Gains and contradictions of the economic situation IN THE DAYS following the revolutionary victory of July 1979, the confiscation of the businesses and private lands of deposed dietator Anastasio Somoza and his followers gave birth to a nationalized sector called "Area de Propriedad del Pueblo" (APP - People's Property Sector). This also included the financial system, insurance and all natural resources. At the same time, a cooperative sector was promoted, mainly for small and medium-scale agricultural producers.
NICARAGUA debt accumulated by Somoza in isolation would have meant having to rely completely on the Soviet Union and its allies for all sources of finance - and the limits of this relative to the needs were well known. In the short term, political isolation and economic collapse would have been inevitable. A rapid dismantling of the large agricultural estates would have meant forfeiting the only available foreign currency income. Moreover, it would involve taking the initiative in breaking up the alliance made with the anti-Somoza wing of the bourgeoisie in the course of the fight against the dictatorship and precipitating new social confrontations.
Today, the nationalized sector accounts for 40% of the gross domestic product, and the private sector of large- and medium-sized estates about 30%. But if you include the small landowners and the cooperatives, the private sector still represents 60% of total production.
The cooperative sector is still extremely small: at the end of 1985, agricultural cooperatives represented a little less than 10% of cultivated land. In industry and commerce, cooperatives are still in an embryonic stage.
While its growth is still limited, the cooperative sector is strategically central in the long term. The objective is for cooperatives to become dominant within the peasant economy. "Alliance for production"
These outlines of the mixed economy have emerged over time, more as a product of the economic and political constraints of the day than of a theoretical model. According to the repeated declarations of the Nicaraguan leaders, the mixed economy is not seen as a stage on the road to a total collectivization of the economy. On the contrary it is an attempt to stabilize society in the framework of an "alliance for production" with the most economically dynamic and politically and socially open-minded sections of the bourgeoisie. It is also an expression of the political will to preserve a framework that contributed historically to speeding up the fall of the Somozaist dictatorship and which was the instrument of the original struggle against underdevelopment.
1. Tomas Borge made identical remaks in an interview in the Nicaraguan magazine 'Pensamiento Propio', reprinted in 'International Viewpoint, No. 84, October 14, 1985.
23 ducers. • The article below looks at the since the revolution in rebuilding that they still face. JEAN-PIERRE RIEL As well as establishing the APP, the Sandinista leaders also affirmed the necessity of maintaining a significant private sector. Profound transformations were imposed on the latter: the most archaic forms of exploitation were abolished, active participation of workers in the running of their workplaces was instituted and at the same time trade unions were encouraged. By means of credit, production contracts, wage and price controls and some control of foreign trade, the state was able to exercise indirect control over the private sector. Six years later, in July 1985, Tomas Borge, a Sandinista leader and minister of the interior of the Nicaraguan government, said of this particular system of mixed economy:
"Rather than being the product of a conscious wish, this was a necessary response, first of all tactically, then strategically ... to an exceptional combination of adverse factors". (1)
For the Sandinistas, the possibility of going for a rapid and generalized nationalization of the economy could not be seriously contemplated. The major reasons for this were the demands of reconstruction at the end of the civil war, the geopolitical environment (in the "backyard" of the United States) and the effects of dependence and underdevelopment after four decades of the dictatorship.
Some of the newly nationalized concerns - those where capital was
International Viewpoint 16 June 1986 progress made by the Sandinistas their economy and the problems already concentrated and wage relations developed - were able to lay the basis for some modernization and accumulation, but this was far from sufficient to provide the foundation of a new development strategy. How could substitutes be found quickly for the two-thirds of agricultural exports that were concentrated in three products: sugar, coffee and cotton? These sectors alone provided 75% of export income and a good 80% of the accumulated surplus, occupied 45% of cultivated land and represented more than a third of capital and of productive investment.
A rapid and large-scale restrueturing of this sector would have involved risks of disorganization and impoverishment. What is more, neither the peasants, the embryonic industries nor the service sector would have been able in the foreseeable future to provide an equivalent surplus. In reality, only external financing could provide the supplementary resources that were vital in the short and medium term.
It is in this context that the Sandinistas chose to accept two major constraints which, ever since, have weighed heavily on the tempo and the nature of the economic changes: the repayment of the foreign debt and the maintenance within the state of large private landholdings essentially engaged in the agriculturalexport business.
Breaking immediately with the world market and denouncing the
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For Commandante Jaime Wheelock, the minister of agrarian reform, such coexistence between revolutionary control and the "productive" bourgeoisie is possible: With this plan, we must establish whether or not the bourgeoisie are prepared to continue production, whether they will restrict themselves to this role as a productive class; in other words, whether they will confine themselves to exploiting their means of production, using them to make a living, and not as instruments for power and oppression. I think that this is possible in Nicaragua.... I think that in the conditions existing in the Third World... it is possible to find methods of social organization in which a dominant revolutionary force can maintain modes of production and the nuclei of production relations that are not dominant but subordinate". (2)
The extent of North American military aggression during the last three years makes it difficult to make an assessment of this orientation. Such attacks now serve the purpose of reinforcing Reagan's economic embargo and the international crisis to smother Nicaragua economically and keep the revolution from implementing its programme for developing the country.
Half of the state's budget has to be allocated to defence spending. In 1985, in addition, the servicing of the external debt represented more than half of export revenue. (Although exports have remained a stable quantity physically, they have fallen in value when calculated in dollars.) (3)
The growing war zones have now Worker at a nationalized textile factory 24 spread to the vital economic regions: the north, which provides a substantial portion of the food production, and the central region, which produces coffee and meat.
Taking into account these constraints, two economic successes and two glaring failures can be noted.
One achievement has been the agrarian reform, which, outside the war zones, has progressed slowly but has accomplished more diversified production and higher productivity.
The other big success has been the reorientation of the flow of trading and international finance. New suppliers and new markets have been found simultaneously in the countries belonging to the Council for Mutual Economic Assistance (COMECON), in Western Europe and among the countries of the Third World (the Middle East and Latin America). Where external finance is concerned, the debt has been spread between international institutions, the Western European countries, COMECON and the oil-producing countries. But the now systematic use by the United States of their right of veto in international institutions is obstructing all financial negotiations.
A big setback is the failure to revive industry, which lost its traditional markets with the collapse of the Central American common market and has been bogged down by its out-of-date productive plants. Although industry no longer really employs more than 14% of the active population, this problem largely explains the stagnation of productive employment in the towns, and particularly in Managua. (4) in Managua (DR)
Above all, attempts to control distribution, commerce and speculation have failed. The economic, social and political implications of this require a more detailed analysis.
During the first two years of the Sandinista government, the immediate tasks of reconstruction were of such a scope as to push the growth rate above that of the rest of Latin America. The owners of the means of production, the large landowners, had their income guaranteed on condition that they accepted the loss of political power. On the other hand, the standard of living of the poorest sections of the population increased, both qualitatively and quantitatively. The social base of the revolution was the first to benefit from the considerable efforts made in the fields of education, health and food supplies.
From 1981 to 1983, the first attacks carried out by the United States obliged the revolutionary government to make a dramatic change in import policy. Only those imports were continued that were given priority for the sake of economic development. The middle layers, whose way of life led to their consuming most of the imports, were the most severely affected. By contrast, the overall standard of living of the masses was maintained and the prices of the components of a "basic food basket" were controlled.
To achieve this result a system of subsidies was applied to necessities, reducing their price to the consumer. Everyone throughout Nicaragua could take advantage of these subsidies for a limited quantity of goods per person. It could then be less expensive for peasants to buy their food this way,
2. Jaime Wheelock is one of the nine members of the national leadership of the FSLN. He has headed the National Institute for Agrarian Reform (INRA) since its creation in the days following the overthrow of Somoza, and he combines this responsibility with that of director of the Ministry for Agricultural Development and Agrarian Reform. In a book called 'Between crisis and aggression: the Sandinista's agrarian reform', , Wheelock sums up the principal objectives of the agrarian changes made in Nicaragua.
3. The Sandinista people's army has to maintain 50,000 people in uniform, that is to say 11.6% of waged urban and rural manual workers. The Agencia Nueva Nicaragua (New Nicaragua Agency), in the March 8, 1986, issue of their weekly information bulletin published in Paris, notes that "non-official sources report that national defence will absorb 70% of the state's budget. According to official calculations, in 1985 the various American aggressions — military, commercial and financial - cost Nicaragua 608 million dollars, that is 26.1% of the gross domestic product (GDP)."
4. While the primary sector and the secondary sector in 1985 represented respectively according to the figures of the Planning and Budget Secretariat) 25.1% and 17.3% of the GDP, the tertiary sector reached 47.6%, which illustrates the weight here of unproductive activities." (From 'Agencia Nueva Nicaragua Bulletin', Paris, March 8, 1986).
International Viewpoint 16 June 1986
because the selling price was sometimes lower than the production cost. From 1984 on, the growing expense of the war and its effects on the economic situation made it impossible to continue to uphold the standard of living of the masses. In that year, it is estimated that the buying power of the minimum wage declined by 30%.
The economic measures taken at the beginning of 1985 reinforced this trend. The subsidies on basic goods, having become too great a burden on the budget, had to be progressively eliminated, thus ensuring price rises. (5) Inasmuch as spending on such products was an important proportion of the expenditure of families on moderate incomes, it was the poorest sections of the population who suffered the consequences of these measures.
It was proposed at the same time to increase the wages of productive workers and open up food centres reserved for them alone. Wages were indeed raised, but at a pace clearly slower than the rise in prices. As for the food centres, they were too often set up and run in accordance with administrative criteria far removed from people's day-to-day needs. Decline in living standards
This decline in the standard of living is all the more worrying because it has not affected all sections of society equally.
In Managua, none of the problems associated with the informal sector - the sector parallel to the official economy, concerned above all with trade and commerce - are on their way to being resolved. (6) A large component of this sector are profiting from inflation and taking advantage of supply problems to hoard and speculate.
What is involved is not just shady practices of easily identifiable layers of the bourgeoisie, but a problem that has deep and multiple roots.
The population of Managua is growing at a rate of 6% a year, notably due to the rural exodus. The city now has one million inhabitants, representing a third of the country's population. Now, as we have seen, the number of productive workers remains stable. The uncontrolled rise of the urban population, therefore, is swelling the percentage of those engaged in one way or another in the informal sector.
It is estimated that more than half of the economically active population of the capital are self-employed as street vendors, craft workers or oddjobbers. The discrepancy between this
International Viewpoint 16 June 1986
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90m9] sector and that of productive workers is such that an ice-cream peddler can expect to earn three times the official minimum wage.
Conditions are made more difficult all the time because of North American aggression. But the source of the most flagrant inequalities lies in the compromises deemed necessary by the Sandinista leadership to maintain a mixed economy system.
With a few exceptions, the antiSomozaist bourgeoisie, dispossessed from political power and from control of the state apparatus, have rapidly come to refuse to collaborate positively and actively in rebuilding the country, or to take their place loyally in the "alliance for production" that they themselves proposed.
Since 1980, the Nicaraguan private sector has received a larger slice of government credits (54%) than the public sector (46%). Certain enterprises have benefited, and continue to benefit, from substantial tax advantages and even subsidies in dollars. But during this period the overwhelming majority of productive investments have been made by the public sector.
Taking advantage of the declining effectiveness of the controls instituted by the state — due largely to the war - a number of the beneficiaries of these funds have injected them into speculative areas.
The cost of this parasitic behaviour and sabotage — encouraged daily 'in the name of liberty" by the newspaper La Prensa or the independent radio stations such as Radio Catolico - adds to the expense of the defence effort.
It is becoming constantly more intolerable economically, but also socially and politically.
It is essentially the rural and urban working class that has to bear the burden. s Previously, the Sandinista leadership had appealed mainly to the political consciousness of the workers and peasants, explaining the dangers threatening the revolution and its fundamental gains. At the same time, they spared no effort to get the bourgeoisie finally to take a construetive attitude.
The choices made in favour of political and trade-union pluralism have not been called into question. They required the Sandinista National Liberation Front (FSLN) to take the lead in providing explanations, in convincing people of its orientation and in promoting a sustained growth of the mass movement.
But a revolution cannot for long continue to demand that those it recognizes as its social driving force accept a fall in their real income and an increasing decline in their living conditions, if sacrifices are not also imposed on the private landlords and the businesspeople who speculate.
It is only by new advances in the latter direction that what Tomas Borge regretfully called the "confusion in the minds of the masses about the mixed economy" will be dispelled. (7)
5 See IV, No. 84, October 14, 1985.
On the scope of the informal sector, see IV", No. 84, October 14, 1985.
7. Ibid.
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