Cooperatives becoming bigger part of Cuba’s reforms

The continuing debates over cooperatives, including whether they represent a promising form of socialism or a reinforcement of capitalism, will likely have fresh evidence in coming years from Cuba.

The nascent cooperative movement in Cuba is genuine and growing, but many questions about its future direction are yet to be answered. That the Cuban cooperative movement is largely a top-down process, and subject to still opaque decision-making by party and government officials, adds more uncertainty. And inevitably intertwined with these debates are long-standing tensions between traditional state-owned models of property and emerging de-centralized models of cooperative property.

Perhaps the safest observation that can be made today is that nobody knows where Cuba’s experiment will lead.

Sunrise in Havana (photo by Jvlio)

Sunrise in Havana (photo by Jvlio)

The beginning stages of Cuban cooperatives were handled with considerable input. Thousands of meetings were held throughout the country in advance of the Communist Party of Cuba’s Sixth Congress, held in April 2011, to discuss the document Lineamientos de la política económica y social en Cuba (Guidelines on Economic and Social Policy in Cuba), which listed more than 300 goals intended as significant reforms to the Cuban economy. The guidelines approved at the Sixth Congress included autonomy for the state enterprises, an expansion of cooperatives, new taxing laws and changes in the system of subsidies.

Changes came swiftly. Almost 200 occupations previously limited to state enterprises were opened, and within three months of the Sixth Congress, more than 100,000 new small-business licenses were granted. The Cuban government estimated that about 489,000 people, representing nearly a tenth of the workforce, were self-employed in the first half of 2015.

The cooperative sector has not grown as fast, but by October 2013, 270 urban cooperatives had been approved. By late 2014, that number had reached nearly 500. But cooperatives are not new to Cuba — agricultural cooperatives have existed since the early years of the revolution and they produce about 80 percent of the food grown in Cuba. What is new is that cooperatives are now encouraged outside of agriculture, although they are primarily in services rather than manufacturing.

Reversal of previous openness to discussion

The Communist Party had intended to “update” the Guidelines at its Seventh Congress, held in April 2016. But no final documents have been released, nor had the documents to be discussed at the Congress been made available for discussion. This lack of transparency, said to be due to a continuing inability to complete the work, resulted in considerable public disapproval. A commentary in Green Left Weekly, contrasting this lack of transparency with the public input that helped shape the Guidelines approved by the Sixth Congress, noted the party faced a choice of either abandoning public consultation or postponing the congress.

The congress was not postponed. But the party did acknowledge the criticism directed at it. In a March 28 article (shortly before the Congress convened) in Granma, the official party newspaper, the paper wrote:

“The editorial office of this newspaper has received, by various means, expressions of concern from Party members (and non-members, as well) inquiring about the reasons for which, on this occasion, plans were not made for a popular discussion process, similar to that held five years ago regarding the proposed Economic and Social Policy Guidelines of the Party and Revolution.

The fact that such opinions and doubts were expressed is in no way reproachable, much less when they come from people who are genuinely concerned about the work of the Party and the country’s destiny.”

The Granma article argued that the discussions scheduled for the Seventh Congress would be a “continuation” of the work of the Sixth Congress, and that most of the Guidelines were still in the process of being implemented. Therefore, “what is more appropriate is finishing what has begun” rather than opening new discussions. The article argued that:

“[T]he guidelines approved by the 6th Congress serv[e] as the tactical approach to reach our aspirations, reflecting their continuity and development. These documents do not, therefore, represent anything different in terms of the road taken, but rather a higher level expression based on what has been discussed and submitted for consultation to all Party members and the people.”

Responding to criticisms of this line, President Raúl Castro later proposed that the Seventh Congress would adopt any documents “in principal” rather than definitively, promising further public consultation. The Congress did agree, but the documents still have not been released. This delay appears to be due to the drafts still being in progress; one of the documents is reported to have been drafted eight times.

Differing ideas as to direction of reforms

There is a consensus among informed observers that a primary reason for the Communist Party’s slowness in promulgating clear rules for the formation of cooperatives is that the party leadership has yet to reach a consensus itself. The Green Left Weekly commentary mentioned above suggests this division of opinion is behind the delays in producing the updated documents promised for the Seventh Congress. The author, Marce Cameron, wrote:

“The Central Committee’s glacial progress in drafting the two key documents suggests that it has tried to reconcile, behind closed doors, divergent conceptions of the new Cuban socialist model that is aspired to. They had to be reconciled if the leadership were to present a more or less coherent programmatic vision to the party as a whole—rather than strive to involve the party as a whole in developing that vision from the outset over the five years since the 6th Congress.”

In a thoughtful NACLA article, Roger Burbach, basing his analysis on the work of Camila Piñeiro Harnecker, summarized three visions of socialist economic development in Cuba. They are:

  • A statist position, largely reflecting the old guard. Advocates of this position call for more discipline and greater efficiency among state industries and enterprises, and argue that Cuba’s economic problems can be corrected through a more efficient state, not through a dismantling of the state.
  • A market socialist perspective, advanced by many economists. Advocates of a “socialist market economy” argue for privatization, even at the price of increased inequality, the exploitation of wage workers and environmental degradation, as the route to increased productivity and efficiency. These advocates assert the state can always step in to correct excesses.
  • An “autogestionario,” or self-management, stance that calls for democratic and sustainable development primarily through the promotion of cooperatives. Participation, association and solidarity should be at the heart of the new economy, advocates say. In this view, control should not come from the top down but from the bottom up, as workers engage in self-management to further their social and economic concerns.

The so far strong push for cooperatives from the party, and the assistance provided to them, is a good indication that cooperatives will be a part of Cuba’s future. To what degree remains an open question, but however that question is ultimately answered, the intention is that a significant portion of the economy will remain in state hands for the foreseeable future.

No return to capitalism

In a presentation on Cuba cooperatives at the Left Forum in New York last May, Isaac Saney noted that, despite the top-down manner of cooperative creation and the ongoing debate on whether the state should drive the development of cooperatives, popular support remains firm. He gave the example of U.S. President Barack Obama, on his trip to Cuba, saying the U.S. would buy coffee directly from Cuban coops, but the coops condemned that as intended to undermine the socialist state, which they would not go along with.

In the same Left Forum presentation, Al Campbell offered five considerations:

  • Cooperatives tend to build a sense of responsibility for the participants.
  • Coops build collective consciousness.
  • A negative is that coops can develop competition and rivalry with others; structures and practices are necessary to connect coops with the rest of society.
  • The danger of leaving economic coordination to the market; planning is an essential aspect of socialism.
  • Self-determination is a collective process; different decisions must be made by different people.

Parallel to these factors, in a part a reflection of the complex nature of the reforms, is that many cooperative enterprises did not become so on their own initiative. The Left Forum presenters, and others, have interviewed members of cooperatives who, when asked why they became a cooperative, did not know, saying they were told their state enterprise would now be a cooperative. Of 124 non-agricultural cooperatives created by mid-2013, 112 were former state enterprises, according to the Inter Press Service.

Complimentary to the creation of cooperatives, enterprises remaining in state hands are to be given more autonomy. The Inter Press Service reports:

“The authorities have defended ‘social ownership of the basic means of production’ as an essential aspect of the new economic model being built on the basis of reforms outlined by the ‘economic and social policy guidelines’ of the governing Communist Party of Cuba, considered a roadmap for ‘updating’ the socialist system promoted by President Raúl Castro.

In recent legislative debates that touched on this issue, the vice president of the Council of Ministers, Marino Murillo, said the changes underway were aimed at building ‘prosperous and sustainable socialism, in which the main protagonist is the public enterprise, strengthened with greater autonomy in its management and the distribution of its results.’ ”

Cooperatives not necessarily a path to socialism

There is some fear that cooperatives could lead Cuba back to capitalism. Although cooperatives represent a socialized form of production, and potentially can form the basis of a socialist economy based on democratic principles, coops are also completely compatible with capitalism. The formation of cooperatives in itself does not eliminate competition, not even capitalist competition. Locating the cause of greed, injustice, inequality and other social ills in the authoritarian, hierarchical structure of the capitalist enterprise is an overly simplistic analysis.

Co-op symbolAlthough that structure certainly is a factor, the cut-throat nature of unfettered, market-driven competition is central. The relentless pressure to increase profits, maximize market shares and eliminate competition — on pain of enterprise death for those who don’t do this sufficiently — makes unethical or anti-social business decisions inevitable. Putting social decisions in the hands of the capitalist “market” means putting those decisions in the hands of the biggest industrialists and financiers.

What if an economy was dominated by cooperative enterprises, but those coops competed ruthlessly with one another in unfettered market competition? Cooperative members would wind up reducing their own wages (which would be a commodity in such a scenario) and cutting whatever corners they could to survive the competition, just as capitalist enterprises do today. Smaller coops would go under or sell themselves to larger coops — an oligarchy would inevitably arise in most industries.

Working for a cooperative has its advantages, even under capitalism, but even a hugely successful cooperative such as Mondragon faces limits due to the relentless nature of capitalist competition, as the 2013 closing of its household-appliances company, Fagor Electrodomésticos, demonstrates.

An economy based on cooperatives would have to have cooperation between its cooperatives, rather than competition. Prices would have to be negotiated up and down the supply chain (with all enterprises’ financial information available to prevent unfair price-gouging) with perhaps an arbitration board to step in when parties could not agree. Community input would also be desirable, in the industries in which a given community is directly involved and for retail prices of consumer goods.

Cooperative enterprises can be responsible for investment, production and financial decisions — subject to democratic oversight — but might be required to demonstrate full compliance with a range of standards on issues such as equal opportunity, workers’ rights, health and safety, environmental protection and consumer protection. Enterprises could be required to be certified on all relevant issues before conducting business, and perhaps be re-certified at specified intervals.

And of course an economy based on cooperatives does not preclude that certain key industries remain in state hands (with democratic control). Banking, energy and basic utilities such as water come to mind as too important to allow any private control.

Old patterns of hierarchy not eliminated

The foregoing are theoretical constructs for a more developed system. In present-day Cuba, as would any society moving toward a cooperative model, there are many practical questions still to be worked out. There are also growing problems that need to be tackled. Writing in Daily Kos after a trip to Cuba, “Geminijen” observed that hierarchy seemed to stubbornly survive in some coops. She wrote:

“Although the coops are managed by the workers and the workers share the profits, many of the criteria of a coop seemed to be missing or in progress — i.e., there was usually one spokesperson who appeared to be the manager or ‘boss’ or a husband and wife heading up the business (coops are not supposed to be family businesses) and there did not always seem to be a clear path as to how the people who worked there could elect a different manager or board members (they all had elected boards) if they wanted to do so. In some cases, the members were encouraged to participate in the decision-making process, in others not so much.”

Although the writer noted that workers mostly seemed to not mind these conditions because they were making more money and had a say in pay scales, nonetheless inequality is a potential problem. In examining why “self-organized” forms of private enterprise approved by the state seemed more successful than state-run coops,

“[W]e didn’t consider that the state coops were hampered by their lack of access to raw materials necessary to create the coops. As a visiting Puerto Rican educational scholar pointed out to me, the privately organized coops have come in and taken over the failed state coops because they have the money (capital) to develop the business that the state run coops do not. When I asked self-organized coops where they got their capital, they were often evasive. My source suggested that many of these businesses were started with money from remittances from wealthy relatives in the United States. She also noted that since most of the wealthy people living in the States are white, this ability of one group of Cubans to obtain and invest capital not only was reintroducing class divisions, but increasing the divisions again between the races since most Afro Cubans did not have access to remittances.”

The Cuban government is making efforts to assist the coops created from state enterprises. Earlier this year, the government announced that restaurants and some other ex-state enterprises would be able to buy products at reduced prices from wholesale operations to be established for them, along with a tax cut, in exchange for price controls. Construction cooperatives are also hampered by inconsistent access to supplies and the sometimes poor condition of equipment inherited from state companies.

Cubans not looking north for answers

Forming a cooperative from scratch can still be difficult. There are heavy barriers, a Cuban anarchist visiting New York earlier this year reported in a presentation — approval is needed from the government, and there is no time period in which a response must be made. Political resistance remains; the presenter reported that his group was told to take down a banner saying “socialism is democracy” while participating in a parade, although they refused to do so. He is also fearful that Cuba is headed toward the model of China and Vietnam — a capitalist direction that he disapproved of.

Concomitantly, his biggest fear was of genetically modified organisms and other ills pouring into Cuba from the United States. Although there is a widespread desire among Cubans to be rid of the U.S. blockade that has done so much damage to their country, there is little desire for Cuba to revert to capitalism.

Daniel Hellinger, writing of the increased incomes but widening class divisions resulting from the reforms, reports that Cubans are firm in seeking to defend their gains. In a report written after a two-month stay in Havana, he wrote:

“They unfailingly welcome change — so long as three major accomplishments of the revolution are left untouched. No one wants a future without free, quality universal health care; free, quality education; and the peace of mind that comes with streets that are virtually free of crime or violence at any hour of the day or night. Moreover, while Cubans clearly welcome the thaw in relations, they are not looking to the U.S. to save them. Virtually everyone who talked to me seemed to agree with the government’s approach to rectifying problems; where they disagreed was over the pace of change, with most hoping to see it speed up, but more than a few anxious about their jobs, rations, pensions, etc.”

The Cuban government has consistently said it intends its reforms as a renewal of socialism, not a retreat. An objective accounting of the old Soviet model of centralized control with state ownership of all means of production has to acknowledge the disadvantages that come with it, along with the accompanying political constrictions. Change came too late, too haltingly and too much on the backs of working people in the Soviet Union, factors that can’t be ignored in assessing why the Soviet Union crumbled.

Cuba is a different country, but does face the problems of centralization. To the leadership’s credit, it is making a bonafide effort to effect necessary change, even if that change is yet to be agreed upon. It is much too early to say where Cuba’s experiment in cooperatives will lead, but the surest guarantee that it will prove to be an advance and not a retreat is the Cuban people themselves, who have stood up to unceasing U.S. attacks for more than a half-century.

New right-wing government cedes Argentina’s sovereignty to Wall Street

Argentina’s new right-wing president, Mauricio Macri, pledged to put an end to the country’s sovereignty, and on that he has been true to his word. The capitalist principal that windfall profits for speculators is the raison d’état for the world’s governments has been upheld.

Or, to put it in a different way, the government of Argentina will again be allowed to borrow on international financial markets — so that it can borrow money for the sole purpose of paying billions of dollars to speculators.

Argentina had been one of the few countries that refused to bleed its population to pay off odious debt under the 12-year husband and wife rule of Néstor Kirchner and Cristina Fernández. Their left-wing populism has been overstated — they left capitalist relations untouched and at best merely tolerated the movement of recovered factories — but they did consistently put the interests of Argentine working people ahead of international financiers. The election of the right-wing President Macri has put an end to that, along with his introducing the repression that austerity requires.

Entre Rios province, Argentina (photo by Felipe Gonzalez)

Entre Rios province, Argentina (photo by Felipe Gonzalez)

Argentina’s difficulties have a long history. The fascistic military dictatorship of 1976 to 1983 laid waste to the Argentine economy while unleashing horrific human rights abuses, and subsequent civilian governments sold off state enterprises at fire-sale prices while imposing austerity until the economy crashed at the end of 2001. Upon assuming office, President Kirchner suspended debt payments that would have impoverished the country. He offered to negotiate with bond holders, 93 percent of whom ultimately agreed to accept 30 percent of their bonds’ face value.

There were holdouts, most notably two hedge funds that waged a 15-year battle to extract the full value of the bonds, even though they bought them from the original holders for a fraction of the price. These two funds leading the holdouts were NML Capital, a subsidiary of Paul Singer’s Elliot Capital Management, and another hedge fund, Aurelius Capital Management. Mr. Singer, the type of character for which the term “vulture capitalist” was coined, is notorious for his scorched-earth tactics. At different points, he had an Argentine naval training ship seized in Ghana and attempted to seize Argentina’s presidential plane. His dedication to extracting every possible dollar regardless of cost to others was nicely summarized in 2011 by investigative journalist Greg Palast:

“Singer’s modus operandi is to find some forgotten tiny debt owed by a very poor nation (Peru and Congo were on his menu). He waits for the United States and European taxpayers to forgive the poor nations’ debts, then waits a bit longer for offers of food aid, medicine and investment loans. Then Singer pounces, legally grabbing at every resource and all the money going to the desperate country. Trade stops, funds freeze and an entire economy is effectively held hostage.

Singer then demands aid-giving nations pay monstrous ransoms to let trade resume. … Singer demanded $400 million from the Congo for a debt he picked up for less than $10 million. If he doesn’t get his 4,000 percent profit, he can effectively starve the nation. I don’t mean that figuratively — I mean starve as in no food. In Congo-Brazzaville last year, one-fourth of all deaths of children under five were caused by malnutrition.”

Buy low, demand very high

He’ll make a windfall profit off Argentina as well. The “special master” who presided over negotiations between the holdouts and the Argentine government — a veteran corporate lawyer who specializes in representing financiers and banks opposed to regulation — announced that NML Capital, Aurelius Capital and two other big hedge funds will receive 75 percent of the full principal and interest demanded by the holdouts. How big of a profit will this be? Only the funds themselves know for certain, but the lowest public estimate is a profit of nearly 400 percent.

Even that lowest estimate likely understates the profit. Bloomberg News reports that Mr. Singer will be paid $2.3 billion, or close to four times the $617 million in principal his firm holds. But as he likely paid only a small fraction of that principal, his profit is likely far greater. A Columbia University researcher estimates that NML Capital will receive $620 million for a portion of bonds for which it paid $48 million in 2008. That’s nearly a 13-fold profit in six years! As former President Fernández remarked when refusing to pay anything more than the 30 percent to which the other bondholders agreed, “I don’t even think that in organized crime there is a return rate of 1,608 per cent in such a short time,” adding that Argentina would not “submit to such extortion.”

President Fernández was referring to the profit Mr. Singer would have reaped had she given in to his full demands. She was speaking in a national address following two U.S. Supreme Court decisions in 2014 that upheld U.S. District Judge Thomas Griesa’s ruling that Argentina is not allowed to continue to pay the bondholders who agreed to accept 30 percent (or “haircuts” in financial parlance) until it reached an agreement with the holdouts. The Supreme Court also ruled that federal courts in the U.S. can order sovereign countries to hand over information on their assets to speculators. In other words, U.S. law, wielded to generate windfall profits for the most greedy, was decreed to apply to other countries, as if they are not sovereign.

The Kirchner-Fernández governments refused to yield their country’s sovereignty, but President Macri took office promising to pay off the vulture capitalists. Not only was Argentina’s ability to determine its own policy at risk, but the very concept of debt relief has been put in danger. The bondholders who agreed to take 30 percent made the calculation that something is better than nothing, and it enabled Argentina to recover from a severe economic crisis. The Kirchner-Fernández governments consistently offered the same deal to the holdouts. But now that the holdouts extracted so much more, will those who accepted the earlier deal now demand the same 75 percent given to the holdout funds? If they do, will they seek to enforce that after-the-fact better deal in the courtroom of Judge Griesa, who consistently showed himself biased in favor of the vulture capitalists?

Consider the assessment of two United Nations officials, Juan Pablo Bohoslavsky, the U.N. independent expert on the effects of foreign debt on human rights, and Alfred de Zayas, the the independent expert on the promotion of a democratic and equitable international order:

“A settlement would validate the type of predatory litigation that has been on the increase during the last decade. Such deals will make it more difficult to solve debt crises in a fair, timely and efficient manner by emboldening and rewarding the behavior of those who refuse to participate in debt restructuring efforts. These are no good news for attempts to solve debt crises in a timely and human rights sensitive manner.”

Paying debt through taking on more debt

The Macri government has now committed itself to paying $6.4 billion to the holdouts. How will it pay for that? By borrowing. Argentina had been blocked from borrowing in international credit markets, and as part of the deal will be allowed to borrow in those markets again. Judge Griesa’s injunction against resuming payments to the 93 percent of bondholders is also to be lifted. (That was enforceable because Argentina paid its debts to those bondholders through the Bank of New York, which was prohibited by the judge to pass through those payments under pain of legal penalties. Alternative routes through non-U.S. banks are difficult to use because of U.S. control over the global financial system.)

The deal also requires that the Argentine parliament reverse a law that blocks the country from offering any deal to holdouts better than terms agreed to by others. President Macri’s Let’s Change bloc does not hold a majority in the Chamber of Deputies, but picked up votes from the Peronist opposition to effect the necessary legal reversal this week. The Senate must still vote, but the expectation has been that the bill would have an easier time there.

The Puerto Madero district of Buenos Aires. (Photo by Juan Ignacio Iglesias)

The Puerto Madero district of Buenos Aires. (Photo by Juan Ignacio Iglesias)

Why is President Macri ceding his country’s sovereignty? Right-wing ideology of course plays a significant role here, but it is also self-interest. While the military dictatorship was conducting a reign of terror against Argentines that ultimately led to hundreds of thousands murdered, “disappeared,” tortured, kidnapped, arrested or forced to flee into exile, Mauricio Macri and his family were adding to their wealth. (Remember that this régime had the approval of Henry Kissinger and was blessed by David Rockefeller, whose loans financed it, with his infamous statement that “I have the impression that Argentina has a regime which understands the private enterprise system.”)

The Macri Society, or Socma, the family business, had close ties to the dictatorship. TeleSUR English reports that Socma “directly benefited” from the dictatorship:

“In 1973, prior to the 1976 military coup that ousted the civilian Peronist government of President Maria Estela de Peron and installed a dictatorship, Socma owned seven companies. When the dictatorship ended 10 years later, in 1983, the Socma corporate empire had expanded to 46 companies. Among Socma’s dozens of companies were various businesses that benefited the Macri family economically by providing services to the dictatorship regime.”

The new president, a director of the family conglomerate from a young age, is opposed to an Argentine parliamentary decision to launch an investigation of people and businesses that participated in the military dictatorship’s crimes, TeleSUR reports. La Nacion, a conservative Buenos Aires newspaper that backed President Macri, the day after the election published an editorial calling for an end of efforts to seek justice for the dictatorship’s victims, denouncing the quest for justice as a “culture of revenge.” Perhaps to emphasize this, the president has appointed as the new secretary for religious affairs Santiago Manuel de Estrada, who served as secretary for social security during the military dictatorship, which presided over severe reductions in wages and living conditions to go along with its death squads and torture facilities.

A monopoly for press backers, repression for opponents

Argentina’s biggest media conglomerate, Clarín, also backs President Macri, and no wonder: He has already moved to eliminate Argentina’s anti-monopoly law, which restricts the number of TV, cable and radio licenses a company can hold at one time, so that a handful of corporations can completely control the mass media. Such laws have precedent; for example, U.S. communications law long restricted anyone from owning more than 14 radio stations and seven television stations until overturned during the Reagan era. The Macri government is moving swiftly to silence opposition — it has forced a popular radio broadcaster, Victor Morales, off the air. According to the Buenos Aires Herald:

“ ‘I’m being kicked out because this company needs government advertising … No radio in Argentina can survive without government ads. They can’t mess with Macri,’ said the journalist.”

Demonstrations against these developments have already taken place, as have a public-sector strike against massive layoffs, demonstrations against the new government’s anti-protest law and protests against the imprisonment of Indigenous leader Milagro Sala. A total of 25,000 public workers have been dismissed as part of the Macri government’s austerity policies, and a new “security protocol” enables indiscriminate arrests and restricts the press’ ability to cover such events, opponents say. A coalition organizing against these new repressive policies states:

“The new protocol implies that every protest is now a criminal offense, and empowers the Security Forces — the same forces that played an active role in Argentina’s last military dictatorship — to allow or forbid any protests. The criminalization of protests violates several judicial decisions that state the right to demonstrate supersedes any occasional traffic problems that may be caused.

This year, on the 40th anniversary of the military coup in Argentina, the Mauricio Macri government has begun a campaign to eliminate an essential human right — the fundamental right to protest and demonstrate. With this new protocol, the government will try to prevent workers from protesting against redundancies or demanding salary increases, or mobilize against power outages and mining projects. This protocol openly defies the constitutional rights of the Argentine people as well as international treaties on human rights.”

Ms. Sala, imprisoned for the past two months, was arrested after protesting the policies of a provincial governor aligned with the president. She was acting in support of an organization she heads that provides social services. Parliamentarians, civil organizations and human rights campaigners across South America have denounced her arrest as political, and the United Nations has called for an explanation of her continued detention. The Buenos Aires Provincial Commission for Memory has issued this statement:

“Organizing collective action does not mean ‘inciting crimes,’ a massive demonstration is not ‘public disturbance’ and to oppose a government decision is not ‘an act of sedition.’ They are all democratic freedoms.”

They should be. But not when a right-wing government is determined to impose the rule of capital, or, in the case of the Macri government, to be a willing subaltern of international capital. The logic of the rule of financiers can only lead to not only intensified austerity, but increased repression.

Colonialism and nationalism in the building of liberation movements

The Sandinistas, in their difficulties with the Indigenous peoples of the Atlantic, had not reflected on the irony of being on the opposite side of the nationalist equation than they were when, as the representatives of Nicaragua, they encountered the United States. It had not initially occurred to the Spanish-speaking majority of Nicaragua that they, too, walked in the shoes of a colonialist. Larger nations have long dominated smaller nations, but a nation can be both a larger and a smaller nation at the same time, in relation to various other nations.

Nicaragua, a small country of 3 million, was long the plaything of far larger neighbors. But Nicaragua is an artificial construct: the dominant people of Spanish descent are dominant because their ancestors decimated the people who had already lived there. The concept of a Nicaraguan nationality is itself a legacy of colonialism, but also the peculiarities of local geography. Why are there seven countries on the narrow strip of land between Mexico and Colombia? Five of those countries, all speaking the same language, were part of a single Central American Federation. Yet that federation broke apart, unlike Mexico, because communication and travel were so difficult due to the mountainous terrain.

Over time, patriotisms developed, separate in each country created by the breakup. Domination by more powerful countries, and repeated direct interventions in the twentieth century by the latest, and most powerful yet, of those more powerful countries helped forge strong national identities. But those identities did not include the people who were already there, and had seen their numbers decimated through war, disease and plunder—in plain language, through a hemispheric genocide. It is easy to understand a colonial relationship when you are on the wrong end; it is far more difficult to understand this when you are on the power side of the equation.

Celebrating the 10th anniversary of the Nicaraguan revolution in Managua, in 1989 (photo by tiarescott from Managua)

Celebrating the 10th anniversary of the Nicaraguan revolution in Managua, in 1989 (photo by tiarescott from Managua)

Nicaragua’s nationalism was forged in its colonial relationship to the European powers and then to the United States. Augusto Sandino was able to articulate these feelings, and Sandino’s writings and example were strong enough to form a key pillar of a movement decades later. But as the majority Nicaraguans found their voices, found the confidence to create a revolution and to attempt to develop their culture free of colonial domination, the minorities in their midst, the descendants of those Indigenous nations decimated centuries earlier, felt themselves oppressed by those very same people who were so motivated by their own oppression at the hands of the giant neighbor to the north.

The movement of the majority, the Sandinistas, were not oblivious to their country’s history nor to the minorities of the Atlantic east, and were acutely aware of the poverty, underdevelopment and cultural trampling endured by the Indigenous minorities. But the Sandinistas had thought and acted in a mechanical manner, and so, initially, inflamed rather than soothed.

“The Left here did not incorporate anthropological concepts because it was married completely to the strict classical scheme: bourgeoisie versus proletariat without analyzing the cultural differences and the ‘civilizing’ conflicts that took place,” is the assessment of journalist and feminist activist Sofía Montenegro, who was one of the leading figures of the official Sandinista newspaper, Barricada. “What has happened here is not a mixing of the races but a clash of two civilizations, the Occidental and the Indigenous, in which one imposed itself on the other but was never able to completely conquer it.”

Marxist difficulties with nationalism

Marxism’s practitioners have often had a difficult time coming to terms with nationalism. The downgrading of the nation-state was articulated clearly in the movement’s most important early document, The Communist Manifesto written by Karl Marx and Friedrich Engels in 1848. The two wrote: “The workingmen have no country. We cannot take from them what they have not got…National differences between peoples are daily vanishing, owing to the development of the bourgeoisie, to freedom of commerce, to the world market, to uniformity in the mode of production and in the conditions of life corresponding thereto.”

Corporate globalization is not a new phenomenon, although of course the process has vastly accelerated since those words were written in the nineteenth century. Despite the increasing cross-cultural fertilizations in which better communications and increased commerce played no small role, the strength of nationalism only increased through the nineteenth century as disunited nations such as Germany and Italy struggled to unify their many pieces and other nations struggled to end their domination by stronger powers.

Those ongoing developments led to a current within Marxist theory that saw a difference between the nationalism of a colonial power and that of a captured nation seeking to throw off the hegemony bonding it. Self-determination for all nations had to be backed and therefore support should be given to independence movements. Independence was the right of all peoples in the name of self-determination. But it was also believed that national struggles were a “distraction” for the vast majority of a nation in that as long as they were oppressed by another nation they would not be able to fight for their emancipation as a class—they would not be able to free themselves of their domination by their native capitalists and aristocracy.

Humans can have multiple motivations, of course. World War I provided an excellent example: Nationalism was whipped up successfully in order to get millions to willingly fight a war that was fought to determine the capitalist division of the world’s resources. There was no other way to get those millions to fight. The war had to be brought to an end when those millions started to think more in terms of class, and of their common interests with the soldiers in the opposite trench, rather than in solely national terms. Very different feelings were unleashed, thanks to bitter practical experience.

Nationalism seen as a distraction from class

But the nonetheless still living body of nationalism continued to engender strong debates among the various strains of Marxism. A forceful argument against advocacy of self-determination of nations was put forth by Rosa Luxemburg, one of the outstanding contributors to twentieth-century political theory. Regardless of how valid a reader finds Luxemburg’s argument, she had the moral authority to make it. She was triply oppressed—as a woman in a male-dominated world, as a Jew in a Central Europe riddled with anti-Semitism and as a Pole (until the last days of her life, Poland was occupied and divided among three empires: Tsarist Russia, Prussian-dominated Germany and monarchal Austria-Hungary). Luxemburg adamantly refused to endorse independence for her native Poland, or any other nation.

It's Not Over cover“[T]he duty of the class party of the proletariat to protest and resist national oppression arises not from any special ‘right of nations’…[but] arises solely from the general opposition to the class régime and to every form of social inequality and social domination, in a word, from the basic position of socialism…The duty to resist all forms of national oppression [under an apolitical ‘right of nations’] does not include any explanation of what conditions and political forms” should be recommended, Luxemburg wrote in 1909. Generic calls for self-determination don’t provide any analysis of underlying social conditions and therefore cannot provide a guide to action.

A further basic weakness of generic calls for self-determination, Luxemburg argued, is that they do not take into consideration the highly differentiated status of nations. “The development of world powers, a characteristic feature of our times growing in importance along with the progress of capitalism, from the very outset condemns all small nations to political impotence,” she wrote. “Apart from a few of the most powerful nations, the leaders in capitalist development, which possess the spiritual and material resources necessary to maintain their political and economic independence, ‘self-determination,’ the independent existence of smaller and petit nations, is an illusion, and will become even more so.”

Further, within each nation, there exist a multitude of interests that cannot be reconciled. “In a class society, ‘the nation’ as a homogeneous sociopolitical entity does not exist,” Luxemburg wrote.

“Rather, there exist within each nation classes with antagonistic interests and ‘rights.’ … There can be no talk of a collective and uniform will, of the self-determination of the ‘nation’ in a society formed in such a manner. If we find in the history of modern societies ‘national’ movements, and struggles for ‘national interests, ’ these are usually class movements of the ruling strata of the bourgeoisie, which can in any given case represent the interest of the other strata of the population only insofar as under the form of ‘national interests’ it defends progressive forms of historical development.”

Luxemburg here argued that movements for national independence or self-determination are effectively controlled by the nation’s capitalists who, by virtue of their economic dominance, will control the movement to establish their own narrow rule and thereby subjugate the working people of the nation. Therefore, only the widespread adoption of socialist economic relations can truly free the working people of any nation.

Seventy years after those words were written, the capitalists of Nicaragua indeed sought to control the liberation movement of their country. Nicaragua wasn’t fighting for independence in the formal sense, but it was a country with very little self-determination. In the modern system of capitalism, the interests of local capitalists in subordinate countries align with the capitalists of the dominant nation. The interests of the Nicaraguan plantation owners and industrialists were simply to rid themselves of their local dictator, Anastasio Somoza, and establish their own rule. Rule by these local capitalists would be dependent on capitalists from the dominant power, through the medium of multinational corporations, and therefore compatible.

When direct rule of a colonized nation is no longer possible because of resistance, formal “independence” is granted, but a compliant dictator can be put in charge. When the rule of the dictator is no longer viable, a more “modern” form of domination is put in place, the rule of a local oligarchy. The local industrialists and plantation owners are ready to step in and assume domination of society; eager to fulfill what they see as their natural role, they seek to topple the dictator. Nicaragua’s capitalists could not do that on their own (they are numerically minuscule) and so joined the rapidly building mass liberation movement in an attempt to wrest the movement’s leadership from the Sandinistas. The capitalists were unable to do so because the working people of Nicaragua took an expanded, rather than narrow, view of self-determination, and this understanding led them to swell the ranks of Sandinista organizations.

But should nationalism be ‘skipped’ as a stage?

But although Nicaraguans were aware of their class interests, and that their liberation necessitated changes in their societal institutions and social relations, nationalism played a significant role. Sandinista National Liberation Front co-founder Carlos Fonseca had helped create the FSLN’s philosophy by skillfully blending the nationalism of Sandino with Marxism. The importance of nationalism was a consequence of the force of colonialism upon Nicaragua. Therefore, for the colonized, nationalism can potentially play a partly progressive role if it is combined with other political ideas. Another outstanding political theorist, Frantz Fanon, writing in the middle of the twentieth century at the peak of the Global South’s national liberation movements, argued that nationalism is an important stage that can’t be skipped.

National and racial differences are used to create and continue colonial situations, Fanon argued, and therefore, for the colonized, this divide adds to the complexities of a class analysis.

“In the colonies the economic infrastructure is also a superstructure. The cause is effect: You are rich because you are white, you are white because you are rich. This is why a Marxist analysis should always be slightly stretched when it comes to addressing the colonial issue. It is not just the concept of the pre-capitalist society, so effectively studied by Marx, which needs to be re-examined here. The serf is essentially different from the knight, but a reference to divine right is needed to justify this difference in status. In the colonies the foreigner imposed himself using his cannons and machines. Despite the success of his pacification, in spite of his appropriation, the colonist always remains a foreigner.”

The urban and rural working people of Nicaragua could not free themselves without “kicking out” the foreigner (the US commercial interests that dominated their country) and instead institute balanced trading relationships with interests outside their borders. No colonized country can attempt such a liberation without developing a sense of itself as a nation, and that sense of nationhood can’t be separated from the differences between the newly awakened nation and the nation that dominates it. During Nicaragua’s domination, just as throughout Latin America, the Caribbean, Africa and elsewhere, these differences were pointed to by the colonizing power as justification for the colonial nature of the relationship.

It is the recovery of nationalism, Fanon wrote, that provides the basis for an independence struggle. “A culture is first and foremost the expression of a nation, its preferences, its taboos, and its models…The nation is not only a precondition for culture…it is a necessity. Later on it is the nation that will provide culture with the conditions and framework for expression.” It is impossible to skip this stage of development. “Humanity, some say, has got past the stage of nationalist claims,” Fanon wrote.

“The time has come to build larger political unions, and consequently the old-fashioned nationalists should correct their mistakes. We believe on the contrary that the mistake, heavy with consequences, would be to miss out on the national stage. If culture is the expression of the national consciousness, I shall have no hesitation in saying, in the case in point, that national consciousness is the highest form of culture. ”

Sandinistas used national understanding as a scaffold

Fanon wrote as a Caribbean activist deeply involved in Algeria’s 1950s struggle against brutal occupation by France, and so it may seem that his expressions of nationalism and equating those expressions with a definition of culture are too strong, but if a people are oppressed on a national basis, then it is only natural that a culture takes on that oppression in that form. It is not necessary to agree with Fanon’s elevation of nationalism to such heights to find merit in his formulation. The course of the past century demonstrated the validity of Fanon’s theories: Nationalism has been, and continues to be, an extremely powerful political force.

Fanon’s integration of nationalism (grounded in profound sympathy for the distortions imposed by colonialism) with Marxism provides a more realistic analysis than Luxemburg’s dismissal of national liberation movements. Not because Luxemburg’s analysis of the lack of autonomy for the world’s smaller nations is incorrect (in fact, it was fully accurate then as it still is today) but because it, to use Fanon’s phrase, “skips” an important stage of development. A national consciousness bound together Nicaraguans in the struggle against Somoza, but rather than make that struggle a purely nationalist movement, the Sandinistas built upon nationalism, using it as a scaffolding upon which they erected a much larger understanding of what would be needed for Nicaraguans to liberate themselves. A struggle against an internal dictator, underdevelopment, lack of education and external domination is necessarily, in part, a cultural struggle.

Such a struggle by a national majority, however, inevitably contains differences from the concurrent struggle experienced by national minorities, and these differences, too, are cultural. The Sandinistas, to their credit, did come to understand, in a concrete manner rather than in their previous abstract theoretical manner, that they had to provide sufficient space for their own minority nations to develop their culture, and that those minority cultures had been stultified to a degree more severe than their own cultural underdevelopment.

This is an excerpt from It’s Not Over: Learning From the Socialist Experiment, officially published February 26 by Zero Books. Citations omitted. The omitted sources cited in this excerpt are: Katherine Hoyt, The Many Faces of Sandinista Democracy [Ohio University Press, 1997]; Karl Marx and Friedrich Engels, The Communist Manifesto [Washington Square Press, 1964]; “The National Question and Autonomy (Excerpts),” Rosa Luxemburg, anthologized in Paul Le Blanc (ed.), Rosa Luxemburg: Reflections and Writings [Humanity Press, 1999]; and Frantz Fanon, The Wretched of the Earth [Grove Press, 2004]

Clean water as an impediment to corporate profits

An Australian mining company insists its “right” to a guaranteed profit is superior to the right of El Salvador to clean drinking water  — and an unappealable World Bank secret tribunal will decide if that is so.

Drinking water is the underdog here. It might be thought that Salvadorans ought to have the right to decide on a question as fundamental as their source of water, but that is not so. It will be up to a secret tribunal controlled by corporate lawyers. And as an added bit of irony, the hearing began on El Salvador’s Independence Day, September 15. Formal independence, and actual independence, alas, are not the same thing.

The case, officially known as Pac Rim Cayman LLC v. Republic of El Salvador, pits the Australian gold-mining company OceanaGold Corporation against the government of El Salvador. OceanaGold is asking for an award of $301 million because the Salvadoran government won’t give it a permit to open a gold mine that would poison a critical source of drinking water on which millions depend.

Cerro Cacahuatique, El Salvador (Photo by Amilcar moraga)

Cerro Cacahuatique, El Salvador (Photo by Amilcar moraga)

OceanaGold — or, more specifically, its Pacific Rim subsidiary, which it bought in November 2013 — has spent only a small fraction of the $301 million. That sum isn’t an attempt to recover an investment; it represents the amount of profits the corporation alleges it would have pocketed but for El Salvador’s refusal to give the company a permit. (El Salvador has had a moratorium on new mining permits since 2008.)

So here we have an increasingly common scenario under “investor-state dispute mechanisms” — environmental laws designed to safeguard human and animal health are challenged as barriers to corporate profit. Not simply to recover an investment that didn’t pan out, but supposed future profits that a company claims it would have earned. Should El Salvador prevail, it would still have lost because it will spend large sums of money to defend this case, money that could have been used for the welfare of its people.

An added insult in this case is that it is being heard not under one of the “free trade” agreements that elevate corporations to the level of (or above) a country, but under an El Salvador law passed by the former Right-wing government that has been since reversed. Pacific Rim originally sued El Salvador under the Central American Free Trade Agreement, but the case was dismissed because Canada, where Pacific Rim had been based before its acquisition by OceanaGold, is not a party to CAFTA. But the tribunal allowed the suit to be re-filed under an El Salvador law that granted corporations the same right to sue in secret tribunals ordinarily found only in “free trade” agreements.

Lawyers for corporations sit in judgment

The tribunal judging El Salvador is known as the International Centre for the Settlement of Investor Disputes (ICSID) — an arm of the World Bank. Neither the public nor the press are allowed to witness ICSID hearings and there is no appeal to its decisions. Under the “investor-state dispute mechanism,” governments legally bind themselves to settle “disputes” with “investors” in the secret tribunals. Cases are decided by a panel of three judges selected from a roster. The judges are appointed to the roster by the national governments that have signed on to ICSID.

Because ICSID, similar to other arbitration panels, does not have rules against conflicts of interest, most of the judges are corporate lawyers who specialize in representing corporations in these types of disputes. To provide just one example, one of New Zealand’s selected judges is David A.R. Williams, who is currently representing Philip Morris in its suit seeking to force Australia to overturn its tobacco regulations, which were ruled legal by Australia’s High Court.

The three judges in this week’s hearing are V.V. Veeder of Britain, Brigitte Stern of France and Guido Santiago Tawil of Argentina. Mr. Veeder and Mr. Tawil are veteran corporate lawyers; the former has carefully omitted any mention of who his clients are in his CV, while the latter’s bio page boasts he has assisted in the privatization of Argentina’s assets while representing corporations in several industries. To put that in some perspective, an austerity program was imposed in the early 1990s in conjunction with selling off state enterprises at below-market prices. This fire sale yielded $23 billion, but the proceeds went to pay foreign debt mostly accumulated by the military dictatorship — after completing these sales, Argentina’s foreign debt had actually grown.

The third member of the tribunal, Ms. Stern, is an academic regularly called on to arbitrate investor-state disputes. One of her previous rulings awarded Occidental Petroleum Corporation $2.3 billion against Ecuador because Ecuador had canceled an Occidental contract over a dispute in which the tribunal agreed that Ecuadoran law had been violated. The oil company was in the wrong but was given a windfall anyway!

Among the precedents these three ICSID judges will consider are separate rulings ordering Canada to reverse bans on PCBs and on the gasoline additive MMT, both dangerous to human health, because the bans hurt corporate investments.

Didn’t meet its obligations, but so what

The former Right-wing Arena government of El Salvador in 1999 passed a law enabling “investors” to sue the country in ICSID, thereby circumventing the local judiciary, as part of its effort to encourage foreign investment. A subsequent Right-wing government yielded to public pressure in 2008 by issuing the mining-permit moratorium, and the Farabundo Martí National Liberation Front (FMLN) administrations of Mauricio Funes (elected in 2009) and Salvador Sanchez Ceren (elected in 2014) have kept the moratorium in place.

In addition to the general moratorium, the Salvadoran government cites not only environmental and health concerns specific to the mine, but also says Pacific Rim has failed to meet its legal obligations nor has it secured more than a small fraction of the local permissions it must have to develop the land it seeks to mine. Some observers fear that a ruling in favor of OceanaGold could lead to violence in a country in which 70,000 were killed in a civil war a generation ago. Luke Danielson, a researcher with the Sustainable Development Studies Group, told the Inter Press Service news agency:

“This mining project was re-opening a lot of the wounds that existed during the civil war, and telling a country that they have to provoke a civil conflict in order to satisfy investors is very troublesome.”

Local communities are shut out of arbitration forums like ICSID, but it is community organizing that is responsible for the, so far, successful pushback against environmentally destructive mining. The National Roundtable Against Metallic Mining, or “La Mesa,” is an organization of civil society groups that has led the opposition to OceanaGold. Several corporations have prospected in El Salvador’s inland highlands areas since the Right-wing Arena government passed the law allowing investors to sue in ICSID.

A now closed mine in the area, on the San Sebastian River, operated by the U.S. company Commerce Group, left behind water too dangerous to touch, never mind drink. The El Salvador Ministry of the Environment and Natural Resources tested the river and found cyanide levels nine times above the maximum allowable limit and iron levels more than 1,000 times the maximum allowable limit. So polluted is the river that it runs yellow, orange or red at times.

Mining for gold is a process that uses large amounts of dangerous chemicals in the extraction. A National Geographic blogger, Vladimir Pacheco, writing about OceanaGold’s proposed mine, reports:

“The cyanide-leach processes at the company’s El Dorado mine will use approximately 900,000 liters of water a day. In comparison, it would take 30 years for an average Salvadoran family to use that amount of water. … Will water needed for the project aggravate the already perilous state of water access in the country? A study by the Ministry of Environment found that only two percent of the rivers contain water that can be made fit for human consumption, or used for irrigation or recreational activities and in another study the Global Water Partnership warns that water supply in El Salvador is hovering on the threshold of 1,700 cubic metres of water per person per year, the upper limit for the definition of water stress.”

Fighting back but at a cost

La Mesa has continued its struggle against mining and for the ability to decide its own pattern of development despite the violence that often seems to accompany mining. Three anti-mining activists were murdered in a six-month span in 2009. A report on Salvadoran activists published last year by Common Frontiers, a Canadian coalition, said:

“The fact that the government of El Salvador stopped issuing mining permits to companies was a real boost for their movement but at the same time it brought a significant shift in Pacific Rim’s tactics towards them. The company is accused of utilizing kidnapping, intimidation and even murder against community members opposed to the mining project.”

OceanaGold, which now owns Pacific Rim, did not address these charges in its glossy Fact Book 2014, but did have this to say:

“We have a staunch commitment to making sure our operations enrich, empower and improve the lives of our stakeholders, by creating a positive, long-lasting legacy that respects human rights and delivers enduring benefits and opportunities beyond the life cycle of our operations.” [page 28]

The Philippines Commission on Human Rights might beg to differ. In 2011, the commission recommended that the Filipino government revoke OceanaGold’s license to operate because of “alleged violation of the rights of the indigenous people of Barangay Didipio in Kasibu, Nueva Vizcaya,” including forced evictions. (The license was not revoked, and the mine is operating.)

La Mesa calls OceanaGold’s suit “a “direct attack against the sovereignty and legitimate right of the Salvadoran population to reject an industry that is a threat to our lives.”

This history is not likely to be under consideration by the ICSID tribunal. It is not known when it will hand down a decision, although it is likely to be at least several months. Two fundamental questions that can’t be avoided are: Does a community have the right to make decisions on its own development? Do multi-national corporations have the right to a guaranteed profit without regard to the cost imposed on communities?

That such questions must be asked — and that “no” to the first question and “yes” to the second are increasingly common answers — is emblematic of dictatorship, not democracy.

High court rules that financiers are more sovereign than Argentina

The victory handed to speculators by the United States Supreme Court over one of the world’s larger countries provides a lesson in where power actually lies. It is not in a government building.

Two June 16 decisions by the U.S. Supreme Court elevates the “right” of hedge-fund speculators to massive windfall profits above all other human considerations. That ruling is consistent with rulings handed down by the secret tribunals used to arbitrate disputes between corporations and national governments that arise under “free trade” agreements that elevate “investors’ rights” above environmental and labor laws.

Between these Supreme Court decisions, most of the attention has focused on the ruling that federal courts in the U.S. can order sovereign countries to hand over information on their assets to speculators. In other words, the U.S. legal system has formally declared it has jurisdiction over other countries. Arrogant as that ruling is, the more dramatic development was the court refusing to hear an appeal of lower-court rulings directing Argentina to pay $1.3 billion to holdout speculators that refused to accept terms agreed to by a large majority of bond holders.

Simply put, the U.S. legal system not only declares U.S. law applies around the world, but that it will be applied to benefit the most aggressively greedy.

The Puerto Madero district of Buenos Aires. (Photo by Juan Ignacio Iglesias)

The Puerto Madero district of Buenos Aires. (Photo by Juan Ignacio Iglesias)

Much of the commentary on this case has attempted to reduce it to a simple morality tale of a debtor being obligated to pay back its creditors. The lead speculator in this affair, hedge-funder Paul Singer, who is trying to be paid the full value of bonds on which he paid pennies on the dollar, has tried to paint it that way.

Reality, of course, is far more complex. So first it is useful to understand the odious nature of Argentina’s debt.

Military junta uses dirty war to impose austerity

Prior to the 1976 military seizure of power, Argentina was an industrialized country with active union and left-wing movements, a sizable middle class and large tracts of arable land. But the Argentine economic elite and the multinational corporations that operated there wanted Argentina turned into a low-wage haven. Only extreme violence would be able to achieve that goal.

Upon seizing power, the military handed over economic policy to a well-connected industrialist, José Alfredo Martínez de Hoz, who ruthlessly implemented a severe neoliberal program of shock therapy, backed by a savage campaign of torture, “disappearances” and killings waged by the military and two allied fascist groups. The CGT union federation was abolished, strikes outlawed, prices raised, wages tightly controlled and social programs cut. As a result, real wages fell by 50 percent within a year. Because of the collapse of internal consumption caused by this austerity, ten percent of Argentina’s workforce was laid off in 1976 alone.

Tariffs were reduced deeply, leaving the country wide open to imports and foreign speculation, causing considerable local industry to shut. High interest rates led to more foreign speculation and an overvalued currency, further hurting national production. Against this backdrop, the dirty war was intensified — initially targeting leftists, the régime quickly began to eliminate students, lawyers, journalists and trade unionists.

This was the régime of which David Rockefeller, whose loans helped finance it, famously said, “I have the impression that Argentina has a regime which understands the private enterprise system.” Further economic contraction occurred, and for the last five years of the military junta, 1978 to 1983, Argentina’s foreign debt increased to US$43 billion from $8 billion, while the share of wages in national income fell to 22 percent from 43 percent.

Civilian control and formal democracy was re-established following the collapse of the junta, but the debt did not go away.

A civilian president, Carlos Menem, imposed an austerity program in the early 1990s in conjunction with selling off state enterprises at below-market prices. This fire sale yielded $23 billion, but the proceeds went to pay foreign debt mostly accumulated by the military dictatorship — after completing these sales, Argentina’s foreign debt had actually grown. The newly privatized companies then imposed massive layoffs and raised consumer prices.

By 1997, about 85 percent of Argentines were unable to meet their basic needs with their income. During this period, Argentina’s debt steadily mounted, leading to a scheme under which the debt would be refinanced. A brief pause in the payment schedule was granted in exchange for higher interest payments — Argentina’s debt increased under the deal, but the investment bank that arranged this restructuring racked up a fee of $100 million, the latest in a series of financial maneuvers that shipped a billion dollars to investment banks in ten years.

It all finally imploded at the end of 2001, when the government froze bank accounts and the country experienced so much unrest that it had five presidents in two weeks. The last of these presidents, Néstor Kirchner, suspended debt payments. Had Argentina resumed scheduled payments in 2005, interest payment alone on the debt would have consumed 35 percent of total government spending. Kirchner announced that Argentina intended to pay only 25 percent of what was owed and any group that refused negotiations would get nothing; in the end, Argentina paid 30 percent to bondholders who agreed to talk.

Vulture capitalist seeks extortionist gains

Approximately 93 percent of bondholders agreed to accept 30 percent of the face value — 30 percent is better than zero. Argentina has repaid these on a steady schedule and Argentine law forbids giving the holdouts a better deal. Some of the bonds held by the original holdouts were bought by NML Capital, a subsidiary of Paul Singer’s Elliot Capital Management, and another hedge fund, Aurelius Capital Management. These were the two whose lawsuits reached the U.S. Supreme Court.

Including interest, the holdouts would walk off with $1.5 billion if paid in full. NML Capital, Argentine President Cristina Fernández said, would see a gain of 1,600 percent for bonds it bought for $48.7 million. “I don’t even think that in organized crime there is a return rate of 1,608 per cent in such a short time,” she said in a national address following the U.S. Supreme Court decisions, in which she said Argentina would not “submit to such extortion.”

Mr. Singer, the type of character for which the term “vulture capitalist” was coined, certainly has been persistent in attempting to collect the full face value of bonds for which he paid a small fraction of that value. In November 2012, he had an Argentine naval ship impounded in Ghana after earlier plotting to seize the presidential plane and artworks that were to have been shown at a Frankfurt book fair.

Among other exploits, he has demanded $400 million from the Republic of the Congo for bonds he bought for less than $10 million and compelled the government of Peru to pay him a 400 percent profit on the debt of two Peruvian banks he bought four years earlier. His specialty is buying debt at a small fraction of the face value and demanding full payment, regardless of the cost to others, and has become a billionaire through doing so.

In the imperialist crosshairs

A series of one-sided rulings in a federal trial court, upheld by the U.S. Court of Appeals for the Second Circuit, favored the hedge funds over Argentina. When the appeals reached the Supreme Court, the bond holders who agreed to accept 30 percent (a “haircut” in financial parlance) backed Argentina, fearing that there would be no money for them should Argentina be forced to pay off the holdouts at full face value. The U.S. government also sided with Argentina, fearing a precedent that could be used to enable it to be sued.

The Foreign Sovereign Immunities Act of 1976 is supposed to bar lawsuits in U.S. courts against non-U.S. governments, but a 7-1 bipartisan majority of the Supreme Court decided that the law is malleable when not convenient. The Argentine bonds were sold with a provision that New York law would be used to settle disputes related to them, which gave U.S. courts the excuse needed to extend U.S. law to Argentina.

Under New York law, investors must be treated equally. That provision could have been interpreted to mean the holdouts would get the same 30 percent payment in installments — which the Argentine government would have agreed to had they been willing to negotiate — but instead it was used as an opportunity to give more rights to speculators.

The practical effect of these rulings is that “investors” — hedge funds with the well-earned sobriquet of “vultures” — have been elevated above a national government. This is perfectly consistent with the decisions handed down by secret tribunals like the World Bank-affiliated International Centre for Settlement of Investment Disputes when “investors” sue governments under “free-trade” agreements such as the North American Free Trade Agreement.

The hedge funds can leverage the U.S. legal system to enforce their will over Argentina in this case because the U.S. financial system is used to make payments to the bondholders who negotiated the 30 percent agreement with the South American country. Argentina could only continue to make those payments, while simultaneously refusing to pay anything to the holdouts, by doing so completely outside the U.S. financial system, which is possible but very difficult due to the system’s global reach. Moreover, those payees within the reach of the U.S. legal system would be susceptible to being sued by the holdouts.

Argentina has consistently said it has does not have the money to pay the holdouts and continue to meet its continuing obligations to the bondholders it has been paying, another reason for those bondholders to side with Argentina against the holdouts. The next payment is due June 30 — on that date, Argentina would be in defiance of the U.S. Supreme Court should it not pay the full face value of the holdouts’ bonds. But if it does so, or simply agrees to pay more than 30 percent, the holdouts would likely demand to re-negotiate to get the same deal.

Immediate conflict doesn’t negate larger interests

What to do? One possibility is to up the ante. That is the recommendation of Argentina’s counsel at the New York corporate law firm Cleary Gottlieb Steen & Hamilton in a memorandum dated May 2, 2014:

“[T]he best option for the Republic could be to permit the Supreme Court to force a default and then immediately restructure all of the external bonds so that the payment mechanism and the other related elements are outside of the reach of American courts. Argentina wants to continue paying its restructured debt. The Courts, nevertheless, have placed it in a terrible position.”

Courts do not act in a vacuum, but ultimately express the interests of the most powerful industrialists and financiers similar to any other component of a government in the capitalist system. It is certainly true that those interests are in conflict in this matter. Such a conflict is not unusual. The victory for one particular set of speculators here, however, serves to tighten the screws of austerity by further codifying the dominance of the most ruthless capitalists within the capitalist legal system.

Should the end result of this case be that all parties agree to a payment level higher than 30 percent, would the speculators on the losing side be crestfallen? Regardless of the outcome, the precedent set here provides additional leverage for speculators in future financial deals. Not even the opinion of the U.S. government, the ultimate protector of corporate interests through its intelligence and military apparatuses and “free trade” agreements, was allowed to interfere with a bid to further tighten corporate power. That is what was at stake here, not the short-term interests of this or that speculator.

For Argentina, or any other subaltern country, to rid itself of odious debt and re-orient itself toward the greater good of its citizenry rather than the profiteering of speculators, will require entirely new structures in a different economic system.

Venezuela’s revolution is a process propelled by millions, not one leader

Venezuela’s Bolivarian Revolution is much bigger than Hugo Chávez; it is a movement of millions. The movement that drives the process forward long predates his election and his failed 1992 coup.

Saying this should not come as a revelation, for no large-scale social movement can exist as a personal vehicle, nor can any one person, no matter how charismatic, single-handedly carry the responsibility for social change, especially when that change has the long-term, open goal of supplanting the global capitalist order.

We Created ChávezContrary to the myopic, superficial corporate-media narrative of a caudillo motivated by a fathomless desire to poke Uncle Sam in the eye (although we must immediately ask how a leader who won 16 of 17 national elections, almost all by at least 10 percentage points, can be a “dictator”), the Bolivarian Revolution is a continuation of struggles that have been waged since the late 1950s. The defining moments, George Ciccariello-Maher argues in We Created Chávez: A People’s History of the Venezuelan Revolution,* are not President Chávez’s electoral victories but rather two outbursts of people’s power, a 1989 uprising and the 2002 uprising that re-installed him, reversing the business coup.

The Bolivarian Revolution can’t be understood without a bottom-up perspective, without analysis of the pressure from below that buffeted President Chávez, pushed forward by organizations that support the revolution. Professor Ciccariello-Maher, as his book’s title signals, provides that necessary background:

“Hugo Chávez is not a cause but an effect, not Creator but creation; in this sense, the history that follows is literally a defetishization, a demystification. His election and even his failed coup did not mark the beginning of the Bolivarian Revolution, but were instead the results and reflection of its long and largely subterraneous history.” [page 21]

That history has roots two centuries old, and the modern manifestation of Venezuelan struggle begins in the late 1950s, ironically with the downfall of Venezuela’s last dictator and the establishment of a formally “democratic” republic. Marcos Pérez Jiménez was overthrown in 1958, replaced by a two-party system designed to stifle popular participation. The “social democratic” party, Acción Democrática — unusually ruthless in attacking its base even by the standards of world social democracy — mostly was in power, alternating with Copei, the Christian democrats.

‘Democracy’ proves little different than dictatorship

Acción Democrática leader Rómulo Betancourt won office in the first post-Pérez Jiménez election. Within a year, his government was shooting people dead in the streets and ruling under states of emergency. Violent repression was the swift response by the new president to his unpopularity; repeated massacres sparked uprisings across the country. A revolutionary situation developed, but Professor Ciccariello-Maher argues that the Venezuelan Communist Party waited too long while the Revolutionary Left Movement went too soon. A series of tactical mistakes doomed this armed struggle, not least of which was a lack of connections with the people, the author writes.

A series of groups blossomed and declined, rural guerrilla strategies failed, the electoral Left floundered, and mass fronts and other popular organizations faced severe state repression during the following years. The net of state repression was cast steadily wider — the government provided little services but attacked those who asked for them. Out of this situation, barrio assembles and popular militias began to be organized for self-defense; the latter forcibly ended the drug trade in neighborhoods in which they operated. These popular organizations organized sporting and cultural activities, and expelled the police — their militancy propelled people forward.

Professor Ciccariello-Maher argues that the 1989 uprising known as the “Caracazo” is the first of two “ruptures” (the 2002 coup reversal the other) that are the critical moments in the process that is the Venezuelan Revolution. Carlos Andrés Pérez took office as president that year as the Acción Democrática candidate on an explicitly anti-International Monetary Fund platform. It took him two weeks to jettison his campaign pledges and impose the full IMF-dictated austerity package. Riots broke out the morning of imposition, led by informal workers. But because political organization was widespread, these were not blind lashings-out — the target of the anger quickly went from bus drivers (a doubling of oil prices prompted large fare increases) to the state and its system.

A curfew was declared the next day, and a violent crackdown ensued, with as many as 3,000 left dead. The author leaves no doubt as to the severity of the government crackdown:

“Known organizers were dragged from their homes to be either executed or ‘disappeared,’ and when security forces met resistance from rooftop snipers, they sprayed entire apartment blocks with automatic machine guns. … The human toll of the rebellion has never been fully revealed, especially because the Pérez government subsequently obstructed any and all efforts to investigate the events. … A recent study has shown that some four million bullets were fired to quell the rebellion, and the Relatives of Victims Committee, an organization founded around the victims of the Caracazo, reports that 97 percent of the documented victims died in their own homes.” [pages 96-97]

Grassroots organizations build opposition

The author writes that the Caracazo crystallized and focused organized opposition within the military while civilian armed groups sought to unify the popular militias with the military opposition. By 1991, barrio assemblies in Caracas were organizing and coordinating opposition. The military uprisings in February and November 1992 (the former the one led by Hugo Chávez) were the “detonators” for subsequent popular rebellions. State repression could not break popular control of the streets, and these social movements led to the 1998 election of President Chávez.

“[D]efeat notwithstanding, the Caracazo sounded the death knell of the old system, simultaneously reflecting and contributing to the inevitability of its collapse and thereby setting into motion the entire process that came after it. In symbolic terms, it smashed in a single stroke the façade of [Venezuelan] ‘democratic exceptionalism,’ revealing the bankruptcy and the violence of the existing system for all to see. Neither completely spontaneous nor fully organized, the Caracazo was an instant in which widespread disgust and revolutionary capacity met on the streets, generating historical agency by emboldening the faithful and converting the waverers: it was 1989 that enabled 1992, and 1992 that enabled 1998.” [page 89]

The author’s second moment of rupture, the reversal of the 2002 business coup against President Chávez after two days, was a product of the connections between militias and military, of political understanding and experience. Millions poured into the center of Caracas in defiance of the coup. Venezuela’s corporate media had unleashed an orgy of lies before and during the coup; the state television channel was closed while the private media blacked out any coverage of the mounting resistance. The coup leader, Pedro Carmona Estanga, the head of the national chamber of commerce, dissolved all branches of government and declared the 1999 constitution void, despite its having been approved by 72 percent of the electorate.

Loyalist military units, taking their cues from the mass popular resistance to the coup, took the presidential palace back, with officers giving the credit to the people and their “spontaneity” — but the “spontaneity” was the product of years of organizing, with Left activists seeking much more than the mere return of President Chávez to the palace.

“[M]ass spontaneity, while fundamental in its importance, is often the result of serious organizing that, in the case of Venezuela, spans decades. As with the Caracazo, then, this spontaneous mobilization and its spontaneous grasp of the strategic realities of the situation it confronted should not lead us merely to a panegyric of spontaneity for spontaneity’s sake. Rather, every moment of this spontaneity and every gesture of these spontaneous masses contained an aspiration toward increasingly conscious organization. In this explosive dialectic between spontaneity and organization that was resistance to the 2002 coup, such conscious effort would be especially important in the realm of mediatic and popular armed organizing.” [pages 172-173]

Struggle within the struggle

Can an engaged people go back to the ancien régime? We Created Chávez was published just before Hugo Chávez’s untimely death, but given the context of this story the president’s passing in no way renders the book out of date. The modern history of Venezuela is that of regularly employed workers, informal workers, peasants, students, women, Afro-Venezuelans and Indigenous peoples in a many-sided struggle against domestic elites and the country’s subaltern status in global capitalism. Then there is the struggle within the Bolivarian Revolution.

There are tensions between economic and political demands, between workers’ autonomy and the state, over the nature and content of “co-management” and over if co-management is a step toward a higher level or a capitalist trick, as well as opposition to developing the Bolivarian process from managers and within the ranks of the movement.

What forms should workers’ control take? Some argue for state ownership with employee participation, others argue for full autonomy of enterprises and the workers in them, and there are gradations in between. Enterprises under state ownership presumably should be managed to benefit the community, but how much management should be ceded to the workforce? Should workers fortunate enough to work in the oil industry be able to reap benefits far in excess of other workers? How should autonomous enterprises be managed to benefit the community, not only those who work in them?

There are similarly serious questions regarding agriculture. Venezuelan land ownership remains highly unequal, with owners of large ranches in control of the countryside. Moreover, because the countryside emptied out and the economy grew overly dependent on the oil industry before 1998, the country lost its food sovereignty. This exodus to the cities has swelled the size of the informal workforce, who get by with street vending and whatever other means they can to survive.

Less than half of the workforce has formal employment, Professor Ciccariello-Maher writes, but although the Chávez government had difficulty with informals, to the point of occasional hostility, the author argues that this sector has been the staunchest base of support for the revolution and is neglected at the government’s peril. Informal workers played no small role in reversing the 2002 coup, for example.

There is no stasis

Ultimately, the revolution can only succeed through creating mechanisms for self-government. “Patriotic Circles” became Bolivarian Circles after 1998, and were tasked with drafting and defending the 1999 constitution. Communal councils (local bodies that manage policy and projects in their communities) came into existence after a 2006 law. These are legally on par with state institutions and have oversight over them; these are views as potential replacements for the state bureaucracy. The councils are linked horizontally to one another and vertically in communes with a goal of them exercising sovereignty.

Due to the timing of the book, the author concludes with an analysis of President Chávez’s “complex and nuanced position” as someone who is not purely a representative of the state but also an ally of the social movements that have driven Venezuela forward in past decades:

“[M]ore often than not he has pushed a radical agenda that facilitates the transformation of that state, a fact most visible in the recent development of communal councils and popular militias. Here there are no guarantees, and despite the fact that the collective ‘we’ of the Venezuelan revolutionary movements … ‘created him,’ this does not mean the creation will not betray the creators. However … to do so would certainly require a fight.” [pages 254-255]

The necessity of struggle to deepen the revolution is unchanged by the president’s death. Social movements have driven the process forward, and will continue to do so, regardless of who occupies the palace. We Created Chávez is indispensable toward understanding the process that is the Bolivarian Revolution and the path taken by Venezuela.

* George Ciccariello-Maher, We Created Chávez: A People’s History of the Venezuelan Revolution [Duke University Press, Durham, North Carolina, USA, and London 2013]

The humanity of resistance can’t be erased by a Pinochet or a Friedman

I have long felt haunted by the fate of Chile. I can’t help but feel a strong attachment because the people who were involved, and “disappeared,” tortured and killed, were me and many of my friends and fellow activists.

Not literally, for I was a boy in 1973 and lived on another continent. But if I were then, and there, who I am now, I would have shared the fate of Chileans who believed a better world was possible.

Today is the 40th anniversary of the Pinochet coup. The first “9/11.”

La Moneda 9-11-73I continue to be struck by the fact that participants in the government of Salvador Allende freely apologize for their mistakes. It is no revelation to say President Allende’s Popular Unity government was not perfect. It was full of people who previously had been shut out of political participation — is it reasonable to expect perfection from them? But contrast their thoughtful reflection with the behavior of the coup plotters and those who took up posts in Augusto Pinochet’s murderous 16-year reign.

No apologies. Nothing.

It is to the credit of those who reflect on what they could have done better, who are moved to publicly acknowledge mistakes, particularly in actions or speeches that, intentionally or not, served to throw up barriers to participation by those in mild opposition or sitting on the fence. Their humanity is there for us to see. Where is the humanity of those who killed, those who tortured, those who willingly served a régime that inflicted casualties in massive numbers and hurled millions more into poverty?

The Pinochet coup was the first application of “shock therapy.” The intellectual author of this shock, Milton Friedman, repeatedly used the word “shock” in advising General Pinochet to apply a maximum of pressure, helpfully reprinting a letter he sent to the dictator in his book, Two Lucky People: Memoirs.

Friedman needed believers just as he needed the dictator to implement his ideas. That such ideas need force is exemplified in a revealing interview conducted by Patricia Politzer in her book Fear in Chile: Lives Under Pinochet. In a 1984 interview, an enthusiastic supporter of the régime and self-proclaimed “Chicago Boy” estimated that 80,000 to 100,000 had been killed — a figure, amazingly, he found acceptable because of the dictatorship’s “honest principles that I shared.” This Pinochet supporter declared that “sometimes democratic regimes suffer from too much freedom” in explaining why he applauded the ouster of the elected Allende government, later saying that “freedom ought to be restricted.”

Let us not dishonor those to whom the shock was applied by forgetting. Another story told by Ms. Politzer is that of a communist woman repeatedly arrested, beaten and tortured, as was her husband. One day in prison she was dragged into a torture room, where her husband had cold water thrown on him so that he would regain consciousness and the torture could be resumed. She recounts these grisly details from one session:

“They applied the electric prod to [her husband’s] penis, to his anus, to his eyes. … it was terrible. I knew what was happening from his awful screams and the way he was moving … every scream went straight to my soul. But I didn’t move or express anything. I was suffering enormously, as if they had my heart and they were squeezing and squeezing it. … The only prayer I had was that they wouldn’t go too far with the torture. That he wouldn’t die.”

The authorities had concocted false charges against the couple; the torture was intended to force a false confession.

The obligation of a poet

Let us remember Pablo Neruda, whose house at Isla Negra was ransacked by soldiers and some of his manuscripts destroyed immediately following the coup. He died only two weeks later, apparently silenced via a poison administered by an agent posing as a doctor. The opening of his poem, “Poet’s Obligation,” perhaps provides us one clue as to why the great poet was seen as a danger:

“To whoever is not listening to the sea
this Friday morning, to whoever is cooped up
in house or office, factory or woman
or street or mine or harsh prison cell;
to him I come, and, without speaking or looking,
I arrive and open the door of his prison,
and a vibration starts up, vague and insistent,
a great fragment of thunder sets in motion
the rumble of the planet and the foam,
the raucous rivers of the ocean flood,
the star vibrates swiftly in its corona,
and the sea is beating, dying and continuing.”

Let us remember Victor Jara. The popular singer and songwriter suffered repeated beatings in a sports stadium turned into a concentration camp, then had his hands mangled and his guitar thrown at him by the guards as they sneered “Let’s see you play now.” He did play, so enraging the ignorant shock troops of fascism that they killed him with dozens of machine-gun rounds. He could do nothing else but play. From the last song he wrote before he was murdered:

“Yes, my guitar is a worker
shining and smelling of spring
my guitar is not for killers
greedy for money and power
but for the people who labour
so that the future may flower.
For a song takes on a meaning
when its own heart beat is strong
sung by a man who will die singing
truthfully singing his song.”

Victor Jara’s songs live on. The singer and songwriter Holly Near celebrated his memory in her song “It Could Have Been Me”:

“The junta broke the fingers on Victor Jara’s hands
They said to the gentle poet ‘play your guitar now if you can’
Victor started singing but they brought his body down
You can kill that man but not his song
When it’s sung the whole world round.”

The spirit of life in the face of death

Salvador Allende captured that essence in his last speech. Speaking at the La Moneda presidential palace on the morning of September 11, the coup in progress and not in doubt of what his fate would be, he said:

“Placed in a historic transition, I will pay for loyalty to the people with my life. And I say to them that I am certain that the seed which we have planted in the good conscience of thousands and thousands of Chileans will not be shriveled forever. They have strength and will be able to dominate us, but social processes can be arrested neither by crime nor force. History is ours, and people make history. …

Workers of my country, I have faith in Chile and its destiny. Other men will overcome this dark and bitter moment when treason seeks to prevail. Go forward knowing that, sooner rather than later, the great avenues will open again where free men will walk to build a better society.”

Of what were the rulers of capitalist societies — those in the U.S., those in Chile, those elsewhere — so afraid? Why would an elected government determined to provide concrete reality to the word “democracy” by enabling all citizens to become real participants in the functioning of their society engender such frenzied reactions? Ariel Dorfman, in his memoir Heading South, Looking North: A Bilingual Journey, told the story of “Juan,” a factory worker who was being driven out of the country into exile with him in the aftermath of the Pinochet coup:

“[Allende’s] policies had created an economic boom: increased salaries and benefits led to skyrocketing consumption and that led, in turn, to a major increment in production. So, more goods sold and a better life for Juan and his co-workers, right? Not at all. The owner of the factory, opposed to the revolution, even if it did not threaten his property, had decided to sabotage production. … The workers had watched this class warfare patiently for months and, finally, when the owner had announced he was shutting down the whole operation, they had taken over the premises. It was the only way to save their jobs and keep producing the food that Chile needed. Allende’s government intervened in the conflict, negotiated compensation for the owner, and put the workers in control. Juan had been elected to head the council that, for a couple of years, ran that factory, and in spite of inevitable mistakes, it had been a successful venture.”

Professor Dorfman’s conclusion?

“[T]he Chilean revolution had given him a chance to prove his dignity as a full human being, had dared to conceive through him and millions of others the pale possibility of a world where things did not have to be the way they had always been. That is why the rulers of the world had reacted with such ferocity.”

Equality or dominance. The ability of everybody to develop their full potential and be full participants in societal decision-making or a minuscule elite hoarding wealth and dictating to everyone else.

Which do you want?