Reactions to the Market: Small Farmers in the Economic Reshaping of Nicaragua, Cuba, Russia, and China

3. The Economic Strategy of the Post-1900 State

3 The Economic Strategy of the Post-1990 State The shift in political economic orientation of the Nicaraguan state began with the inauguration of the Chamorro regime in April . A modification in the balance of forces of the distinct social groupings within Nicaraguan society had, effectively, culminated in the electoral victory of the anti-Sandinista alliance, UNO, or Unión Nacional Opositora. That victory gave majority control over the state to representatives of the capitalist class, thereby opening up a new stage of the struggle for hegemony that had escalated during the Sandinista era. Thus, from a government that had initiated a transition toward socialism in Nicaragua under the Sandinistas, the baton passed to a government that was committed to bringing free-market economics back to the country. That there was a shift under way in the reigning political economy was put in evidence in a variety of areas of government policy making. These ranged from the economic sphere (which will be analyzed at length) to the social/ideological sphere, as expressed, for example, in the transformation of educational policies. Most of the changes arising from the new political economic framework coincided closely with the policy requisites of the key governments, most especially the United States, and the international lending community that the Chamorro government was eager to establish relations with. Hence, the restructuring of the economy and society that the government embarked on in  was part of its larger project of bringing  ’   about a rapid retreat from socialism, while also endearing it to those it sought to ally with and borrow money from. The country’s improved standing with the international financial community represented a stark contrast from the status quo of the s. During a relatively brief honeymoon period (–), the development plans of the Government of National Reconstruction—which was constituted following the Sandinistas’ overthrow of the Somoza regime—were endorsed, albeit tepidly, even by the World Bank. After this time, however, Nicaragua’s relationship with the international lending community became extremely restricted and continued to be so throughout the Sandinistas’ tenure in power. In large part because of the pressure the U.S. government brought to bear on crucial multilateral lenders, by the mid-s, Nicaragua’s government could only look to a limited number of bilateral sources for loans and assistance to fund its development program.1 That development program was to be based on a mixed economy, with a state and cooperative sector that were initially formed with properties confiscated from the Somoza family and its close allies, and a private sector that had producers of all sizes and organizational types. Part of the profits from state enterprises was to be distributed socially through the expansion of social services. The remainder was to be invested in infrastructural development geared toward agroindustrial enterprises that the government was building with international assistance. These new enterprises were designed to modify Nicaragua’s role in the international economy from an exporter of raw materials to an exporter of processed agricultural goods. Yet export production would now have to share many productive resources it had previously monopolized with the sector of production geared to the domestic market. That is, the Sandinistas’ program was oriented toward changing the nature of the country’s productive structure, as well as redistributing productive resources and the surpluses that were generated by them. Nonetheless, foreign assistance began to shrink with the escalation in U.S. hostilities as of . And the defense effort consumed a growing percentage of the national budget as the Contra war advanced from primarily consisting of skirmishes to rendering uninhabitable (and unproductive) larger and larger parts of the central mountain region from  to .2 . See further, Stahler-Sholk (), Conroy (), and Kornbluh (). . Remnants of Anastasio Somoza’s National Guard, which the Sandinistas had swept from the country in , actually initiated their ‘‘counterrevolutionary’’ activities as early as . During the s, the Contra forces, which were financed, armed, and organized by the U.S. govern-  -   Thus, the Sandinista government found itself forced to shift economic gears. Over the next several years, it implemented a series of economic reforms designed to bring about greater control over inflation and fiscal imbalances while maintaining intact the larger objectives of the development plan. The first section of this chapter will provide a brief look at the changes that took place in Sandinista economic policy during the s. Then I will describe the Chamorro government’s economic reform...