Nicaragua: A Neoliberal's Dream Part I

         Nicaragua is small country of 5.9 million people[1] with a history of colonial exploitation, corporate imperialism, a lengthy U.S. sponsored dictatorship, multiple hurricanes, and a brutal civil war. Subsequently, it is the poorest country in the Western hemisphere aside from Haiti. Yet, economic indicators used by capitalists to measure growth have steadily increased. Since 2003 Gross Domestic Product has increased a modest but steady two to four percent annually.[2] Foreign direct investment has been augmented prodigiously, rising from $75 million in 1997 to $335 million a decade later. During the same period exports nearly doubled from 23% to 45% of the country’s total GDP.[3] Still, year after year Nicaraguans struggle endlessly to survive:  47% of the population live on less than $1 a day and 80% percent live on less than $2 a day, nearly 50% of the workforce is underemployed, one in ten people do not live past age forty, one in five do not have regular access to potable water, and a significant portion rely on the one billion dollars worth of remittances sent home from Nicaraguans living abroad.[4][5][6] These figures have, more or less, remained fixed since the neoliberal economic model was forced upon the country by institutions like the International Monetary Fund and the World Bank in the early 1990’s. This chasm between economic growth and social indicators is staggering, but it is only perplexing when viewed with the framework constructed by bourgeois economists and financial elites.

If the economic situation in Nicaragua is analyzed with the assumption that the financiers and members of the capitalist class, who maintain hegemony over trade and lending institutions, serve the interests of the masses in the countries they loan too then, undoubtedly, the numbers are bewildering. If instead, this simple assumption is removed and replaced with the more obvious one that the financial elites serve their own interests, a more realistic, lucid analysis is possible. Political analyst and author Michael Parenti asserts that countries like Nicaragua are “getting poorer as there is more and more deregulation, more and more so-called free market, which is really monopoly market. It’s a free market if you got money. It’s a market that works for those who have money.”[7] The neoliberal economic model shoved down the throats of third world countries by the political and economic elites, both domestically and of the traditionally oppressive imperialist powers, has vastly augmented the concentration of wealth and power in the hands of the few while widening the gap between the rich and the poor.

Nicaragua is, perhaps, the most vivid example of this phenomenon in the western hemisphere. First world capitalists, utilizing the rhetoric of free markets and globalization, move in to extract resources, exploit cheap labor, and force their state-subsidized goods upon new markets while propping up the often blatantly corrupt domestic ruling class. Meanwhile, a sort of dual economy is established where the poor working class, by far the vast majority, are relegated to substandard living and struggle to meet basic needs while a small, financially secure sector of the population indulge in their ostentatious wealth. To understand Nicaragua’s particular situation, highly unique given the historical context, one must trace the current economic and political institutions to their origins.

The colonial tradition of Nicaragua facilitated the concentration of land in the in the hands of a small oligarchy. This process had largely been completed by the early twentieth century. As a key strategic access point to Latin America, U.S. imperial interests established military bases in the region, leading to a failed uprising led by Augusto Sandino from 1927 to 1933. Anatasio Somoza, a general at the time, was vigorously supported by the United States and killed Sandino on their behalf. Subsequently, the Somoza family remained the sole, dictatorial rulers of Nicaragua for over forty years.[8] Vehemently loyal to northern business interests, the Somozas further concentrated land and large sectors of the economy into the hands of family and friends. Nicaragua became home to foreign corporations and Somoza directed primary exports to wealthy nations. “The agroexport model was provided and financed by the State…The financial system assigned a major portion of its funding to the cultivation of exports” such as cotton and coffee.[9] This agroexport model, which forced Nicaragua into growing cash crops for exports to wealthy nations, placed in the country’s well-being on the precarious whims of the global market. While first-world nations, already highly advanced, utilized protectionist trade policies and their enormous industrial and technological power to maintain themselves, third world nations like Nicaragua were set upon a dangerous precipice on which they could fall at any moment. Obviously, this global arrangement served the interests of capital in the first world and provided enough kickbacks to the multifaceted, corrupted oligarchies in the third world that those benefiting could steadily rely upon their force to maintain hegemony.

Nicaragua provides the perfect paragon in which to analyze how dreadful this agroexport model truly was. In conjunction with a brutal dictatorship backed by the United States government and business interests, this economic model proved disastrous for the majority of the Nicaraguan people. As Magda Lanuza of Jubilee South reports, “The coffee latifundios were formed since the end of the XIX century with a history of expropriations and the destruction of a large area of moist forest.”[10] Coffee and cotton combined accounted nearly forty percent of exports by the 1970’s. The United Fruit Company of the United States, receiving large subsidies and cheap access to fertile land, furthered this monoculture, cash crop model by encouraging large scale deforestation for the planting of African Palms. “In 1972, people working for the production of [cotton] wealth obtained only 7.5% of the income from the sector while 4% of the population, the "patrones," received 60% of the income.”[11] By some estimates, Chiquita banana plantations caused four billion dollars worth of social and ecological harm through intense amounts of air, soil, and water pollution.[12]

The agroexport model was applied vigorously to the country’s Pacific coast while the Atlantic coast was “oriented toward the control of natural resources for export.” Large U.S. mining companies such as Rosario and Neptune Mining were responsible for the deaths of hundreds of miners and the poisoning of two major Nicaraguan rivers. The growth of mining cities galvanized the process of deforestation and forced the removal of indigenous inhabitants from their lands.[13] Inevitably, this importation of Northern agricultural capital lead to the destruction of the traditional, rural modes of living. Underemployment in the agricultural sector facilitated the movement of workers from rural communities into the cities where such massive influxes could be used to maintain low wages and dismantle any serious labor organizing. The Somoza dictatorship was granted various loans by international lending institutions to facilitate the building of infrastructure intended to facilitate the export model. Roads, bridges, buildings, and other things needed were built not in a manner conducive to human development but economic exploitation. To this day, agriculture, timber, and fishing constitute one-third of Nicaragua’s GDP.[14]

By the early 1960’s a subterranean revolt was brewing underneath the repressive dictatorship. After a major earthquake destroyed large sections of Nicaragua, including the capital of Managua, the Somoza regime misused state funds and failed to initiate any serious restoration projects. All legitimacy was lost in the eyes of the Nicaraguan masses. The Sandinista National Liberation Front (FSLN) was founded during this period and launched a guerilla war on the corrupt Somoza regime. By 1979 Somoza’s regime was crippled under the weight of popular resistance and the guerilla war. A general strike struck the final nail in the Somoza coffin and that year the FSLN came to power with Daniel Ortega at the helm.[15] The new, popular government nationalized the enormous Somoza holding, initiated popular land reform, and took over important social responsibilities such as reducing illiteracy, fighting poverty, and supplying electricity, clean water, and other services at affordable rates. Almost immediately the United States pressured the World Bank to cut off all loans to the new government in response to such popular measures.[16] 

Contrary to U.S. propaganda, the Sandinistas never claimed to be Marxists, nor did claim allegiance to the Soviet Union. They maintained a “pragmatic” platform with mix of revolutionary socialist rhetoric, populist reform, and concessions to bourgeois elements; it was not until after the U.S. sponsored the Contra war against the Sandinistas that they were pushed into the Soviet orbit. They intended to develop Nicaraguan society and reduce poverty through a fusion of the dependency and participatory development models. On the one hand, they made brief gestures towards the working class in order to stimulate industrial growth and reduce dependence upon the agroexport model. On the other hand, they were largely focused on land reform and developing a communal agricultural sector that allowed the peasants to work the land as they pleased.Within three years the Contra rebels, mostly remnants of Somoza’s notoriously brutal national guard unit, began a vicious war on the new government. They were heavily backed by Ronald Reagan and received significant support from the CIA. Thus, in the midst of the most popular revolution in Nicaraguan history the country was plunged back into civil war against an enemy backed by the most powerful nation on Earth. Instead of focusing on internal reform and democratic advancement the Sandinistas were forced to carry out yet another war, one that would have devastating effects. 

By 1988, the Contras had been given more than one billion dollars of support from the United States. Submarine oil ducts and petroleum deposits were specifically targeted to harm the Nicaraguan economy and cause major ecological damage. Prodigious sections of forest were destroyed as warfare ignited massive fires that rapidly spread. Thousands of mines were placed all throughout the country by Contra forces, one for every thirty-two inhabitants. These have significantly “reduced the production possibilities in communities due to constant danger.”[17] In all, over 50,000 people died during the Contra war against the popular Nicaraguan government. So serious was the offenses committed against the Nicaraguan people that in 1987 “the International Court of Justice ordered the US government to pay Nicaragua an indemnity of US$16 billion in compensation for the losses caused by its terrorism.” This ruling was bluntly ignored by the United States.[18]

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[1] “Background Note: Nicaragua,” U.S. Department of State (August 2009); http://www.state.gov/r/pa/ei/bgn/1850.htm

[2] “Nicargua GDP – Real Growth Rate,” IndexMundi, (2007); http://www.indexmundi.com/nicaragua/gdp_real_growth_rate.html

[3] “Nicaragua at a Glance,” World Bank Group, (2008); http://devdata.worldbank.org/AAG/nic_aag.pdf

[4] Fred Weston, “Ortega Wins Nicaraguan Elections: Where To Now?”, In Defence of Marxism (2006); http://www.marxist.com/ortega-wins-nicaraguan-elections081106.htm

[5] C.I.A., “Nicaragua,” The World Fact Book (2009); https://www.cia.gov/library/publications/the-world-factbook/geos/nu.html

[6] Human Development Report, “2008 Statistical Update: Nicaragua,” HDR (2008); http://hdrstats.undp.org/2008/countries/country_fact_sheets/cty_fs_NIC.html

[7] Michael Parenti quoted by Kim Peterson, “Toward An Equitable Economy,” Dissident Voice (2004); http://dissidentvoice.org/Jan04/Petersen0120.htm

[8] Westen, “Ortega Wins Nicaraguan Elections: Where To Now?”

[9] Magda Lanuza, “Nicaragua: Ecological Debt and the model of indebtedness, impoverishment, and predatory destruction,” Jubilee South; http://www.jubileesouth.org/journal/nicaragua.htm

[10] Lanuza, “Nicaragua: Ecological Debt”

[11] Ibid.

[12] Ibid.

[13] Ibid.

[14] “Background Note: Nicaragua,” U.S. Department of State (August 2009); http://www.state.gov/r/pa/ei/bgn/1850.htm

[15] Westen, “Ortega Wins Nicaraguan Elections: Where To Now?”

[16] “Chronology of the World Bank,” International Socialist Review (Issue 11, Spring 2000); http://www.isreview.org/issues/11/chronology.shtml

[17] Lanuza, “Nicaragua: Ecological Debt”

[18] Toni Solo, “Neo-liberal Nicaragua,” Global Policy Forum (2003); http://www.globalpolicy.org/component/content/article/162-general/28088.html