Shock treatment for
OPULAR perception of the FSLN
P and the government is characterized both by political support for their anti-imperialist project and,
Nicaragua's economy
FOUR MONTHS after last February's economic measures, which included the introduction of a new currency, a new economic "package" was introduced in mid-June.
The new córdoba (C$) was once again devalued in relation to the dollar, going from 10 C$ to 80 C$ to the dollar. The "parallel" currency exchange which had been eliminated in February was reintroduced on the basis of 130 C$ to the dollar. The cost of inter-city public transportation, of electricity, and of fuel rose more than 100%. A graduated scale of interest rates was introduced for different sectors of the economy: 45% for commerce, 20% for agriculture, and 12% for industrial production. Finally, wages were increased by 30%, and state subsidies of health ($70 million), education ($75 million), and public transportation ($1.4 million per month were maintained.
But this "economic shock" was not to be the last for the Nicaraguan people, since this August saw a new series of measures introduced by the government: another devaluation of the cordoba by 125%; the exchange going from 80 C$ to 180 C$ to the dollar in the official currency exchange, and fixed at 420 C$ in the parallel currency market. There has also been an increase in the cost of electricity, and salaries have risen by 140% in the public sector. Private sector wages remain linked to productivity levels. And there is to be more room to maneuver in the allocation of credit for small farmers.
These measures have not failed to arouse reactions, provoking discussion and criticism in the general population as well as within economic circles. In fact, there is scarcely any doubt that a debate around the "Sandinista model" is taking place within Nicaragua today, despite President Daniel Ortega's reaffirmation on July 19 of this year that the Sandinista revolution has been "socialist from the beginning".
We publish below extracts of a study done by the Institute of Sociology of the University of Central America (UCA) from the August issue of Envio, on popular reactions after the June measures were announced. All illustrations in this article by Nicaraguan cartoonist Róger Sánchez
20
on the basis of data obtained in June 1986, that the mass of the people had doubts about the economic capabilities of the government but believed that the cause of the economic crisis was American aggression and the cost of the war. They lacked confidence in the government's economic management because the various initiatives of economic adjustment undertaken since 1985 had always led to higher levels of inflation and a drop in their level of income. On the other hand, their own experience had convinced them it was Reagan, and not the Sandinistas, who was responsible for an economic situation going from bad to worse, since the standard of living had noticeably improved between 1979 and 1983, the year that American aggression began to have serious repercussions on the economy. This was also the year that people's real wages began to fall precipitously.
Informal sector hit hard, but unevenly
Other studies by the UCA looked at the economic impact of the February 1988 measures on the populations of Managua and Carazo [a nearby region]. On the basis of studies from before and after the February measures, it is clear that - as the government had hoped - the informal sector of the economy was hit hard, but even from this point of view the effect was uneven: Among families relying on the poorer layer of this informal sector incomes dropped substantially, and people had to abandon their activities in order to look for waged
It was this urban informal sector which had served as a safety valve for a working class whose real wages were dropping. The February measures, and even more so those of June, forced those who worked in the informal sector to return to waged labor where, in turn, the new wage freeze eliminated all maneuvering room.
In this context, the raising of wages by 30% was perceived as a slap in the face or a cruel joke because the prices of some basic necessities had risen, along with the exchange rate, by as much as 566%, and the price of fuel and urban transportation rose respectively by 1,066% and 350%.
After the new measures, many Managuan workers who lived in the "green belt" of the capital or in commuter towns could not even get to work, because the cost of a return bus ticket was higher than the day's wage! From Masatepe, a return ticket is 90CS a day, which, multiplied by the num-
----- pull-quotes on this page -----
NICARAGUA at the same time, serious doubts about their administrative capabilities in the economic sphere. This political and economic dichot- omy in popular consciousness is evident in every single opinion poll. An analysis done by the UCA explains,
THIS IS TOO
MUCH!!
GETTING RID OF
NICARAGUA state].
SOMOZA WAS I Unequal distribution of incomes exacerbated
At the other end of the spectrum in the more affluent informal sector, although people were affected during the first few weeks after the measures their incomes quickly reverted to previous levels.
Thus, in both the informal sector of the economy and the sector subject to the SNOTS wage scale, the February measures created an even more unequal distribution of incomes — the normal result of any economic adjustment when a country's national currency is drastically devalued. This process of wage differentiation and polarization of the informal sector into proletarians and small bosses was accelerated by the June measures.
The general feeling that better-off families were hurt less by the measures than the mass of Nicaraguan people is supported by the facts. This is why the declaration of Ramon Gurdián [one of the leaders of the employer's association, COSEP] that "I support and applaud the new measures taken by the Sandinista government" has hurt the government more than any of his previous attacks. Even if these measures will have a big effect on the middle layers and petty-bourgeois producers, the manner in which this is understood within the working class will be quite different, given the abysmal drop in their income. This perception will ultimately be transformed into a political pressure which the government will have to confront.
The Nicaraguan people have shown that they were ready to make sacrifices to ensure their national sovereignty, but it remains to be seen whether they will pressurize their government so that it makes sure that everyone contributes equally for the right to be Nicaraguan. Even in cases where employers may be efficient and where their production serves to stabilize wages in the working class, it is hard to demand more sacrifices from people who can see that employers are pleased with the measures taken by the
At a time when the inefficiency of any enterprise is a further burden for the working class to shoulder, and in an economy of scarcity, restlessness and unease among the general population is to be expected.
The most recent opinion poll, dating from June this year, and conducted by the Center of Studies associated with the UCA (ITZTANI), once again shows the dichotomy between attitudes concerning politics and economics. But it also reveals a new perception of the economy, which could mean that the political cost of this series of economic measures may be higher than the
REVOLUCION
government expected.
The poll demonstrated that 71.7% of the population of Managua supported president Daniel Ortega, and that more or less the same percentage of Managuan inhabitants supported Sandinista political positions and voted for the FSLN in 1984. Even if 65% of this group thinks that the government wants to solve the economic problems, only 19% think that the problems are caused by either Reagan, American aggression, the blockade, or the war. And 36% think that the major economic problems are low wages, insufficient production, and
Is the war the only reason for the crisis?
So, in two years, or rather in the eight months since the super-inflation of November 1987, we have seen the steady waning of the popular perception that the war was at the root of the economic crisis. This could be in large measure the result of the government's own propaganda about the "strategic defeat" of the counterrevolution, for, in popular consciousness,
ENOUCAH.
### CAPTALEN 3 there is a simple dichotomy: Either the contras have not been defeated as the government claims and therefore war spending must continue, or they have been defeated and war spending must stop. Among those who think that the contras are in an irreversible decline, in a certain very small and reactionary sector there is the idea that both sides need the excuse of the war in order to finance their respective armies.
The Sapoa Accords and the temporary cease-fire have begun to reinforce the popular opinion that military spending is no longer so necessary and other factors must therefore explain the drop in the standard of living. However, the problem is that in the geo-political and military sense, the war is not over; the cease-fire is precarious. In Reagan's final months anything could happen — the situation could suddenly take a turn for the worse.
At each stage the common perception of the situation is more marked by what President Ortega calls "the dichotomy or the division of our reality between the problem of the war and that of the economy". As he explains, "when we address the economic difficulties, we tend to forget about the war". 21 Even if Nicaraguans are not following the
----- pull-quotes on this page -----
ber of days worked, produces a sum greater than the monthly wage of the lower level administrative workers as determined by the SNOTS [the wage scale set by the
International Viewpoint #149 • October 17, 1988
NICARAGUA
"WE HAYE то 60 то THE MASSES. .. GO TO THE MASSES" opposition parties (the opposition party which got the most support in the opinion poll conducted by ITZTANI was the Independent Liberal Party (PLI) with only 3%, and the FSLN is still the only party with a mass base of support), the growing discontent with the government and the nightmare vision of an armed crowd taking over milk trucks in certain neighborhoods are exerting strong political pressure on the
This pressure from below, which affects even technical and administrative layers of the state apparatus, is undermining its ideological coherence, unity, and the ability to implement economic policy. The fact that the June package includes no measures that can satisfy the most supportive and productive layers of Nicaraguan society, those within the state and cultural administrations, also helps to create the danger of a loss of coherence in this program.
From this arises the danger of an incomplete economic program that further undermines the ability of the government to have any influence on the functioning of the economy, as Ortega warned in his presentation of the new measures: "If we don't maintain our coherence, keep saying the same thing, and if we do not conform to the reality which confronts us at this stage, if we lose our political and ideological cohesion, then this weakness will have its effect at all levels of the society we are trying to
When all is said and done, the coherence of a government with a socialist orientation and a mixed economy in this world context depends on the strength of the mobilization of a people in support of their government's economic policies. For, as we warned in our first evaluation of the February measures, any adjustment of the Nicar-
"an operation 22 without anesthesia". Since we don't have i the material base that would enable us to control inflation, the only element giving Nicaragua a cnance to confront the escalating deterioration of its economy is its
Such an economic base would require: • The necessary international reserves to consolidate the effects of the devaluations.
• A guarantee of adequate productive input from domestic production, or through foreign credits.
• Relatively stable prices, and a climate in which whole workweeks are not lost, nor national production made to suffer solely because economists cannot predict the effects of such sharp devaluations on
• And, above all, a chance to escape from the inflationary spiral by reducing military spending. This is the true cause of the gigantic deficit and of the serious imbalance between huge and unproductive public spending and the scant resources de-
In the absence of these material conditions and their stabilizing effect on the economy, the people's conscious support for, and confidence in, their government's administrative abilities stands out as the most important factor. Without the people, the project of economic adjustment is simply non-viable. This is the crux of the economic conjuncture in which Nicaragua
Criticism of the measures continues to build up
The government has the political support of its people for its project of national unity and political pluralism. But in the economic arena, it needs a new series of more diversified, more popular measures, if it wants to succeeed in carrying out the fundamental line of this economic readjustment at a minimum political cost.
For the reasons outlined above, the new measures led to increased public criticism of governmental inability to manage the economy. Popular criticism will continue to build up a wave of pressure which will crash against what until now has been seen as the slowness of the government to restructure productive strategy in wartime, to change the style of economic management and to draw a new balance sheet of how resources have been allocated to the war and
The peaking of this pressure wave could force the new economic program to take any of three different directions:
• Abandoning the measures even though they are absolutely necessary. Pursuing them without a coherent alternative will soon produce all of the negative consequences we have already mentioned.
• Retain the measures without any modifications and run the risk of losing political support as well as maintaining the current high levels of inflation.
• Modify and complement the development of the Sandinista economic model to accommodate better to a survival/war economy, instead of papering over the cracks.
Despite the difficulty of widening the productive alliance that underlines the Sandinists model, the political consequences of the two first solutions are so negative that we tend to believe that popular pressure will play a crucial role in the forging of a new Sandinista economic model in the
The February and June measures have been without doubt the indispensable fiscal steps towards the reconstructing a Sandinista economic model on its original popu-
The extension of the Sandinista model of accumulation has as a prerequisite the enormous task of winning back, in the economic sense, the lands which were ravaged by the war. It is in this region one finds the best potential for the production of beef and coffee, the two areas in which Nicaragua
"BUREAUGRATS MUST GO TO THE MASSES - "1 can actually increase its exports. In fact, the income lost by Nicaragua from coffee and beef — in relation to pre-war export levels — has been without doubt the principal reason for the difficulties encountered in trying to get productive inputs. It is this fundamentally that has drained the Nicaraguan economy and thereby limited the government's capacity to maintain social programs and protect the real incomes of workers and peasants.
Nicaragua did lose sources of income and means for producing basic foodstuffs because of the war, but also because the middle producers and peasants near the border were never part of the class alliance prioritized in the original Sandinista model of accumulation. As many Sandinistas have said, "the revolution never got that far".
The February and June measures provide the fiscal framework necessary to recover economic ground lost as a result of the war, but they will not be sufficient to mobilize
October 17, 1988 • #149 International Viewpoint the great complex that produces domestic corn, beans, pork, cement, and coffee, and whose final fruit is exactly the amount of income needed to provide a secure base for the adjustment of this economic model.
This adjustment or broadening of the current model of accumulation could be summed up in the seven following points:
1) A model more rural than urban, which would mean redirecting the metal industry towards the production of consumer and capital goods for the coffee and cement producers instead of acting as an industry serving the big projects of MIDINRA
[Ministry of Agricultural Reform].
2) A model based on the technological level of the population today, thus with a slower rate of transformation than the one currently in force.
Using agrarian reform to relieve crowding
3) A model which changes the eightyear-long relationship between the nonproductive informal sector and the productive sector, where the informal sector has benefitted more than producers. This will be done by better organizing the artisans involved, and investing resources in that part of the informal sector that provides essential services for production. The fiscal measures will quickly do away with the most inefficient small-scale concerns, while maintaining those which the revolution can encourage as service or credit cooperatives.
4) A model that uses the agrarian reform to relieve crowding in the urban areas, especially Managua and the Pacific region, by giving up non-strategic state lands for the creation of cooperatives.
5) A model that encourages the mobilized population to turn away from the commercial sector towards the productive sector, not only by keeping track of speculators, but also of who produces and who does not.
6) A model that reinforces the traditional production of villages and in the countryside, thereby creating an economic base that can speed the rate of technological transformation.
7) A model that broadens the alliance of classes which support it; that increases the role of peasants and small and medium-sized producers in the countryside and small businesses in the towns; that changes the nature of the alliance with the poorer urban layers from a policy of subsidized consumption to one of productive mobilization; and that keeps a better check on the inefficiency of large companies, whether state or privately owned.
The extension of the original Sandinista model will continue to be impelled by popular pressure, in the same way as the agrarian reform was. There are two factors which determine the potential for development of the Sandinista model: firstly, the depth of structural changes already consolidated cessions to the broader productive sector by readjusting the credit policies in order to stimulate the economy.
• Restructuring the investment program as the only real possibility of raising the level of exports and as the first step towards a new productive strategy and a new model of accumulation.
• Developing and putting into place a new program of significant foreign
• Integrating the economic potential of the army within the survival economy.
• Energizing the state's economic administration in a new direction: priority to production, instead of administrative
• Increasing popular participation in planning through public debates and meetings and establishing a new ethic of austerity and efficiency. *
* Envio is published monthly by the Instituto Historico Centroamericano in Spanish, English, French and German: IHCA, Apartado A-194, Managua.
BUT HoW CAN I IF THEY WONT
GIVE ME A
CAR?
NICARAGUA
"Our goal is to
take better
advantage of
our country's
meager
resources"
LAST JUNE, Daniel Ortega
travelled to Cuba: we print
below his remarks to the Cuban daily Granma on the meaning of the recent economic measures.
CONOMIC measures are an integral part of a war economy — a survival economy. The measures we have decided upon are aimed at taking better advantage of the meager resources our country has. Our political program has included extensive subsidies, and this produced high inflation and a surplus of money in circulation. There has been a serious tension between the excess money in circulation and the relative scarcity of consumer goods.
In other respects, this situation ran counter to such central revolutionary goals as favoring the fundamental forces, those active in the military defense of the revolution and those linked to production or basic services in the country.
For example, the commercial sector did quite well out of these difficulties, whereas we were finding it hard enough to direct resources to the sectors we wished to prioritize. Neither were the interests of workers and productive enterprises served, since goods the latter produced had their prices fixed according to quite rigid norms set by the government. Moreover, as these prices were often either heavily subsidized or badly calculated, once on the market they were exploited by dealers who jacked them up three, four or five times. Their market value was falsified, and it was the petty shopkeepers or dealers who profited.
The goal of these measures is therefore to better manage the country's few resources by directing them towards military defense and certain productive sectors. What does this mean? In part, that some areas of production must be sacrificed, indeed some necessary sectors. As we are at war, we can't keep everything; something has to go.
To give an example, if we must spend money on coffee production and, at the 23 same time, the production of lemonade,