8. Austerity, the Contra War and the National Question¶
Core Argument¶
Chapter 8: Austerity, the Contra War and the National Question¶
The FSLN’s 1981 economic plan, ‘Austerity and Economic Efficiency’, promised 60,000 new jobs, a 43.5 per cent rise in industrial investment, and a twelve per cent increase in workers’ food consumption, funded by sacrifices from the ‘privileged sector’. Yet the surplus for investment depended on intensifying labour exploitation, primarily through the private sector. This contradiction was soon overwhelmed by external aggression. President Reagan terminated aid and bankrolled the Contras, a mercenary army based in Honduras, unleashing a war of terror to destabilise Nicaragua. Urban workers flocked to trade unions; the PCN-led CAUS led strikes for wage rises and nationalisation, which the CST denounced as counter-revolutionary. The FSLN’s mixed economy strategy relied on bourgeois cooperation, but capitalists decapitalised their enterprises, forcing nationalisations such as Electroquimica Pennwalt. The Agrarian Reform Law of July 1981 promised land to poor peasants and granted women legal title. In response to escalating Contra raids and bourgeois opposition, the FSLN decreed a state of emergency in September 1981, banning strikes and land seizures.
The war, decided in the White House by 1981, dominated all life. Nicaragua spent a quarter of its GDP on defence; inflation hit nearly thirty per cent in 1983 and forty per cent in 1984, slashing real wages. The government introduced food subsidies and tightened distribution. 114,000 refugees strained healthcare, schools and housing. Pope John Paul II visited in March 1983, refusing to pray for the government or dead soldiers; competing chants disrupted the mass. The war killed 43,000 Nicaraguans—two per cent of the population. The domestic bourgeoisie waged economic sabotage and disinformation to overthrow the regime. The FSLN cut social programmes rather than seizing property, as the US had done after its War of Independence. Compulsory military service began in January 1984; women could volunteer but not register, a compromise reflecting machismo in the FSLN leadership. AMNLAE focused on recycling, energy saving and food production, but women agricultural workers demanded a more anti-capitalist emphasis. The Catholic hierarchy, led by Archbishop Obando, backed the Contras; Obando became a cardinal in 1985, briefed Contra leaders in Miami, and urged US military aid. The FSLN mishandled the Atlantic Coast, sending Spanish-speaking militia, denying land tenure or ethnic autonomy, and forcibly relocating Miskitos from the Rio Coco, driving 10,000 to join the Contras. It later reversed course, allowing return with land security, and Tomás Borge developed an autonomy policy based on the Historic Programme.