rising in the oil industry as the workers are demanding the implementation of workers’ control.

These were some of the demands made by the PDVSA workers:

  • that cogestion involve all aspects of extraction, distribution, production and storage, including the control of prices for buying and selling

  • that all books are open to all representatives at all levels elected by the workers

  • that cogestion is exercised by all the workers through their elected representatives in every plant and factory, and that they will not stop working and be given time for management duties

  • everyone is accountable to the assembly of workers, and there must be strict maintenance of order and discipline and protection of goods

  • reports will be made to the workers assembly on a regular basis

  • all representatives will be subject to the right of recall (full proposal in Spanish:

On the basis of these proposals the oil workers have also made the following arguments:

  • that sabotage of PDVSA cannot be prevented without workers’ control and without the adoption of the above measures to ensure accountability, discipline, and transparency.

  • President Chavez has threatened to stop selling oil to the United States. If this threat were to be followed through, it would not happen without workers’ control of the oil industry as management would attempt sabotage.

At the same time the workers at CADAFE started a struggle for cogestion. Both the PDVSA and CADAFE workers are aware of the differences between workers’ control and workers’ participation. The CADAFE workers also wrote a series of concrete proposals for workers’ control. The workers are angry because some token measures and steps have been taken, but genuine workers’ control has not been implemented. Of the 5 member coordinating committee, 2 positions have been reserved for trade unionists who were appointed and not recallable. The president of the company does not need to heed the directives or instructions of this board. In this case it is the managers in this state company that are resisting the workers’ demands. Both the managers and the state wanted to restrict the workers’ decision making power to secondary issues (in Valencia for instance they gave the workers full consultation rights over X-Mas decorations in the company buildings!). The workers have fought for every inch of workers’ control, and have now launched a struggle for real cogestion.

The workers in these two industries now face another argument from management who say that there should be no workers’ participation or control in strategic industries. This is a joke. It was the PDVSA workers that recovered production during the bosses’ lockout, it was the aluminum and steel workers in Guayana who fought their way to the gas installations to maintain supplies, and it was the CADAFE workers who maintained the supply of electricity to the country and prevented the sabotage of the industry and the Venezuelan economy as a whole. The argument is that the workers cannot be trusted with strategic and vital industries, a smokescreen behind which lies a generalized assault on the idea of workers’ control. However, if the Venezuelan government wishes to ensure the smooth running of these industries and prevent their sabotage, they should entrust them to the workers, as they have already proven that they will defend and protect these industries against the sabotage of the bosses and managers in defence of the revolution. But there is another important point to make – similar to what Trotsky argued about the Donets Coal Basin. That if PDVSA is left in the hands of a workers’ cooperative, that this cooperative would control the oil of PDVSA and could conceivable hold the rest of the country hostage. The most powerful force in Venezuelan society would be the PDVSA managers, who would control some 70%-80% of Venezuela’s economy. If something similar to what is happening in Venepal were to take place in PDVSA, this would surely be the case. Workers’ control and management must be put in place in PDVSA, but to ensure that the working class as a whole democratically controls the economy, and to ensure workers’ democracy in general, all major companies, including PDVSA, must be incorporated into a centralized, democratic plan for the economy. This would mean that the board of directors for PDVSA be composed of 1/3 of the workers, 1/3 from the trade unions, and 1/3 from the state (or some variation thereof).

A good example of workers’ control is CADELA, a subsidiary of CADAFE in Merida which is run under a form of workers’ cogestion. A few weeks ago there were serious mudslides and floods that cut the electricity supply to the surrounding communities. The experts thought that it would take 2 months to restore the supply. However, the organized communities were in direct contact with the workers and helped to repair the damage. Through working together and planning the work, and after a lot of overtime to benefit the people, the electricity supply was restored in 2 weeks.

After the defeat of the bosses’ lockout the bosses across Venezuela closed and locked-out many factories and enterprises – for political reasons not economic reasons. Some 250,000 to 500,000 jobs were lost. This where you can see that workers’ control does not generally come about over questions of production, but the defence of jobs, communities and so on.

Shortly after these widespread lockouts and factory closures, the workers began to take over the factories and places of work. The most advanced struggle at this time was Venepal. At one point the workers took it over and wanted to run it as coop. The workers were able to demonstrate the superiority of workers’ control. There was a machine at the plant that was made in Germany. The machine had broken down and needed to be repaired. Management refused to fix it because it required that an engineer be flown over from Germany to repair it (so they said). This left the plant running at less than full capacity. After management left and the workers occupied the plant, they simply improvised and repaired the machine and restored the factory to full productivity.

It was our comrades in the CMR who first put forward the demand for workers’ control and nationalization and it was then adopted by the workers. On January 19th this year the company was expropriated and Chavez announced it would be run under workers’ control. Now the workers’ cooperative owns 49% of the plant and the state owns 51%, to guarantee the nationalized character. The workers elected the directors and the ministry sent two representatives to go through the experience of running the factory with the workers.

However, problems have developed. A workers’ assembly decided to disband the union and now hope to buy the state’s shares so that they can become the owners of the plant and keep any profits made from production.

Alexis Ornevo, a member of INVEPAL’s directorate stated earlier this year at the International Gathering in Solidarity with the Venezuelan Revolution, that since the workers no longer had bosses, they no longer needed a union. According to the constitution, through some sort of loophole, the workers’ cooperative can legally increase its 49% share to 95%. Ornevo has openly expressed his intention to do this. Contradictions like this are inevitable. An all-embracing, genuine, workers’ control is needed to prevent groups of workers from going down the path of individual enrichment.

Angel Navas, the CADAFE union president worries that the development at INVEPAL will create a model of cogestion as a capitalist cooperative. He said the following:

“As we saw in yesterday’s presentation of INVEPAL, they are having some problems, they seem to be thinking as managers. According to what we heard yesterday, they want to own all the companies shares. 800 workers will be the owners of a company. And if it becomes profitable, are these workers going to get rich? This is a company that is supposed to belong to the entire country; my company can’t only belong to the workers. If we make profits they belong to the entire population. This is a responsibility that we all have – workers in the oil industry, those who make the most: how do we spread this to the rest of the country? These profits are not for me. It doesn’t make sense that because I work in the oil industry, for example, I can make 90 million bolivars when the minimum wage is 4 million bolivars.”

Compare that to Yugoslavia, where the workers felt that they owned their factory and competed on the market. Again, this was the major problem is Yugoslavia – the inequality of wages. Certain workers were simply lucky that they had a monopoly of access to good jobs, whereas other workers were left out in the cold. The whole point is that the profits of a state-owned, nationalized company should be taken by the state and redistributed and reinvested in society as a whole, in order to develop the economy and rid it of inequality. This is what is meant by the socialization of the economy. If productivity is raised, there is more profit to be distributed to society, which in turn creates more social wealth, ridding society of inequality. In Yugoslavia, it was a still a system of individual appropriation of profit by individual firms, not socialized appropriation. If the current group of directors succeed in INVEPAL in their project of taking over a majority stake in the company in order to enrich the workers of INVEPAL, this will simply set one group of workers against the others and increase inequality. It could also create a struggle within INVEPAL for control of those shares. If the workers of each industry or enterprise are allowed to keep the profits of production, profit will not be redistributed socially but remain private – which is basically capitalism and will in no way lead to the development of socialist relations of production.

Then there is the CNV, where we also have a certain amount of influence. The CNV was nationalized in May and renamed INVEVAL. Here the difficulties are coming not from the workers’ cooperative but the state. Well, it must be said that the former owner has launched an injunction demanding to be paid compensation for the expropriation, but the real problem is that when it was nationalized Chavez made it very clear that the workers had to have a majority of representatives on the board of directors and that the highest decision making body should be the General Workers’ Assembly. However, when the representatives of the Ministry for People’s Economy read the proposed statutes of the company to the workers, there was no mention of the participation of the workers. The mass meeting of workers rejected this proposal and began to mobilize around the demand for workers’ control. They have now linked up with workers in other companies where there is workers’ control in order to spread the struggle beyond INVEVAL. We will come back to this in a few minutes. (1)

The most advanced experience of workers’ control is taking place in ALCASA, the massive state-owned aluminum plant. It is absolutely amazing to read the material on cogestion in Venezuela. The debates and discussions on workers’ control and socialism are very advanced, in many ways more advanced than in Russia 1917, and this is without the benefit of a Bolshevik Party!

The workers at ALCASA are absolutely clear about what cogestion means. Edgar Caldera, one of the workers’ union leaders has written the following:

“If there is something the workers must understand clearly it is that our co-management cannot become a weapon to deepen the exploitive capitalist mode of production. We cannot repeat the sad story of Europe, where the system of co-management was used to get rid of the rights of the workers and their acquired rights.

The co-management that we have begun to apply in ALCASA has nothing to do with this. It is about a genuine emancipation of our class, based on the revolutionary principles of Marx, Rosa Luxemburg, Gramsci, and Trotsky, amongst others. It is about creating a model of co-management with the aim of transforming the capitalist mode of production, which is based on the exploitation of man by man, into a mode of social relations based on the principles of cooperation, solidarity, justice, equality, co-responsibility and common well-being of the workers and the population in general.” (ALCASA:Cogestion, workers’ control and production,

In another article he writes:

“The workers of ALCASA are pushing forward workers’ control and community control, based on the General Assemblies as supreme authority… which have totally transformed the old structure of power and are giving all power to the workers and the community…

In ALCASA the workers elect the managers, who are paid the same wages, and are subject to the right of recall. The most important decisions are made by the General Workers’ Assembly. The managers have also said they will not shut themselves away in the office, they will continue to work.” (ALCASA: bourgeois cogestion or workers’ cogestion,

Trino Silva, another one of the workers’ leaders said the following in an interview:

“The workers should choose the president of ALCASA. But the Board of Directors should not be composed of only workers. We are thinking of a 14 person board: seven primary, and seven substitutes. Of the seven primary members, four should be ALCASA workers, two should be government representatives (so that they can oversee what we are doing with the business), and another should a representative of the organized community.”

Significantly he adds:

“ALCASA does not only belong to the ALCASA workers, nor to Trina Silva and the ALCASA workers, but to all of the people. Therefore the public has the right to representation on the Board; first for transparency, and second to ensure that ALCASA benefits everyone.” (Aluminum Workers in Venezuela Choose Their Managers and Increase Production, interview by M. Harnecker,

The experience at ALCASA and community participation in management has led them to other excellent ideas, which demonstrate the power of workers’ control to transform society. Last year ALCASA spent 24 billion bolivars on health care in private clinics for workers. The union believes that they own some land close to the plant and that they can give this land to the state to build a public clinic for ALCASA workers and the surrounding communities. ALCASA and several businesses in the area are also going to chip in and build an industrial kitchen for workers and the community. There are some 200 cooks in the area they could organize and provide jobs to. They also want to break the transportation monopoly on the area. They want to help fund and create a better, more comfortable and more affordable public transportation system. This is a clear demonstration of workers’ control, workers’ democracy, can replace the market as a regulator of the economy. The workers’ can clearly see what needs to be done, what needs to be improved, and can demand that investment be made in these areas. If this experience were repeated on a national scale, and social wealth available to all through a democratically planned economy, it is easy to see how quickly Venezuela could develop.

However there are some dangers that ALCASA faces. ALCASA is in fact a loss-making enterprise. The reformists and the bureaucrats may use the creativity of the workers to turn it into a profit-making enterprise, and then try to squeeze out workers’ control. Or, if ALCASA continues to make a loss, the reformists may try to argue that workers’ control does not work and that it should be abandoned as part of a generalized attack on the working class and any elements of control or management they may have over the economy.

I hope everyone here had a chance to see Jorge Martin’s article which appeared about a week and a half ago on the expropriation of idle factories. The total number of idle companies being investigated in Venezuela is 1149. This is a measure designed to defend jobs, break the sabotage of the bosses, and break Venezuela’s dependency on imports. If the state is to run these enterprises under workers’ control, they will need to provide these companies with raw resources. These companies will then in turn have to sell their finished product. This will force the beginnings of an economic plan and may eventually force Chavez to consider the expropriation of the bourgeois. This demand will more than likely come from the working class itself. The workers will begin to ask questions: why is nationalization limited to factories that are bankrupt or shutdown? Why should the state always nationalize the losses and privatize the profits? In order that these former idle, soon to be nationalized enterprises are viable, they must be part of a general plan of production. That will not be possible as long as the key sections of the economy, such as banking and credit, remain in private hands. These nationalized companies will be at the mercy of capitalism, will face sabotage, and will face the refusal to sell products. This will force Chavez and the government down the road of expropriation.

Jorge Martin’s article also explains that for any employers that want to keep their companies open, the state will help them out with low interest credit, but only on condition that “the employers give workers’ participation in management, the direction, and the profits of the company”.

Under normal conditions this would be a clever trick to disarm the working class. However in Venezuela today, this will only serve to increase the confidence of the workers and sharpen class struggle in these factories.

Now, the final point I want to make about Venezuela is the national meeting of workers involved in the experiences of workers’ control which was held on June 16-18. This involved the workers of INVEVAL, ALCASA, PDVSA and several other companies. Some of the decisions made were:

  1. the construction of a National Front for the Defence of Revolutionary Co-management, Endogenous Socialist development… at a local and state level.

  2. to characterize our cogestion as a movement that will affect capitalist relations and drive towards workers’ control, the power of the assemblies of citizens and the construction of a socialist state.

  3. the National Front proposes labour, social, and military co-management.

  4. to include amongst the proposals for revolutionary co-management that the companies must be the property of the State, without distribution of shares to the workers, and that any profits will be distributed according to the needs of society through the councils of socialist planning. These councils of socialist planning must be understood as bodies which implement the decisions taken by the citizens in assemblies.

  5. to fight for, promote and sytematize social and political education and socialist ideology in order to deepen the Bolivarian Revolution by the creation of local centres, state and regional centres with the view of building a National Network of Revolutionary Socio-Political education

  6. to build solidarity and spread the revolution throughout Latin America and the world.

  7. acknowledge the excluded, exploited, and oppressed as class allies of the struggle for the building of socialism of the 21st century.

It is quite clear from these resolutions that cogestion or co-management in Venezuela is in fact seen as a step towards the building of a socialist society. This national meeting of workers experiencing workers’ control is obviously an enormous step in the right direction. It is bringing the different groups of workers together and bringing them under one banner, it is giving shape to the movement, and giving shape to the ideology of the workers, which is moving inexorably towards socialism. The workers, through their own experience, have drawn the conclusion that workers’ control is a powerful tool in the hands of the working class. The struggle for workers’ control directly challenges the private ownership of the means of production, and is the struggle for the creation of the new society within the old. The socialist transformation of society depends on the transformation of the mode of production, and workers’ control and management is the revolutionary method of the working class to effect this transformation and attack the very heart of capitalism – on the factory and shop floor. This is why the revolution in Venezuela is moving in the direction of socialism – the form of struggle the working class adopts to defend the revolution, their jobs and livelihoods, and their interests, takes place on the shop floor against their enemy, capitalism and the bosses, in the form strikes and demonstrations but also of workers’ control and management. The socialist aims of the revolutionary movement are born out of this struggle, and workers’ management lays the foundations of the new society.

The movement for workers’ control is leading the working class to one conclusion: that the Bolivarian revolution must break with capitalism. It is the workers who see that in order to achieve their goals, the Revolution must break, radically, from capitalism. In order to solve problems such as unemployment, housing, education, and food production, it is necessary to draw up and economic plan based on the needs of the majority, not the profit of the minority. However, you cannot plan what you do not control, and you cannot control what you do not own. As long as the most important levers of economic power remain in the hands of the bosses, they will be able to organize sabotage, and even possibly the overthrow of the revolution.

The control of one, or several factories, as in Spain 1936, or in Chile in the early 1970s, or as in Venezuela today does not mean the end of capitalism. Inevitably, while the capitalists remain in overall control of the economy workers’ control cannot be maintained. Workers’ control is a big step. It gives the workers priceless experience in administration that is essential in a socialist planned economy. However, again, as long as the key elements of the economy remain in private hands, as long as there is not a genuine nationalized planned economy, the experience of workers’ control will only have a partial, unsatisfactory character.

Again, while workers control develops from below, from the shop floor through the plant upwards, workers' management develops from above and is only meaningful in the context of a socialist planned economy, with the monopolies nationalized. It means management by the workers of the overall plan of the economy, not just their own factory or local economy, making the general investment decisions' and plans for growth to meet the needs of the people. Socialists are not syndicalists who believe that control of individual plants or industries by the workers in them can guarantee the harmonious running of industry without overall management of the economy by the workers as a whole.

This means that ownership of industry cannot remain in the hands of the capitalists. Only public ownership of the major monopolies would guarantee workers' management and workers' control in the individual plants.

These workers councils must involve all sections of the working class including tenants, housewives, students and old age pensioners as well as the industrial trade union organizations of the workers. Regular elections of delegates, subject to immediate recall, and officials tied to the average wage of a skilled worker would safeguard the workers from the growth of a bureaucracy of officialdom usurping power.

The struggle for workers’ control must move forward, must be extended, and must be linked to the demand for the socialist transformation of society. The workers in Venezuela are doing this. Nationalization must be extended to the banks, the telecom sector, the land and food production centers, and to manufacturing and heavy industry. The economic power of the oligarchy and the imperialists must be broken. The Venezuelan working class is undergoing a massive transformation and becoming aware of its strength and its goals. Herein lies the hope for the Bolivarian Revolution. The successful extension of workers’ control and the building of socialism in Venezuela would spread across the entire continent. It would give hope and confidence to the working class in Bolivia, Argentina, Brazil, Mexico, and Cuba. The Latin American revolution would be a source of inspiration to the whole world.

I will end here with the words of Hugo Chavez: “A revolution is a process in which new ideas and models are born, while old ideas die, and in the Bolivarian Revolution, it is capitalism that will be eliminated!”

(1) The conflict has now been solved through a halfway compromise. The director’s board will be composed of three members appointed by the government and two by the workers cooperative. But Chavez insisted that the main director which is appointed by the government be the main leader of the workers’ struggle.

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