Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapter 10, Chapter 11, Chapter 12

Translated by Matt Noyes

[Translator's note: In this chapter, Razeto introduces the first solidarity economy road, which starts with the self-organized economic activities of people living in poverty, on the margins of the dominant economy. After describing the reality of poverty and marginalization, Razeto defines the term “popular economy,” traces its structural causes, and explains its relation to solidarity economy. (The term “popular” is similar in meaning to the terms “grassroots” or “people’s” but we are staying with popular as in “popular education.”) - MN]

Chapter 2

The Road of the Poor and the Popular Economy

The reality of poverty

A first road to solidarity economy sets out from the situation of poverty and marginality in which large sections of the population find themselves.

As a consequence of transformations in the contemporary economy and dominant tendencies in the reorganization of markets, many people have been impoverished and relegated to the margins of growth and its gains. Due to the dominance of the finance factor in the economy and the consequent concentration of markets, together with public debt and the State’s declining capacity for redistribution, those who have no goods to exchange, little money to spend, or are unable to find employment in companies or institutions because their labor power is less productive than that required, are excluded from participation in the economy.

The declining possibilities of participating in the economy of companies and the market, on the one hand, and the public and state economy, on the other – the two main sectors of modern economic life which permit one to contribute to production and obtain the goods and services needed to satisfy basic needs – leave many people facing a critical problem of subsistence.

Pushed to the margins of the official economy, they find themselves having to deploy survival strategies, carrying out on their own whatever informal economic activity they can so as to obtain the income necessary to satisfy their basic needs. In this way the reality of poverty has given rise to the (poorly named) “informal economy” or “invisible economy.” We prefer the term popular economy because of the greater economic and cultural significance it implies – that is, the economic activation and mobilization of poor and working class people.

To understand the significance of this process and its impact, its internal economic rationalities and the way it contributes to the formation and development of solidarity economy, we must carefully examine its dimensions, its external causes, and the characteristics of the poverty in which it emerges. We must also identify the different elements of a typology that can be constructed from its notable heterogeneity and diversity.

Poverty has persistently expanded in the last few decades in many countries of Latin America, spreading in terms of the proportion of the population affected, in some countries nearly 60%, and becoming more radical and intense, as reflected in the growing gap in living standards between the region’s rich and poor. But perhaps more significant than the quantitative expansion of poverty is the qualitative transformation of poverty we are witnessing.

The transformation of poverty

Summarizing greatly, three or four decades ago the world of the marginalized comprised that part of the population which had not integrated itself into modern life. Urban infrastructure (streets, housing, potable water, sanitation, etc.), production (industries, employment), and services (education, health, etc.) did not expand rapidly enough to absorb the population swelled by demographic explosion and migration from rural areas. A certain percentage of the people agglomerated in the periphery of the large cities, those who had not experienced the development of culture and labor required to participate in modern social processes, fell into extreme poverty.

Marginalization was the end result of the reorganization of the economy and social structures in that period. As modern industrial and state forms expanded, they displaced and disarticulated the social fabric and the traditional activities of production, distribution, and consumption, with the greatest impact felt by indigenous social groups, farmers, and artisans. The growth of the modern sector, and the capacity it showed to absorb labor power and satisfy consumer demands, drew many people to the cities. Prematurely abandoning their traditional ways of life, they came in search of other ways to live. But those who failed to integrate, being also unable to put to use in the urban context skills and abilities suited to peasant and artisanal modes of production, were turned to public sector social programs to find the possibility of survival and reinsertion. As a result, all their social activity tended to be expressed in terms of demands and pressure.

This residual poverty and marginalization, to give it a name, continues to this day. But the world of the poor is much larger now, swollen by a mass of people who, having attained some of level of participation in the world of employment, consumption, and modern life, subsequently found themselves excluded. They suffered layoffs, loss of social benefits, underemployment, etc., all as a consequence of new economic transformations seen in industry, in the market, and in the public sector occurring since the middle of the 1970s. In short, the modern industrial and state process was not only unable to absorb all of the labor force and the social needs that were growing with the population, it also began to expel a portion of those it had at one time incorporated.

This mass of people who were forced out of employment after having experienced some level of participation and integration have modified the cultural, social, and economic composition of the world of the poor and marginal. Those who have participated in a modern organization in some stage of their lives, however precariously, have developed certain capacities, behaviors, and habits corresponding to modernity. We can say that the world of the marginal has been enriched by the knowledge, labor skills, levels of consciousness, technical competencies, organizing capacity, and other aptitudes of this large social group that “official” society once integrated but later discarded.

In this way, in the world of the poor, remnants of traditional skills and culture have been merged with recently acquired skills and abilities that are precarious but real.

The popular economy

The skills and competencies of the popular sector, which are superfluous to the demands of the market and the world of formal economy, have not gone unused just because the companies and the State fail to employ them. Having been excluded from both employment and consumption in the formal sector, and still facing the crucial challenge of subsistence, the world of the poor has become economically activated, giving rise to the many different activities and organizations which make up what we call the “popular economy.”

The popular economy combines traditional resources and capacities for labor, technology, organization, and commerce with others of a modern type, giving rise to an incredibly heterogeneous and varied proliferation of activities oriented to securing subsistence and the means of daily life. It thrives and expands by seeking out interstices and opportunities in the market, finding ways to make use of benefits and resources provided by public services and subsidies, and inserting itself into projects promoted by non-governmental organizations. Sometimes it even manages to reconstruct reciprocal and cooperative economic relations of the type that predominated in more traditional forms of economic organization.

The variety of organizations and activities that make up the popular economy is striking and it is not possible to make sense of that economy using our proposed visualization of a road leading to solidarity economy without establishing a typology that distinguishes its various manifestations. In fact, we can identify at least three principal forms:

a) Labor for personal benefit, performed by innumerable independent workers who create goods, provide services, or sell on a small scale, be it at home, on the street, in the public square, on public transport, at community fairs, or other places where people gather. In a study of self-employed workers in Chile, three hundred distinct informal “occupations” were identified. b) Family micro-enterprises, operated by one to three people, preparing goods or selling on a small scale, using their living space or an adjacent space for a workplace and store. The phenomenon of micro-enterprises has become so widespread in the popular districts of the big cities of Latin America that it is normal to find them in one of every four or five homes. c) Popular economic organizations, that is, small groups or associations of people or families who collectively manage their scant resources so as to develop activities that generate income or provide services to satisfy the basic needs of work, food, health, education, housing, etc. on a basis of cooperation and mutual aid. Solidarity workshops, housing committees, “buying together,” community utilities, “building together,” family gardens, and community development programs are some of the most widespread types.

Structural causes of the popular economy

One of the questions posed by the popular economy with its varied manifestations is how to determine whether it is a passing conjunctural phenomenon or a permanent structural reality, destined to endure, that has only recently emerged like the tip of an iceberg. To find the answer we need to deepen our understanding of the causes of this phenomenon.

To begin with, the explanation is not to be found exclusively in the internal dynamics of each country, nor can it be exhausted by a survey of the effects of neoliberal policies implemented in the region in recent years. We are dealing with a phenomenon that is spread throughout Latin America and in a certain form throughout the world, and must recognize that its roots are much deeper, more structural, and international.

Our countries are being profoundly impacted by global transformations and tendencies that affect the world economy and global markets. In the advanced industrial countries three major processes are spreading and becoming more accentuated and there is little we can do to slow them.

The first is the striking concentration of capital entailed by the establishment and development of large multinational companies and trusts. These business giants – operating in finance, production, and commerce – have extensively penetrated our markets, to the extent that a large portion of the goods we use come from multinationals, not only capital goods but consumption goods too, including those easily produced locally. The world economy tends to spin around these companies which utilize the best available resources and factors of production and increasingly directly shape local markets and economies. As multinationals expand their field of operations, it becomes increasingly difficult to compete with them, which reduces the range of possibilities of economic action by other types of national subjects (including the State).

The second phenomenon is economic competition between the great centers of the developed world: the United States, the European Union, China, and Japan, and their satellites. As the struggle for control of markets between these economic powers unfolds, our countries are reduced to mere zones of confrontation. Large companies have no choice but to rationalize operations, raise productivity, pursue greater earnings, and accelerate the repatriation of profits made in our countries, if they hope to secure the new investment needed in order to keep up with this ever-exacerbated competition.

The third phenomenon, linked to the others, is the accelerated process of technological innovation: informatics, robots, bioengineering, the green revolution, etc., which together constitute the so-called “scientific-technological revolution.” This wave of innovation has spread to every branch of production and services, modifying labor processes and diminishing, altering, and changing the types of labor needed.

The combination of these three processes has a profound impact on the social-economic realities of underdeveloped countries. Let us underscore here two of the principal effects.

The first is the deployment in our countries of a process of partial modernization which reaches only some branches of economic activity and some sectors of society and the working class. In the hunger to participate in modernization and avoid being “left out of history,” our societies are making enormous efforts to maintain their connection with international markets and assimilate some of the progress made in the developed world. Among these efforts should be stressed those directed at paying the external debt and maintaining our “credibility,” increasing and diversifying exports, and bringing in external capital which translate into processes of restructuring that reorient a large part of the economy externally, giving rise in turn to a special emphasis on rationalization and productivity. These internal efforts, though, are insufficient and our economies become open to foreign investment, which reinforces the outward orientation. As a result, elements of modernization, some quite advanced, are introduced into our countries but in a way that makes them accessible to only a portion of the society.

It is a question, then, of a partial and dependent modernization that is clearly unbalanced when considered from the standpoint of human and social needs. Only one segment of the population really benefits: those with the highest incomes. Those with middle-incomes who have access to modern consumption get some limited benefit, as do workers employed in specialized operations by companies in the modern sector.

The second effect which follows from the restructuring of world markets is the decline in the redistributive capacity of the State, rendering it increasingly incapable of responding to social needs. For several decades as the public sector has grown in scale and added functions and activities, its utilization of material, financial, and human resources has also grown. Now, however, the process of partial modernization of society and the economy generates demands for the modernization of the State with respect to its administrative systems, health and education services, military and police systems and equipment, etc., and requires the businesses it controls to dedicate resources to technological modernization. This has resulted in underfinancing of the public sector, which leads to considerable macroeconomic disequilibria. The phenomena of inflation, which permanently haunt many Latin-American countries, are largely a result of this crisis. The policies of adjustment that inflation entails, accompanied by privatization of companies and services in order to lighten the load of the public sector and secure resources to cover fiscal deficits, are producing a very rapid structural reversal of the decades-long processes of expansion of the State.

The expansion of poverty can be attributed in large measure to the phenomena described above. In effect, partial modernization of the economy implies a technological and economic restructuring of companies which lower their demand for labor power and even discharge workers. Other companies are sold to foreign capital, merged with other companies, or, should they fail to maintain the rhythm of modernization and keep their prices competitive with those of open economies around the world, driven to bankruptcy.

To this can be added the fact that the State – due to its financial crisis – is unable to absorb labor, has to eliminate civil service facilities, and even faces the need to cut social expenditures.

Which leads to the phenomenon we have emphasized: the need of the poor and the marginalized to find in themselves the necessary forces for subsistence, initiating activities on their own using whichever of the forms described above.

Popular economy and solidarity

The popular economy in its various manifestations and forms contains important elements of solidarity which we should acknowledge and delineate. In the first place, there is solidarity in the culture of the poorest social groups who naturally demonstrate more solidarity than groups with higher income. The lived experience of poverty, the need to secure the means of subsistence – which they experience as a daily crisis – leads many to appreciate the importance of sharing the little they have, of forming groups and communities for mutual aid and reciprocal protection. Once engaged in economic activity, the poor and working classes do it “in their own way,” with their own values, ways of thinking, feeling, acting, and relating to each other.

To this is added the fact that, because they dispose of so few resources with which to carry out economic activities, each person or family needs those closest to them, people who share the same needs, in order to assemble the labor power, natural and financial means, technical skills, and capacity for management and organization, i.e., the minimal supply of factors indispensable for the creation of a viable small economic unit. Thus is it not difficult to find significant elements of solidarity in community fairs, among poor artisans, and between small stores and their local customers.

As we search for these elements of solidarity, our gaze becomes more focused, particularly on one type of experience of popular economy: forms of association which present themselves as social or community organizations, which we call, generically, popular economic organizations. We focus on them precisely because their particular organizational dimension enables us to hypothesize the existence of a more defined social formation, to postulate a greater potential for being subject and actor in the construction of a solidarity economy, and a capacity to be in the vanguard, guiding a much broader process of social organization in the popular economy.

This hypothesis is sustained by the observation and documentation of ten relevant characteristics shared by the majority of these organizations:

1. We are dealing with initiatives that develop in popular sectors, among the poorest and most marginalized. 2. They are experiences of association of the “small group” or community type, not “mass” organizations but personalized associations whose members recognize each other as individuals. 3. They are forms of organization in the technical sense of the term. They have precise objectives, organize in a rational way the resources and means needed to achieve them, plan time-specific activities, establish procedures for adoption of decisions, etc. 4. They are organizations with a clear economic content. They have emerged to confront economic problems and needs, carrying out production, consumption, distribution of revenues, savings, etc., and making rational use of scarce resources in the process. They can be recognized as authentic economic units, although their activities extend to other dimensions of social life. 5. Popular economic organizations seek to satisfy the needs and address the social problems of their members through direct action, that is, through their own power, utilizing resources that they manage to obtain for this purpose. Their practice does not have, then, the character of a demand (in the sense of pressing others to take responsibility for one’s problems), rather they seek to resolve their problems through mutual aid and self-development. 6. They are initiatives that imply values and relations of solidarity in the sense that people establish collaborative relationships, practice cooperation in labor, and assume responsibility in mutual solidarity. Solidarity constitutes an essential element in the life of these organizations in the sense that the accomplishment of their objectives depends to a great extent on the degree of cooperation, trust, and community developed by their members. 7. They desire to be participatory, democratic, self-managing, and autonomous, in the sense that the group of members consider themselves to be the only ones entitled to make decisions about what they do, a right which derives from the effort and the labor of each member and of the group as a whole. 8. These organizations do not limit themselves to only one type of activity, but tend to be comprehensive, in the sense that they combine their economic activities with social and educational activities, personal and collective development, solidarity activities, and often political action and pastoral care. 9. These initiatives intend to be distinctive and alternative with respect to the prevailing organizational forms (capitalist, individualist, consumerist, authoritarian, etc.). They contribute to social change from a perspective of building a better and more just society. The nexus between desire for transformation and “being the change” deserves emphasis because popular economic organizations are distinguished by the intention to adopt already and on a small level the values and relationships that they hope to spread or implant on the level of global society. 10. These organizations seek to overcome isolation and marginalization by linking up horizontally, forming liaisons and networks that permit them to propose objectives on a greater scale. In the same way, they actively seek the collaboration of non-governmental organizations which offer skills training, technical assistance, and various types of support, or community and public institutions that are open to community projects.

The identity and project of popular economy.

This set of distinctive characteristics enables us to specify the identity of popular economic organizations, distinguishing them from other types of popular organization or other social movements. More precisely, these economic organizations appear to bear a special economic rationality, an internal logic sustained by social practices and behaviors in which solidarity occupies a central place and function.

Popular economic organizations are only one part of this world, one element of the reality of poverty, out of which they open a way toward solidarity economy. But it can be observed that these experiences of association and collective functioning open onto a broader process that, bit by bit, can bring more sectors of the popular economy into a perspective of solidarity economy. In effect, the testimony of these organizations teaches us that there are abundant benefits to be obtained through association and cooperation between people and small, individual economic projects. Operating together is it possible to carry out activities on a larger scale; it is possible, for example, to get better prices in the procurement of inputs, develop complementary productive activities that lead to reduced costs, replace intermediaries by conducting joint marketing, gain access to credit through cross guarantees, learn new techniques for production or management through exchange of experiences, and so on.

Some of the most advanced experiences of association show that it is possible for popular economic organizations to achieve adequate levels of operational efficiency without losing their distinctive characteristics. As they grow it is likely that many of these economic entities will change forms, modes of organization, functional structure, etc., but the character of solidarity and the alternative they offer that sets them apart will not be affected. Our view is that together all of these alternative, familiar, self-managed, cooperative organizations will come to constitute a solidarity economy sector. A sector that though small is nonetheless dynamic and expansive, actively intervening in the national economy, contributing not only the concrete result of its work but the revitalizing spirit of its own values, the innovating force of popular creativity, and a new type of management and business energy.

The popular economy, in its real heterogeneity and dispersion, lacks a defined social identity and a common project. Building a solidarity economy out of the popular economy can supply this missing project and enable this sector of activity to gain power and develop coherently, making a substantial contribution to the overcoming of poverty.

Such a project is possible because, as we have seen, the popular economy contains germs or embryos of an eventual solidarity economy founded on labor. There is a peculiar economic rationality at work in the popular economy, which derives from the fact that its principal economic factors are labor and cooperation. As our experience with popular economic organizations confirms, these beginnings of an economy of labor and solidarity can be strengthened and developed. In this sense, there is a great deal of cultural and educational work to be done, to discover the value of labor well performed, of “good work,” of “work performed in friendship,” to discover and strengthen the sense of solidarity, of cooperation, the value of solidarity-based organization, the special efficiency of love and solidarity.

This is the first road to solidarity economy, traveled by many who set out from the reality of poverty and experiences of popular economy. As these initiatives encounter others arising from other realities, with different motivations, the idea of a solidarity economy sector acquires greater visibility.

Read Chapter 3 - The Road of Solidarity with the Poor and Social Development

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