CATAUNIDOS Business Plan and my Future in Brazil

Ever since I decided to come to Belo Horizonte to study cooperatives of catadores, I knew that my goal was not simply to perform a year of research and leave. Rather, I wanted to lay the foundation for a more long-term participation, understanding this movement in general in order to figure out what role I could play in moving it forward. As my Fulbright draws to a close at the end of this month, the answer is finally beginning to come into focus. Although I was not accepted into the masters program I applied for at UFMG, I actually believe that this was for the best, as I have decided to stay in the area and focus my work with INSEA. I will be dedicating myself to a large challenge: creating and executing a new business plan for the CATAUNIDOS network.

Although CATAUNIDOS has existed for several years, in many ways we are starting from scratch in creating the cooperative. The idea of the network centered originally on the plastic processing factory, which is currently closed. During its short span of operation, the factory experienced numerous difficulties, stemming primarily from problems with establishing a functioning management structure and organizing efficient logistics for collecting material from the cooperatives and transporting the final product to buyers. The factory is currently closed for restructuring, and SEBRAE consultants are helping INSEA to devise a new business plan for the organization.

Talking with the SEBRAE consultants has been very helpful for me, as their analysis is very similar to mine, thus reassuring me that my thoughts about the future of CATAUNIDOS are not just personal opinion but legitimate business insight. In order to be successful, CATAUNIDOS must change its focus from industrialization (value-added plastic processing) to commercialization (logistics of coordinating sales among the cooperatives).

As I have explained before, the recycling industry has four main steps: source separation, collection, sorting, and transformation. Since the catadores already work together with local governments to handle collection and sorting (and encourage residents to source segregate materials), the logical next step was to enter into the transformation industry by setting up a materials processing factory that turned plastic into pellets. However, doing this skipped a crucial step. Actually getting material from the cooperatives to the industries that process materials is a huge undertaking in itself, requiring detailed systems of information control and logistics. This is currently done by the middlemen, who are able to gain huge profits simply by acting as the intermediaries between catadores and the factories. Trying to create a factory without first assuming the function of the middlemen is putting the cart before the horse. Instead of trying to increase income in the cooperatives by value-added processing, we should be trying to capture more of the value from commercialization, which in itself is a gold mine that can double or triple the price of recyclables for the catadores.

The most optimistic news regarding a commercialization venture is that we already know it is economically viable, given the success that middlemen have had in the market. In fact, the profitability of these enterprises shows that commercialization can work even without strengthening control of materials and information at the level of the individual cooperatives. Despite the organizational weaknesses of the organizations of catadores, middlemen still run dynamic businesses that sell their materials directly to industry.

Instead of trying to focus on developing economic autonomy at the local level, we can turn CATAUNIDOS into a commercially-viable umbrella organization that will provide organizational and financial support to the local cooperatives in a sustainable way. Once we have achieved this, we will be able to provide more support services to the local cooperatives from a stronger position. As a network of social enterprises overseen by a profitable commercialization venture, the cooperatives will be able to reduce their political dependency and have access to sustainable financing for infrastructure improvements and operating capital. Furthermore, we will be able to fund a more permanent and deeper participation by INSEA technicians within the enterprises, thus helping to simultaneously strengthen the groups from the grassroots, improving their management and working conditions, while giving them more leverage in their negotiations with municipal governments. This stands in sharp contrast to the situation today, where many cooperatives lack basic infrastructure and equipment and are completely dependent on ongoing financial and managerial support from government technicians and local NGOs.

There are, however, lots of challenges ahead to make this dream a reality. Creating a commercialization center to serve as a logistical hub for this new enterprise will require a lots of time, effort, and money. We will face stiff competition in the market from current middlemen, who will certainly have no interest in relinquishing the domination they currently have over the catadores. We will have to find talented, passionate personnel interested in helping to run this start-up. And of course, we will need a large initial capital investment to build a physical structure, purchase equipment (scales and presses, trucks, computers), and fund salaries for our workers. There is also the risk that the factory project, a large endeavor in itself, will become a major distraction that limits our ability to focus on commercialization.

Perhaps most challenging of all, we will have to develop an organizational structure that allows CATAUNIDOS to function as a regular, efficient business in the market while still maintaining its characteristics as a cooperative owned by the catadores. The relationship between the catador leaders, who will make up the advisory board, and the CATAUNIDOS technicians, who will actually run the business, will be complicated, and will certainly cause some uncomfortable questions regarding the catador-technician partnership. Having catadores as the owners (in essence, shareholders) but also the employees who perform the more onerous physical work, while the technicians serve as the managers, relates back to the “outsourcing management” problem I discussed earlier in my writing.

Overall, there is a lot of work ahead of us, and many profoundly difficult questions we must try to tackle. While I have no way of knowing how this initiative will turn out, I am very excited to help try and make it a reality. I will continue to post with regular updates about the project, and now that my Fulbright is ending, the new focus of this blog will not be general research reflections, but rather specific observations regarding the process we are making in turning CATAUNIDOS into a model social enterprise.

The Conveyor Belt Dilemma

One of the most common themes of this blog is the difficult trade-off between efficiency and social inclusion in the cooperatives, and how this relates to society in general. I want to briefly touch on one case that I believe exemplifies this dilemma: conveyor belts for sorting.

Since Henry Ford popularized them in factories in the early 20^th century, conveyor belts (and the ensuing doctrine of “Fordism”) have become the symbol of modern, capitalist manufacturing. They are the epitome of efficiency and control: automatic pace-setters that reduce tasks to dull monotony and turn the production line into one, smooth-running machine. To any casual observer, the beauties and evils of the conveyor belt are readily apparent.

In the recycling industry, conveyor belts for sorting materials have become a “best practice” among the large private companies. As this video shows, conveyor belts (especially state-of-the-art ones with automatic sorting features) are able to process large amounts of recyclables at a very rapid pace, relying on a team of workers to pick out specific materials that come past their station. This is much faster than the manual sorting (either on the ground or workbenches) commonly done by catadores. As the example of ITAURB shows, private companies in Brazil prefer conveyor belts to other alternatives for this very reason.

The best example of the supremacy of the conveyor belt is COOPERT, a CATAUNIDOS cooperative based in Itauna. The only organization in the network to employ a conveyor belt, COOPERT is able to process significantly more recyclables than any other group, thus giving its associates the highest average salary despite having some of the worst-quality materials. (According to a study by Dr. Lima’s team, the selective collection program in the municipality produces an 80% rejection rate, meaning that the grand majority of the material passing through COOPERT is, in fact, trash.)

A picture of the COOPERT conveyor belt:

If the conveyor belt is such an obvious boon to production, then how come it isn’t employed on a wider scale in the cooperatives? The answer is simple: many catadores cannot handle the rigors of this form of work. Many have physical disabilities or other issues that make work on a production line incredibly difficult. Others simply do not like the stress and monotony, or prefer to work at their own pace. Conveyor belts separate catadores into able and non-able individuals, replicating broader societal divisions caused by the labor market.

Conveyor belt technology represents a fundamental dilemma for the cooperatives. On the one hand, they allow the groups to increase their productivity, improving living standards and protecting the environment by processing more materials. On the other hand, they limit the ability of everyone to participate, as only the most able are fit to work on the production line, thus undermining the cooperative nature of the enterprise. Using the conveyor belt undermines the social mission of the group. Not using the conveyor belt undermines the economic and environmental mission of the group. Employing a mix (conveyor belt for some, hand-sorting for others), creates a two-tiered production system in the group, reinforcing inequalities.

I have a hard time solving the conveyor belt dilemma when I think about improving the situation at the cooperatives. A choice to use or to not use the technology must be made, but it seems nearly impossible to do so while still reconciling the economic, social, and environmental goals of the organizations. When even such a simple question as employing an industry-wide best practice becomes difficult, how is it possible to move forward?

Automation of Work and its Implications for the Future of the Labor Market

During my time here in Brazil, one thing I always notice is the amount of people doing jobs that are normally done in the U.S. by machines. One easy example is metro service. In the U.S., we normally buy our tickets out of machines that dispense change automatically, whereas in Brazil there are ticket counters run by attendants. Construction work here is also much more labor-intensive, employing a large workforce with little equipment, especially in terms of heavy machinery such as cranes and tractors. There is little doubt, though, that Brazil is steadily going the way of the U.S. by replacing workers with machines. Almost all bank interactions here are done through ATMs and large-scale farm equipment has radically reduced manual labor input in agriculture. Although rich countries have more money to employ machines on a much wider scale, developing countries are rapidly catching up. Across the world, the automation of work is changing human society in fundamental ways.

The use of machines is certainly nothing new to humanity. Since the beginning of civilization, we have steadily developed more-advanced tools to improve our productive capabilities and minimize our labor. In fact, it was just these sorts of technological breakthroughs that allowed the West to dramatically increase its production despite a small population during the 19^th century, leading to a huge divergence in material living standards compared to the rest of the world. With the advent of the digital age, information technology (computers, cell phones, the internet, etc) is once again revolutionizing our lives.

The benefits of the industrial and digital revolutions are obvious in many ways. As a society, we are now able to produce significantly more while doing much less work. This has clear benefits for individuals. A farmer no longer has to spend his entire life doing backbreaking labor in the field under a hot sun to produce a few basic foodstuffs. A construction worker no longer has to carry heavy brick back and forth, up and down stairs, to build a house. A ticket counter attendant no longer has to sit underground for eight hours a day, simply handing change back and forth. By replacing this work with machine inputs, we are freeing people from painful and unnecessary physical labor and dull, monotonous tasks.

But there is a flip side to these benefits. Under our current labor market paradigm, people need to work in order to take advantage of societal production. No job, no money. No money, no consumption. Although the ticket counter attendant may be saved from an unpleasant job, he or she is now in a worse position because they are unemployed. Instead of saving people from unnecessary work, automation thus condemns them to live within an economic system in which they cannot fully participate. (There is also the very legitimate question of undermining the dignity and accomplishment people can get from their work, which is often an emphasis of Marxist critique, but not the focus of this post.)

In political debates about jobs, globalization is the most common culprit. American factory workers lobby fiercely against free trade, blaming desperate Chinese or Indians for “stealing” their jobs. There is certainly no denying that a globalized labor market has led to some jobs leaving the rich countries, where labor costs are high. But studies show that automation has had a larger effect on employment figures across the world. Factory workers are not primarily losing their jobs because industry is moving to new, cheaper locations. Rather, they are losing their jobs because we are developing new machines that make human labor obsolete.

This trend will only continue to accelerate. A recent study by the McKinsey Global Institute divided work into three broad categories: transformational (normally physical work involving building or making things), transactional (routine in-between jobs, such as bank teller or call center attendant), and interactional (using knowledge, critical thinking, and teamwork, usually to produce ideas or actions). Ever since the industrial revolution, machines have been able to replace many workers in transformational jobs, and it is just these sorts of jobs in the manufacturing center that are often at the center of political debates. But with the digital age and rapid improvements in computing and internet technology, transactional jobs are also in danger. ATMs and grocery store check-outs are obvious examples, but the potential goes much further. Any sort of work that can be reduced to a repetitive task, or a series of basic algorithms, is in danger. As artificial intelligence continues to develop, even lawyers’ and doctors’ jobs will be put in jeopardy. Eventually, the truly necessary, irreplaceable “interactional” jobs could be few and far between.

While the question of artificial intelligence raises many particular questions and worries of its own (think The Matrix), the more pressing issue to be dealt with is what the automation of work means for our economic societies. Overall, we should see this as an unequivocally good thing. Much of the world’s work is dull and tedious. If we can get the same results (or possibly better ones) without having to do any of the work, human society will be free of the bondage of constant labor. Who wouldn’t enjoy a permanent vacation?

Yet, within our current economic structure, this result would be a disaster. As we are already seeing in the rich countries of the world, automated work throws people out of jobs, destroying their ability to take advantage of societal production. The reason so many people around the world are willing to endure awful work conditions and horrendous schedules is simple: they need the money. In the U.S., the automation of work has slowly eroded away at middle class spending power, a fact temporarily masked by an enormous credit bubble forty years in the making, but laid painfully bare in the aftermath of the 2008 economic crisis.

In our shortsighted political climate we have desperately groped around for easy answers to the jobs crisis: repeal environmental regulations, simplify the tax code, or promote green energy (a good idea for other reasons, but certainly not a panacea for the jobs market). This is a moment in which we need to be asking ourselves a more fundamental question: what is the future of the world economy going to be when most of our work is done by machines, and jobs thus cease to be a source of income for all? (Whether they were ever a source of income for all is debatable in itself, considering the labor market has never achieved zero percent unemployment, but that’s a different story.) Will all wealth and power become concentrated in the hands of those who own the machines, or those whose unique cognitive abilities still gives them a useful skill to sell in the labor market? Or will we develop new systems in which consumption is no longer tied directly to production? Will the labor market cease to exist? And if so, what will replace it? How will we determine who has the rights to what goods and services?

It is very hard, if not impossible, to come up with answers to these questions. But I certainly find them far more relevant than the hot political topics of whether or not ozone standards increase unemployment, or whether new industrial policies could jump-start job growth, as if simple government actions could reverse a structural decline decades in the making. Ultimately, what we will need is an economic paradigm shift. While I do not know what it will look like, or when it will occur, I have no doubt that increased automation of work will eventually render our modern economic system obsolete. We need to at least start thinking about what will replace it.

On a more specific note, I want to mention that I spend a lot of time reflecting on the implications of work automation in the recycling sector, and the catadores in particular. As people who have long been shut out of the formal labor market, they are no strangers to these concerns. But even within this new sector they have created out of their own hard, physical labor, the dangers will ultimately arise. As government subsidies turn recycling into a profitable economic activity that attracts the formal sector (see my earlier post about reverse logistics), private businesses will enter the fray, and the catadores will find themselves competing not only with formal-sector workers but also trucks (which will replace the transport they do with their carts) and robot waste sorting machines (currently in experimental phases, although heavy-duty magnets are already commonly used to sort scrap metal). While new recycling processing technologies are a boon for the environment, they could ultimately undermine all the hard-earned progress made by the picker cooperatives I accompany here in Brazil.