The Organic Intellectual

If our greatest task is to liberate humanity, as Paulo Freire asserts, then it is absolutely essential that we create a culture of resistance from below that is able not only to counter, but transcend the limitations of the ruling culture imposed by above. Hopefully, The Organic Intellectual will help serve this purpose.

Wednesday, October 28, 2009

Nicaragua: A Neoliberal's Dream Part II

PART I HERE

In 1984 the FSLN held onto power in a decisive electoral victory. By 1990, however, economic sanctions and brutal civil war had taken their toll. “Nicaragua's per capita income had fallen drastically and much of its infrastructure had been seriously damaged.”[1] So intense was this destruction that the country was left “on the edge of economic collapse, with astronomical foreign debt and a rate of inflation of more than three digits.”[2] The electoral defeat for the FSLN that brought the conservative Violeta Chamorro was less a show of support for neoliberal economic policy than the people hoping that relief from the corporate, first world economic onslaught would result from their voting in another direction. Since then, an ushering in of neoliberal economic reform has drastically altered Nicaraguan society.

The World Bank resumed lending in 1992 with the ascent of Chamorro to the presidency.[3] The first small agreement with the IMF was not reached until 1993, long after the downfall of the Sandinista revolution.[4] While the majority of the loans under the World Bank were processed through the International Development Association, its “low-cost lending arm” that provides loans ostensibly interest fee,[5] Nicaragua remained under burdensome debt. Even after the Orwellian termed “debt forgiveness,” a concept ridden with fallacy as most of Nicaragua’s debt is illegitimate, which cleared 87% of the country’s debt burden, huge payments were still being made.[6] For instance, from the projected figures given by the World Bank’s website, Nicaragua will pay nearly $233 million in debt repayment to the World Bank alone from the six-month span of September 2009 to March 2010. Of this, only $17.5 million, around 7%, is even applied to the principle. That means, despite being “interest free,” the rest of the payment goes towards the vaguely termed “charges.”[7] Furthermore, despite most of the debt being dropped, Nicaragua still remains in a precarious situation that will likely force it to borrow more simply to stay afloat.

Even more onerous than the debt are the crushing conditionalities that are strictly applied to loans from these institutions. These conditionalities have to be met in order to receive funding and are the main economic tools utilized to exploit third world nations. Some of the fundamental tenets include severely reducing the public sector’s role in society, forced privatization, and the tearing open of the country’s economy to foreign capital. In a plan outlined in 1998 by the IMF, Nicaragua was forced to undergo an intense series of cutbacks and privatization efforts to augment private power. Nicaragua’s Structural Adjustment Program (SAP) was intended to increase GDP by 5% annually by measures such as removing taxes on private businesses and large agribusiness, a freeze on public expenditure followed by a drastic decline (44% since 1990)[8], cutting over 3,000 public sector jobs in two years (not resulting from privatization of state enterprise, which essentially means many more would be cut), a reduction in social spending to be replaced with private charity, a partial privatization of the social security system, drastically reducing trade tariffs, monthly increases in consumer electricity costs, the possibility of regressive taxation in the form of Value-Added taxes, and a full scale plan “to privatize public utilities [state electrical company (ENEL), phone company (ENITEL), 80% of the state owned bank (BANADES), and others], the state oil distribution company, and the services of major ports.”[9]

By 2008, many of these measures had been accomplished. An IMF report for that year maintained that GDP growth had been 3.8% in 2007 and a consistent 2-4% before that. Over three-hundred state enterprises have been privatized since the early 1990’s.[10] It claimed that Nicaragua had fostered a “good business climate” where “Energy, infrastructure, agriculture, livestock, fishing, forestry, tourism, and free trade zones” were the main accomplishments. Meanwhile, strict controls on public wage increases were to be enforced, the poverty rate had remained virtually unchanged, and the social health indicators had increased only measly over the ten-year period.[11] These so-called “free trade zones,” or FTZs, mentioned above, have been purported to decrease unemployment and empower community members to stimulate the economy. The reality is quite different. “While the FTZs have been a major source of employment for women, they have not created jobs that can bring women out of poverty and contribute to their empowerment. On the contrary, management in these factories pays low wages, provides difficult working conditions, and tries to suppress the women’s labor rights.”[12]

The agroexport model so heavily pushed by foreign interests has failed the Nicaraguan people as well. “Until 2000, coffee had been Nicaragua's main foreign exchange earner…After years of World Bank pushing countries (especially Vietnam) to plant this cash crop, the coffee sector in Nicaragua, as elsewhere, has collapsed.”[13] Subsequently, massive migration from rural areas to urban areas has drastically increased the plight of the urban working class as they struggle to find jobs with decent wages or any employment at all. Over half of the working-age population suffers from underemployment and the significant majority of Nicaraguans survive on less than two dollars a day. The cost of a basic basket of goods has doubled since the 1990’s for families and the prices of water and electricity have increased fivefold while real wages have remained stagnant.[14] This has cultivated a dual-economy in Nicaragua where a small, wealthy elite maintain luxurious lifestyles while the majority are forced suffer in the squalors of poverty and deprivation. Even the former Sandinista, and current president Daniel Ortega, has renounced his past populism, swallowed up the SAP as his own, and stressed his commitment to respect private property, small, medium and large.”[15]

It is apparent, then, that Nicaragua provides the perfect model under which to examine the neoliberal paradigm. It is obvious that “free trade” has done very little for the people of Nicaragua other than increase their misery. The words of political analyst Noam Chomsky, as he dissects what is meant by the term “trade” in the economic world, are easily applicable to Nicaragua’s situation:
“What's called trade isn't trade in any serious sense of the term. Much of what's called trade is just internal transactions, inside a big corporation... by now it's estimated that about 40% of what's called world trade is internal to corporations. That means centrally-managed transactions run by a very visible hand with major market distortions of all kinds, sometimes called a system of corporate mercantilism, which is fairly accurate.”[16]
It is well understood by the people of Nicaragua that this system has done nothing for them. Wealthy, first world bankers and highly advanced multinational corporations, alongside a crooked domestic elite, have exploited the land, resources, and labor of Nicaragua.

Nicaragua’s situation is genuinely unique, of course, but the general problems it faces from the onslaught of neoliberalism can be almost universally applied to third world countries. Therefore, the predilection towards the free market must be countered. This may or may not happen, but it is absolutely essential that new forms of economic and human development are applied with the simultaneous dismantling of the existing model. A green-industrial mode of economic development could be particularly useful, especially in the regions that already have some infrastructure and industrial capability. However, one must be careful not to posit blind industrialism as the solution, especially given the drastic advance global warming has made and the advent of new technologies that could be utilized in Nicaragua’s situation. This would require important skills and training that would require greatly augmenting the educational structures in the country, something that may or may not push them, yet again, into reliance on predatory global powers. Therefore, dependency models of technological and industrial development offer some hope, but with possible consequences that would have to be addressed as they appear.

Participatory development, the utilization of limited technology and labor-intensive methods that traditional rural sectors are familiar with, could provide individual solutions in individual communities. It is not, however, a panacea for all of Nicaragua’s problems which extend far beyond how the agricultural sector is organized. While subsistence or small-excess farming methods may allow particular communities to maintain their style of living, it does not necessarily mean that the needs of the growing urban sectors will be met. Participatory development is, at most, a tactic to be applied to certain regions within a more comprehensive strategy. Any strategy that develops, however, ought to be organically constructed through the democratic participation of the Nicaraguan people, not through first world financiers, wealthy Nicaraguan oligarchs, or corrupt party officials.

Popular protests against privatization and pressure on local legislators have stalled some neoliberal offensives. Still, the projectory has been increasingly to the right in the past thirty years. This has only just changed with the vote for Ortega, who in the hearts and minds of the Nicaraguan people represented a shift away from the neoliberal economic model. It is clear, however, that he remains committed to the corporate world and private interests, not the masses.[17] If Nicaragua’s future is to be reversed from the bleak course it is currently traveling it will take a massive upsurge of popular fervor and democratic struggle. Democratic participation by the massive will prove the only antidote for an economic system that functions solely on profit and not on people. Those involved in working-class and rural struggles must transcend the limits of corporate capitalism and search for a new alternative. Participatory development and technological advancement, where appropriate, are absolutely essential if Nicaragua is to break free from the chains of their past. These methods may advance the potential for Nicaraguans to control, in a limited manner, their own destiny. Likewise, debt relief provided a rather paltry gesture towards reconciliation. The United States government owes the Nicaraguan people large-scale reparations and access to technological developments and social services the Nicaraguan state does not have the capacity to implement with its limited resources. Perhaps the words of Malcolm X are applicable here: “If you stick a knife nine inches into my back and pull it out three inches, that is not progress. Even if you pull it all the way out, that is not progress. Progress is healing the wound, and America hasn't even begun to pull out the knife.” America’s knife may be pulled out three inches with debt-relief, but there is still far more work to do. However, until the means of production are democratically controlled and society is organized around collective principles of existence poverty, hunger, and exploitation will remain an everyday occurrence in Nicaraguan society.


[1] Westen, “Ortega Wins Nicaraguan Elections: Where To Now?”
[2] Lanuza, “Nicaragua: Ecological Debt”
[3] “Chronology of the World Bank,” International Socialist Review
[4] “Nicaragua: History of Lending Arrangements,” International Monetary Fund, (2009); http://www.imf.org/external/np/fin/tad/extarr2.aspx?memberKey1=720&date1key=2009-07-31
[5]Nicaragua: Estimated Debt Service Payments,” World Bank (2009); http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/0,,PAGESIZE:10~menuPK:177680~pagePK:169643~piPK:169646~theSitePK:136917~COUNTRYCODE:NI,00.html?countrylist=NI
[6] Kimmo Lehtonen, “Most of Nicaragua’s Foreign Debt Canceled,” Kepa (2004); http://www.kepa.fi/international/english/information/newsletter/2004/3817
[7]http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/NICARAGUAEXTN/0,,menuPK:258694~pagePK:141159~piPK:141110~theSitePK:258689,00.html
[8] Solo, “Neo-liberal Nicaragua,”
[9] Michael Camdessus, “Nicaragua Letter of Intent and Memorandum on Economic Policies,” Internatinoal Monetary Fund (1998); http://www.imf.org/external/np/loi/010998.htm
[10] Solo, “Neo-liberal Nicaragua,”
[11] Camdessus, “Nicaragua Letter of Intent and Memorandum”
[12] Rose-Marie Avin, “Free Trade Zones and Women I Nicaragua: Empowerment or Exploitation?” Working Capital for Community Needs, (2002); http://www.capitalforcommunities.org/articles/ftz.html
[13] Solo, “Neo-liberal Nicaragua,”
[14] Ibid.
[15] Westen, “Ortega Wins Nicaraguan Elections: Where To Now?”
[16] http://www.lipmagazine.org/articles/featchomsky_63_p.htm; He further outlines this critique of neoliberalism when he applies it to the United States: “So let's take the United States. 200 years ago the comparative advantage of the United States was exporting fish and fur, and maybe cotton, thanks to slavery. If the U.S. had followed the principles that are dictated to the poor countries, we'd be a sparsely populated, pretty poor country, exporting primary resources. Instead, the United States violated all of the rules--the rules of the economists and the neo-liberal principles.” (http://www.counterpunch.org/dossani03092007.html)
[17] When I traveled to Nicaragua in the summer of 2009, the people that I spoke to in the city of León about Ortega were often quite willing to point out his shifts to the right (being baptized Catholic and passing strong anti-abortion legislation, submitting to private business, etc.) and the fact that he owned multiple mansions as evidence of his being completely bought off.


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