Massimo de Angelis of the editor’s blog has a fascinating story about the cooperative economy in the Salinas region of the Ecuadorian Andes. The Salinas area, a region centering on the village of the same name, includes some thirty communities comprising a total of around six thousand people. The area economy is a network of cooperative enterprises, commonly called “the organization,” that includes some 95% of the population.

The “organization” is in reality a quick name for several associations, foundations, consortia and cooperatives, ranging from cheese producers to textile, ceramic and chocolate making, herbal medicine and trash collection, a radio station an hotel, a hostel, and a “office of community tourism”.

The area has an interesting history. Only a generation or so Salinas was the typical domain of a Latin American patron, the Cordovez family. The Cordovezes owned the common land of the area pursuant to a Spanish crown grant and were the main employer–most notably via the family salt mine. As such, Salinas is an unlikely location for such an egalitarian economic experiment.

The origin of “the organization” is reminiscent of a couple of more famous distributist experiments: the Antigonish movement in Nova Scotia, and the Mondragon system in the Basque country of Spain. Like those two previous experiments, the organization started out with a single cooperative enterprise and from there grew by mitosis into an entire federated network of cooperatives. The first cooperative, formed in the 1970s, was a credit union created as a source of independence from the loan sharks who preyed on the poor. (This initial nucleus, as was also the case with Antigonish and Mondragon, was the project of an activist Catholic priest, the Italian immigrant Fr. Antonio Polo) The credit cooperative offered to buy the Cordovez family lands.

From my own perspective, I have a hard time quoting descriptions of such feudal land domains as legitimate “private property” with a straight face. Anyone collecting rent from the rightful owners of the land should be grateful to go to bed at night with his head still attached to his body, let alone actually receive a purchase price for the land. You may recall the old joke about the delegation of peasants from an English village who confronted the lord of the manor: “By what right do you claim property in this land, which our ancestors worked time out of mind, and collect rent from us?” “Why, I inherited it from my father, the previous lord of the manor. And he inherited it from his father, and so on, going back to our ancestor the first lord of this manor, who fought for it under William the Conqueror.” “Ah, well then,” said the delegation. “Now we’re going to fight you for it.”

De Angelis has some of the same reservations, although he fairly reports Fr. Polo’s reasoning in advocating peaceful purchase of the land:

Antonio explains to me that the original choice to buy the land from the Cordovez, rather than taking it, in spite of the fact that the locals had really all the reasons for reclaiming their own land from the Cordovez who effectively stole it from them, was moral and economically rational. It was moral, because it was an anti-violent choice. And it was economically rational, because when people buy land they have an invested interest to make it productive for them (at least in the sense that they have borrowed money to buy it and they have to repay the loan with interest). I have my doubt, as the reasons given seemed to me too ideological. After some probing it seemed to me that the Cordovez family was interested to sell and selling at a relatively good price because of the broader context of land struggle and talks of land reform, hence of “violence” against the private property of the big land owner. The “peaceful” choice was therefore dependent on the “violent” context, making the moral distinction between the two quite thin, and leaving the distinction relevant only from a strategic point of view, that is contingent to the existing condition and opportunity to pool resources together (whether human political resources or money resources). On the other hand, there are experiences of movements of people reclaiming land by trespassing the gates of the large property owners that has led to the formation of institutions such as school and health centers besides allowing the land to be used for productive purposes meeting the food needs of the people. The landless movement in Brazil is a case in point.

With the encouragement of Fr. Polo, the village organized one cooperative enterprise after another to provide employment after the salt mine closed.

Like Mondragon, the cooperatives disconcertingly maintain a two-tier labor force, including a lower tier of wage laborers who are not member-owners. The wage laborers frequently do contract work in their homes, on something like the old “putting out” system. The contract work is part-time, supplementing subsistence production.

As I’ve argued elsewhere, the character of such arrangements depends heavily on the bargaining power of the workers involved. If access to the means of subsistence production is ready and cheap, and they can afford to take work or leave it at any given time with a sufficient economic cushion to wait for terms more to their liking, such arrangements may well be consistent with an economy of a generally libertarian character. I have no idea from the article what the current nature of land tenure is for the contract workers who engage in subsistence agriculture; but the relations between them and the cooperatives seem to be fairly relaxed and transparent, which suggests the core of permanent members doesn’t hold the whip hand over them.

This impression is reinforced by the fact that a significant social safety net operates in the village, funded by the surpluses of various cooperative enterprises, on a gift economy basis. And it’s possible to earn exchange value outside of wage labor by contributing to something like a time bank.

However, at the end of the year, the monetary surplus [of the cheese factory] is not distributed among coop members on the basis of their milk contribution, but is shared among them for common projects: either buying new equipment, or transferred to community funds. This way, as our guide told us, “the farmer who has 10 cows is helping the farmer that has only one cow”, allowing for some re-distribution. Another example is the use of Mingas. Minga is a quechua word used by various ethnical groups throughout the Andes and refer to unwaged community work, in which men, women and children all participate in pretty much convivial ways and generally ends up in big banquets. Infrastructure work such as road maintenance, water irrigation, planting, digging, but also garbage collection and cleaning up the square are all type of work that calls for a Minga of different size and are used in Salinas. Yet another example is the important use of foundations, that channel funds earned in social enterprises for projects for the community.

The combination of such a safety net with cheap and easy access to means of independent subsistence makes it more likely that employed and employer can deal with one another as equals.

Michel Bauwens, in a post to the P2P Research email list drawing my attention to the article, noted that “this is pretty much what I envision the transition situation to be, when commoning becomes more central within capitalism, but with great potential for a phase transition away from it…”

This was in keeping with De Angelis’s observation:

There is something intriguing in Salinas, and that is that you do not know when capitalism ends and commonism begins . . .and viceversa. You feel definitively the presence of both and this is unsettling and make someone like me nervous. But I promised myself to keep an open mind, I am travelling to understand commons, the mechanism of their coupling with capital and the limitation of this coupling, as well as the lines of struggle and power relations that emerge in various context of commons.

De Angelis is interested, in particular, in how the commons principle interacts with the market system.

We have therefore a mix of organising principles between private and community production, adaptation to the market and its needs for “competitiveness” and solidarity and communitarian values, a mix that would be interesting to deconstruct and study with some more lengthy field work in terms of how power relations are reproduced or diffused, and how the distribution and control conflicts inherent in market-oriented arrangements are dealt with. But the overall basic question in the back of my mind is this: what is co-opting what? Is capital co-opting the commons or the commons co-opting capital? My impression is that taken as a whole, Salinas offers a context in which dignity is definitively at the centre of doing things, and capital is not all, and perhaps — perhaps not yet — not even the most important thing.

De Angelis has serious doubts, nevertheless, as to whether the project is scalable.

For one thing, this mixed commons/market system may be less sustainable when more capital-intensive forms of production are undertaken, and may accordingly be more vulnerable to destabilization and decay into exploitative capitalism. De Angelis raises the example of the new factory for turning wool into thread, to be vertically integrated with the household production of sweaters and other woolens. The large capital outlay, he says, means a break even point can only be achieved with fairly large batch production.

For another, de Angelis says, the success of the Salinas model arguably depends on its uniqueness, so that it can serve wide-open global niche markets without a lot of global competition from other local economies pursuing the same development model.

And finally, debt financing of capital investment leads to a certain degree of self-exploitation to service that debt.

De Angelis analyzes the cumulative implications of these problems:

I have mixed feelings about this Salinas’ experience. There is no doubt that the 69 agro-industrial and 38 service communities enterprises are quite a means for the local population to meet reproduction needs in ways that shield them from the most exploitative practices of other areas in the region and make them active participants in commoning processes centred on dignity. But the increasing reliance on, and strong preoccupation with, global export circuits and on the markets seems excessive, with the risk that experiments like these really become the vehicles for commons co-optation.

Yet another problem, parallel to these, is that the agricultural model pursued in Salinas has not been properly speaking agricultural at all, but agro-industrial: i.e., export-oriented agribusiness.

The discrete amount of common land available could have perhaps been used more for the community, and only now some experiments are conducted with green houses and different types of plants. I wander whether the Salinas reality would be any different today if 40 years ago, priority was put on the generation of food self-sufficiency within the areas.

These are serious issues. But there are grounds for hope.

First of all, the structural effects of high capital outlays will become less and less of a problem over time. For one thing, even given past technical possibilities of production, that capital outlays were as high as they were arguably the result not so much of technical necessity as the choice of a more capital-intensive production model to suit the institutional and economic needs of a dominant class.

From the time electrically powered machinery was first introduced in the late nineteenth century, there were two possible ways of integrating it into production: 1) mass production using extremely expensive, product-specific machinery with deskilled labor, producing in large batches to fully utilize the enormously expensive machinery and minimize unit costs, and using supply-push distribution and planned obsolescence to dispose of the product and keep the wheels turning; and 2) integrating smaller, cheaper general-purpose machinery into craft production, frequently switching between short runs of different products and gearing production to changes in demand on a lean, demand-pull basis. Arguably, the second method was the 0ne naturally suited to electrical power; the introduction of electrical power eliminated the main rationale for large-scale factory production, which was the need to economize on power from a prime mover. When each machine had its own built-in prime mover, and it was no longer to power as many machines as possible with belts connected to a drive shaft from a single steam engine or waterwheel, individual machines could be scaled to demand and sited as close as possible to the point of consumption.

Mass production was chosen over flexible manufacturing because it suited the institutional needs of organized capital.

And production technologies currently in process of being developed are radically lowering the price of machinery. As this happens, capital outlays will become less and less important as a source of structural imperatives to maximize output and serve large market areas.

I suspect that the choice of concentrating wool spinning in a single factory, even now, was not the only possible choice. Fewer machines, scaled to local demand, would have required less investment and met the consumption needs of the local economy. The decision to invest larger sums of money in an operation scaled to production for a global market, I suspect, was the result of deliberate choice rather than necessity.

As production tools become cheaper and cheaper, for an ever increasing range of products, the more feasible it is to produce more and more of the things we consume in small shops scaled to the local market, without high capital outlays and overhead creating pressure to maximize batch size and amortize costs. This will also mean less indebtedness from capital investment, less pressure to self-exploitation, and less pressure to compete in a global marketplace instead of serving the local economy.

That means, in a sense, that manufacturing will be moving toward the same kind of local subsistence model that de Angelis advocates for agriculture.

The lower the capital outlays and overhead required for production, the more the local economy will taken on the very character de Angelis described above: “a means for the local population to meet reproduction needs in ways that shield them from the most exploitative practices of other areas in the region…”

Before I conclude, I want to make a few observations about markets. The problem, I would argue, is not that markets or exchange as such are exploitative. Markets, when structural privileges are not present, are simply mechanisms for exchange between producers. It is only under conditions of unequal exchange that markets become exploitative. And unequal exchange can only come about in conditions of privilege: artificial property rights, artificial scarcity, and legally mandated artificial levels of capital outlay or overhead to enter the market, so that labor must work harder to obtain a consumption good than is actually required to produce it.