CUBA: The Revolutionary as Economic Manager, Review of Helen Yaffe’s New Book: “Che Guevara: The Economics of Revolution”

Posted on July 31, 2009

The revolutionary as economic managerchefidel

Che Guevara: The Economics of Revolution
By Helen Yaffe
Palgrave Macmillan, 354 pp. $59.95
Reviewed by Allen Myers

Every socialist revolution to date has occurred in a country whose economy stood at a level of development well below that of the most developed capitalist nations. New revolutionary governments have therefore confronted from the start a very material contradiction: trying to begin constructing socialism with inadequate productive forces. Karl Marx and Frederick Engels envisioned socialist consciousness developing in a society of rational abundance, but revolutions have occurred primarily where the existing capitalist economy could barely, if at all, feed the population. (In Soviet Russia, by the end of the imperialist-backed civil war in 1921, some areas were reduced to cannibalism.)

The dilemma facing revolutionary working people’s governments in the underdeveloped countries is how to increase simultaneously socialist consciousness and labour productivity, given that workers and poor farmers have been accustomed all their lives to having their labour regulated by a capitalist market dominated by monopolistic corporations. A socialist government has to improve the material well-being of the working people, but do so in ways that counter capitalism’s tendency to isolate and alienate workers from each other and from their work.

Helen Yaffe’s new book on the economic thought and practice of Che Guevara during the early years of the Cuban Revolution is a hugely valuable contribution to a Marxist discussion of these crucial questions. It is also extremely timely, being published as the advancing Bolivarian socialist revolution in Venezuela is confronting the same sorts of questions about the construction of a 21st century socialism.
Law of value and planning

The Cuban revolutionaries did not come to power with a detailed theory of how to manage the economy, and different leaders had different ideas. Once the socialist character of the revolution was proclaimed (in 1961) and assistance began arriving from the socialist states, there was an understandable tendency to imitate the mechanisms used in the Soviet Union. These mechanisms relied to a great extent on the law of value — that is, on monetary rewards and sanctions for both workers and production units. In what was known in Cuba as the Auto-Financing System (AFS) or “economic calculus”, capitalist tools such as competition, profit, credit and interest and individual material incentives were used in an effort to speed industrialisation and the growth of productivity. The role of the socialist state was seen as ensuring that these capitalist methods did not grow out of control, and steering the economy through measures such as taxation and regulation of imports and exports. The AFS was used in large parts of the Cuban economy.

From his study of Marx and of the political economy in the Soviet bloc countries, Che came to believe that the AFS was the wrong approach. He saw its origins in the Soviet New Economic Policy (NEP) of the 1920s, a retreat forced on the Soviet government by the destruction of the civil war and the receding of the revolutionary wave in Europe. The NEP allowed a revival of small-scale private business and became, in Che’s view, a major source of capitalist restorationist pressures. In his notes on the Soviet Manual of Political Economy, Che wrote: “[The NEP] constitutes one of the biggest steps backward taken by the USSR. Lenin compared it to the peace of Brest-Litovsk [the rapacious treaty imposed by German imperialism in early 1918]. The decision was extremely difficult and, to judge from the doubts in Lenin’s mind that were clear at the end of his life, if he had lived a few years longer he would have corrected its most reactionary effects. His followers did not see the danger and it remained as the great Trojan horse of socialism, direct material interest as an economic lever.”

As the head of the Ministry of Industries (a post he occupied until he left Cuba in 1965 to aid revolutionary struggles in Africa and South America), Che developed economic methods with a quite different emphasis, known as the Budgetary Finance System (BFS). The aim, Che believed, should be to restrict the operation of the law of value to the greatest extent possible. The country should be seen, not as a collection of autonomous economic units that traded among themselves, but as a single great enterprise, products being moved within it according to a national economic plan. Money’s role here was to be reduced to that of an accounting instrument, a measure of productivity. Surplus products no longer took the form of profits, but were simple use-values controlled by the government that could be used to increase either consumption or future production.

The extent to which Che’s ideas could be implemented varied with circumstances, but he was constantly pushing the envelope, as Yaffe thoroughly documents. Che understood that the objective circumstances were not totally outside the control of the revolution and its leaders. The ability to plan production depends, among other things, on knowing how to control inventories, on quality assurance, on the ability to coordinate shipments and similar factors that rely on the education and the enthusiasm of workers. These in turn were largely influenced by the policies and example of the government and its revolutionary leaders.
Forced pace

Like the Russian Revolution of 1917, the Cuban Revolution was forced by capitalist sabotage and imperialist threats to expropriate capitalist industry at a speed that would have been irrational if the only consideration had been economic efficiency. As the Bolsheviks found themselves in control of industries which they lacked the technical capacity to manage properly, they conscripted or cajoled capitalist experts into managerial roles, carefully watched by political commissars. The Cuban revolutionaries also sought to persuade the technical intelligentsia to remain and participate in building a new Cuba, and they succeeded in a few cases, but for the most part the Cuban technicians and supervisors in US-owned businesses were enticed to the US, sometimes with offers to double their salaries. In 1961, when the Ministry of Industries set up a minerals research body, the Cuban Institute of Mineral Resources, there were only two geologists in the entire country.

Che, like Fidel Castro and the July 26 Movement generally, saw education as indispensable to human freedom. In the situation of the skills shortage faced by the revolution, education was also an urgent economic necessity. Furthermore, for Che, education was part of creating a new culture, moulding the new socialist human being. Che sought to encourage education by both force of example and material incentives. Yaffe notes that Che himself studied not only the Marxist classics and political economy but also corporate capitalist management theory, Cuban history, and world political and military history.

On being appointed the head of the National Bank of Cuba, Che started taking mathematics lessons, and later went on to study advanced set theory. He took lessons from a specialist accountant and in 1964 studied “probability and theories of information, an area understood by a handful of people in Cuba at that time”. Che demanded a similar pursuit of education by everyone in the ministry.

Under the AFS, workers who exceeded their norms by some percentage would receive that percentage of increase in pay. Under the BFS, bonuses were limited: they could not raise a worker’s total pay above the base pay for the next level up in the salary scale, set according to the worker’s attained education level. But workers’ exceeding of norms made it possible for them to study — with salaries paid while they did so — and attain the qualifications for promotion to a higher pay category.

Creating the new socialist human being, Che believed, required more than just the multiplication of the productive forces. It was equally a matter of raising consciousness, and doing so at the same time as raising productivity. Yaffe writes that for Che, “the challenge was to replace the workers’ alienation from the productive process, and the antagonism generated by class struggle, with integration and solidarity, developing a collective attitude to production. In the Soviet bloc he observed that the prevalence of the operation of the law of value and neglect of political education were obstructing the transformation of consciousness.”

Che’s emphasis on moral and collective material incentives was part of what he saw as the process of transforming workers from their status as commodities under capitalism into self-developing human beings. In the socialist future, labour will be a human need. For Che, the transformation began by changing work from a form of commodity exchange into a social duty. This accounts for the great importance that voluntary labour has played in the Cuban Revolution. As was said by one of Che’s co-workers quoted by Yaffe: “Che insisted that voluntary labour be seen as a social duty from which you obtain indirect benefits”.

In late October 1960, in response to US trade restrictions, the Cuban government nationalised 200 small US companies still operating in Cuba. Yaffe recounts an amusing but inspiring story told by Orlando Borrego, who at that time was the head of the Department of Industrialisation, which later became the Ministry of Industries. Che phoned him late at night and told him he had until morning to find managers for the 200 factories, which included 80 sugar mills. “I nearly had a heart attack!”, Borrego reported later. “Where were we going to find them? I only knew about three people with any accountancy experience. Half an hour later Che called me again and said ‘Fidel has an idea, a solution.’” Fidel’s solution was to appoint as the managers 200 students, aged between 15 and 20, who were studying to be voluntary teachers in the mountains. The students were able to fill their positions because they were supported by the unionised workers.

This and similar experiences, Yaffe writes, helped to convince Che that revolutionary commitment was as important as technical expertise and that collaboration between administrators and experienced workers was key to overcoming functional problems. Undoubtedly, such ad hoc measures carried an economic cost, but the alternative would have been strangulation and defeat by US imperialism. Che’s methods at the Ministry of Industries were largely successful. Yaffe quotes the observation of a Cuban economist who has studied the national statistics of the period: “What took place under Che’s management was the transition from a capitalist industrial sector to a socialist-run industrial sector. It was such a smooth and positive transition, without trauma or a fall in production. There has never been a more profound change with less trauma or with a better response to the new conditions created. That was Che’s main achievement.”

In an interview on Cuban television in October 2007, Venezuelan President Hugo Chavez said: “I have discovered Che the critical thinker, Che the transformer of the economic system, Che of the stage of industrialisation in Cuba, Che and his reflections in Africa, Che and his criticisms of the Soviet model and the Soviet manual …” Thanks to Helen Yaffe, readers in the English-speaking world now have a chance to discover a Che who was a profound economic thinker and doer, not in addition to his life as a revolutionary, but as an inseparable part of it.

Even a much longer review could not give an adequate idea of the scope of this work, based upon hundreds of books, documents, reports and interviews. It provides a mass of detail in areas from science to workers’ participation, from investment to psychology, without ever losing track of the main threads or becoming bogged down. I can’t think of enough superlatives to describe it.