human capital, its implication en informal trading
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Isabel Pereira Cedice LibertadTRANSCRIPT
Human Capital: its implication in informal trading
Isabel Pereira Pizani
1
Abstract
The men and women who occupy public places earning a living in street trading are victims of a double exclusion: on the first front, as a consequence of the statist- rentier-distributive nature of the Venezuelan State and of the attempt to impose a collectivist model in the place of the market and private property -both with strong anti-job-generating traits reflected in the game rules governing the incorporation of Venezuelans into the labor market-, a situation that has resulted in informal work becoming a structural feature of the Venezuelan labor market; and on the second, this differentiating exclusion occurs as a result of the nonparticipation of informals in the building of the knowledge society, a key factor for generating wealth, for innovation, and for adding value as the fruit of the transforming power of human capital. Key words: Statism, distributive society, human capital, knowledge society, informal workers, contributions and benefits
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Introduction Since Adam Smith postulated labor as the source generating all wealth in 1776, little
progress has been made, in relative terms, in managing to convert it into the axis of
mankind’s progress. “The annual labour of every nation is the fund which originally
supplies it with all the necessaries and conveniences of life which it annually consumes,
and which consist always either in the immediate produce of that labour, or in what is
purchased with that produce from other nations. (…) It is the great multiplication of the
productions of all the different arts, in consequence of the division of labour, which
occasions, in a well-governed society, that universal opulence which extends itself to the
lowest ranks of the people.”1
It is not too farfetched to say that much more has been invested in finding ways to
supplant labor than in expanding and consolidating spheres of freedom that would permit
the creativity of the worker to become the guide and mainstay of the creation of wealth. It
was not until half way through the 20th century that some researchers, among them Gary
Becker and Amartya Sen, began more definitive research into the importance of the
relationship between productivity, labor and the possibility of achieving better standards of
living for mankind. This change in direction in thinking was the starting point of an
unceasing search for the link between labor, wealth and standard of living.
This short paper responds to this need to understand what participating in the labor
market as informals means for workers and the opportunities this offers them. By
“informals” we mean workers whose work is based on game rules that are different from
and often diametrically opposed to those of the rest of society, i.e. the formal sector that is
accounted for and legally constituted.
In the specific case of Venezuela, it is important to note that informality occurs at
the heart of a society whose defining trait is that it is a rentier-oil country: “The State is the
owner of the revenues it charges and collects from the world market independently of the
domestic economy or, what comes to the same thing, of the economic life of the society
under its aegis,”2 a circumstance that sets limits on the labor market and puts informal
workers in a situation of dual exclusion: exclusion derived from this rentier state having to
do with the scant generation of job opportunities and, secondly, the intrinsic separation
that engaging in a productive activity on the informal side of the tracks confers. The
combination of both factors results in an informal sector that carries most weight within the
1 Smith (1776), u, pages 27 and 41.
2 Baptista (2004) b, page 33.
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labor market, numerically speaking, but offers its members scant possibilities of rising
above that situation or consolidating those aspects of their line of work that could become
viable.
This paper takes a look at the possibilities of expanding human capital as a result
of combining real job opportunities in the formal sector and options for development and
consolidation derived from engaging in informal economic activity, this being the main
occupation of the majority of Venezuelan workers.
The first part of the paper presents the basic concepts relating to rentierism, as a
basis for understanding the general economic dynamic as a determining factor in the labor
market structure and an effective cause of informality. It suggests the importance of the
absence of links between of the processes of salarization, productivity and salary as
essential elements of the labor dynamic. The second part, based on a field study
conducted on the streets of Caracas by CEDICE LIBERTAD’s Public Policy Analysis Unit
and a comparative analysis of the findings, puts forward the following hypotheses: a)
Informal economic activity is not one engaged in by choice; and b) the level of education of
the population in the economically active age group has little impact on their incorporation
into the labor market. Both hypotheses clearly show us how decisively general economic
conditions affect the possible options open to the informal worker.
Finally, a number of conclusions are presented as a point of departure for further
research together with proposed general guidelines for defining public policies and other
measures that local and central government could adopt immediately.
1. Basic Concepts
The labor market can be defined as an area of human relations that clearly
expresses the way in which a society is made up: the type of prevailing economic
development, game rules, current social conventions, the rates of productivity derived from
efforts in the field of knowledge-technology, and the level of education of the working
population, to name just a few of an infinite number of variables.
We live in salaried work societies that hinge on two principles, relative security for
all those taking part in the economic process derived from game rules adopted by common
accord, and the calculability of costs, expectations and risks over the long term. Salaried
work is, moreover, the base of the Welfare State and Social Security. Only when societies
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achieve near full employment can the economically active generations finance the older
ones.
Salaried work is also a guarantee of democracy. A worker is a citizen whose
existence depends on his participation in a market with pre-established game rules and
who, in his daily life, actively ensures that those rules are improved. This worker-citizen is,
therefore, the bearer of a given order of things, of a project that is translated into his own
biography.
The special feature of this research paper on human capital and informality stems
from its own proposal; it has to do with determining the limits and restrictions on expansion
for those individuals who have salaried status, but in a sense that runs counter to the given
order of things and the rules that this society establishes as constituent elements, i.e.
established game rules that are formally recognized by society (labor laws, property laws,
among others).
An informal worker is defined as being someone who forms part of an income
generation process not regulated by society’s institutions in the same way as other similar
activities are regulated socially and legally.3
This research paper extrapolates the Richard Barret’s idea regarding efficient
organizations to the concept of human capital, understood not merely as a seeking of
efficiency and productivity, but as those individuals who, because of their training and
personal qualities, are capable of forming part of “visionary organizations that find a
dynamic equilibrium between the needs of survival and growth, the meeting of their
personal needs, economic sustainability, and being socially and environmentally
responsible with their community and society in general”.4
Now then, the Venezuelan labor market, like any other, is in fact a variable that
depends on the general development option adopted by this society. In capitalism, labor
markets clearly express the margins allowed for and restrictions on the economic freedom
to invest and, in doing so, to drive the development of the productivity and salarization of
the population or, put another way, of opportunities for incorporating workers into
relationships of formal wage dependency and prospects of salaries understood as “current
schemes of remuneration, benefit or advantage, whatever their denomination or method of
3 Portes, Castells and Benton (1989), q, page 34.
4 Barret (2001), d, page 33.
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calculation, provided they can be given a cash value and are due to the worker for the
provision of his service.”5
In market economies, salarization, productivity and the salary are elements bound
together in a close relationship, where a variation in one triggers immediate reactions in
the others. In societies of a socialist-statist bent, the existence of labor markets is
debatable. They will always be the result of the discretionary expressions of those who
direct or plan the economy. The incorporation of men into the labor market or salarization,
the level of productivity, innovation, technological development and salary levels will be
variables that are independent of one another, responding, fundamentally, to the political
decisions of those who control the State apparatus and set the objectives of central
government planning.
However, in the specific case of Venezuela, taken as a country of a capitalist
persuasion, we see that the labor market responds to a socialist-type model, given the
superimposition of the weight of the State, endowed with a nature that is intrinsically that of
a proprietor, possessor of the ownership and control of the main sources of production of
wealth and whose main revenues come from the sale of oil on the international market.
This series of factors determines the specific nature of the Venezuelan labor
market, where the weight of the State has the capacity to generate, destroy or simply not
create jobs, replacing them with any other means of subsidizing of or transference to
sectors of the population of job age in this market.
The Venezuelan labor market, rather than expressing healthy competition between
individuals and reflecting our levels of productivity, is a sphere where the effects of the
redistribution policies decided upon or adopted by the proprietor-State at any given
moment or in a specific set of circumstances materialize.
Addressing the issue of the possibilities for and restrictions on the development of
human capital involves, first of all, a comprehensive empirical view of how the labor market
has been formed in its relationship of dependence on the general economic model
prevailing in this society. A second approximation reveals informality as one of the forms of
specific participation in the labor market, as opposed to the formal sector, that is the sector
covered or governed by the framework legally established by society.
Determining the possibilities of and restrictions on the human capital of the informal
worker remits us, then, in the first place to the significance of the proprietor-rentier model
of the economy in the Venezuelan labor market.
5 Ley Orgánica del Trabajo (1997), p, page 34.
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2. The rentier, proprietor, redistributive State
The economic theses put forward as a proposal for Venezuela during the second
half of the 20th century emerged in a context where there was a need to shake off any
remnants of the dictatorships and militarism that had existed for nearly 60 years and the
autocratic way of managing and understanding the economy and politics. Up until then, the
main beneficiaries of setting up the oil industry in Venezuela had been the military
dictators and their cronies. The need to break with that atavism reinforced the proposal of
the new ideologues regarding the necessity of putting all the economic power in the hands
of the State. “Not a single oil concession for private individuals”6 was the manifesto and
objective of the new leaders, who, in their understandable settling of scores with the old
tyrannies, scorning half measures, lumped together all private individuals with the former
beneficiaries of the military dictatorships. Thus Venezuelans were stripped of any
possibility of making a comeback, this time as the creators of wealth, and a first
expropriation was perpetrated, that of participating in the industry that generates practically
all the country’s wealth, the oil industry, a circumstance that we will call here “the
confiscation of comparative advantages.” 7
As a result of this circumstance, investment in Venezuela in highly profitable
sectors or sectors where there are static and dynamic comparative advantages is
restricted by the presence of institutions that give precedence to public investment over
private investment. This includes the energy sector in general (hydrocarbons, electricity,
etc.), mining and tourism, all examples of areas of economic activity where the decisions
to invest and redirect resources and productive factors are restricted by a supply of
property rights controlled by the State on the basis of formal rules that it shapes to suit the
political interests of the day.
The supply of property rights relating to investment in sectors with the biggest
competitive advantages is the outcome of a legal scheme of things that is based on the
coercive capacity of the political power held by the State. This institutional dynamic,
consolidated ideologically, imposes transaction costs that make private investment in
those sectors prohibitive. In this way, the productivity potential and the country’s potential
6 Betancourt (1978 ), g, page 33.
7 Pereira y Zanoni (2004), o, page 33.
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are affected, because of the existence of “institutionalized” state monopolies that restrict
competition, lessen the possibilities of adding value to our economy and, basically, turn the
majority of workers into passive individuals in dealings with the State.
The political consensuses reached in each government express these limitations
on investing, which are only made more flexible, in practice, in response to the need to
generate fiscal revenues. The State “grants quotas” or it cedes limited property rights to
investors only to the point where it gains in terms of power thanks to increased fiscal
revenues, which it can distribute. Workers and their families lose the opportunity of having
decent jobs and achieving better standards of living as a result of their merits and efforts.
The proprietor-State is not interested in generating value but in obtaining fiscal
revenues that will guarantee political power. In the case of the Venezuelan economy, this
characteristic, which is frequently got around, defines the structure of the real sector of the
economy and determines macroeconomic options for achieving growth and well-being. An
economy whose productive apparatus is dichotomized into profitable economic activities
(appropriated by the State) and economic activities having scant capacity for generating
value engaged in by the rest of society can only generate a labor market with profound
restrictions.
In contrast, the perennial proposal to grow based on the development of the private
non-oil economy, to diversify building on the growth of sectors where transaction costs are
very high and profitability doubtful has turned attempts to industrialize Venezuela into a
kind of bottomless pit that swallows up vast sums of fiscal resources. And it could hardly
be otherwise, when the State reserves to itself the economic activities having comparative
advantages, redistributes fiscal revenues to sectors with low profitability and inhibits
competition in a scheme of inward growth. This situation explains the problem that is
restricting the country’s possibilities of growth: on the one hand, the infinite and
insurmountable transaction costs involved in establishing private investments in profitable
sectors and, on the other, a very high “Venezuela Cost”8 for achieving growth in sectors
with scant comparative advantages.
This is the distorted situation facing Venezuela’s economic growth and social
development: the impossibility of achieving growth in the sectors with the biggest
advantages, on the one hand, and, on the other, the use of the resources generated by the
profitable state-owned companies to “subsidize” sectors with scant or zero profitability.
8 Penfold (2002), m, page 33.
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2.1. Political Expropriation
This insistence on doing away with the participation of private individuals in the oil
business, a kind of anti-caudillo backlash, could have been a passing phenomenon while
the aftermath of years of dictatorship dissipated. Unfortunately for us, however, it served
as the basis for another and perhaps worse transformation. Although the production of
wealth was no longer in the hands of private individuals, it was now in the hands of the
State, converted, inexorably, into the recipient and owner of undreamed-of revenues and
wealth. The creation of mechanisms of mediation between this omnipotent public
machinery and the citizenry became a necessity, particularly given the aspirations of
founding a democracy that was inspiring the leaders emerging in the country at that time.
In 1945, the proposal was for a society that disowned the economic citizen, but
established the party man as the interlocutor of the State, a newly created monster. Since
then, people’s standing as citizens has been linked to their membership of mass
organizations. The political and cultural consequences of this belligerence on the part of
the political parties are very profound, given that the transfer of responsibility is an attribute
of the political organization. In point of fact, this organization is now more responsible than
the individual. Henceforth, the sense of individual responsibility was to be conceived of as
being directly tied to obedience to the party and, indirectly, as responding to the inexorable
and transcendent course of history as a social process. So it is that the party has become
the principal interlocutor of the State in the place of citizen participation.
This mediation by the political parties between the citizen and society
consummated the second and, perhaps, most terrible confiscation, that of a person’s
status as a citizen. The pacts between the parties were to be the fundamental point of
political consensus in the relations between the State and society and in the social plurality
required by democratic regimes. Henceforth, citizens would not be distinguished on the
grounds of merit or civic ethics, but for their loyalty and responsibility to the party. Party
membership was to become the most valuable means of identification that would establish
the difference between one Venezuelan and the next. The strength of governments would
be associated with the consistency and allegiances derived from agreements expressing a
new form of tutelage or control, this time plural, clearly replacing the possibility of building
a society of citizens. This particular trait assumed by the Democratic State in its early days
is what the researcher Luís J. Oropeza describes in the Gendarme Innecesario as being a
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system’s source of legitimacy where control, order and possibilities are still not in the
hands of the citizens.
These two major expropriations are at the base of the State that has been built in
Venezuela since 1958. These expropriations are defined as a combination of the
confiscation of the citizenry by political parties, the establishment of pacts that were to
guarantee plural tutelage, and the alienation of economic freedoms and, with them, the
possibility of developing our comparative advantages as a country. Both confiscations, the
political and the economic, were to become the foundations of the Proprietor-Redistributive
State, the political mainstay of the democratic trials of the second part of the 20th century
and the attempts to establish a completely socialist regime in the 21st.
2.2. The impact of the “confiscation of comparative advantages”
The process of expropriation of comparative advantages, endorsed by powerful
pacts among the political parties, is the platform that bestows on Venezuela the nature of
rentier society or economy. The main revenue of the country’s economy depends on the
price of oil imposed by the world market; it is “income not created by the country,” that is to
say income for which there is no entry of labor and capital on the other side of the balance
sheet. In this sense, it is income without a balancing entry in terms of production… “The
State is the owner of revenues it charges and collects from the world market outside the
domestic economy, or put another way, apart from the economic life of the society under
its aegis.” 9
The appropriation of the oil industry by the State, which gives rise to the
expropriation of comparative advantages as a means of sustaining the rentier economy, is
a determining factor in Venezuela’s economic and social future, given its direct effects on
the basic structure of the labor market and because of its social repercussions in terms of
the depreciation of human capital as the engine of economic development.
The structure of the Venezuelan economy and, in particular, its labor market, is an
expression of the ideological-political visions that have prevailed in the management of the
country, a situation that is reflected in the different degrees of fragmentation that
characterize the labor market as an overall structure. By fragmentation of the labor market
we mean the coexistence within it of segments differentiated on the basis of specific
economic logics.
9 Baptista (2004), b, page 33.
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This nature of the structure of employment in Venezuela is apparent when we
observe the overwhelming presence of informal workers, both in terms of physical space
and over time, as a category that is more numerous than public and private sector
employment combined. This means that the majority of Venezuelan workers are not
protected by the legal and regulatory framework that covers the formal worker, and which
gives rise to a series of basic contributions and benefits aimed at ensuring their welfare as
individuals and as a group. The most obvious conclusion is that two logics of workers’
material reproduction coexist in the labor market, with the informal strategy
predominating.
Understanding this fragmented nature of the labor market allows us to appreciate
more fully the behavior and reactions of variables such as the level of employment,
unemployment, informality, the types and quality of jobs, wages and income and, most
important, it allows us to approach poverty as a phenomenon that results from the dynamic
interrelating of these variables. On this point, it is worth formulating some preliminary
considerations to be used as a working hypothesis, which are derived from the premise of
revenue being used as a mechanism of distribution and not as capital for generating new
wealth and opportunities; in other words, taking into account not the usufruct of the
revenue but the fact that this revenue does not imply any major domestic productive effort.
a. The fragmentation of the labor market is a phenomenon generated autonomously.
It has no preconceived form. It is the product of the interrelating of the economic,
political and legal game rules under which it falls and which constitute its quasi-
material means of support.
b. If we accept this premise, the second has to do with identifying the game rules that
determine the Venezuelan economy and, therefore, the labor market: public
ownership of the profitable sectors of the economy, political-legal restrictions on the
participation or intervention of private investment in the development of these
sectors, and the proprietor-rentier nature of the State. This public control of the
lion’s share of the economy supports the imposition of a state agent with a political
rationality that seeks power, crushing and squeezing out the economic rationality
that should prevail in the wealth generation process and, with it, the creation of
productive jobs as the substratum for incorporating Venezuelans into opportunities
for human, physical and material development.
c. Based on the foregoing, it is possible to reach an approximation to a preliminary
conclusion: the goals and objectives of the Venezuelan economy are not geared
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primarily to the creation of wealth. Given the prevalence of the political interest over
the economic, the purposes of the economy are tied to the generation of fiscal
revenues in order to sustain the political power structure. This explains the
historical difficulties Venezuela faces when it comes to adopting an appropriate
path for developing the economy other than the one deriving from the distribution of
revenues.
d. Control of the economy by the public sector based on ownership of the industries
that are most profitable, extremely capital intensive and generate few jobs, added
to the scant political interest in developing or opening up areas of investment
downstream in these industries that would permit the involvement of sectors other
than public capital, limits or restricts the capacity for generating jobs in the
domestic economy. If the dominant rationality is not the creation of wealth and, if
the basic economic activity is a poor job-generator, then the formal labor market in
Venezuela will be very restricted insofar as its capacity for expanding employment
is concerned, as it has always been.
e. Domestic private investors are relegated to sectors with low profitability compared
to the economic potential of the country. As this is the only way of sustaining these
private activities, the State maintains a structure that subsidizes private economic
activity either directly or indirectly. The private sector emerges in the shadow of the
State. This is the closing move in a perverse game played out within Venezuela’s
institutional framework: the political-legal framework turns the State into the
economy’s employer, denies the rest of society the right to invest where it can
obtain a return, but, at the same time and out of the need to maintain itself in
power, shares these resources out among the population and subsidizes
unprofitable activities that reduce the impact of unemployment and poverty. This
process explains the confiscation of the comparative advantages as a basic
malaise of the Venezuelan economy, a confiscation that explains the Venezuelan
economy’s scant capacity for generating jobs and the high cost of producing them
for sectors with low profitability. The paradox is that, when the majority of these
private incursions into the economy produce poor results, the private sector is
blamed for its low level of profitability and for wasting public funds.
f. The demand for productive jobs is not a priority, and the growth of employment is
discretionary depending on the volume of revenues obtained by the State. When
there is an abundance of resources, owing to rising international oil prices, the
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State, as a form of indirect subsidy, permits itself to finance more jobs in the public
sector with no regard for their productivity and transfers resources to private
undertakings with small chance of success. When oil prices fall, the margin the
State has for implementing these mechanisms for generating employment shrinks
or disappears. The notion of labor is not strictly associated with the generation of
added value, and a considerable number of surplus unproductive jobs are
generated within the public sector. This is what causes the deep crises and
Venezuelans’ scant ability to weather the storms resulting from a reduction in
public funds.
g. The qualification of the labor force is not a determining factor for its entry into the
labor market, except in the modern, highly technified sectors. This manifest
incapacity of the Venezuelan productive apparatus, added to the high cost of doing
business for the private sector, forces the majority of Venezuelans to develop
strategies for generating income outside the formal economy, engaging in activities
that do not contribute, on a large scale, to the gross domestic product. This is a
situation that does not worry the governments, as long as the revenues from the
state-owned companies are sufficient to meet their fiscal requirements. In point of
fact, the informal economy is left practically undisturbed by the authorities, even
when it becomes a nuisance, takes over public places and contributes to their
deterioration or poses a threat to public health.
h. The absence of productive activity is financed by the State through social spending
(missions or social programs, subsidies, handouts), which, in turn, is fed by oil
revenues. There is a trade-off between salaries and social spending to ensure
peace in the country. Rather than use fiscal revenues to protect the highly
vulnerable sectors, they are allocated to disguise the structural lack of jobs and
salaries facing the population in the economically active age group.
i. Rentierism and the expropriation of comparative advantages produce a separation
between fundamental categories at the very base of the labor market: salarization
is not driven by the dynamics of the economy or the need to ensure greater yield
on investments. To the same extent, the growth of salaries does not operate as a
process that is closely linked to increases in productivity. This relation between
salarization, productivity and salaries in the Venezuelan rentier economy is not,
therefore, a determining factor in the size, composition and structure of the labor
market.
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j. The extension of salary relations is extremely limited, a situation that is translated
directly into informality as a consequence of the tremendous difficulty of obtaining
access to a real income that is the product of work, of being cut off from the formal
economy, and of poor access to systems of contributions and benefits that back up
the worker’s well-being and social stability.
k. This structural differentiation in the labor market –its fragmentation in other words-
stems from this perverse dynamic that ruptures the intimate relationship between
salary, productivity and salarization.
l. This situation has given rise to the splitting off and formation of economic, cultural
and political sectors, each with their own particular game rules, dissimilar and
contradictory goals and objectives, and values that are an expression of the deep
splits and differences that exist in Venezuelan society.
3. The extension of salary relations
The extension of salary relations and the defragmentation of the labor market have
been pre-requisites for capitalist expansion and ensuring the domestic social peace of
countries. In this regard, it is unquestionable that the well-being in rich countries is closely
related to the unequivocal approach adopted by their ruling classes in the search for better
conditions for incorporating the huge masses of people occupying wretched jobs into the
capitalist labor market.
It was into this dilemma-ridden scenario that the Welfare States emerged at the end
of the 19th century as the element providing most solid support for capitalist development in
Europe and the United States and as guarantors of the process of homogenization of the
salary relation or salarization, by permitting the incorporation of workers into the labor
market with lower social costs. The great objective was to consolidate growing,
homogenous societies within which it was possible to share risks, societies in which the
immense majority of the population would be able to have a stable job.
The great historical role played by the Welfare States was that of establishing a
form of conciliation that would get past the “hand-to-hand” combat that was occurring in
each factory to obtain better wages. The public sector’s social efforts were focused on this
objective: agreeing game rules by setting up a system of risk sharing that would permit
capitalist expansion and, at the same time, favor workers. To achieve these objectives, the
states, making full use of their fiscal policies, built up social security systems, granted their
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economic agents full freedom, and strengthened the legal bases guaranteeing legal
certainty for the expansion of capital. It is worth pointing out here that, in these cases,
intervention in the economy by the State was restricted to setting and managing the fiscal
policy.
Through the different welfare systems, based on universal systems of contributions
by workers and employers, the governments of these countries took on tasks that before
had fallen within the private domain of the family or were reserved to the more powerful
sectors. Amidst tremendous conflicts, strikes, negotiations and agreements, they
implemented measures and took action aimed at backing this profound social migration to
new forms of economic participation (extension of salary relations; defragmentation of the
labor market), while at the same time setting up systems of social contributions and
benefits unheard of until then. In less than a century, they managed to extend access to
education and make it compulsory, democratize the entry into universities and training
centers, while getting legislation passed that would provide the worker with protection from
the complexities of his working life.
The priority for welfare regimes, established as a result of the extension of salary
relations, meant, in a more general sense, increasing the value of the human potential of all
non-owners so that they would acquire, via that route, autonomy as political citizens and
economic entities, a circumstance that guaranteed them the enjoyment of their social
citizenship and freedom to sell their labor and their know-how and accumulated skill
potential without restrictions, so turning this into the key to individual and collective well-
being.
Another decisive player joined this process of increasing the value of the salary,
underpinned by the different types of Welfare States and welfare systems: the large trade
unions, defenders of the financial power of the wage, which were to undergo an intense
process of organization and internal democratization throughout this entire period, a basic
requirement for ensuring the workers’ representation in dealings with the State and capital.
As can be seen in Table No. 1, the prevailing trend in the United Kingdom, France
and the United States has been the extension of salary relations and, with it, of formal
employment. By the 90s, more than 80% of the economically active population in each of
these countries were wage-earners, a trend that runs counter to what has happened in
Venezuela, where growth of the salarized population tends to be dominated increasingly by
the informal sector (see Tables Nos. 2 and 3).
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Table No. 1
Salaried Status: International Experience 1688-1993
(Salaried population as a percentage of the economically active population)
United
Kingdom
% France % USA %
1688 35.8
1801 43.2 1900 69.8
1911 87.2 1866 57.7 1940 75.7
1951 92.8 1926 65.1 1970 89.8
1991 87.9 1982 83.6 1992 91.2
Source: Baptista, Asdrúbal. 2004. “Teoría Económica del capitalismo Rentístico”. Caracas
Ediciones IESA 1999.
Table No. 2
Venezuela
Salaried population as a percentage of the economically active population
(1936- 1995)
Salarization
Year %
1936 37.4
1953 63.6
1961 70.7
1971 78.7
1995 83.8
Source: Baptista, Asdrúbal. 2004. “Teoría Económica del capitalismo Rentístico”.
Caracas Ediciones IESA 1999.
16
0
20
40
60
80
196919721975197819811984198719901993199619992002
Formal
Informal
Table No. 3
Venezuela
Population Working in the Formal and Informal Sectors
Source. Encuestas de Hogares por muestreo. 1969-2003. Instituto
Nacional de Estadísticas
Regardless of the ways in which Welfare States operate or the specific details of
their social security systems or welfare regimes, it is undeniable that their participation was
decisive in the creation of risk-sharing societies that were guarantors of capitalist
expansion, the defragmentation of the labor market in an environment or relative social
peace and, above all, in benefiting workers without creating disincentives to business
investment.
By way of conclusion, it can be said that the combination of the extension of salary
relations and the free development of business within the general framework of the
Welfare States, the organization of trade union movements, and the expansion of
educational-health services permitted the leaders of these countries to incorporate large
masses of the population into wealth-generating economic activity, create the conditions
for expanding their possibilities of developing human capital and so overcome poverty as a
structural problem.
Although these countries may experience periods when the salary loses value or
the capacity for employment contracts, neither of these situations constitutes phenomena
of poverty as we know them in our country.
In Venezuela, the construction of a risk-sharing society based on defragmentation
of the labor market, extension of salary relations, and generation of formal jobs has not
occurred. Depending on how the economy is behaving at any given time, informal workers
account for just over or just under half the economically active population. Added to this is
17
the magnitude of unproductive public sector employment, whose dimensions stem from
the rentier nature of our economy.
18
Graph No. 1
Structure of the Venezuelan Labor Market
2004
Source: Instituto Nacional de Estadísticas. 2004
The vast majority of informal workers are either poor or potentially poor, lack
savings capacity, do not have ties with the financial system or any possibility of taking part
in the contribution systems that would provide them with the protection of social benefits in
the event of being unable to work or a family emergency. In Venezuela, only 30% of
workers contribute to the social security system. This means that it is impossible to
generate possibilities for human development and to deal with poverty without making
direct reference to this instability and fragmentation of our labor market.
The extension of salary relations in the formal sector, or salarization, as an
alternative to poverty implies, then, generating jobs as a response to the demand for
economic development and salary relations that are valid insofar as they contribute to the
expansion of physical and human capital and to the generation of goods that consumers
need and find desirable at home and abroad.
4. Productivity in a rentier society
The oil revenue that the Venezuelan State receives is income that has no
counterpart in terms of productive effort. This initial circumstance indicates that the
Some features:
Salarization shows negative
fragmentation; majority of non-
taxpayers
Predominance of non-salary
relations and of sectors providing scant
added value (jobs in informal + public
sectors)
Private-sector formal market is a
comparatively small employer in
international terms
Poor remuneration
Productivity with zero strategic
value in terms of the participation of the
sectors
Impossibility of universal social
security owing to the low level of
distribution
Informal Sector
52%
Public Sector
24%
Private Sector
34%
19
salaries set within the domestic economy have little to do with productivity -unlike what
happens in capitalist societies where salaries closely follow increases generated in
productivity-, a trend that accentuates the lack of linkage between productivity, salary and
salarization -fundamental variables in the growth of employment and the extension of
salary relations- in the Venezuelan rentier economy and restricts workers’ potential for
human development.
Although it can be said that increased productivity is not sufficient to definitely
ensure improvements in the social conditions of the worker, it is unquestionable that, in
order to guarantee social rights, it is necessary that society’s productivity levels be
increased to the point where resources are available from which to distribute any surplus.
This is not a situation that prevails in oil rentier societies, where the State’s
fundamental income is not linked to increases in endogenous productivity. In these cases,
redistribution or sharing out automatically becomes a discretionary function of the sectors
or institutions that control the flow of income and, ultimately, it is a product of the game
rules agreed upon by a given society for distributing that fiscal revenue.
When the revenue is channeled to encouraging a domestic productive structure
where this income is used as seed capital, a kind of original sum to finance new economic
activities that will generate new income, the linkage between productivity, salary and
salarization is formed immediately. The rate of benefits that this type of investment
produces for society will be directly related to the productivity of labor and the
competitiveness of the products generated by this activity. In this situation it can be
expected that the salarization process, understood as the generation of opportunities for
incorporating workers into dependent, formal salaried relations, will be reinforced.
Establishing the link between productivity, salary and salarization is a pre-requisite
not only for achieving improvements in people’s standard of living, but also for achieving a
true strengthening of democracy. If this link exists as a fundamental of economic fact, the
fate of the working population will not depend on chance external circumstances, as in our
case, where the variations in the price of oil on the world market, the volume of oil sold
and, above all, the political decision and political interests are the factors that prevail when
it comes to directing the redistribution process. If the link between salary, salarization and
productivity does exist, a healthy competition can be established between the State,
business and workers to determine growing salary levels that are sustainable over time.
The trade unions can make sure that the level of wages are representative of workers’
efforts and that achievements in productivity are translated into salary improvements;
20
similarly, the extension of the salaried population would occur as a result of the expansion
in economic activity, and not as a result of a decision to increase jobs in the public sector
or in any other unproductive activity.
As can be seen in Table no. 4, in the main developed countries, salaries, while very
near productivity levels, always remain below them.
Table No. 4
Productivity and Real Salaries, Various Countries
Germany France Italy United
Kingdom
Europe USA
1965- 1981
Productivity 4.0 4.1 4.4 3.3 3.9 1.4
Salaries 3.8 3.4 4.6 2.9 3.6 1.1
1981 -1997
Productivity 1.9 2.3 2.3 1.8 2.1 0.7
Salaries 0.7 1.1 0.8 1.5 1.0 0.5
Source: Baptista Asdrúbal. 2004. “Teoría Económica del capitalismo Rentístico”. Caracas
Ediciones IESA 1999.
In the case of Venezuela, this relationship does not exist and may be the opposite;
the growth or decline in salaries is not a direct consequence of variations in productivity
(see Table No. 5).
Given the economic power of the State, its capacity to generate employment at its
discretion based on its policies for redistributing revenue, and the considerable subsidizing
and protection of domestic industry, a margin or degree of independence between the
worker wage and productivity variables is created. “…the rates showing the behavior of
both indicators since 1958 permit the observation that, while per capita GDP is at 1962
levels, the productivity of the employed work force in the country is only 70% of what it was
in 1958. In other words, today, each worker produces 30% less than his counterpart might
have generated in 1958. Current academic discussion links productivity and long-term
growth to the effort of developing human and social capital, the quality of institutions, the
strength and flexibility of labor markets and, in general, to conditions that might promote
and favor investment in all areas having positive consequences for the human
development of all a country’s citizens. It is for this reason that verifying this continuous
21
deterioration in the contribution made by production is a crucial element for the future and
prosperity of Venezuela. Low productivity also implies declining real remuneration, which
means that better conditions can hardly be expected for workers and for the population in
general.”10
10 Curiel (2005), i, page 33.
22
Table No. 5
Productivity and Real Salaries, Venezuela
(1953 -1980)
Source: Baptista Asdrúbal. 2004. “Teoría Económica del capitalismo
Rentístico”. Caracas Ediciones IESA 1999.
The lack of linkage between salaries and productivity affects all Venezuelan
workers, except those who work in the private sector, where benefits depend on the
profitability of the business. In the case of the informal workers, income depends not so
much on the productivity of their work but on the existence of game rules that will allow
them to obtain additional benefits, such as not existing as far as the tax authorities are
concerned, which means they do not pay either taxes or municipal business licenses,
evading the labor costs implicit in the labor law, and evading fixed costs, such as paying
for electricity, renting premises, etc.
5. Devaluation of education in the rentier economy
The absence of linkage between salary and productivity, typical of the rentier
society, has as one of its correlates the devaluation of the credentials of human capital as
an irreplaceable requirement for the generation of income. Despite the huge amounts of
resources obtained by the State from oil revenues, Venezuelan statistics show that the
number of people without specific job qualifications in the Venezuelan labor market is
extremely high, a situation that affects more than three quarters of people in the
economically active age group. These same statistics also show, however, that the
number of people with higher education qualifications is twice the average of that in
developed countries. This paradoxical situation is due to the peculiarities of the
Venezuelan education system, which offers university education as an alternative to
Period Productivity Salaries
1953-1961 5.6 6.8
1961-1970 4.8 4.1
1971-1978 -1.4 2.5
1978-1995 0.3 -5.2
23
Nivel Educativo de la Fuerza Laboral Ocupada
2004
5% 1%
54%
21%
19%
0%
Analfabetas
Sin Nivel
Básica
Media Diversificada y Profesional
Superior
No Declarado
Nivel Educativo Buhoneros de Caracas
1%
51%
38%
10%
Sin Nivel
Básica
Media Diversificada y Profesional
Superior
joining the labor market, for the privileged, but lacks opportunities for acquiring mid-level
qualifications that would allow the mass of the population to obtain the qualifications they
need, pressed, as they are, to start working at an early age. This contradictory situation of
a large mass of people without qualifications and a sector with university qualifications that
is larger than the averages in more developed countries shows the lack of linkage between
education and the country’s development requirements. There are no opportunities for the
majority to obtain qualifications. The structure of the levels of education within the informal
population reflects averages similar to those prevailing in the formal sector, with 81% also
lacking any professional qualification.
Contrary to all expectations, the research done by CEDICE managed to
demonstrate that there are no significant differences between the educational
characteristics of informal workers and those of workers in the formal sector: more than
38% of informal street workers are high school graduates or mid-level technicians and
10% have higher education, while the predominant level of education for both sectors,
formal and informal, is primary education, which covers more than 50% of the workers in
both cases.
Graph No. 2 Graph No. 3
Source: Instituto Nacional de Estadísticas 2004
This devaluation of education is significant when revenue distribution alternatives
are generated based on large-scale education-type programs of an inferior quality through
which the population is offered mass qualifications without meeting the requirements that
would lead to the training of human capital capable of playing a competitive role in the
economy, a situation that takes on greater significance when it is understood that joining
the informal sector is not a completely autonomous or voluntary decision, as our research
shows.
A first conclusion that can be drawn from the analysis of these data is that it is not
the level of education that prevents informal workers from joining the labor market, as fairly
Source: UAPPEI, CEDICE LIBERTAD
24
Lo Que Sabe Hacer Mejor es...
40%
60%
Comercio / Buhonerismo
Otro
Experiencia en Otras Ocupaciones
(Distintas al Buhonerismo)
79%
21%
Si
No
Tiempo Transcurrido desde Última
Ocuapción
(Distinta al Buhonerismo)
9%
18%
34%
19%
20%
Menos de 1 Año
De 1 a 2 Años
De 2 a 4 Años
De 4 a 6 Años
Más de 6 Años
similar levels of education predominate in the two sectors. Now then, what can be
postulated as a deduction is that it is not the levels of education that generate
opportunities for joining the formal labor market but the specific characteristics of the
general rentier economy model.
6. Is informal work an option chosen voluntarily?
Despite knowing the limitations facing anyone in the economically active age group
when attempting to enter the labor market, it is important to understand to what extent
informal work can be considered an option chosen voluntarily by the people in this sector,
according to the findings of the study conducted by CEDICE. The following graphs show
that 60% of street vendors stated that what they know best is an occupation other than
commerce/street vending, which is in line with the 80% who have experience in other lines
of work.
Graph No. 3 Graph No. 4
Source: UAPPEI, CEDICE LIBERTAD Source: UAPPEI, CEDICE LIBERTAD
Moreover, it can be seen that 62% of all informals interviewed had worked in
occupations other than street vending for periods of more than two years and a third had
worked for brief periods in other occupations.
Graph No. 5
25
Años en Última Ocupación
(Distinta al Buhonerismo)
11%
19%
10%
33%
27%
Menos de 1 Año
De 1 a 2 Años
De 2 a 4 Años
De 4 a 6 Años
Más de 6 Años
Horas de Trabajo Diarias
78%
15%
7%
Entre 5 y 8 Horas
Entre 9 y 12 Horas
Entre 13 y 16 Horas
Días a la Semana que Trabaja
2%
18%
78%
2%3 Días o Menos
4 Días
5 Días
6 Días
7 Días
Años de Experiencia Como Buhonero
7%
18%
43%
18%
14%
Menos de 1 Año
De 1 a 2 Años
De 2 a 4 Años
De 4 a 6 Años
Más de 6 Años
Source: UAPPEI, CEDICE LIBERTAD
Graph No. 6 Graph No. 7
Source: UAPPEI, CEDICE LIBERTAD Source: UAPPEI,
CEDICE LIBERTAD
However, even though the occupation they know best is different from street
vending, 64% have remained in this line of work for periods of more than six years. Given
these facts, it is worth asking, if a street vendor gives another occupation as what he
knows best and has ample experience in other types of job, why does he continue in street
vending? One possible hypothesis would be that his continuing in this line of work does
not depend on training or experience, but on the lack of jobs in the fields or areas in which
he has skills and experience. It also permits us to infer that the possibility of mobility into
the formal sector grows less the longer a person remains on the street.
But if, besides that, we add the hours a typical street vendor works, the question
that then arises is what is the attraction or what are the motives that induce these people
to work between 9 and 12 hours a day, seven days a week, which are normal working
hours according to 78% of Caracas street vendors?
Graph No. 8 Graph No. 9
Source: UAPPEI, CEDICE LIBERTAD Source: UAPPEI, CEDICE
LIBERTAD
26
The hypothesis that joining the informal workforce is not a matter of free choice
seems to be confirmed by the study’s findings regarding the perceptions of informal
workers, where almost all the answers have to do with the possibility of joining the formal
sector. Most aspire to having their own business, formally owned by them, provided the
change in their job status does not mean a loss of real benefits enjoyed at present.
27
Percepciones
99%
88%
77%
64%
26%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tener Comercio Propio Buhonerismo Acabará
Prox. 5 años
Tomaría Trabajo Formal Aceptaría ese Trabajo
Ganando Igual
Se Formalizaría si con
eso Ganara Igual
Aspiraciones
84% 86%80%77%
97%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Cambiar a otra
Actividad Formal en
la que Ganase Igual
Contar con Seguro
Social
Cubrir los Costos
de SS a sus
Empleados y/o
Famlia
Pagar Impuestos
Sobre la Renta
Pagar Impuestos
Municipales
Graph No. 10 Perceptions of Informal Workers
Caracas Metropolitan Area
Source: UAPPEI, CEDICE LIBERTAD
As for their aspirations, there are clear references to formalizing their situation, the
majority would like the backing of a social security system that protects their families, to
pay municipal taxes, and to change over to a formal line of work.
Graph No. 11 Aspirations of Informal Workers
Caracas Metropolitan Area
Source: UAPPEI, CEDICE LIBERTAD
28
Deseo de Formalizarse
95%
5%
Sí
No
This verification of the informal worker’s working conditions and the desire of 95%
of informal workers to formalize their situation give rise to definite doubts as to whether
joining the informal market can be a matter of preference or free choice.
Graph No. 12
Aspirations of Informal Workers to join the Formal Economy Caracas Metropolitan Area
Source: UAPPEI, CEDICE LIBERTAD
7. Learning “the other game rules”
Besides the outdoor working conditions that the informal workers have to face in
order to guarantee a living, they have to adopt or abide by game rules that are different to
those prevailing in the formal sector. Factors such as “having someone to take care of the
stand,” indicative of the precarious nature of rules governing this line of work or of the
absence of formal ownership, and having to depend on direct dealings with persons of
influence in order to survive -with the police, for example, for getting round legal
procedures and requirements that restrict informality- are part of the cultural environment
of the game rules they must learn and master if they are to be reasonably successful in
street trading.
Mastering the extra-legal game rules allows these workers to cope with the factors
associated with informality, such as the insecurity and instability that makes physical
control of the stand from which they work enormously important, a variable expressed in
the relevance of “never leaving the stand” because of the fear of maybe losing the
29
business or being evicted. Another requirement is being “sharp or on the ball,” which is
translated into the capacity to respond immediately to rules that aim to regulate their line of
work or any changes in the game rules governing the business. These factors are as
relevant as the conventional factors in any commercial relationship, such as treating the
customer well, being a responsible person or the level of formal education.
30
Índice de Factores de Redes Sociales en el Éxito de la
Buhonería
0,16 0,150,11
0,16
0,220,19
0
0,05
0,1
0,15
0,2
0,25
0,3
Conocer lider de
la cuadra
Conocer
policias
Conocer
maladros
Conocer
personas
influyentes
Tener panas en
la zona
Tener alguien
para cuidar el
puesto cuando
te vas
Índice de Factores de Aptitudes / Actitudes en el Éxito
de la Buhonería
0,15
0,05 0,05
0,16 0,15 0,13 0,150,15
0
0,05
0,1
0,15
0,2
0,25
0,3
Ser
viv
o/p
ilas
Ser
vio
lento
Esta
r
arm
ado
Buen t
rato
con e
l
públic
o
Ser
una
pers
ona
responsable
Ser
respeta
do
Ser
Bachill
er
Nunca f
altar
al puesto
Graph No. 13
Source: UAPPEI, CEDICE LIBERTAD
Graph No. 14
Source: UAPPEI, CEDICE LIBERTAD
Those who work in the informal sector on a daily basis are exposed to the ups and
downs of the contradictions between formal and informal rules, so much so that 10% of
informal traders consider that the laws regulating public places -and therefore their
business activities- are well defined, while 71% consider that they are either poorly defined
(34%) or not applicable (37%).
31
Graph No. 15
Source: UAPPEI, CEDICE LIBERTAD
This contradiction is reflected in the perception these workers have of their formal
rights as regards the legal situation of their line of business, with 67% of those surveyed
recognizing that the Constitution does not grant them the right to occupy the streets, but
almost a third pointing out that Article 87 of the Constitution clearly states that they have
the right to work as non-dependent workers.
Graph No. 16
Source: UAPPEI, CEDICE LIBERTAD
These working conditions that prevail in the informal economy, added to the social
friction that adopting game rules that are opposed to those of the formal sector, allow us to
infer that remaining in a situation of informality or the difficulty in formalizing their situation
is tightly linked to the specific model of work socialization centered on the learning of
Las leyes que regulan el espacio publico están:
10%
34% 37%
19%
Bien definidas Mal definidas
No son aplicables No sabe/ no responde
¿Existe un derecho Constitucional para trabajar
en la calle?
No sabe/ no responde 3%
Si da un derecho 30%
No da derecho a Trabajar en
la calle
32
values contrary to those that govern formal society, owing to the scant opportunities for
entering the labor market in an economy founded on the distribution of revenue and not on
the generation of productive investment opportunities. This is a situation that denies
opportunities for creating formal jobs and casts a shadow over or reduces the role of the
factors that have been considered key factors for closing the gap that separates us from
more advanced countries: investment in education, opening up to new technologies, and
encouraging research and development in the private sector.
While the annual per capita income in the region doubled from US$3,000 to
US$6,200 between 1950 and 2000, in developed countries, it tripled from US$7,300 to
US$23,000. The number of poor people in Latin America and the Caribbean today comes
to nearly 169 million. This phenomenon of lagging behind in the growth of income is due to
a productivity gap, which, in turn, stems from Latin America’s and the Caribbean’s inability
to keep abreast with adopting new technologies in their productive processes and the slow
updating of skills.
To close this gap, it is not enough to simply import the latest technology, it is
necessary to bring the level of education and skills of the population up to the level
required in order to exploit its full productive potential, because technology and skills
closely complement one another.”11
8. Decline in the number of jobs since 1999
In 1999, the clear trend of informal work becoming the predominant activity within
the Venezuelan labor market began to emerge. The expansion of informal work, in our
view, is going to be closely linked to the new approach adopted by the Venezuelan
government, focused on the following elements:
a. Return to centralization and the concentration of power
This approach adopted by the Venezuelan government broke with the boost that had
been given to redistributing the economic and political power within the country during
the decade 1980-1990. This objective, pursued during this period, became evident in
the Law on the Direct Election of Governors (1989) and the Decentralization Law
(1989), which transferred the management and control of public services to the
municipal and state governments. This process of gradually reversing the process of
decentralization has meant a return to the concentration of power in the rentier State.
11 World Bank (2003), a, page 33
33
In terms of employment, it has had the effect of discouraging the growth of economic
fabrics with their bases in local communities and municipalities and inhibiting the
democratic redistribution of regional economic activities.
b. Reducing the participation of private enterprise in the country’s economic
development. Replacing private activity with public.
The escalation of the penning-in of private companies through laws and decrees that
severely restrict economic freedoms, the majority of which contradict the present
Constitution, has caused, among other problems, a major shift in economic activity
from the private to the public sector. It is worth noting here how the ratio of Total Fiscal
Spending to Gross Domestic Product grew from 21.2% between 1990 and 1999 to
24.4% between 2000 and 2004, the latter being the highest rate of growth since
statistical records have been kept in Venezuela. This same ratio in the 60s did not
exceed 16% according to figures produced by the Central Bank of Venezuela.
This re-orientation of the economy marked the starting point for a gradual
escalation of measures, decrees and regulations, conveniently accompanied by threats
of expropriations, invasions of private property, and rigidity in the rules for operating
private companies, the most obvious result of which is the absence of private
investment, both domestic and foreign.
Graph No. 17
Foreign Investment in Venezuela 1996 - 2004
Source: www. venamcham.org
34
With the defining and application of these approaches, the generation of private
sector jobs in the labor market began to decline. The number of manufacturing industries
contracted by nearly half between 2000 and 2004, from 13,000 establishments to nearly
7,000 in 2004. Industry has declined and with it the number of employed workers in the
private sector. What is clear, however, is that, while the decline in the private industrial
sector is a negative result in economic-social terms, it is one of the political objectives
pursued by the new regime, which aims to cover this vacuum in the generation of
employment by slowly and gradually imposing economic establishments based on
collective forms of economic organization and ownership.
With this objective in mind, the new law on the functioning of cooperatives was
passed, in which cooperatives are conceived of as unions of associated producers with
considerable restrictions on incorporating salaried labor, so managing to substitute this
type of property ownership for all private sources of generation of employment. These are
cooperatives with a strong anti-employment bias, as they are only allowed to incorporate
salaried workers as an exception with temporary jobs lasting for up to six months, at the
end of which time the worker has the right to demand that he be allowed to become a
member on the same terms as the founder members. In situations where the incorporation
of new salaried workers is indispensable, because the cooperatives are not in a position to
be able to do the work themselves, the law orders that these workers be hired through
other cooperatives, companies in the social, participative economy or even enterprises
having other forms of legal incorporation. Sanctions, including suspension of certification
as a cooperative and fines, are established for cases where salaried workers are hired on
a permanent basis.
The regulatory framework for these cooperatives reflects the anti-capitalist bias that
prevails in the law, which is aimed at eliminating salaried work or reducing to its minimum
expression. These cooperatives, which are being promoted by the government as the
great alternative to poverty, will be a source of major social conflicts, as, inevitably and
because of internal inertia, they will block the entry of new members as a mechanism for
preserving a larger slice of the earnings for each of their members, to the detriment of the
poor jobless sectors, who will pressure for new opportunities to join.
9. Conclusions
35
In modern, competitive market economies, human development is a priority. In
rentier economies, whose main revenue does not come from domestic productive efforts
and where salaried labor is not the fundamental linking factor between individuals but
rather a determining feature of the separation and differentiation of expectations, human
development is not a priority. The absence of this priority as a fundamental in the
socialization experience in salaried labor is, moreover, the cause of the proliferation of
violent behaviors, insecurity and the destruction of society’s collective assets.
The education and training of the individual lose their strategic importance as a
requirement for achieving better standards of living.
The division between the population in the formal sector and the population in the
informal sector generates a weakness in terms of contributions that makes it impossible for
societies to build up universal assistance and security systems to help individuals cope
with life’s ups and downs: illness, old age, losses in the family, and so on.
These conditions, which pose restrictions on the human development of men and
women engaged in street trading in public places, make them victims of exclusion twice
over, so making them more vulnerable and reducing their possibilities of opting for an
alternative that would improve their economic and social circumstances. This double
exclusion manifests itself on two fronts:
The first has to do with the specific conditions of the economic-political regime that
characterizes Venezuelan society insofar as it is a) a statist-rentier distributive society and
b) a society where attempts are being made to impose a collectivist production model in
the place of the market and private property. Both features of this sociopolitical model
have a characteristic in common: their strong anti-job-generation trait expressed in all the
public policies, laws and game rules that govern the incorporation of Venezuelans into the
labor market. This anti-employment trait has become the efficient cause of the presence of
informal work as a structural feature of the Venezuelan labor market.
On the second front, the differentiating exclusion of informal traders occurs as a
result of their non-participation or distancing as a social group from the possibilities of
human development implicit in the building of a knowledge society and a key factor for
generating wealth, innovation and added value as a product of the individual’s subjective
transforming power. In street trading, what prevails is the kingdom of “other knowledge” or
learning and continuous improvisation of game rules for the survival of these growing
social sectors.
36
The two types of exclusion have features in common. Both in the distributive,
collectivist societies and in the social groups outside the knowledge society, human capital
becomes a passive, dependent factor and not a crucial element for generating wealth.
Education and investment in human capital is not the highest priority; education is not
conceived of as the intangible with the highest power of transformation, with the result that
belonging to the knowledge society loses its strategic value. The problem becomes more
complex given the evidence that any attempt at urban regulation and at re-launching the
market economy includes the incorporation of the vast majority of these street vendors into
economic activities where the level of training, socialization and work culture are key
factors for their effective inclusion.
The existence of these two worlds –the one formal, modern, centered on
knowledge and innovation as they key for generating wealth, and the other, on the other
side of the tracks and based on the ability and skill for negotiating informal game rules,
where shrewdness and the capacity to deal with whoever happens to be in authority takes
the place of education- gives rise to an irreconcilable split within society, a situation in
which both sides end up losers, inhabitants of the same world and occupying the same
geographical space but who view life from totally different perspectives.
The significance of this double exclusion of informal vendors is linked to the fact
that, increasingly, in the Venezuelan distributive society, now tending towards collectivism,
informal economic activity is becoming predominant owing to the effects of the model
itself. A side effect of this expansion in informality is the decline in the importance of
education, investment in the individual and the growth of human capital, for the simple
reason that the survival of the majorities does not depend on their intrinsic membership of
the knowledge society but, rather, on how they manage to get around these formal rules,
which do not take them into account.
The alternatives or solutions to this crucial problem must address both of its
manifestations: the transformation of the general model, which necessarily has to be re-
oriented to turning the distributive society into a society based on a system of contributions
and benefits, as it only has the individual, the power of human capital as its center, and the
revaluation of education and continuous learning as the key factor of change and social
well-being.
10. Challenges involved in developing informal human capital in Venezuela
37
Creating opportunities for human development for informal workers involves, first of
all, a) a change in society’s understanding and perception of informality as an economic
and socio-cultural phenomenon; and b) the generation of expectations of integration or
self-betterment within these groups.
If the game rules prevent large segments of the population from gaining access to
formal work that generates wealth and viable life projects, society must take steps to
engage in self-criticism that gives rise to changes and modifications in those game rules. If
the country’s economic strategy prevents the growth of opportunities for business or the
salaried population with decent wages and access to social security from expanding, the
economy or its pattern of development needs to be re-oriented so that opportunities are
made available to all. If the legal framework excludes the informal population, the law as a
sphere for intersubjective creation must be rethought so that it gradually opens up to bring
the informal population under the rule of law.
10.1. Surmounting the rentier model
It will only be possible to solve the social division implicit in the separation between formal
and informal society by surmounting the rentier mode, a task that necessarily involves
adopting the following approaches and taking the following measures:
Restoring to Venezuelans investment opportunities in sectors with comparative
advantages.
Extending salary relations by establishing the link between salary and productivity
Increasing the value of and strengthen the capacity for generating value adding
activities of the informal sectors.
Giving priority to education as part of a new paradigm that will convert human capital
into the foundation of the generation of wealth in our society.
All these reforms are linked to the transformation of the proprietor-State into a manager of
democracy and to restoring to citizens the possibility of investing in the sectors having
comparative advantages.
10.2. Mass human development program and capitalizing the informal
sectors
This program would imply:
38
Consolidating the business initiatives of productive units with a low application of
capital and scant technological and management development.
Reeducating or retraining informal workers whose line of work is unviable.
Amending the education law and reforming the national education system by
establishing professional accreditations for sectors that join the labor market at an
early age.
Contributing to the creation of a legal-regulatory framework that counteracts the
undercapitalization of companies in low-income sectors.
Promoting economic organizations of informal workers through corporate structures
that facilitate trade (e.g. trading companies)
Transferring to organizations of low-income groups methods for negotiating the
elimination of useless permits that hinder the exercising of economic freedom and
make it more expensive.
Promoting access to financing and technological support opportunities offered by the
private sector for informal businessmen
Creating new opportunities for the Venezuelan business sector to negotiate social
responsibilities.
Transferring methodologies to the municipal governments that will enable them to
effectively negotiate property ownership with the low-income sectors.
39
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