13. Demobilisation, Economic Collapse and the 1990 Election¶
Core Argument¶
After the Contra war ended, the demobilisation of thousands of returning combatants with leadership experience marked a decisive turning point. Rather than deploying these cadres to advance social projects, the FSLN leadership politically demobilised them, leaving veterans to confront private bus operators who denied them free travel without state intervention. By 1988, 78% of industry, 76% of commercial agriculture, and 60% of commerce remained in private hands, while wage controls and austerity were imposed on workers. Daniel Ortega insisted the mixed economy would distribute wealth fairly, declaring ‘now is not the time to establish socialism’. Production fell by a third that year. In 1989, the government devalued the currency from 80 to 2,000 cordobas to the dollar, cut subsidies, sacked 35,000 workers, and drove unemployment above one-third. Tomás Borge attempted to justify policy by invoking Lenin’s New Economic Policy, but the NEP had been implemented after the establishment of a workers’ state, which Nicaragua lacked. The FSLN offered large landowners low-interest loans, wrote off debts for cotton farmers, and sold Cuban aid supplies on the free market. Private wards were reintroduced into state hospitals. The 1990 election programme promised to maintain private property and protect land ownership, limiting demands to mild reforms. The FSLN lost to Violeta Chamorro’s UNO coalition, a vote against hunger and misery; by 1989, real income was less than half its 1977 level.
The electoral defeat led to a negotiated handover. Humberto Ortega was retained as army chief, and the FSLN entered a de-facto coalition with the Chamorro administration. Workers, anticipating a harsher regime, launched over a hundred strikes during the transition, demanding wage increases and reform of the 1945 labour law, which the FSLN had never updated. The FSLN leadership refused, arguing this would be “the road of violence”. Daniel Ortega publicly supported the strikers but qualified this with calls for calm. The strikes achieved some wage rises but were uneven. The FSLN subsequently supported Chamorro’s austerity measures, accepting falling real wages and high unemployment. The neo-liberal programme privatised state assets, restored the pre-revolutionary wealthy families, and drove small peasants into bankruptcy. Women were hit hardest; the FSLN later abolished therapeutic abortion. The women’s organisation AMNLAE fractured, and an independent women’s movement emerged. The chapter concludes that the absence of a revolutionary Marxist party with workers’ democracy allowed the petty-bourgeois FSLN leadership to protect capitalism and demobilise the masses.