Capitalists and Revolution in Nicaragua

Opposition and Accommodation, 1979-1993

Rose J. Spalding

• Publisher: The University of North Carolina Press
• Year: 2017
• Print ISBN: 9780807844564, 9780807821503
• eBook ISBN: 9781469639901
• Topic: History
• Subtopic: Latin American & Caribbean History
• Index: History

By tracing the complex relationship between the Sandinista government and the Nicaraguan business elite, this book examines the shifting mix of alliances and oppositions that shaped the Sandinista revolution. Rose Spalding takes issue with models of the business sector that assume a high degree of class cohesion. Drawing on carefully structured interviews with ninety-one private-sector leaders at the end of the Sandinista era, Spalding documents responses to the Sandinista government that range from extreme ideological hostility to enthusiastic support. To explain this variation, Spalding explores such factors as the prerevolutionary social and economic characteristics of the elite, their organizational networks, and their experiences with expropriation and government subsidies. She is one of the first scholars to look at the ways in which these groups have evolved in the postrevolutionary era under the Chamorro government. In addition, Spalding provides a valuable analysis of four other cases of attempted structural change, thereby drawing broader, cross-national comparisons and developing theoretical insights about the political character of the 'bourgeoisie.'

Originally published in 1994.

A UNC Press Enduring Edition — UNC Press Enduring Editions use the latest in digital technology to make available again books from our distinguished backlist that were previously out of print. These editions are published unaltered from the original, and are presented in affordable paperback formats, bringing readers both historical and cultural value.

chapter 1. Capitalists and Revolution

It is a complex problem, but we have not given up the search for ways of integrating the more-or-less large individual producers who live in Nicaragua today into a social formation in which revolutionary hegemony prevails.

—Jaime Wheelock Román, El gran desafío

DEVELOPMENTALISTS, social theorists, and revolutionaries have long puzzled over the problematic role of economic elites in the process of social change. Much of the general literature on revolution and structural reform presents the dominant class as a homogeneous entity intransigent in its opposition to significant change. As beneficiaries of the status quo, economic elites are seen as a primary obstacle to social restructuring, often in close cooperation with foreign capital.

In recent years, however, many of the standard categories used to chart contending social forces, such as “workers,” “peasants,” and “bourgeoisie,” seem increasingly inadequate to describe what are often highly differentiated clusters of people. Workers moving steadily into the informal sector now lack a formal employer counterpart and become self-employed; peasants have weaker ties to the land and rotate annually through a series of job categories and residences; the bourgeoisie is divided into a series of competing layers whose relative fortunes rise and fall. The inability of the traditional conceptual categories to accommodate this acute diversity calls for the use of different analytical methods and the development of new conceptual schemes. For studies of the bourgeoisie, a closer analysis of the social sectors that make up the elite is in order.

The search for the fissures within the dominant elite is not simply an analytical exercise in social dissection. This task has been a central preoccupation of proponents of social change. Underlying much of this kind of analysis has been the desire of both academicians and political practitioners to locate a “progressive” sector of the bourgeoisie. Academic analysts such as Barrington Moore (1966) claimed to find such a sector, arguing that there were circumstances under which an urban bourgeoisie could break with traditional landholding elites and nudge the political system toward democracy. Some reform-oriented political leaders also claimed allies within the economic elite. Needing the economic capabilities, international credibility, and domestic leverage that such coalition partners would provide, these politicians searched assiduously for business leaders with whom to link arms.

Leaders of populist movements were particularly inclined to seek an alliance with a “nationalist bourgeoisie,” Populism as an ideology presented no barrier to the inclusion of national elites; indeed, the overriding nationalism embedded in populism called these leaders to strengthen local economic strongholds. Cultivation of emerging industrialists often secured their support. Juan Perón’s success in building an alliance with small- and medium-sized capitalists through the Confederación General Económica in Argentina has been well documented (Acuña 1991; Teich-man 1981). In spite of its social base in labor, the Peronist coalition anchored the support of emerging elites in the light industry sector, firms that manufactured for the domestic market, and industries that were less dependent on imports. Since these kinds of industrialists benefited from an expanding local market, they could find common cause with unionized labor in its bid for increased earnings. Although old, established elite organizations moved firmly into the opposition, emerging elites included prominent allies.

Even democratic socialist movements typically found it necessary to court a segment of the economic elite, in spite of ideological reservations. To locate a theoretical rationale for this compromise, the concept of a “non-monopoly” bourgeoisie was sometimes employed. A non-monopoly bourgeoisie was differentiated from the hegemonic, monopoly sector by the former’s unfavorable economic position and tendency to be eroded by the monopoly sector. This alliance was reinforced in dependent nations by the tension between subordinated local capital and hegemonic foreign capital. Alliances between a nonhegemonic, small- and medium-sized local capitalist faction and the peasant and worker underclass, it was argued, would undercut the foreign-oriented, hegemonic bourgeoisie and allow for a process of socialist transition.¹

This form of social theory and consequent alliance strategy had its critics. For analysts of the bourgeoisie like Nicos Poulantzas and André Gunder Frank, the effort to locate a sector of the dominant class that could accept social change was futile and self-defeating.² In a monumental study of agrarian, industrial, and financial factions of the Chilean bourgeoisie, Maurice Zeitlin and Richard Earl Ratcliff add empirical support to this interpretation. Their detailed study of the social structure of the top Chilean elite in the 1960s produced “a discovery of great import: an incomparably large effective kinship unit, formed of multiply interinarried banking, industrial, and landowning families, erases any ostensible social cleavages between supposedly contending landowning vs. capitalist ‘upper’ classes in these economic sectors” (Zeitlin and Ratcliff 1988,173).

Because of the presence of close family members who straddled sectoral divisions, Zeitlin and Ratcliff concluded that contradictions between top capitalists with different structural locations in the economy were muted. Clashes and divisions between capitalist sectors in the twentieth century, they argued, “arose not between ontologically real rivals, but within the bosom of the same class” (Zeitlin and Ratcliff 1988, 208). Divisions that other analysts had found to segment the capitalist class—between bankers and industrialists, owners and managers, large landowners and urban capitalists, foreign and local capital—are minimized here, since bonds of kinship ultimately were found to weave these sectors together.³

This discussion of the character and political predilections of the Latin American bourgeoisie reflects two competing visions. In one view, the bourgeoisie, in spite of some sectoral divisions, is essentially a unitary actor. Interpénétration through family, financial, or contractual ties overcomes any tendency toward segmentation. In the other, real differences exist within the bourgeoisie that incline different segments or clusters toward different political projects.

This book tackles the question of the unity/division of the economic elite by focusing on the elite’s political interactions with the state during periods of state-led reform. Episodes of structural change put enormous pressure on both the state and the bourgeoisie. Established social hierarchies and resource allocation patterns are called sharply into question. A sense of peril propels the elite into direct political action. This moment can either increase the unity of the elite, as it attempts to defend established privileges or obtain new ones, or divide it, as different segments negotiate for an improved position relative to the others.

The way the bourgeoisie responds, I argue, depends on a series of factors. Central among these are (1) the degree to which oligarchical control over the elite has been ruptured, (2) the organizational autonomy and density of private sector associations, (3) the degree of perceived class-based threat posed by the state, (4) the extent to which the revolutionary regime succeeds in institutionalizing a new political order, and (5) the capacity of the regime to consolidate a viable economic system. The first two factors focus on the inherited character of the economic elite. The last three shift the attention to the nature of the revolutionary state.

To explore the segmentation of the bourgeoisie, this chapter briefly analyzes two types of outcomes: cases in which the bourgeoisie unites in opposition to the reform movement and defeats it, and cases in which the bourgeoisie divides and some sectors reach an accommodation with the regime.⁴ Each of these subtypes will be analyzed by a review of cases in Latin America where the central dynamics diverged. Analysis of the oppositional bourgeoisie focuses on the democratic socialist regime in Chile under Salvador Allende (1970–73) and the reform regime in El Salvador (sputtering between 1979 and 1989). Information about the accommodationist bourgeoisie is drawn from the study of state-capitalist relationships under revolutionary populism in Mexico during the Lázaro Cárdenas era (1934–40) and in Peru under the Juan Velasco regime (1968–75).⁵

Not all of these experiences are conventionally regarded as revolutions, either because they were quickly reversed or because the changes actually introduced were not profound enough to warrant the label. Each of these cases did, however, entail a major effort to restructure what had been core features of the nation’s social and economic order. In this sense they all qualify as major initiatives in structural change. Lessons drawn from the analysis of these experiences will be used to sketch an interpretation of the variations in state-capitalist relations and devise a framework within which to analyze state-capital relations during the Sandinista revolution.

A cautionary note is needed here before we proceed. The literature on these cases has been compiled by hundreds of scholars, most of whom have spent decades working on a single country. Because there have been so few cross-national studies of revolutionary processes and none that focus specifically on the reaction of economic elites, the task of building up this broad comparison is both daunting and perilous. Epistemological assumptions and methodologies vary from study to study. Concepts that are frequently used in this literature such as “family clans” or “oligarchy” may refer to different phenomena in different national settings. Standards used in making judgments about the degree of economic concentration may vary from case to case. For example, Chile’s long experience with multiparty electoral democracy allowed it to be linked analytically to the study of Western European politics. Analysts studying the Chilean system, therefore, may be implicitly comparing the Chilean social structure with those found in Italy or France rather than those found in Peru or Mexico.

Since the same set of assumptions and standards is not applied consistently by scholars analyzing each of these cases, similar characterizations (for example, the claim that the economy is dominated by an oligarchy) may reflect rather different realities. I have attempted to look beyond the summary judgments to appraise the evidence on which those judgments are based and to use comparative statistics when possible, but my work is necessarily constrained by these limitations.

The Bourgeoisie in Opposition

Democratic Socialism and the Coalesced Bourgeoisie in Chile

Prior to the election of President Salvador Allende in 1970 and his attempt to introduce “democratic socialism,”⁶ economic diversification had generated some divisions in the Chilean bourgeoisie, and the deepening of democratic processes had diminished its power. The experience of the Allende era, however, reunited the economic elite and propelled their offensive against the regime. Several characteristics of the Chilean elite and the Allende regime contributed to this outcome.

The Chilean bourgeoisie was shaped by a centralization of resources at the top and a norm of forceful organization that extended even into the middle sector of the elite. At the end of the 1960s, for example, 2 percent of all industrial establishments produced over two-thirds of all industrial output in Chile; the top five banks allocated over half of all credit (de Vylder 1976, 18).⁷ Land concentration was marked. Prior to the adoption of the agrarian reform law by Christian Democratic president Eduardo Frei in 1967 there were 11,000 large, multifamily estates averaging 2,200 hectares each. These large estates represented 4.2 percent of all agricultural units but occupied 79 percent of the country’s agricultural land (de Vylder 1976,166). (Zeitlin and Ratcliff’s 1988, 163–64) detailed analysis of the upper reaches of the Chilean economic elite in the 1964–66 period identified 24 “kinship groups” that were located among the top stratum of bankers, corporate executives, and landowners of the country, including one large “maximum kinship group” that included 56 percent of the top bankers, 16 percent of the top corporate executives, and 30 percent of the top landowners.

In spite of a relatively sustained tradition of political democracy and the dense organization of civil society in Chile,⁸ the business elite retained significant political influence. The economic elite pressured the state directly through leadership of political parties and indirectly through privileged access to state institutions.⁹ Six private sector associations provided an organizational forge for the economic elite. The venerable National Agricultural Society (sna) was formed in 1838; leaders of this association, in turn, formed the Society for Industrial Promotion (sofofa or sff) in 1883, after the minister of finance requested their assistance in promoting the industrial development of the country. The National Chamber of Commerce (previously the Central Chamber of Commerce) dates from 1858, and the National Mining Society, representing Chilean mine owners, from 1883. Of the associations representing economic strongholds, only the Chamber of Construction and the Association of Banks and Financial Institutions were of twentieth-century origin (Menges 1966, 344–46; Campero 1984, 312–18).¹⁰ To defend their collective interests, the four older associations came together in 1935 to form one central peak association, the Production and Commerce Federation (coproco). Chile’s elite business associations tended to be very selective, drew heavily from larger establishments, and had restricted internal democracy.¹¹

Nonetheless, a large population of medium-sized producers had emerged in Chile including small- and medium-sized industrialists, urban professionals, a self-employed petty bourgeoisie, and small- and medium-sized agricultural producers. Reflecting the norm of political pluralism, this medium-sized economic elite had devised its own network of associations in Chile, albeit in more recent decades. The largest of the private sector organizations serving small- and medium-sized businesses, the Chilean Trade Federation of Retailers and Small Industry, was founded in 1938; a host of transportation federations developed in the 1940s-60s (Campero 1984, 316–19). Unlike their larger counterparts, these business associations lacked a central organizing agency that could pull them together, and they were not given the representational prerogatives in government agencies that the elite institutions had acquired. Compared with most other Latin American cases, however, these small and midsized capitalists in Chile were relatively mobilized and autonomously organized.

Allende’s up coalition was designed to divide the Chilean bourgeoisie and incorporate small- and medium-sized producers. The up’s official campaign Programa opens by expressing concern about the suffering “by workers, peasants, and other exploited classes as well as in the growing difficulties which confront white collar workers, professional people, small and medium businessmen, and in the very limited opportunities open to women and young people,” Against this broad coalition of the disadvantaged are placed the interests of “imperialist nations,” “bourgeois groups who are structurally related to foreign capital” and the “national monopolistic bourgeoisie” (“Popular Unity’s Programme” 1973, 255–56).

In practice, however, deep divisions remained within the coalition about how to deal with this sector. The traditional Communist party position had favored a broad “People’s Front” that included “progressive sectors” of the national bourgeoisie. The Socialist party, on the other hand, raised doubts about the existence of any such progressive sector and favored a more narrowly based coalition of proletarian forces. The up government, composed of Socialists, Communists, segments of the old Radical party, and heretical leftists from the Christian Democratic party, began without consensus on the role of the bourgeoisie. There was agreement that the hegemonic faction of the bourgeoisie should be eliminated, both to undercut the political capabilities of the right and to secure, through expropriation, economic resources with which to finance the new order. But there were sharp divisions within the coalition about what to do with the nonhegemonic faction of small- and medium-sized producers.

Allende began his presidency by avoiding that divisive issue; he sought na...

Table of contents

• Cover
• Title Page
• Copyright Page
• Contents
• Tables
• Preface
• chapter 1. Capitalists and Revolution
• chapter 2. From Elite Quiescence to Elite Confrontation in Prerevolutionary Nicaragua
• chapter 3. Revolutionary Transition and the Bourgeoisie (1979-1986)
• chapter 4. The Recrudescence of the Economic Elite (1987-1990)
• chapter 5. A Profile of the Elite Leadership
• chapter 6. From Revolution to Neoliberalism
• chapter 7. The Nicaraguan Revolution in Comparative Perspective
• appendix 1. Methods
• appendix 2. Statistics
• Notes
• Bibliography
• Index