07 February, 2010

Yaffe interview CORREA - SUCRE vs Dollar

HELEN YAFFE completed her doctoral thesis in the
Economic History Department at the London School of
Economics, with an ESRC studentship. She then went on
to an ESRC Postdoctoral Fellowship at the Institute for
the Study of the Americas, University of London and is
now a Latin American history Teaching Fellow at
University College London. She has worked on a variety
of newspapers and publications and has presented papers
at conferences and seminars. She has an article in the
March 2009 issue of the journal Latin American
Perspectives - a special issue commemorating the 50th
anniversary of the Cuban Revolution.

12/12/2009 Interview with Ecuadorian President Rafael
Correa - in English This English translation of the
interview was published in Fight Racism! Fight
Imperialism! No. 212, December 2009/January 2010:
socialism for the 21st century in Ecuador

In April 2009, Rafael Correa was elected to his second
term as President of Ecuador with 51% of the vote. This
gave him a mandate to continue and deepen the programme
of reforms and structural changes initiated since he
first became president in November 2006. In three years
Correa's government has introduced an unprecedented
social and economic programme of reforms -- the
Citizens' Revolution -- to reverse the poverty and
exploitation suffered by the majority of the population
in a country which has been ravaged by neo-liberalism
(see FRFI 210). Correa has announced that Ecuador is
building socialism for the 21st century and joined the
Bolivarian Alliance for the Americas (ALBA). In late
October 2009, he made a brief trip to London, speaking
at universities and to over 1,000 Ecuadorians living
and working in London, en route to a formal state visit
to Russia. HELEN YAFFE had the privilege of
interviewing President Correa during a boat trip on the
River Thames and a translation appears here.

Helen Yaffe: In what way is ALBA distinct from previous
attempts by Latin American countries to develop
mutually beneficial   trade and investment strategies?
Rafael Correa: In every way because it is integration
based on fraternal solidarity, not between competitors,
which has been the great mistake in the past. The
integration that we have sought, above all in recent
years, has been orientated towards trade, to having
larger markets and competing between us. In ALBA we
don't talk about competition, we speak of coordination
in energy, finances and even in defence, but
coordination, not competition.

HY: In 1965, Che Guevara said, "there should be no more
talk about developing mutually beneficial trade based
on prices imposed on the backward countries by the law
of value and the international relations of unequal
exchange that result from the law of value"

We have to prepare conditions so that our brethren can
directly and consciously take the path of the complete
abolition of exploitation"' How does ALBA trade and the
formation of supra-national companies achieve this -
constraining commercial exchanges based on profit -
particularly given that, with the exception of Cuba, the
means of production in the ALBA states are predominantly
in private hands? RC: The question of value is perhaps
the most difficult and complex economic problem. It is
clearly very difficult to remove the question of
monetary prices when large parts of the means of
production are in private hands. But with ALBA we are
experimenting with other forms of exchange, not
necessarily based on market prices but on mutual
compensation, collaboration and bi-national enterprises.
For example, since the beginning of my government I have
sent crude oil [to Venezuela] and they refine it and
charge me the cost.

So, Che was right, and you are right, it is difficult
to remove the law of value, basically monetary prices
imposed by the market, when the means of production are
in private hands and are guided by the logic of
capitalism, the logic of profit. But at the level of
countries something can and is being done. For example,
Chavez has a lot of experience with petrol in the area
of the Caribbean where he gives petrol without
considering the market prices but considering the costs
and the need for help and other circumstances. We are
doing a lot of this. We are seeking food sovereignty
and sovereignty in health, producing our own medicines,
guiding ourselves by planning and coordination, without
competition and without this relationship to the
market. Let me state something clearly, Marxism has not
overcome this question of value either. It is very
difficult. Sometimes you can remove monetary prices set
by the market, other times you cannot. You have to try
to prevent speculation and the power of the market.
There is the problem of what value is, and the problem
of utility also -- the markets try to respond through
supply and demand. Supply expresses the costs of
production and the social costs of producing; demand
expresses preferences, the usefulness to the consumer,
but in practice with an unequal distribution of income,
price represents anything, not the intensity of
preference. So the problem is there and no-one has been
able to convincingly solve it. In its trade the Soviet
Union also used money prices, not necessarily set by
the market, but not compensations based on equivalent
values either. There are alternative proposals, like
the one for equivalent values presented by Heinz
Dietrich who works on socialism for the 21st century,
but all these alternatives are insufficient and
inapplicable. HY: This term "socialism for the 21st
century' is sometimes used as a way of rejecting all
the antecedents, all previous struggles" RC: There
are things which should be superseded -- I have spoken
with Raul and Fidel about Cuba -- for example, state
ownership of all the means of production. Of course
there should be a certain space for private property
and obviously the strategic sectors, certain areas
which are fundamental for food sovereignty and so on,
should be controlled by the state. But in the 21st
century, it is difficult to sustain state ownership of
all the means of production.

HY: It is also difficult if you permit small private
production. What controls are there to prevent the
accumulation of capital or speculation? RC: This is
easier than directly managing everything.

HY: Announcing the Plan for Land Distribution,
Ecuador's Minister of Agriculture said that the land
was "not considered to be a commodity, but for its
social function, as a means of production, a place for
settlement and a way of living'. RC: This is
important. There are things which are not commodities
-- the earth, water -- that have to be under state
control -- their exchange has to be controlled. We are
introducing a law where the state has to authorise the
sale and purchase of land to avoid what has occurred in
the past -- peasants cheated and left without land. But
the land is going to be theirs and the communes'; it is
not going to belong to the state. Under control of the
state -- that's another matter.

HY: It is similar to the new campaign in Cuba to
distribute lands in usufruct. They have to produce, if
they don't produce, the land will be taken back. RC:
Yes. We are also going to distribute 130,000 hectares
of state land and we are drawing up an inventory of all
the unproductive private lands to distribute -- around
one and a half million hectares. This is why they are
desperate to destabilise us so quickly.

HY: Che Guevara believed in using the technological
advances and managerial methods of capitalism but with
different social objectives" You were trained in
economics in the US and you have spoken about the poor
quality of university education in Ecuador. How does
your government plan to train skilled workers, while at
the same time forging a political commitment to social
development and the Citizens' Revolution? RC: What Che
did was common sense. Technology cannot be the
patrimony of capitalism - there is no capitalist
technology, just technology. Of course it uses the
human resources formed by capitalism. The Cuban
Revolution benefited from the human resources formed by
the Soviet Union, China and so on. For the development
of our countries we have to emphasise technology and
this is linked to human resources. We are not referring
to having technology without the human resources
capable of using and generalising it, so we are
introducing major reforms in education that have
generated resistance from the groups which have always
appropriated the education system.

Public education in Ecuador is very bad, we need to
make a huge effort to improve it and higher education
is also terribly bad. We have a new law which, among
other things, obliges universities to carry out
research. At present, half of the universities don't
spend 20 centavos on research. Their argument is that
resources are scarce. But there is Cuba, with few
resources, carrying out research. Resources are always
going to be scarce, but these universities have
invested in expensive extensions instead of funding
research. We have strong programmes to improve
education, the law of higher education, scholarship
programmes, to train people in other countries, and
clear policies to invest in science and technology
despite the scare resources. The development of
revolutionary consciousness and commitment depends on
various factors. I believe that part of this education
is about social commitment, without it being partisan.
I also believe that when leaders are seen to have
enthusiasm and a real desire to change the country,
people support this desire for change. The future
professionals, who will be trained because of this
change, are going to have this revolutionary
consciousness. With this dynamic period Ecuadorian
society is living through - along with the
opportunities that we are creating -- we believe that
all these new professionals who are receiving
scholarships, who go abroad to train, will develop this
revolutionary consciousness. But you are probably right
that we have to work more directly on this. We are
already training people, but what you said about
revolutionary consciousness is more difficult to
achieve. We have political education schools, but we
lack structure in the Movimiento País [the political
organisation which Correa heads], we lack consolidation
and this is perhaps the great challenge that we face.
HY: The next question is about the SUCRE -- how will it
function? RC: It is very easy, we are going to start
pilot operations to test it. It is a system of
compensation. It is for commercial or private trade. It
will not be pegged to the dollar. We are going to
create an electronic currency and we won't have to use
any [US] dollars.

HY: If the aim of the SUCRE is to replace the dollar in
trade between ALBA countries, is the goal eventually to
replace the dollar as the national currency of Ecuador?
RC: No. We are minimising the need for dollars.
Unfortunately, Ecuador adopted the dollar as the
national currency [in 2000]. It is very difficult to
undo dollarisation; it could create a total social

HY: How can the ALBA countries defend themselves
against the kind of reaction seen with the coup in
Honduras? RC: Well, there is no infallible defence,
but, for example, Telesur is a great assistance -- in
providing information -- imagine, before that the news
came from CNN -- as is having strong relations between
countries for mutual support. But there is nothing that
guarantees that this cannot happen in Ecuador, in
Venezuela, in Bolivia. We must be very well organised.
You know that our governments have great popular
support, but we are not organised to defend our process
from any intent at destabilisation. They tried to do
this in Ecuador a few days ago and unfortunately
indigenous people and teachers collaborated. A small
group of teachers called a totally unjustified
indigenous uprising and the right wing began a campaign
in their newspapers claiming that the popularity and
credibility of the president had fallen. They are also
preparing mobilisations in Guayaquil. They had
everything ready when we managed to resolve the
problems, but perhaps not next time. Basically every
country has to organise its internal structures.

HY: Recently you spoke about socialism for the 21st
century in Ecuador combining elements of "classical
socialism', the socialism of Mariategui and liberation
theology, and socialism based on Ecuadorian conditions.
Can you expand on these concepts?  RC: Socialism for
the 21st century is a process of construction which
tries to take the best of traditional socialism, but
also of other socialisms that have existed, like Andean
socialism, agrarian socialism and also, at least in
Ecuador, you note the social doctrine of the church,
liberation theology. We are a Christian continent. In
Cuba, they declared the state to be atheist when the
people were believers. This created big conflicts and
impeded, perhaps pointlessly, significant support
because there were many Catholics committed to the
Revolution. They recognised the mistake and rectified
it decades ago. A much better and legitimate strategy
is to guide religion to be revolutionary also. This is
what liberation theology did. Basically the message was
"enough with this theology that tells us to endure
exploitation in life because after death you are going
to have the Kingdom of Heaven'. No, the Kingdom of
Heaven must be made here -- it is the kingdom of
justice. You have to struggle against injustice. 21st
century socialism is based on this search for social
justice, and it coincides with the social doctrine and
liberation theology. This project can be joined by
atheists, practising Catholics -- because I am a
practising Catholic. It doesn't contradict my faith
which, on the contrary, reinforces the search for
social justice.

Socialism for the 21st century seeks this change
through democratic processes and the vote, we have
became accustomed to this in Latin America, it is no
longer through armed struggle. There are things in
traditional socialism which we agree with; the primacy
of human labour above capital, the need for collective
action, the need for planning, the role of the state in
the economy, the search for justice in all its
dimensions, social justice, gender justice, ethnic
justice, international justice. But we are obliged to
reject some elements of traditional socialism which are
not feasible or desirable; class struggle, violent
change and dialectical materialism itself. This will
grate with you as a Marxist, but any attempt to explain
processes as complex as the advance of human society
with simple or simplistic laws will fail. Just as it is
simplistic to say that the motor for the advance of
society is individualism, abstracted from culture, the
community, etc, it is also a simplification to say that
it is class struggle, the opposition of forces within
the productive system. A technological revolution can
create more social changes in the revolutions in
production than by supposed dialectical materialism,
the conflict between oppositional forces. Not only
this, dialectics takes as an infallible law thesis,
anti-thesis and a synthesis which emerges and is better
than what you began with. It doesn't have to be that
way. You can have a thesis that is true, you present an
antithesis that is erroneous, and the synthesis can be
worse than the thesis. This is the reality we have
lived in Latin America. We propose something that is
correct, we are told some nonsense in the name of
democracy, of dialogue, and we have united the two
proposals and produced a synthesis, but the synthesis
is worse than what we had before. We have to improve
all these things, it is necessary to be objective, it
is not necessary to be romantic. HY: Doesn't what
happened in Honduras, or before that in Venezuela,
demonstrate the importance of class struggle? RC: We
completely agree that the great challenge in our
countries is to change the relation of forces and pass
from a state which is captured by certain powers to a
state that represents popular power. This is the first
step in Latin America, but to go from that to believing
that this change in the relation of forces will resolve
everything is a mistake in my view. There are many
important things to consider. The technological base,
cultural changes; also be careful about how you
identify the poor. The poor have many values, but they
often make mistakes. It is not certain that the masses,
the proletariat, are always right. You can convert a
bourgeois state into a popular state, but that does not
mean that it is going to take all the right decisions.
For example, Latin America has to make huge cultural
changes. Among the indigenous people, who are so
mythologised, is where there is most interfamilial
violence, but these things are not spoken about. So the
point is not only about transforming the structures, it
is also about transforming the family, people,
transforming culture, transforming technology. There
are many factors which generate social advance. It is a
very complex process. This is a difference. We do not
reject dialectical materialism, but neither do we
accept that the idea that it is fundamental for us, as
the motor for society, producing class struggle which
means violent changes.

Perhaps the greatest error that traditional socialism
made was in not disputing the notion of development
proposed by capitalism. They sought the same, via a
faster and supposedly more just route, but the same, in
the Soviet Union - industrialisation, mass consumption,
accumulation -- this was a mistake. It is impossible to
generalise the western development model. If all the
Chinese people achieved the standard of living of
people here in London, the world would explode.
Traditional socialism never presented an alternative
notion of development. Today we are presenting this
alternative. HY: To what extent can we say that the
welfare-based development model of socialist Cuba, and
its global status achieved through its internationalist
health and education programmes, was the inspiration to
ALBA. RC: Cuba has great things and obviously ALBA was
started by Chavez and Fidel. A great example provided
by Cuba is that in its poverty it has known how to
share, with all its international programmes. Cuba is
the country with the greatest cooperation in relation
to its gross domestic product and it is an example for
all of us. This doesn't mean that Cuba doesn't have big
problems, but it is also certain that it is impossible
to judge the success or failure of the Cuban model
without considering the [US] blockade, a blockade that
has lasted for 50 years. Ecuador wouldn't survive for
five months with that blockade. Of course ALBA is
largely inspired by the good things of the Cuban model,
like solidarity, trade between peoples based on
solidarity, not for profit, cooperation for
development. Of course ALBA is inspired by the
successes of the Cuban model. Posted at 11:57 PM |
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Rafael Correa President of Ecuador in London - with

On Wednesday 28 October, I had the privilege of
interviewing the President of Ecuador, Rafael Correa,
who was in London for an academic trip stopping over on
the way for an official visit to Russia. On Monday and
Tuesday the president had spoken at Oxford University,
Chatham House, the London School of Economics and at
the TUC's Congress House to a vibrant audience of over
a thousand Ecuadorians and other Latin Americans in
London. On Wednesday the president went to Parliament,
before I joined him, with my colleague Ethesham who
filmed the interview, for a tour of Westminster
Cathedral, followed by a boat trip down the River
Thames from the London Eye to London Bridge and then
lunch by the river where we eat fish and chips in a
smart French restaurant. The focus on my interview was
on the Bolivarian Alliance for the Americas (ALBA), a
trade and cooperation agreement between nine countries
in Latin American and the Caribbean and which Ecuador
joined earlier this year. Specifically, we discussed
how ALBA proposed to deal with the problems which Che
Guevara had outlined about undermining the operation of
the law of value, domestically and in foreign trade
between fraternal, socialist and underdevelopment
countries, to promote trade based on cooperation, not
competition. Che Guevara's response to this and
associated problems, which remain pertinent today, are
the focus of my book. As an economist trained in the
US, as well as leading a revolutionary process in
Ecuador, Correa has a good insight into these
challenges. We also talked about the SUCRE, a new
virtual currency for exchanges between countries in
ALBA which will be launched in early 2010, and about
several developments and challenges in the
revolutionary process in Ecuador, including the plan to
redistribute idle state and private lands to poor
people and the problem of raising the technological and
educational level of the population, simultaneously
with their commitment to social development. I have
written up part of the interview for Prensa Latina, and
another colleague has offered to edit the interview to
make it part of it available over the internet. For
now, here are a few photos of myself with President
Correa, at the event with Ecuadorians and with a copy
of my book which he is keen to read! Since the last
entry of this blog I have written various articles
about Cuba and ALBA, including: "Cuba: Strides Towards
Sustainability' for Resurgence Magazine to be published
in January 2010. "Cuban Development: an inspiration for
ALBA' for the Journal of Iberian and Latin American
Research, due for publication in January 2010

"Cuban Socialism: To be educated is to be free',
article co-written with Rebecca Rensten and published
in the September/October issue of Fight Racism! Fight
Imperialism! A review of Simon Reid-Henry's book Fidel
& Che: A Revolutionary Friendship, for the Camden New
Journal In addition I have done interviews for Radio
France Interview and George Galloway's show on Press
TV, Real Deal, as well as speaking at book launches and
conferences in Glasgow, Manchester, Nottingham and
London. I guess I am excusing myself for the infrequent
updates on this blog" I will reinforce my efforts to
write regular updates...

Posted at 10:59 PM 06/23/2009

Here is a short piece I wrote for the website of Red

Che Guevara: The Economics of Revolution Helen Yaffe
explores impact of Che Guevara as an economist and
politician In my first A-level economics class, at the
age of 16, I was taught these guiding principles;
people only produce if they can make a profit, humans
have infinite desires, while resources are limited, so
everything must be rationed through the price mechanism
-- demand and supply.

No concept of production for need or socialist
economics appeared on the curriculum. This was the
early 1990s, the socialist bloc had collapsed and
neo-liberalism was triumphant, or so we were told. Over
the previous ten years, British Telecoms, the British
water industry, British Rail, British Gas and British
Coal had been packaged up and sold off to corporations
and share holders.

Rational economic man, it was said, would ensure
efficiency through privatisation and competition, even
while, in the following years, prices rose and
accidents increased in these fundamental services of
the economy. Darwinism was recruited to the cause, as
underdeveloped countries were forced to "liberalise'
their economies, selling their natural resources to
foreign investors, rolling back the state, and removing
obstacles to the "revolutionising' power of market
forces. In Latin America, the "lost decade' of the
1980s and the "Washington Consensus' of the 1990s saw
debt crisis, restructuring and liberalisation plunge
millions more into destitution, with or without
inflated GDP statistics.

Amidst this neoliberal onslaught, Cuba stood almost
alone. The collapse of the socialist bloc countries
between 1989 and 1991 cut off 80 per cent of Cuba's
trade, GDP plummeted by 35 per cent and food shortages
decreased caloric intake by nearly 40 per cent. The
crisis was exacerbated by punitive laws tightening the
US blockade in 1990, 1992, and 1996. Despite entering a
"special period in time of peace', the Cuban revolution
did not renege on political commitments to socialist
welfare, state planning and the predominance of state
property, even while forced to introduce pragmatic
reforms -- limited concessions to market forces -- to
stimulate the economy and get vital goods to the

Following my A-levels, in the mid-1990s, I lived in
Cuba with my sister -- an austere time during the
'Special Period'. Cubans dug deep to find what they
needed to survive, as individuals and as a socialist
society. In December 1995, we participated in the first
solidarity brigade of the campaign from Britain, Rock
around the Blockade, staying in an agricultural camp
where hundreds of young Cubans had volunteered to
labour in the fields, conscious that the revolution's
future depended on the population's ability to feed
itself. This was my first glimpse of the important
relationship between consciousness and production,
which lies at the heart of the economics of revolution.

Like anyone who has visited Cuba, I felt the
omnipresence of Che Guevara on the island. What became
clear, however, that Cubans recognised a more
multifaceted individual than the one caricatured
outside the island; the romantic guerrilla fighter with
idealistic notions of how human beings are motivated
and how social change is brought about. In the
mid-1980s Cuba had pulled back from the Soviet model of
socialism, entering a period known as "Rectification'.
This involved an overt return to the ideas, approach
and symbolism of Che. Two Cuban academics, Fernando
Hernandez Heredia and Carlos Tablada, published seminal
works providing the theoretical basis for this move --
linking Che's promotion of voluntary labour and
consciousness to his Marxist analysis of capitalism and
his critique of the Soviet system which had relied on
capitalist tools to build socialism.

Che was not alone in the 1960s in criticising the USSR
for neglecting questions of consciousness and failing
to put human beings at the centre of development --
many Marxist intellectuals in Western Europe and the US
had done the same. Having seized state power, however,
the Cuban revolutionary leaders moved beyond the
critique to the task of transformation. Che faced the
challenge of demonstrating that there was an
alternative approach -- the possibility of carrying out
the transition to socialism in an underdeveloped
country, without relying on capitalist mechanisms (the
law of value, the profit motive, competition, material
incentives, and all those A-Level principles). What
practical policies could be implemented to transform
the consciousness of individuals and put the working
class in control, whilst increasing the wealth of the

My historian's curiosity was stirred. Hardly any
information about Che's practical work as a member of
the Cuban government between 1959 and 1965 was
available. Che had created a system of economic
management which was unique to socialism - the
budgetary finance system; but what did that involve and
how was it different? I set out to Cuba to find out.

This book is the result of six years of research,
analysis, writing and editing. My investigations
uncovered new archival material, including the internal
transcripts of the bimonthly meetings in the Ministry
of Industry headed by Che from 1961 and his critical
notes on the Soviet Manual of Political Economy,
predicting the return of capitalism to the socialist
bloc; a document so controversial that it was kept
under lock and key for 40 years. I met and interviewed
fifty of Che's closest colleagues and compañeros, some
of whom had never spoken formally about their
experiences of working at Che's side while he served as
President of the National Bank, head of the Department
of Industrialisation and Minister of Industries between

The early 1960s in Cuba was a period of turmoil and
transition; nationalisations, the shift in trade to the
socialist bloc, the introduction of planning, the
exodus of professionals, the imposition of the US
blockade, attack, sabotage and the threat of nuclear
conflagration. Yet under Che's leadership, Cuban
industry stabilised, diversified and grew -- testimony
to his capacity for economic analysis, structural
organisation and the mobilisation of resources, both
human and material. His approach was based on his study
of Marx's analysis of the capitalist mode of
production, his engagement with socialist political
economy debates and his recourse to the managerial and
technological advances of capitalist corporations.
Che's promotion of voluntary labour and his emphasis on
consciousness were not idealism but part of the search
for ways to undermine the law of value, moving away
from capitalist mechanisms in the construction of

As Minister of Industries, Che set up nine research and
development institutes, studying everything from the
mechanisation of the sugar harvest and a sugar
derivatives industry, nickel production, green
medicine, oil exploration, the chemical industry, to
computing and electronics (at a time when there was
just one computer on the island -- a betting machine
for the greyhound races). He integrated psychology as a
management tool, secretly organised the printing of new
banknotes, devised a new salary scale, promoted
workers' management, inventions and innovations. In six
tumultuous years, Che made an indelible contribution to
Cuban development.

There have been few more poignant moments in history to
talk about the economics of revolution. 2009 is the
50th anniversary of the Cuban revolution --
contradictions and challenges persist, but the
Revolution remains vibrant. We see the growing
radicalisation of social movements and governments in
Latin America and the consolidation of the Bolivarian
Alternative for the Americas (ALBA) trade and
cooperation agreements between them. This is also a
period of acute crisis for the global capitalist

In late September 2008, George W Bush, perhaps the US's
most neoliberal, anti-regulation, aggressively
imperialist frontman in history declared: "The market
is not functioning properly.' Bankers, entrepreneurs,
and moneyspinners, went from being hailed as the good
guys who kept the economy dynamic, to facing public
opprobrium and shareholder rage over the bonus systems
which rewarded incompetence and greed.

Bush's successor, Barack Obama, has poured enormous
sums of money into the US economy, propping up failing
banks and financial services, car manufacturers and the
housing sector. Rational economic man has given way to
an unprecedented level of state intervention in a
desperate attempt to save the capitalist system -- well
beyond the state subsidiaries so mocked and criticised
in the socialist countries by neoliberal commentators.

Huge companies like General Motors are going bankrupt,
not because they are technologically stagnant or
unproductive, but because of the restraints imposed by
capitalism's financial mechanisms and the crisis of
profitability. Workers, skilled and manual, are being
made redundant. Hundreds of US citizens join tent
cities scattered around the capitals of highly
industrialised US states, not because there are
insufficient houses, but because families are thrown
onto the street when they can't afford to pay rent and
mortgages. Where is the rationality in any of this? In
London, at the G20 in April, Obama and Prime Minister
Brown recognised the end of the Washington Consensus.
After years of rolling back the state, governments
around the world are now impelled to intervene.

Guevara was right to recognise the technological
advances of the capitalist corporations and aspire to
their high productivity and efficiency. But he was also
correct in the view that state planning and centralised
budgets are the only rational way to organise the
economy; with production for people's need, not for
financial profit. In rescuing Guevara's work as a
member of the Cuban government, this book hopes to
place his economic ideas firmly on the table for
consideration in the search for alternatives to the
bitter legacy and human suffering of collapsing market

Che Guevara: The Economics of Revolution by Helen
Yaffe, Palgrave Macmillan, 2009, 368pp, hbk £70, pbk

Posted at 02:15 PM

"CHE GUEVARA: The Economics of Revolution" Book by
Helen Yaffe and Review by Diana Raby This review was
published in the newspaper Fight Racism! Fight
Imperialism! No. 209 (June/July 2009).Copied from the
website: Haiti Cuba Venezuelan analysis website A

Helen Yaffe, Che Guevara: The Economics of Revolution
(London: Palgrave Macmillan, 2009) Reviewed by Diana

Helen Yaffe has produced a very important book which
can only be described as essential reading for all
socialists. Ernesto "Che" Guevara has been justly
admired, indeed romanticised and even idolised, for his
heroic role as revolutionary guerrilla fighter, his
personal integrity and self-sacrifice culminating in
martyrdom. But a vital period of his short life has
been inexplicably neglected in previous accounts: the
six years in which he served the Cuban revolutionary
government, playing a crucial role in the transition to

As President of the National Bank, head of the
Department of Industrialisation and then Minister of
Industry, Guevara was responsible for many of the
fundamental decisions in creating a distinctive Cuban
model. Despite the importance of Soviet support in
providing a lifeline to the young revolution, Che
quickly made clear his reservations with regard to
economic policies in the USSR.

Che's criticisms  gave rise to a public polemic which
came to be known as the "Great Debate", and several of
the key contributions to this discussion were published
in a useful volume edited by Bertram Silverman (Man and
Socialism in Cuba: The Great Debate, New York:
Atheneum, 1971). But we have had to wait until Yaffe's
book for a detailed analysis of Guevara's arguments and
of actual policies.

On the basis of 60 interviews with Che's former
colleagues and extensive archival research, including
consultation of Guevara's crucial notes for a critique
of the Soviet Manual of Political Economy, Yaffe gives
us unprecedented insight into his vital contribution to
the Cuban Revolution and to Marxist theory.

The Law of Value under Socialism

The central issue at stake was the role of the Law of
Value under socialism. Ever since Lenin, Communists had
recognised that this key component of capitalist
economics would not simply disappear overnight and
could not be legislated out of existence; in the USSR
in the early 1920s, Lenin's New Economic Policy (NEP)
was an explicit tactical retreat which authorised
extensive use of capitalist practices and hence the Law
of Value. Although Stalinist collectivisation appeared
to eliminate or greatly restrict its operation, in fact
it continued and after Khruschev's  reforms in the late
1950s, the Law of Value was once again explicitly
enshrined in Soviet economic manuals.

To Guevara, Soviet technological backwardness was a
symptom of the stifling of socialist creative potential
by trying to combine socialist planning at national
level with capitalist management systems at enterprise
level. In technical terms, the key issue was the use of
the Auto-Financing System (AFS), promoted in Soviet
manuals from the 1950s onwards, as against the
Budgetary Finance System (BFS) favoured by Guevara. The
AFS encouraged enterprise managers to maximise profits
by using market mechanisms to determine prices,
financing their own investments through credit and
developing autonomous commercial relationships with
other public enterprises with little regard for the
national plan.

In contrast to this, under the BFS goods exchanged
between public enterprises were transferred without
payment; a cost price was administratively determined
and the relevant adjustments were made in the
respective enterprise accounts in the Treasury.
Incentives were based on micro-management of costs and
production contracts (determined by management
consultations at all levels, with direct worker input)
regulating quantity, quality and punctuality.

Che's argument for the BFS was that under socialism,
the entire Cuban economy was essentially one big public
enterprise, and therefore exchanges of products within
it were not commodity transactions; there was no
transfer of ownership and therefore no purchase or
sale. Costs had to be recorded to prevent waste, but
incentives for increased quantity or quality of
production should be based on the collective interest
and not market forces.

This principle of socialist exchange, in which the Law
of Value does not operate, could not be applied to
foreign trade with capitalist countries, where imports
were necessarily priced according to the Law of Value.
It followed that goods produced in Cuba with imported
inputs (raw materials or machinery) would have to
reflect the Law of Value in their pricing. Indeed, one
of Che's major criticisms of the Soviet Bloc was the
extent to which they applied capitalist market prices
in their international trade.

The transformation of Cuba

It is fascinating to see how Guevara applied these
abstract principles in practice to the management of
the Cuban economy, at the same time that he was
wrestling with all kinds of mundane practical problems.
The nationalisation of virtually all large-scale
enterprises in only two or three years, together with
the sudden loss of Cuba's traditional commercial ties
to the US and the need to replace American with Soviet
technology, threatened to bring about complete economic

What Helen Yaffe's book shows in this respect is how
Che's extraordinary revolutionary dedication enabled
him to deal with this daunting situation. While her
discussion of the BFS refutes the widely-held myth of
Guevara as a pure voluntarist and idealist, her account
of his practical administrative work shows how his
personal will and commitment drove him to find
solutions to apparently insoluble problems.

Yaffe gives amusing examples of the improvisation and
spontaneity which characterised the revolution in its
early years, such as Che's appointment as President of
the National Bank despite having no economic training
or experience and his decision to appoint his math
lecturer, Salvador Vilaseca (who was equally
inexperienced) as his deputy; and the appointment of
200 teacher trainees, aged 15-20, as managers of
nationalised enterprises.

These examples confirm the tendency to improvisation
and spontaneity which characterised the revolution in
its early years, and while such rash decisions
sometimes had disastrous consequences, it is remarkable
how often these young and inexperienced revolutionaries
succeeded in their new tasks. The reason for this
almost certainly lies in the dedication which Guevara
(and Fidel and many of their associates) brought to
everything they did, and the practice of giving real
decision-making power to shop-floor workers.

Study and scientific rigour

The myth of Che as impractical idealist is further
undermined by his respect for science and his quest to
apply the most advanced scientific knowledge in all
spheres. Whenever he assumed a new responsibility, he
immediately began to study the relevant scientific
disciplines, systematically and intensively -- and he
insisted on his subordinates doing the same.

This combination of dedication, theoretical rigour and
attention to practical detail also characterised Che's
approach to issues of workers' participation and
socialist consciousness. His insistence on the crucial
importance of developing consciousness -- the "New Man"
-- was not just a matter of propaganda and exhortation.
All kinds of mechanisms were introduced to promote
workers' initiative and participation: Committees for
Spare Parts, the Movement of Inventors and Innovators,
Advisory Technical Committees, Production Assemblies
and Committees for Local Industry. Most important, the
human side of workers' involvement was a central

Thus the encouragement of voluntary labour and moral
(as opposed to material) incentives was accompanied by
measures which showed a growing understanding of
workers' practical problems. Health and safety were
recognised as important issues, and "burnt-out" workers
were given entitlement to rest and recuperation in
holiday resorts. Guevara's medical training made him
sensitive to workers' problems of stress and
self-esteem, and of psychological issues in general;
and he was forced (with some difficulty) to recognise
the problematic impact of his own explosive character.

The Critique of the Soviet Manual

Guevara's contribution to socialist theory is summed up
in an incomplete study which he was working on in
1965-66, before leaving for Bolivia. These notes, which
amount to a comprehensive critique of the Soviet Manual
of Political Economy, and which were so contentious
that for 40 years they were kept under lock and key by
Che's deputy Orlando Borrego Díaz, are analysed in
Yaffe's chapter 9.

Guevara's ideas are certainly controversial, and a
breath of fresh air for anyone familiar with the
fossilised formulae of "orthodox" Communist (and in
many cases also, Trotskyist) exegesis. He argued that
in the USSR the NEP (which Lenin would surely have
abandoned had he lived longer) had entrenched the
structures of pre-monopoly capitalism, but centralised
planning had prevented competition (and the Law of
Value) from operating freely. The result was the worst
of both worlds: technological stagnation and a
situation in which "man neither develops his fabulous
productive capacities, nor does he develop himself as
the conscious builder of a new society". Stalinist
dogmatism had frozen the system but had  since been
replaced by inconsistent pragmatism, which in turn
would lead more and more towards capitalist
restoration, pure and simple.

But Guevara's criticisms went far beyond this. He also
rejected the Soviet Manual's acceptance of the idea of
a peaceful, parliamentary road to socialism in some
countries; condemned the working class in imperialist
countries as accomplices of the system; identified
landless peasants as the truly revolutionary force in
most countries; and condemned the USSR for replacing
internationalism with chauvinism, forcing other
socialist countries into submission.

Che's Legacy

Yaffe recognises that Che's ideas have not been fully
applied in Cuba since his departure and death, but
neither have they been simply abandoned. Rather, she
argues, the country's subsequent history "can be
portrayed as a pendulum swinging between what is
desirable and what is necessary -- with Guevara's ideas
being associated with the vitality of the Revolution".
She also correctly draws attention to the importance of
the new relationship with Venezuela and the ALBA, in
which international exchanges take place on a
non-commodity basis. She quotes favourable comments by
Hugo Chávez on Che's ideas and the adoption by the
United Socialist Party of Venezuela of "the strategic
objective of neutralising the operation of the law of

What this book has achieved, then, is to demonstrate
that Guevara's greatness lies at least as much in his
contribution to socialist thought as in his heroic
example as a guerrilla leader. This does not mean, of
course, that his ideas should be accepted uncritically;
indeed that would itself be totally un-Guevarist. In
the humble opinion of this reviewer, two questions
immediately arise. First, if the BFS is a desirable
mechanism for avoiding the operation of the Law of
Value at enterprise level, does it not create an
enormous danger of bureaucratic centralism stifling
workers' democracy and initiative? And secondly, while
it may be desirable to view the entire economy of a
socialist country as one single enterprise owned
collectively by the working people as a whole, does
this not pose a serious problem of the potential
disparity between ideal and real possession of the
means of production: i.e., workers may well feel that
they are the owners of their particular workplace, but
do they really feel -- and do the objective conditions
exist for them to function as -- owners of the entire

One thing is certain: for anyone engaged in the
struggle for a better world, the thought of Che Guevara
is a fundamental point of departure, and this book is
an essential work of reference.

Aleida Guevara, doctor, revolutionary internationalist
and daughter of Ernesto Che Guevara, checking out an
interesting new book... Oh look, it's Che Guevara: The
Economics of Revolution!

Thanks to brigadistas from Rock around the Blockade
who, in early May, took a copy to the Che Guevara Study
Centre in Havana, which is directed by her mother,
Aleida March - another great revolutionary.

As stated in the acknowledgements, the Che Guevara
Study Centre gave me vital support during the research
carried out for this book, offering me access to
important archives which provided much of the original
material. http://palgrave.typepad.com/yaffe/

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posted by u2r2h at Sunday, February 07, 2010


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