PLURAL economy · 2012-11-13 · La Paz, September 2011 Pluraleconomy 1 The Ministry of Economy and Public Finance presents the first issue of the magazine Plural Economy, a periodical

The New Economic, Social,Communitary, Productive Model

PLURALeconomy Monthly publication of the Ministryof Economy and Public FinanceYear 1 / Nº 1 / September 2011

n How the Model works

n ElThe neoliberal model vs. the New Model

n The actors of the New Model

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Pluraleconomy 1La Paz, September 2011

The Ministry of Economy and Public Finance presents the first issue of the magazine Plural Economy, a periodical of system-atic dissemination of the thought of people from the University

Academy who ventured back in the second half years of the 1990s, to begin a journey of reflection – not always understood - towards the design of an economic theory for the replacement of neo liberal-ism. Such theory is now known under the name New Economic Social Communitarian and Productive Model. This model was implemented since 2006 by the administration of President Evo Morales.

For this purpose, the following pages present interviews to the Min-ister of Economy and Public Finance Mr. Luis Arce, who, in the first instance, talks about the formation of the Grupo Duende (Goblin), in which he and other scholars started the analysis of the neoliberal model imposed in Bolivia in August 1985 with the infamous Decree 21060.

After other remembrances of the time, Luis Arce explains the serious-ness of the energy, food, climate and financial crises and of macro-economic policies that cast doubt on the prevalence of the capitalist system, and place the industrialized countries of the northern hemi-sphere in a precarious position, as evidenced in the financial collapse of the United States, Ireland or Greece, among others.

Bolivia, said Luis Arce, has watered in such turbulences with some comfort, because five years ago the administration of President Mo-rales adopted measures to stimulate the domestic market and not rely exclusively on the external one; also State assume a leading role in planning for the economy, manage public companies, invest in the productive sector, finance projects, regulate the market players and so on. Besides, the State begun to apply income redistribution poli-cies, to reach vulnerable groups who were neglected by the previous administrations.

All the new powers of the State are aimed at turning Bolivia into a in-dustrialized country through coordinated action by four actors: pub-lic, private, community and cooperative sectors, whose integration configures a plural model; it means a Plural Economy.

In the following issues of the magazine, the reader will be provided other theoretical and practical elements that will facilitate the under-standing of the economic thought of the Bolivian women and men who contributed to the formation of the New Economic Social Com-munitarian and Productive Model.

Unit of Social communication

All the new powers of the State are aimed at making Bolivia -

under the direction of the public sector - a

country industrialized by the coordinated

action of four actors: the private, community and cooperative sectors, and

the public sector itself

To the reader

Ministry of Economy and Public Finance2 La Paz, September 2011


What is an economic model

An economic model implies a way of organizing the produc-tion and distribution, therefore, a way of organizing the social relations of production. In the history of mankind, there have been several economic models under different modes of pro-duction that have established different social relations; also, these relations determine the way in which societies are or-ganized into legal, religious and cultural aspects.

It is not the claim of the New Economic Social Communitar-ian and Productive Model en-ter directly to the change of the capitalist mode of production, but lay the groundwork for the transition to the new mode of Socialist production.

An economic model defines how economic surplus is gener-ated and distributed. A society is sustainable over time when the generation of surpluses is aimed at the satisfaction of current and future needs through the distri-bution of this surplus in society, when surpluses do not satisfy the collective need, then it is nec-essary to redistribute them ac-cording to social needs.

In the neoliberal model, the sur-plus was generated from the

The New Economic Social Communitaty Productive Model

It is not the claim of the New Economic

Social Communitarian and Productive Model to enter directly to the change of the capitalist

mode of production, but lay the groundwork for the transition to the new mode of Socialist

production

worker’s surplus-value. Workers are exploited by making them to work more hours than are neces-sary to produce the goods and depriving them of benefits. That surplus was also produced by the exploitation of natural resources in the hands of transnational cor-porations and the private sector, so that the surplus value accrues to them without making the nec-essary transfers to the State for it to address education and health for the people.

Therefore, the distribution of the surplus was not equitable nor the income so that social prob-lems arose which ultimately led to economic problems. When economic problems are resolved, social problems are gradually eliminated.

What is happening in Europe at this time is a social mobiliza-tion due to economic problems. There had supposedly equi-table distribution of income; however problems now arise because people are losing their hard-won economic rights. For example, the retirement age is increasing, salaries to public employees are decreasing, the State is lacking investment ca-pacity; i.e. the income distribu-tion is becoming worse provok-ing social problems.

The New Model is a transition model to Socialism

By Mr. Luis ALBerto Arce cAtAcorA


A model of transition

As already stated, at the time of designing of the new model, they wondered what comes af-ter the neo-liberal model, is it is socialism? Which is the ultimate goal? or, is there an intermediate stage?

This is a model of transition to socialism, which will gradually solve many social problems and strengthen the economic basis for an adequate distribution of economic surplus.

It was never thought to build so-cialism immediately. Even Carl Marx -when speaking about the Paris Commune- and Lenin ex-plain why is not possible the mechanical transition from capi-talism to socialism. There is an intermediate period. In the case of Bolivia, the New Economic So-cial Communitarian and Produc-tive Model would allow laying out the conditions for a transi-tional society towards socialism.

The diagnosis

To understand the new model it is paramount to depart from a di-agnosis of the capitalist system, which since 2005 already experi-enced an acute wear expressed in four crisis: energy, food, climate and financial. However, recently it was added the crisis of macro-economic policies.

The energy crisis is seen in the increase and the price volatility of oil and natural gas, thus affect-ing the electrical energy costs.

This crisis erupted with hard-ness of the world’s largest coun-tries, proof of this are the black-

outs in the large cities like New York and Paris; This is a sample of the high consumption of ener-gy, in contrast to the insufficient capacity of power generation in these countries. On the other hand, there is a great potential in South American countries to generate energy, although they do not have the same level of demand.

This situation is evident in the nighttime pictures taken via satellite, where we see that the northern hemisphere is extreme-ly lit, while the southern hemi-sphere not. Only major cities, like Rio de Janeiro, Buenos Aires, Caracas, are lit, while the rest of the South America and Africa are virtually in darkness.

This growing demand for energy in developed countries together with the depletion of deposits and reserves of gas and oil in the world, forced several industrial-ized countries to seek alternative sources of power generation, in-cluding nuclear power. Howev-er, the latter is being revised fol-lowing the latest developments in Japan.

The food crisis was already warned in 2005, when the Gov-ernment Plan of the MAS pro-posed measures to reach food se-curity. Food production became insufficient in the world by the growing demand for food, espe-cially in Asia, and the decline of arable agricultural land on the planet. In addition, the change in consumption caused by the ener-gy crisis because some countries used much of its land for the pro-duction of bio fuels is deriving in using food for machines, instead of food for people.

This is a transition model towards

Socialism in which many social problems

will be solved gradually while the economic basis will

be consolidated for an adequate distribution of economic surpluses

In the New Model, the State is the fundamental actor of the economy


In the New Model, the emphasis is in Production

The third crisis of capitalism is the climate crisis. International agencies have called it: “cli-mate change”, but it is actually a climate crisis generated by the warming of the Earth as a result of a disorderly production and consumption and the plundering of natural resources by the devel-oped countries and transnational corporations, to the detriment of the ecology and the environment in the world.

Hence arisen climatic phenom-ena such as El Niño, La Niña, cyclones, floods, and hurricanes have worsened at the global lev-el in recent years. For example, Bolivia is facing high and low temperatures that had never been before. High heat waves become fires and droughts like those recorded in the Chaco re-gion, among others.

The fourth crisis of the capital-ist system is the financial crisis; the so-called financial bubble on Wall Street that led to a series of bank failures, because of the use of very imaginative derivatives which got out of control. In 2008 that financial bubble -which was expanding for 15 years in Unit-ed States- exploded. Misguided economic policies and poor su-pervision of the financial system in this country contributed to such condition. Now the crisis shows no sign of ending because it has spread its impact to Eu-rope generating concerns world-wide as well. There is a crisis of trust within the society, about what the capitalist system had built and the role of the market in the economy .

Developed countries are facing fiscal and debt crises and there

That bubble blew up in the United States after

15 years of its expansion. Unwise economic

policies and a mistaken supervision of the nancial

system of that country made this situation

even more serious up to reaching a point of a

nancial crisis which does not seem to nish

Currently the world is not only going through the financial crisis and its consequences in the real sector; but also it is enduring:

n The five crises of capitalism

Climate crisis

Crisis of macroeconomic policies

Food crisis

Energy crisis

Crisis in the financial system


is social unrest in Europe unlike small countries. Restricted fis-cal policies are heading –for to increase of the retirement age, which is a reflection of the finan-cial crisis, while the situation is different in Latin America.

The world currently lives in a se-nile, old, capitalist model that is not giving answers to the crisis which derives into the fifth crisis: the cri-sis of macroeconomic policies, as evidenced by the overwhelmed lack of responses of capitalist-way economic policies to the problems of capitalism itself.

There are two main flows of economic thought within the orthodox capitalist conception: monetarists and Keynesians.

In the New Model, the State is the promoter of the Economy

The New Economic Social Communitarian and Pro-ductive Model was brewed in a scenario of rise of the neo-liberal model. Back in the year 1999, when Bolivia lived far cusp of neo-liberalism with the so called “Ca-pitalization” (Privatization), a group of “old socialist”, for-mer activists of the Partido Socialista Uno (PS-1), began to think of post neoliberalism. This group was named Grupo Duende (Goblin) and consisted of lecturers, in-cluding Luis Arce, professor at the Universidad Mayor de San Andres UMSA and at the Development Scien-ces Post-Graduate Program of UMSA (CIDES-UMSA).

The new model designers considered that Francis Fukuyama’s book (The End of the History) was wrong, because capitalism was not the only and last instan-ce of history: there was something else ahead.

By this time, Álvaro García Linera, now Vice Presi-dent of Bolivia was conducting his own research on Bolivia’s social issues. He formed the “Grupo Comuna” integrated, among others, by Raúl Prada, Luis Tapia and Oscar Vega.

At a meeting of the Goblin Group with Álvaro García Linera’s group, they realized that they held coinci-ding thoughts and they “spoke” the same language; while using different methods and tools. Comuna was working on research about the socio-political process in much depth while Goblin was working on the transition to socialism through a construction of a new economic model.

Additionally, and once the electoral campaign for the elections of 2005 started, Luis Arce worked on the Economic Plan of Government for the Movimiento al Socialismo (MAS) along with Carlos Villegas, then director of CIDES-UMSA, and other researchers.

The Research of Arce and Villegas were the embr-yo of what later became the New Economic Social Communitarian and Productive Model which has been the base for the economic programme of Go-vernment of the Movimiento al Socialismo(MAS), from 2006 onwards, which is an economic model for Bolivia made by Bolivians.

n Origin of the design of the new economic model

Both theories have no answers to the crises of capitalism. To-day, Keynesianism has been tested; the U.S. President, Barack Obama, dressed the shirt of John Maynard Keynes and began to implement its economic prescrip-tions, but, unfortunately for the Americans the crisis continues, unemployment is still high and recession is acute in that country.

Monetarist policies were also put into practice and failed because these policies in the past were the core element of neo-liberal-ism in several Latin American countries which have gradually been swept away.

The crises of capitalism are op-portunities for Bolivians, since

Unidad de Comunicación Social


The New Economic Model boosts domestic demand as much as the external

The New Economic Social Communitarian and Pro-ductive Model is two-pillar pronged: the strategic sector that generates surplus and income and em-ployment engendering sector.

The model recognizes four strategic sectors that Bo-livia counts on to generate surplus for all Bolivians: hydrocarbons, mining, energy and environmental re-sources. They are traditional sectors that supported the primary export model; however the country can-not change its economic structure overnight; there must be a strategy that is embodied in the new mo-del to break that surplus-export negative circuit.

Income and employment generating sectors inclu-de manufacturing, tourism, housing, agricultural and others that have not yet been dynamic enough.

According to the new model, to make Bolivia a dy-namic economy, generate that productive transfor-

mation, and change the primary export model, it is required to put the foundation stone in manufactu-ring, industry, tourism and agriculture by transferring the surplus of mining, oil, and electric energy to tho-se sectors.

The State is the re-distributer, which must be able to transfer the resources of surplus sectors to the gene-rators of employment and income. In other words, what it is intended is to free Bolivia from dependence on exports of raw materials, i.e., Bolivia has to leave the primary export model for building an industriali-zed and dynamic economy.

While for a time Bolivia will remain a primary expor-ter, at this time the country should have clarity about the goal and the path to take. The new economic model is based on the success of the administration of natural resources by the State, and it is designed for the Bolivian economy.

n How the model works

the country has the resources to become a major producer of energy and food, the two major weaknesses of the capitalist sys-tem. Therefore, reaching the sta-

tus of food and energy producer should be the country’s strategy to tackle these problems, with-out neglecting the other sectors of the economy.

STRATEGICSECTORS:SURPLUS -

GENERATORS

INCOME ANDJOBS

GENERATORSECTORS

REVENUE REDISTRIBUTION:SOCIAL PROGRAMS

POVERTY REDUCTION STEPS

•Hydrocarbons•Mining•Electricity•Environment resources

•Maufacture Industry and handicraft

•Tourism•Agricultural development

•Housing•Trading, transport services, other services

•Juancito Pinto Bonus•Dignity Pension•Juana Azurduy Bonus

Surpluses

REDISTRIBUTER STATE


The State is the Redistributer of resources to excluded and vulnerable sectors

Bolivia established a pattern of exporting

primary development, i.e. a model based

on the exploitation and export of raw

materials for the benefit of a few. In the new model economic, social, community and productive the emphasis is on the production and the

redistribution of income

In the scenario of the structural crisis of capitalism and under five crises appearing together, which overlap, they intertwine and they complicate to capital-ism, the new Bolivian model is constructed.

The New Economic Social Com-munitarian and Productive Mod-el depart from a diagnosis of the mistakes of the neoliberal model to oppose a new policy that is the antithesis of the neo-liberal model of economic policy in response.

1. The first element is the cri-tique to the free market and to the hypothesis of the effi-cient market, and therefore the new model places the State as the key player in the economy and that corrects market failures.

The Neoliberalism holds that the market is the best and most efficient administrator of resources in the economy, however, this premise failed since the Bolivian economy did not get an effective boost towards economic develop-ment. State-owned enter-prises were privatized, the State’s participation was re-duced in the economy, and there were no adequate allo-cation of resources in Bolivia, which generated a larger gap between rich and poor. In this sense, the market shows seri-ous weaknesses.

2. The second element of the new model is to attach to the

The neo-liberal model vs. the new modelState a very active role; The State has to make everything needed: planner, entrepre-neur, investor, banker, regu-lator, promoter of develop-ment. But in addition, the State has the obligation of generating growth, develop-ment in all instances of the country.

3. The third element is that the State, with the nationaliza-tion of natural resources, takes control of strategic sec-tors as oil, mining, electricity and telecommunications, to benefit Bolivians and not the transnational corporations.

It is the antithesis to the scheme posed by the neo-liberal model, which privatized state-owned companies and transferred surplus abroad as foreign direct investment repatriated profits. Such scheme gave away con-trol on natural resources to transnational corporations. That was the essence of the neo-liberal model.

4. The fourth element is the change of the existing export primary pattern in the coun-try by a process of industri-alization and productive de-velopment.

From the colonial times and through the neoliberal peri-od, Bolivia established a pat-tern of commodity-export development, i.e. a model based on the exploitation


and export of only raw ma-terials. In the New Economic Social Communitarian and Productive Model, the em-phasis is on production and generation of products with added value.

The need for implementing an industrialization process for Bolivian raw material forces the country to change the mentality of its people to-wards a mindset focused on such process. In recent years it was evidenced that there is a large of an idle production capacity.

It is necessary to change the productive matrix of that old primary export model to another one that prioritizes industrialization and, conse-quently, increases the value of the products. Enhancing the material basis of produc-tion is essential to get out of poverty.

5. The fifth differentiating ele-ment between these models is that the New Economic Social Communitarian and Productive Mode looks for achieving economic surplus and redistribute it to the sectors previously excluded from it.. Thus, the State as-sumes the role of surplus allocator. The neoliberal model concentrated income in few hands, and therefore excluded other segments of the population.

With the new model, it is in-tended to get the inclusion of the excluded of the excluded. How to do that? By not con-centrating the income and

redistributing it aiming es-pecially to the marginalized of Bolivian society.

6. The sixth element is the State is the main promoter of the economy, it is the most im-portant player, symbolically leads the economy as the attacking midfielder (# 10) does in a soccer team.

The neoliberal model as-sumed an economy focused on private initiative, while the State worked as a mere appendage. A former Presi-dent of Bolivia handled the “export or die” motto and this assertion was not by chance because within the private sector, the sector that would generate the de-velopment of the country’s economy was the exporting one. However, this sector did not diversified; it was not generating added val-ue nor creating additional wealth for the country, and therefore the neoliberal col-lapsed earlier than in other countries, where there was a better export capacity and a better exporting private sector.

7. The seventh difference is that the new economic model boosts domestic demand at the same pace as external de-mand to achieve economic growth. The neoliberal model was external demand-driven mainly as it considered that exports would be the engine of the economy.

In the new model the ex-ternal sector is not the only driver of the economy.

It is necessary to change the productive

matrix of that old primary- exporter model for another that prioritizes the

production and, consequently, the

increment of the value of products

In the New Model macroeconomic stability is a social asset


In the New Model, the macroeconomic stability is the starting point, not the goal

While exports are important when the economy takes ad-vantage of trade, a country should not neglect domes-tic demand. Under the new model, the State is working to strengthen domestic de-mand, which allowed Bo-livia to tackle the financial crisis and achieve greater growth rate in the region (in 2009) when the rest was suf-fering from the crisis.

External demand fell glob-ally in 2009 because of the financial crisis and countries like Colombia and Chile could not keep up their neo-liberal models based on their exporting sectors. If Bolivia would have bet solely and exclusively to the growth re-lying in external demand, it would have been experienc-ing strong recession in 2009. But it was not so because of a stronger domestic demand. The Bolivian economy since 2006 is like a plane that flies with two engines, domestic demand and external.

8. The eighth difference is that under the new economic model Bolivia rid off the de-pendence on external savings and developed the capacity to generate domestic savings for investment, reducing the external debt and achieving fiscal surplus.

In the neo-liberal model, Bolivia was dependent on external savings for public investment and also to en-sure the sustainability of the public sector, i.e. fiscal defi-cits were financed by exter-nal debt.

With the implementation of the new model, it has shown that Bolivia has the capacity to generate domestic savings not only to have a strong and solid fiscal sector, but also to increase public investment with domestic resources.

9. The ninth difference is social inclusion. The new model enables the generation of opportunities for more peo-ple through a more dynam-ic economic development that drives to redistribu-tion with employment gen-eration. In the neo-liberal model stagnation, poverty, inequality prevailed; lack of economic opportunities was a constant.

10. The tenth difference is that the new economic model considers macroeconomic stability as the starting point - not the ultimate goal – to generate economic develop-ment.

Macroeconomic stability in the neoliberal model was an end in itself. It was the ulti-mate goal that all economic policies had to pursue. More-over, the fight against infla-tion was practically the only goal that neoliberal economic policy pursued, because the private sector was entrusted to deal with the rest.

In the new model, macroeco-nomic stability is a social as-set and is the basis on which stand the economic develop-ment and redistribution of income and industrialization of natural resources will be built up.

The new economic model overcame

the dependence of the external savings

and developed the capability to

generate domestic saving for investment, reducing the external indebtedness and to achieve fiscal surplus


The New Model pursues to built up an Industrialized Bolivia

The neo-liberal model The new model Free market. The market is the

mechanism through which resources are allocated and correcting imbalances. Efficient market

hypothesis

The State intervenes to correct the market failures (absence of redistribution of wealth and transnational monopoly of strategic companies)

State policeman. State observer. The market is the self-regulatory

mechanism of the economic process

Active participation of the State in the economy. The State should intervene in the economy through its seven roles: Planner, entrepreneur, investor, regulator, benefactor, promoter, and banker

State that privatizes, and transfers surplus abroad and does not preserve

natural resources that belong to the Bolivian people

Nationalization and control of natural/strategic resources to benefit Bolivians

Development pattern: commodity exporting

Development pattern: Industrialization for economic development

Concentration of income and proliferation of exclusion

Income redistribution. Plural economy and social inclusion

Economy focused on the private sector development State sponsor of the plural economy

Entire reliance on external demand-driven growth

Growth based on external demand and domestic demand

Dependence on external savings for investment, higher debt and fiscal

deficit

Generation of domestic resources for investment, lower debt and fiscal surplus

Stagnation, poverty, inequality and lack of opportunities

Ongoing development, redistribution and employment generation

Macroeconomic stability as an end in itself

Preserving macroeconomic stability as a social asset as the basis for economic development


Here comes the concept embodied in the Political Constitution of the State (CPE): the Plural economy, which establishes four key players: the State, the pri-vate sector, cooperatives and communities. These are the Plural Economy players

The State is the fundamental promoter, organizer, in-come re-distributor, in sum the most important play-er of the team. Then it is the classic private enterprise that generates employment and has some indepen-dence from the State to produce and distribute.

As part of the plural economy, there is also the co-operative social economy: the associative unions, be-cause cooperatives in Bolivia are deeply rooted not

only in the mining sector, but also in the rural sector as well as in the financial sector (credit unions).

The most important characteristic of the plural econ-omy is the recognition of all players involved in the Bolivian economy and the acknowledge of all forms of production, such as the ones that still persists in rural areas among the indigenous people and that were not taken into account until now.

As the CPE mandates, the State must encourage the communitarian economy with technological, financial support and should also integrate the three aforemen-tioned players.

n Who are the players in this model?

STATE

COMMUNITARY

PRIVATE

SOCIALCOOPERATIVE

- Generator of production and employment- Principles of solidary work and

cooperation

- Generator of production and employment

- Principles of solidary work andand cooperation

- Employment generator- Generator of production and services

- Strengthening ofeconomic independence

- Promoter- Organizer

- Redistributer

Role of the StatePromote the integration of di�

erent economic forms of produc-tion, aiming to achieve economic

and social development

PLURAL ECONOMY Association of the individual interesand the collective living well

WITH INCOME REDISTRIBUTION

ECONOMIC GROWTH

The reason for the name

The New Economic Social Commu-nitarian and Productive Model is:

Social, because it places empha-sis on solving social problems rather than individual problems.

Communitarian, because its main objective is the common good and welfare of all, but also it contains traditions and values of ancestors, which were displaced in the neo-liberal model by the exaltation of individualism. It was necessary

to modify and incorporate funda-mental values such as solidarity. State policies have to have a soli-darity component.

Productive, because it is not con-ceivable to beg to defeat poverty in Bolivia. The only decent, re-sponsible, and sustainable way out of poverty is producing goods and services in Bolivia. That is the reason the Bank of Productive Development (BDP) was created, meaning to channel credits which gradually shall transform the pro-duction matrix of the country.

Documents

PLURAL economy · 2012-11-13 · La Paz, September 2011 Pluraleconomy 1 The Ministry of Economy and Public Finance presents the first issue of the magazine Plural Economy, a periodical