Against the Current No 7, January-February 1987
Letter from the Editors on Nicaragua
— The Editors
When Farmworkers Walk Out
— David Finkel interviews John Joslin
Some Perspectives on the FSLN
— Alan Wald
- Nicaragua in Economic Perspective
The Revolution at Age Seven
— Gary Ruchwarger
The New Salary Policy
— Gary Ruchwarger
State, Party, Masses: Who Rules?
— Dan La Botz
Their Socialism and Ours
— Ralph Schoenman
Privilege's Paradise Lost
— Dianne Feeley
Random Shots: Irangate Proves God Is Great
— R.F. Kampfer
"War Sandinism," 1979-1986
— Carlos M. Vilas
Slow Motion Toward a Survival Economy
— The envio Staff
OVER THE PAST seven years, the Sandinista government has shown its capacity to pursue its global strategy of national unity and mixed economy within the framework of a democratic, popular, and anti-imperialist process. This strategy has called for maintaining an alliance with private capital, especially the agroexport bourgeoisie, while coordinating an economy which continues to be composed, to a large extent, of small-scale enterprises in both town and country. Although aiming to develop the economy, in large part through encouraging private investment, it has sought to destroy the political power of the bourgeoisie and to raise the living standards of the mass of the people, especially by radically increasing health, education, and welfare services.
Today, however, the Nicaraguan economy and the revolutionary process are going through a difficult and contradictory period, characterized by a crisis which affects all of Central America, but Nicaragua in particular. This crisis has been made massively more difficult and complex by the U.S.-backed contra war.
In a process of revolutionary transformation, the new economy and society first exist as a political project and only later as an objective reality. At least at the beginning of the revolution, the rationality of politics-which is to say the organization and direction of society, the formation of alliances, and the struggle for class power override the strictly economic rationality of costs and benefits.
This essay begins by outlining the economic strategy initially implemented by the Nicaraguan government. It goes on to explain the modifications of that strategy which were introduced in 1985 in an attempt to respond to those problems. Finally, it sketches the economy’s future prospects.
I. The Sandinista’s Economic Strategy
The Nicaraguan government has, from the start, looked to the development of the agroexport sector as the way to develop the economy. It has thus sought to amass surpluses, especially foreign exchange, by exporting coffee, sugar, and cotton, and to use these surpluses to further develop the domestic economy, especially through financing large government projects to build up the infrastructure, partly to promote agroexport, partly for other sectors.
The Nicaraguan economy today maintains, therefore, certain continuity with the prerevolutionary economy of the Somoza period, in which agroexports also played a central role. It is possible that the Sandinistas were induced to retain the agroexport emphasis by the experience of the Cuban revolution, which, in its early stages, neglected the agroexport sector with detrimental results for the economy as a whole.
The Sandinistas recognized that the agroexport sector was the link which chained the Nicaraguan economy to the capitalist world market. But they also saw that this sector is, in relative terms, the most-developed part of economy. It thus appears to provide the best route for the increase in exports required by a Nicaraguan economy which remains profoundly dependent upon imports in order to operate. So, while the revolutionary critiques of Nicaragua’s dependent capitalism under Somoza attributed dependency largely to its agroexport character, the Sandinistas opted to maintain this link to the world market while at the same time introducing important changes.
The economic strategy of Somocismo had created a powerful conflict between the need to develop agroexports and the need to produce basic foodstuffs. Agroexport production got the best lands, the most modern technology, the most favorable relative prices; it was also organized along modern capitalist lines. In contrast, the basic food sector was in the hands of a great number of small farmers, who tilled poor soils with primitive techniques, without access to distant markets.
The revolutionary project sought to transcend the Somocista stage in which the agroexport sector existed to an important degree as an enclave, producing profits but failing to develop the national economy; in particular leaving food production to stagnate. It aimed to develop the productive forces in agroexports so as to accumulate the means to develop the rest of the national economy. The Somocista stage of agroexports versus food was to be replaced by a Sandinista stage of agroexports and self-sufficiency in food.
In order to implement this strategy, the Nicaraguan government has taken the following basic steps.
First, the Sandinistas carried through an agrarian reform to drastically reduce the power of the landed oligarchy. Second, the government created a state sector (Area de Propriedad del Pueblo, APP) to take charge of critical areas of the economy. The banks were nationalized. Moreover, the government took over an important part of internal production and trade, although the majority of production and commerce remained in private hands. Third, the government undertook an ambitious program of public investments, especially in infrastructure linked to agroexports. It sought to tap new markets in the Third World and the socialist countries. Meanwhile, to make it easier to import necessary materials, the government maintained an overvalued currency, the cordoba, exchanging for dollars at a higher rate than was warranted by real costs of production in Nicaragua and abroad.
Finally, the obverse side of its emphasis on agroexports, the government limited its concessions to the peasants. The distribution of land through the agrarian reform was limited. Food prices were set relatively low in relation to industrial prices. Prices for goods produced on the capitalist farms for export were generally set higher than those for goods produced on the peasants’ farms.
Economic Results of the Government’s Strategy
In 1980-1981, the government’s economic strategy produced satisfactory results. Production was restarted, albeit unevenly: the basic needs of the population were met; social and educational services were expanded tremendously; a series of great public projects were begun. Nevertheless, from 1982 onward, there were deepening difficulties. The economy grew more slowly and tended toward recession. Export earnings experienced a steep fall and the external debt rose. Inflation accelerated. A black market developed and speculative activities grew. Nicaragua’s economic performance compared favorably to that of the other Central American economies, but was way below initial expectations.
What were the causes of the economic problems? There were three in particular: first, a radical drop-off in private capitalist investment; second, a precipitate decline in export earnings; third, the expensive startup costs of great and administratively complex public projects. In an economy in which the government controls only 30% of industrial production and 20% of agricultural production, private capitalist investment is crucial. But confronted by the new political and economic environment created by the revolutionary regime, private capitalists decreased their investment from SO% of total investment in 1979 to 20 % of total investment in 1986.
Between 1981 and 1984, export earnings fell by more than 20% (see Table 2). This decline resulted especially from the decline in international prices for raw materials which was brought about by the general international economic downturn of the early 1980s. This fall-off in raw material prices wreaked havoc throughout the Third World. The problems of agricultural exports were exacerbated by the overvaluation of the Nicaraguan currency.
To make matters worse, warfare brought increasing damages to the coffee producing areas, as well as to mining, forestry, and fishing. Agricultural production for the domestic market actually grew more quickly than that for export, and production for the domestic market by the peasant-dominated regions did better than that by regions dominated by capitalist farms. Even so, food consumption grew faster than production and this required growing imports.
As a result of the decline in agroexports, the trade deficit grew rapidly. The government had no choice but to borrow abroad; the foreign debt grew precipitately.
The government’s strategy of building up the productive forces through big public projects led it to make huge investments which could, however, bring increased production only over the long run. The Sandinistas were also committed to raising living standards through offering employment and a higher social wage. But to accomplish this, they had to pursue a highly expansionary economic policy of deficit government spending and growth of the money supply (see Table 3). The consequences were a big rise in the government’s budget deficit and rising, ultimately runaway, inflation (see Table 4).
The Sociopolitical Consequences
These economic developments brought serious deprivations to the mass of the population. The government was committed to containing wages in order to finance growth. But, in the inflationary environment, real wages declined sharply, falling by between 40% and 75% between 1979 and mid-1985, depending on what type of index is used. Although the economic stimulation and the rise in social wage did bring improved conditions for some narrow categories of urban workers, the mass of wage workers saw their situation worsened, especially agricultural workers.
The workers’ response to declining wages further exacerbated problems of production. Numerous wage workers simply left their jobs and became self-employed in tiny businesses in the service sector. The policy of low wages, pursued through 1984, also drove agricultural workers to go to the towns. Many agrarian wage workers got their own land through the agrarian reform or were recruited into the military, leaving manpower shortages in the countryside for the harvest of export crops and for the upkeep of tilled land.
Growing inflation, in the context of the government’s overvaluation of the Nicaraguan currency, exacerbated the flight of capital and prepared the ground for the increase of speculative activities and the growth of the black market. There was a growing gap between the real value of the cordoba and the real value of the dollar.
The government was obliged to pay partly in dollars for products from the private sector in order to provide incentives for private investment. Many of those who held dollars sought to export them, since they could buy more outside Nicaragua with them than within. Thus, there was a growing pressure toward the flight of capital. Failing to export their dollars, many turned them to speculation, either betting that the government would have to devalue the cordoba or unloading them within a growing black market in dollars which emerged in response to the weakening of the cordoba. More generally, the economy suffered from a widespread redirection of funds from production toward speculation in the dollar.
Meanwhile, the black market expanded because the prices the government set for goods tended to be too low, especially in view of the rising gap between the real value of the cordoba and the real value of the dollar. This led many to try to avoid losses by means of black market sales or dollar acquisitions.
The government’s initial economic orientation did little for the peasants or rural wage workers. Redistribution of land was limited, and price and investment policies favored agroexports and industry relative to peasant-produced products, such as food. In this context, it is not surprising that the government’s policy of containing wages, which resulted, via inflation, in declining agricultural wages, combined with its failure to improve needed supplies to peasant producers, led to the alienation of significant rural sectors. Indeed, the government’s approach to the rural masses created a space in which the counterrevolution was able to operate for a number of years.
The State and the Economy
The strategy of mixed economy and national unity, in which most of investment was in private hands, meant that the capacity of the state to direct development was at all points limited. This was especially so because the state firms were not more efficient than private enterprises. The strategy of alliance, which gave favored treatment to sections of the bourgeoisie, was adopted because it was supposed to be favorable to production. But its implementation took place in a period of economic recession and external crisis. The result was a production decline, accompanied by a sharp decline in the standard of living of wage workers and farmers. Nor did the government show itself at all capable of controlling the flight of capital, the growth of speculation, or the rise of a black market.
To make matters worse, the strategy of alliance did not even prevent international technical, economic, and financial cooperation from falling to minimal levels. Nor did it stop the United States from pursuing a strategy of extreme confrontation with Nicaragua, which it accuses of being another Cuba.
In these conditions the impact of war was graver still. The Nicaraguan economy had already begun to deteriorate in the second half of 1982 when the levels of military aggression were relatively low. But the growing intensity of the counterrevolutionary war from 1983 accentuated the pre-existing tensions and added new ones caused by the war itself.
II. The Orientation of 1985
In early 1985 the government initiated certain changes in its economic orientation. (See the announcement of the new program in Barricada, 9 February 1985.) First, it made major changes in fiscal and monetary policy to correct the imbalances brought on by its initial expansionary approach. Second, it sought to respond more sensitively to the demands of the countryside.
The program of adjustment, which began to be implemented in February 1985, called for the elimination of subsidies on basic necessities and services (with the exception of transport), the reduction of social expenditures, and the implementation of a hiring freeze in the public sector. It ordered sharp increases in prices for state enterprises and the public sector, restricted credit, and raised interest rates. It subjected new government investments to careful scrutiny, eliminating those which were not productive, and giving preference to projects outside Managua. Between 1980 and 1984, the state had transferred financial surpluses to the private sector; now “civil society” was to transfer revenue to the public sector.
At the same time, the government aimed to reduce speculation and undercut the black market by reducing the overvalued cordoba. It therefore carried through a partial devaluation of the currency and introduced a free market in currency, subject to the supervision of the Central Bank. It also broadened the system of state sales of consumer goods in dollars and collection of taxes in dollars.
In addition, the government tried to put increasing pressure on commerce, self-employment, and rentier activity, while seeking to crack down on speculation.
Inflation increased, production continued to decline, and the external debt grew, albeit at a slower rate. Budget deficits also grew, exceeding 30% in 1985 in comparison to 23.5% in 1984. Nevertheless, the government seems to have brought financial variables under better control: the means of circulation fell 10% in real terms and active liquidities fell 18.5% (see Table 3).
It was impossible to achieve the goal of reducing public expenditures, due to the rising costs of the war, as well as to resistance to cutting public investments mounted by certain circles of the state. The composition of state expenditures did change somewhat, however, as a result of the reduction of spending on some nonmilitary items.
Tax revenues did increase. However, owing to the crudeness of the tax instruments and political resistance, it proved difficult to tap the revenues earned in the informal sector and among “independents”-professionals, technicians, and self-employed. Wage increases were implemented to make up for the rise in prices and the suspension of subsidies. But the government was also obliged to implement price increases to undercut and reduce the black market. In the course of 1985, the purchasing power of wage workers declined almost 50 % on average. Beginning in 1986, the government raised wages an average of 90%, but followed this with producer and consumer price increases averaging between 100% and 150%.
Unfortunately, these increases in official consumer prices did not produce the hoped-for levelling between the prices set by the state and those of the black market (toward which increasing proportions of consumer goods were flowing). By early 1985, official retail and wholesale prices had doubled in comparison to what they were in 1984, but this was not enough to prevent a spectacular growth in speculation in the black market. The value of the black market dollar quadrupled over the same period that wholesale and retail prices doubled (see Table 5).
Because of inflation and declining wages, manpower continues to flow out of wage work and into nonproductive sectors, especially all sorts of small-scale buying and selling activity. The resulting reduction in output has exacerbated the problem of supplying the workers of the agroexport sector and has caused a drastic reduction of the working day.
The Peasant Question
The Sandinista’s initial strategy of developing the agroexport sector had relegated the peasant to a secondary, even a marginal, position. The following statement by one of the deputy ministers of the Ministry of Agricultural and Livestock Development and Agrarian Reform (MINDINRA) summarized the official view:
“The peasant plot as a productive unity which can assure an expansive dynamism within the structural conditions now existing within our agriculture does not exist. Rather, it is an entity which must be transformed. . . The possession of land will in no way resolve the problem [of increasing marketable output–editor’s note], as this problem is a structural one. It will persist in the short run and become more serious in the medium and long run.” [Coronel, 1984]
In keeping with the government’s view that the peasants’ production would be mainly for subsistence and would therefore fail to contribute a great deal to national economic development, by 1984 agrarian reform had failed to modify the peasant possession of land, for it had not affected a large proportion of the latifundias. Between 1981 and 1984, the agrarian reform created the state-run APP and encouraged a strategy of cooperative development. It paid little attention to peasant demands for individual and family ownership of land.
In Region V (Boaco and Chontales Departments), for example, 2% of private producers possessed 22% of the land in 1984, while 41% of the small producers possessed 8.5%. Moreover, in December 1984, in an attempt to reassure large private producers, MINDINRA suspended the implementation of the agrarian reform law. In the future the focus would not be on the “recovery of the lands, but on their organization” (MINDINRA, 1985:33). Nevertheless, in mid-1985, rural pressure for land, political opposition to agricultural price and trade policies, and resistance among certain sectors within the countryside to the cooperative movement, forced the government to change course and to satisfy the peasants’ need for land. The state began to extend the reform to a number of large private farms and to some state enterprises in the APP.
The government, at this point, faced a political dilemma. It could freeze the agrarian reform to lessen the fears of the large producers and in this way try to retain their neutrality vis-a-vis the counterrevolution at the cost of alienating large numbers of peasants. Alternatively, it could meet the demands of the peasants and extend the agrarian reform to larger farms even below the 500 manzanas’ limit at the cost of alienating patriotic landowners. The modifications made in the agrarian reform law in January 1986 attempted to meet this dilemma. The new legal text lowered the minimum acreage subject to reform from 500 mz to 100 mz or 50 mz, depending on the region. But it left intact previous regulations regarding absenteeism, inefficiency, and abandonment. The state was in this way allowed not only substantially to increase the potential land fund at its disposal, but also largely to avoid attacking the large landowners. A second factor was the absence of peasant pressure for land in regions where there were still large estates. The revised law thus allowed it to meet the demands of the peasants and the large landowners at the expense of middle landowners who are absent, or inefficient, or who abandon their lands, or directly out of the existing APP lands.
It is too early to say what will come of this extension of the land reform. What is certain is the turn in landownership taken in mid-1985. Between 1981 and 1984, only 50,000 mz of land were given to the peasants. But between June and December 1985, the peasants got 160,000 mz of land, or about three quarters of the total distributed throughout the whole course of the reform. In some regions almost two-thirds of the land distributed came from the APP, i.e., the state sector.
Simultaneously with the extension of land reform, the government sought to respond to peasant needs by softening the policy of forced commercialization and improving the supply of equipment such as machetes and boots. In addition, the state sought to modify its agricultural pricing to meet peasant demands. Spokespersons for the peasantry and for the medium agricultural bourgeoisie have criticized the government’s new price/ incentive policy, however, asking for incentives in kind, such as new trucks, rather than in dollars which are often unable to make up for the extreme shortages of factory-produced goods.
In any case, the revised policy toward agriculture is not without its own contradictions. In conditions of economic recession, the policy of giving priority to supplying the countryside means reducing supplies to the cities. Increased supply to the countryside thus implies a transfer of surplus. Such a transfer must in fact be paid for by low-income urban groups, by means of a deterioration of social services, a reduction in the levels of basic supplies, a rise in urban poverty. The city poor are particularly hard hit, for the government has made a special attempt to maintain the living standards of the small, productive industrial proletariat.
The Revised Global Strategy
The reorientation of the agrarian reform toward the peasant constitutes a reformulation of the initial strategy of agroexports plus food. Since the end of 1985, the government and the FSLN have paid increasing attention to peasant demands and 1ave thus placed more emphasis on food security and support for production for the domestic market.
At the time of the revision in strategy, the program of public investment in large, capital-intensive projects with lengthy maturation periods came in for particular criticism. This program had raised sharp polemics within the FSLN and the government in 1980 and 1981. But various factors, among them the lack of alternative proposals, as well as the enthusiastic and even triumphalist spirit of the early post-revolutionary period, insured that this program would be adopted.
Five years later, things had changed. It had become clear by this time that the whole strategy of large public investments linked to agroexports had been made possible only by deep budget deficits and ill-advised expansion of the money supply, which had ended up causing serious inflation. Within the government and FSLN there continues to be a strong commitment to large scale, technically advanced, capital-intensive investments. But the pressures of war on the state budget have compelled the state to shift its emphasis.
I. A Problematic Future
The agroexport economy obviously rests on the capacity to export. But the tendency for external prices for Nicaraguan products to decline can be expected to continue (leaving out of account certain fortuitous events such as recently overtook the international market in coffee).
The continuing decline in private investment renders the agroexport strategy even more vulnerable because capitalist enterprises account for a third to a half of export production. Despite substantial incentives from the government to invest in the mixed economy, Nicaraguan private capital is repelled by the politico-<economic regime sustained by the revolution. A suspicious and prejudice-laden Nicaraguan bourgeoisie thus finds it difficult to tolerate the trade union organizations, with their supervisory or-at the very least-denunciatory powers over working and productive conditions, and the growing system of state regulation of economic activity, with its cumbersome procedures.
Although the government’s restrictions on the import of nonessential goods have reduced the capitalists’ ability to realize their profits by way of consuming them, the capitalists’ reduced ability to consume has tended to diminish their desire to invest and to produce.
Subordinated politically, disarmed militarily, threatened with total expropriation if it joins the counter-revolution or if it abandons the country, and smuggling its sons abroad to evade military conscription, the Nicaraguan bourgeoisie is living in a veritable hell. This is, no doubt, a situation little conducive to calculating profits and to increasing investment in production.
It cannot be expected that the counterrevolutionary war will decrease in intensity or that the U.S. will reduce its support for the contras. The Sandinista Popular Army has the capacity to inflict military defeats on the contras, but the war will still have terribly harmful effects on Nicaraguan society. The cost of maintaining Nicaragua’s sovereignty has been paid in the form of deteriorating public services, health, education, and welfare, and a fall in living standards for the great mass of the population.
A New Relationship to the World Economy?
Conditions of declining exports, economic crisis, and war are not necessarily incompatible with pursuing a revised agroexport strategy that will mean for some time reducing Nicaragua’s links with the world economy. Indeed, the experience of other revolutionary movements indicates that a certain disinsertion from the world economy is necessary in order to carry through the internal transformation which is required to ready the economy to reinsert itself in the world economy in a new and more productive way.
Unfortunately, the cost of such a disinsertion for an economy such as Nicaragua’s, traditionally very open to the world market, and is extremely high. This is so especially because the Nicaraguan economy is so very dependent on imports. A decline in imports could, indeed, paralyze whole sectors of the economy, including the agroexport sector itself. The costs of disinsertion could be political as well. Moving toward a less open economy, one more inwardly directed, would mean giving priority to the peasant and to the internal market, to basic consumption and not to imports, and might therefore presage some decay of the alliance with the agroexport bourgeoisie.
What does a new reinsertion into the international economy mean concretely? So far, Nicaragua has attempted to diversify its foreign markets by developing ties with the Third World economies and the socialist world (COMECON). But the creation of these links does not promise to generate basic transformations, at least not in the short run. The Third World countries are simply not in a position to absorb significant shares of Nicaragua’s exports. They, too, are going through economic crises.
The reorientation of external commerce and the lines of economic cooperation vis-a-vis the socialist countries has so far been minimal, but it is developing quickly. A thorough integration of Nicaragua into the COMECON might be beneficial to the country, but in the short- and medium-term it could create serious ruptures and tensions.
Such an integration would compel Nicaragua to introduce profound modifications in its sociopolitical structure, which it is not yet prepared to do. Further, a decision to integrate into COMECON would surely alter Nicaragua’s international political relations, especially with the constitutional governments of Latin America, as well as with Western Europe. But the government is trying to maintain and improve these relations as part of its strategy of survival in the face of the counterrevolutionary war organized by the U.S. government. Rather than integration into COMECON, one can expect a progressive development of bilateral supply agreements between Nicaragua and the COMECON countries on the basis of annual and biannual accords, especially to the degree that Europe and Latin America increase their restrictions on commercial and financial dealings with Nicaragua.
Contradictions & Modifications
The strategy of national unity and mixed economy will continue to be pursued in the foreseeable future. This means that the policy of economic incentives for capital will continue, even if it means other sectors have to pay the price. The position of the government and the FSLN is clear: the bourgeoisie must limit itself to production and not meddle in politics. This is the sine qua non for its incorporation in the national unity and for its reproduction as a propertied class.
Nevertheless, the experience of history-an experience which is not foreign to Nicaragua-shows clearly that the bourgeoisie does not produce if it is not politically dominant. The bourgeoisie accepts therefore the external forms of the new situation in Nicaragua which permit it to tap part of the national surplus through cheap credit, partial dollarization of agricultural and animal prices, etc. But it removes its money from the circuit of production and invests it in speculative ventures, and, whenever possible, takes it out of the country.
Thus, the war is being fought on two fronts: not only at the frontiers and in the mountains, but also in the domestic political economy. Insofar as it contributes to the deterioration of production via the black market, speculation, and refusal to produce, the bourgeoisie objectively fights on the terrain of counterrevolution.
While the bourgeoisie has simultaneously subverted and received the support of the revolutionary government, the workers, artisans, peasants, and city and rural poor have borne the costs of war on both the economic and military front. This has naturally put a strain on the alliance with the agroexport bourgeoisie. Indeed, it was the demands, implicit and explicit, of those who were fighting and suffering from the economic and political conflict, especially the peasants, which induced the decision to revise the economic strategy, a decision which was taken reluctantly.
Modifying the strategy does not, of course, mean throwing it overboard, but finding a new equilibrium between exports and food production, between large state and capitalist production on the one hand and peasant production on the other. The revised orientation has contradictions of its own. Perhaps most obviously, rather than supporting the city at the expense of the countryside as with the previous policy, it calls for a transfer of the surplus toward the countryside and away from a large proportion of the urban middle and lower classes.
The decision to be more sensitive to the peasantry owes more to the need to redress historical injustices and to remove a potential social basis of support for the counter-revolution than it does to the belief in the productive capacities of the small producers. But in scaling down the great public projects to free resources to meet the needs of the peasantry, the priority on increasing exports and production is sacrificed to requirements of food security and the continued political loyalty of the rural masses.
On the other hand, to maintain the political loyalty of the middle urban sectors and the surviving nuclei of the patriotic bourgeoisie, the government retains a consumer price policy which discriminates against low income groups. But this is the price which must be paid to elicit production from an industry and agriculture still largely in capitalist hands.
Revolution in a Backward, Open Economy
Put most generally, the Sandinista revolution confronts a predicament common to other popular revolutions in economies which are very backward and very open to the world market. During a period, which can be very long, these economies on the way to restructuring-transitional economies, if you will-simply are not viable.
The specialized agroexport sector which the Nicaraguan revolution, and other revolutions like it, inherited, was able to compete on the international capitalist market only on the basis of an intense exploitation of the labor force-salaries below the cost of maintaining the workers, highly authoritarian work relations, etc.
The revolution has put an end to this, or at least sensibly improved working and living standards of the workers and peasants. But in so doing it has tended to raise the costs of production with respect to international market prices, thus eliminating or drastically reducing the competitiveness of its production. In addition, the agrarian reform and the bettering of the peasants’ condition of life has created serious problems in the supply of labor for the agroexport sector.
ne alternative to this would be to develop agro exports on the basis of intensive capital investments in new technology purchased abroad. Yet such an approach leads, in the short run, to a growth of external debt and internal inflation. Loans can be procured from the international banks only on increasingly onerous terms. Besides all this, the international competitiveness of capital-intensive agroexport production is open to serious question. And in the case of Nicaragua, the production of the principal export item-coffee-cannot be mechanized.
The strategy based on supplying the basic necessities of the working masses-especially through distributing the land to the peasants-appears to have its own sharp limitations. If an economy takes this road, it generally finds it difficult to produce large surpluses. It tends to suffer from a restricted internal market and the technical and organizational backwardness of economic activity undertaken for internal consumption. It remains profoundly dependent on imports for which it has increasing difficulty paying.
As a result, until the process of restructuring is complete, these economies need an external subsidy. Failing this, they collapse. The Chinese and Soviet revolutions did not suffer such collapse because they took place in closed, continental-sized, and practically self-sufficient economies. But the social revolutions in the rest of Asia, in Africa, and Latin America cannot easily avoid it.
Properly understood, this is one of the oldest themes in the polemic around the viability of socialism in backward capitalist countries, which began in nineteenth century Russia. Replying to the queries of the Narodniks, Engels proposed that the construction of socialism in an underdeveloped country was possible, if the revolution succeeded in the West and the victorious revolutionaries gave material assistance to their counterparts in the underdeveloped world.
Of course, the revolution did not take place in the West, only in Russia. But the central idea remains: the help of the advanced countries is indispensable to guarantee the initial viability of social revolutions in backward and dependent economies (see Lenin, 1920).
Under what conditions in the advanced countries, revolutionary or not, will this subsidy be available? And what will be required for the peripheral society successfully to transform this subsidy into development? This is today not solely a technical question, but a very practical one. A central component of the transition to socialism in the peripheral economy is the fight against imperialist military aggression. In such an unequal test of force, the courage of the entire people is the most powerful weapon of poor countries. But this is not enough. Without cooperation and international solidarity, it is not only the future of the economy which is imperiled, but above all, the very lives and freedoms of the people.
NOTE: This article has been updated to correct two errors inadvertently introduced into the print version. Carlos Vilas pointed them out and they have been corrected in this text.
January-February 1987, ATC 7