Che Guevara: The Economics of Revolution
by Helen Yaffe
read 2019-2020

page numbers for citations in square brackets []. ? means question or comment, ! is something important. source is something else related that I might want to read. I skipped the first chapter in these notes.

Chapter 2: Revolutionary consolidation and the emergence of the BFS

[13] cuba's underdevelopment at the time of the revolution had these aspects:

  • sugar monoculture, large seasonal swings in employment related to the sugar harvest, and little industry aside from sugar processing
  • dominance by american monopolies and a total subservience to the american sugar quota for export earnings

[14] starting from the agrarian reform law (which was popular even with conservative elements in the country), a split developed betweel liberal anti-Bautista groups and the left (M26J, PSP, DR). as the revolution radicalized, nationalizations, the withdrawal of the US sugar quota, and eventually US sanctions and a blockade proceeded. the state took control of trade and what industry was left.

? did the Cuban revolution 'smash' more of the state than the Boolshevik revolution did?

source: Judson: Cuba and the Revolutionary Myth: the political education of the Cuban rebel army

[17] Guevara prioritizes education and production in the army even before the seizure of power- sounds like people's war?

[19-20] preparations for the blockade and a planned economy began as early as 1959, when Guevara visited eastern bloc countries to establish trade links and observe Yugoslavian and Soviet socialism up close. the bank of cuba took control of gold and capital flows during this time as well.

[22-26] Guevara is appointed head of the National Bank of Cuba. he stays for a year and accomplishes some important things:

  • gets the gold out of fort knox by selling it before the US can steal it. brings it back as hard currency.
  • state control of imports and exports
  • trade re-alignment to socialist bloc
  • laid the groundwork for the chance in currency

[27] in october 1960 the US imposed a partial blockade and Cuba responded with the import/export controls, and things spiraled until Cuba had nationalized US assets, fully nationalized banking, and switched their sugar trade to the socialist countries (on more favorable terms).

[28-30] Guevara moves to the Ministry of Industries by February 1961, but the change in currency which would occur later was already ready to go. the change in currency was necessary to stop predatory monetary policy causing inflation that the US and Cuban exiles were enacting. the currency change made all their hoarded banknotes useless. it also capped deposits, seized large deposits outright, paid off the state's debt and halted capital flight.

[32-39] the new Ministry of Industries collected abandoned and forcibly nationalized firms in all industries and administered them from a central plan. firms were given an estimated budget per year, surrendered all earnings, and had prices set centrally, not based on costs of production or profit motive. many of these firms were foreign owned - the Cuban Electric Company in particular - and their internal organization was carefully studied to see if it contained any lessons for socialist construction.

? what lessons are there for a future socialism from today's capitalist management practices? I dont see a lot honestly.

[40-42] Che was always studying and taking trips to socialist countries to observe their system, and encouraging innovation in economic management in Cuba. his dissatisfaction with the USSR's law-of-value based system led to a debate with its proponents in Cuba.

Chapter 3: The Great Debate

how should socialism be built? how can underdevelopment be overcome? the Soviet Union at this time thought that capitalist methods (credit, decentralized per-firm finance, profit material incentives etc.) could be used to spur on higher productivity that could lay down the material basis for communism. Che argued otherwise, that building socialist consciousness and focusing on centraliztion, cooperation, and seeing work as a social duty would themselves raise production and bring the whole society closer to socialism.

[47-48] two central planning regimes existed in Cuba in the early 60's. Guevara's BFS (Budgetary Finance System) and the Soviet-derived AFS (Auto-Financing System). the BFS made no use of credit, and only used money as a unit of account, whereas the AFS used money and credit money in a fashion similiar to capitalism. firms were separate in the AFS, combined and centrally coordinated under the BFS. the law of value - commodity production, exchange, profit ad loss - was supposed to operate in the AFS but not in the BFS, which transferred commodities and set prices according to an overall plan.

source: several good sources on this debate she mentions:

  • Man and Socialism in Cuba edited by Silverman
  • Gran Debate: Sobre la Economica en Cuba 1963-64
  • Stalin's Economic Problems of the USSR sounds really bad, I should check it out

[57-59] summary of financial methods in the BFS

[63-65] separating the distribution of the social product from labor meant material incentives couldn't be the main incentives offered. "a new man must be created simultaneously with the social base"

Chapter 4: Education, Training, and Salaries

[77] 1962 literacy campaign taught 600k Cubans how to read

[77-83] education was conducted at a mass scale at all levels of society - anyone who knew anything taught, all institutiuons, from workplaces to the military, became schools. specialists were trained abroad and in Cuba to run enterprises, and factory managers under MININD were required to pursue ever higher levels of education, starting from the most basic level.

[84-86] overcoming the law of value required decommodifying labor power and creating the conditions under which labor could become "free and uncoerced." to this end eages were paid for training as well as work, payments for overproduction were carefully controlled, and pay raises were linked to qualifications.

[88-91] a new salary regime linked pay to qualifications and standardized wages across all forms of work.

! wage diferentials across the same industry were seen as eroding solidarity and delaying progress towards socialism (thinking about a fabricator and a concrete worker laying the exact same concrete and making wildly different wages)

[92-95] trade unions were deeply involved in the new salary scheme but resisted the government in other ways - such as refusing to lower high salaries they forced on employers during the early revolutionary period. Che's approach was to insist that under socialism trade unions would (gradually) become obsolete, but only as the need for them declined. abolishing the distinction between workers and management was seen as a step along the right path.

Chapter 5: Administrative Control, Supervision and Investment

[100-103] standardizing accounts and spreading knowledge of accountancy were seen as key to democratizing production - everyone could see how well/poorly they were doing at work. the training of new accountants paralleled the training of new factory managers and technicians. guevara also studied US sugar mills that had been nationalized to learn how their businesses were run.

[104-107] Guevara extensively studied management science, and might have learned more from General Motors than the Soviet Union's example (the AFS, or half-assed capitalism). principles of centralization combined with local autonomy and transparency of information, and strict rules setting out expectations, responsibilities and processes for decision making. he conceived of technology (like computers, which he wanted to use but never had the time/resources to explore fully) and management science as developed under capitalism to be politically neutral. hrm.

cost cutting would replace the profit motive - very important to note that the two are not the same under capitalism either.

? how terrible is [company I work for] in relationship to this description of socialist economic organization? what does 'cost cutting' and 'stepping over dollars to pick up dimes' mean in the context of socialist construction?

[108-111] guevara drilled his EC (consolidated enterprise) directors about their understanding of their own firms and required them to conduct constant statistical and in-person, worker-focused analysis or be replaced. Guevara imported a computer (one of two in Cuba) and developed an input-output matrix to help effeciency. but some problems didn't have mathematical solutions.

[111-114] Guevara's approach to inventory management was borrowed from the capitalist example (careful accounting, planning spare parts purchases well in advance etc.). he emphazied 'leanness' because inventories and lack of parts represented millions of pesos across the country. the sudden switch away from US machines drastically increased ship times and strange requirements, especially considering that nearly 100% of capital goods and spare parts came from the US before the revolution.

[114-117] a comprehensive and independent auditing and investigations department was established to discover flaws and errors and also investigate worker complaints. this was to retain worker loyalty and keep managers in line.

source a "manual" published in June 1964. I assume it was some sort of internal document? I didn't see a citation or anything. maybe check this again.

[118-119] arbitration was necessary between state-owned firms whose production processes were mutally dependent. what an awesome way to abolish the market. arbitration boards administered fines for non-completion of contracts, which was distinct from the operation of market forces.

[121-125] investment was centralized under the BFS, because individual firms lacked the ability to accumulate a surplus on their own for investment. investment slowly became more coordinated and effective throughout the early 1960's.

[125-128] "quality is respect for the people." Guevara began emphasizing quality in the new enterprises immediately and would not accept the blockade as an excuse for defeciencies. the de-linking of objects as use values from commodities required that quality be considered as important, or even more important, than quantity. he would even direct production to stop completely rather than produce inferior goods.

capitalist quality control, at least as I've seen it done, makes very little sense from the perspective of use values, even when companies should know better. most of the issues come from senesless division of work, contracting problems, fraud etc. the need for total control of the process also gets in the way of productivity.

source in 1964 a group of advisors in MININD put out a report summing up their current level of knowledge: "Report on the Elements Required to create a Model Industrial Enterprise and the methods of work that should be Applied in District Areas of Activity"

source "Manual for Factory Administrators" mentioned p. 107

source "My Years With General Motors"

Chapter 6: Collectivising Production and Workers Participation

[131] in october 1961 Guevara self-criticized for running the MININD like a military operation and not knowing how ordianry Cubans really lived now. he wanted to find a new balance and "get closer to the masses."

getting workers to see themselves as managers, innovators and owners was made difficult by the prior conditions the revolution inherited.

[135] Guevara came up with three ways to solve these problems: ideological and structural cohesion of the BFS, promoting workers efforts to improve the means of production, and integrating workers into management.

[135-138] monthly meetings and mass publications highlighting workers participation in design and effeciency and including technical bulletins promoted the BFS way of doing things. factory managers manuals and hiring policies emphasized the role of workers knowledge in production.

[138-141] the spare parts committes were a successful example of workers participation in production. refinery workshops were crucial in the homemade spare parts that kept Cuban industry running. dozens of private inventors submitted nw gadgets and ideas to MININD, so many "inventos" submitted ideas that a new department had to be created to deal with them all.

source "Death of a Bureaucrat" by tomas gutierrez alea.

[142-143] units of motivated workers were brought together to coy and improve on existing machinery. directors were selected from among self-starting, innovative workers.

source the magazine "Nuestra Industria" - I need to find this somehow

[143-148] directors and managers were required to visit workplaces often, with a specific set of investigative directives and a requirement to hold extensive talks with workers. workers councils were set up to advise managers on production. general assemblies of workers were formed to evaluate directors work on a quarterly basis.

local industry committes were formed to coordinate material and machinery surpluses/deficits locally, across industries

[150-155] Guevara's promotion of these committies, the CLIO's, came from his study of capitalist cooperation in places like Japan.

the normal absurdity of unmet need and unused resources had to be overcome to divorce labor and production from surplus value, and build socialism.

another absurdity that had to be confronted was the increasing bureaucracy and division between intellectual and manual labor. Guevara's plan was to demote office workers to subordinate positions temporarily, where they were supposed to learn from workers and study the process from the inside. this was the "Plan of Demotion."

traveling teams of expert workers were formed to improve processes across the country. this promoted mutual assistance, free exchange of ideas, decommodification of knowledge. this was the "Plan of Integration."

[155-162] the level of safety and occupational health was very low in Cuba before the revolution. basic regulations were passed and safety inspections became regular. emphasis was placed on not making safety investigations punitive like they are here.

absenteeism and sloppiness of work was a growing issue, especially because the government guaranteed employment and provided free social services. some solutions were to exert social pressure on those who were absent or falsely sick. but direct and indirect absenteeism are still serious problems in Cuba.

overall there were many attempts in the BFS to integrate workers into production. US blockade and terrorism have presented a serious obstacle to true decentralization and worker control however (I thought that wasnt a good enough excuse for Che)

Chapter 7: Science and Technology

[163] a greyhound track betting machine was the only computer in Cuba in 1959. insane.

an Elliot 803 was imported in 1960, and the oil refineries had a few IBM punch machines, not really computers.

[164] Guevara was excited about the possibilities of automation and cybernetics, and thought that Cuba had to rapidly burn through the stages of capitalist industrialization, reaching technological parity with capitalism without going through a 150 year process.

Cuba's early focus was on import substitute industrialization, which still relied on imported raw materials, and was quickly seen to be ineffective. buying a textile factory and importing thread, for example, made no sense. Soviet advice and education was more help than machinery most of the time.

[165] the new plan became to use sugar exports to diversify the economy from the bottom up, using resources cuba had on hand or could develop. sugarcane derivatives, iron and steel, automation chemicals and other agricultural byproducts were early focuses of research.

[171] list of research projects established in the first 3 years of MININD

[172] the pre-revolution sugar industry had two main characteristics (noted above as well)

  • domination of land and labor - 75% of arable land used for sugar with half of it left fallow at any one point, brutal seasonal unemployment, and dominance of export over domestic production
  • sugar was in turn dominated by foreign (US) interests. the US controlled Cuba's sugar quota and owned most of the plantations on the island.

[173] when sugar was realized to be the most suitable means for capital accumulation by the new government, it was decided to mechanize it, build industries off of its products, and insist on fair terms of trade with other countries that would help alleviate underdevelopment.

mechanization of the sugar cane harvest had been resisted by workers who needed the work to survive, but Guevara was able to succeed because workers were convinced they would be taken care of if they could work in the fields or if they were replaced by machinery.

[175] imported machines, reverse-engineering, the inventiveness of sugar cane mechanics, Soviet advice, and assistance from "machateros" made Cuba's next sugar harvest its first stab at mechanization.

[176] good story of an engineer who had designed sugar machinery and was trying to leave Cuba. Che asked him to stay and finish his work, and he agreed even though he had no sympathy for the revolution.

[177] the first harvests were 1% mechanically harvested, by 1990 the figure had reached 71% and its almost entirely mechanized today.

[178-179] investigation into sugar byproducts had to be started from the bottom because no one was studying it at the time. its only success at first was extracting a medicine from sugar cuttings.

[179-182] nickel and magnesium mines were abandoned by US-based firms and reclaimed by the Cubans, with help from miners and the few engineers and technicians who stayed behind. a geological survey was also conducted that revealed a lot of other resources that could be exploited, and help to reduce import dependence.

[187-190] experimental farms and research accompanied experiments in incentives and cooperative production.

[193-198] rural electrification and automation of production were key priorities for overcoming rural-urban divides and underdevelopment. "automation would permit political control over the economy."

Cuba also designed a computer, the CID-201, in 1969 and it helped to coordinate the sugar harvest.

Chapter 8: Consciousness and Psychology

[199-204] separating labor from wages required setting it on a socially useful basis. replacing "alienation and antagonism with integration and solidarity." the right attitude was a prerequisite to the development of the productive forces.

[204] material incentives were not enough to increase productivity, and actually went against the spirit of Guevara's approach. socialist, fraternal competition and voluntary labor that everyone (including Guevara) participated in, sought to increase production while breaking the link between work and wages, commodities and value.

these competitions were called "emulations" and would pit two work brigades against one another for a symbolic prize, in some sort of socially useful work like harvesting sugarcane, building a road or a school.

[212] the thing that justified voluntary labor was that the product was for the benefit of the whole society, not an individual firm. "undermining the law of value through the decommodification of laboe", it also worked to abolish the distinction between manual and intellectual labor. the labor was supposed to be well-organized, useful and truly not obligatory. the pressure was on managers to lead by example.

[216-222] a camp for ministers who mess up - MININD had a workers rehab center that people could be sent to if they burned out.

[223-227] as a doctor, Guevara had an interest in psychology. even during the rebellion he had staff psychiatrists who analyzed the soldiers in his column. these doctors joined MININD as the psychology department later on. they applied psychometric tests to candidates for directorships and other important posts, and advised workers in the ministry on communication and leadership skills. sometimes the tests discovered schizophrenia in pottntional managers, but mostly the tests were used to find areas of improvement for individuals who were getting the job they were up for anyway.

[227-231] social psychologists were also routinely dispatched to workplaces to conduct investigations of specific problems. they would live and work among the workers and issue a report after a couple months. the goal was to improve morale and productivity

Chapter 9: Critique of the Soviet "Manual of Political Economy"

[233-236] Che wrote an extensive critique of the Soviet manual of political econmy and by extension the Soviet Union, following his experiences with the BFS/AFS debate, towards publishing a corresponding Cuban manual of political economy. this analysis was hidden for geopolitical reasons.

Guevara says that commodity production and private propertyu have to be gradually overcome during the transition to socialism. the USSR and eastern bloc countries have categorically not done this. the NEP, which Guevara claimed would have been modified by Lenin had he lived longer, had formed the basis for the Soviet economy, stalling the transition to socialism. even critical/dissident eastern ruopean economies like Yugoslavia failed to overcome or even understand the law of value.

[234-235] his critique was meant to be constructive, but he could tell from the international cliomate for debate about the transition to socialism that there was no way his critique would be accepted that way.

[237] the BFS represents an improvement on the Soviet model because it combines technology and consciousness - accumulation, increasing mechanization/automation, and changing the relationship of workers to work and management, and each other.

[238] Che makes a comment that imperialism has made an alliance with its own domestic working class. as an aside.

"centralized planning must rationally use all elements of production and cannot be determined by one workers assembly or on the opinion of one worker"

what follows is a summary of Guevara's critique of the Soviet manual

*1: Capitalism and Imperialism

[241-242] Guevara argued against the manual's two-class understanding of capitalism, arguing that imperialism shares the loot somewhat in the metropoles, taking away the vanguard role of the working class in imperialist countries.

Guevara also pointed out Matx's lack of a theory of crises, and that more work needed to be done. its not enough to just say that the productive forces have surpassed bourgeois relations of production, and that this is enough to cause the final crisis or something on its own.

2: Kolkhoz

[243-246] Guevara's criticism of the Soviet collective farm hinged on his criticisms of cooperatives. allowing personal property in the cooperative set the individual member against the state and the rest of the members of the cooperative. the economy of a socialist country in transition has to be looked at in total - one big factory. there can't be any commodity transfer between 'firms', or any contracting with an exploitative nature (didn't Szymanski discuss the Soviet Union's contracts with the republics?)

social ownership of the means of production does not mean ownership collectively by a group of producers. this is an advance relative to capitalism but a setback relative to socialism.

Che is sympathetic to the conditions the Soviet Union found itself in and why the NEP/kolkhozes were seen as necessary. but he still predicts that the contradiction between the individualized collective property and social property will lead to the eventual restoration of capitalism. he explicitly diagrees with the idea that the USSR could never turn capitalist again.

3: Socialism

[246-251] Guevara dismisses the parliamentary road to socialism.

"this old story about parliament is not even believed by the Italians, who have no other God."

Guevara emphasizes planning as the fundamental challenge for socialist transition. planning is socialism in economics. Che advocated democratic centralism in planning. 'the masses' should participate, but once the plan has been decided it should be executed as mechanically as possible.

Guevara also attacked the use of loans, interest, etc in socialist construction.

4: Class Relations

[251-253] Guevara emphasizes oppressed and oppressor nations as a new wrinkle in imperialist class structure. oppressor nation working classes don't unite with oppressed nation workers in a front against imperialism.

trade unions have an anachronistic role under socialism, especially when differences in resources exist between different trade unions. think about building trades unions in a socialist transition like this. are the electricians going to give up their millions lol

5: International relations

[253-255] "peaceful coexistence" was basically murderously selling out on the part of the USSR, as Che saw it. economic competition with the west is a misunderstanding of what GDP and capitalist development actually represent.

Guevara criticized socialist countries for basing trade with underdeveloped countries on the law of value. he raises the issue of unequal development and exchange in socialism as a possibility.

Chapter 10: Guevara's Legacy in Cuba

[257-261] Guevara left Cuba in april 1965 to fight in the Congo. he never intended to stay in Cuba, but he wanted to help establish the BFS before leaving. his/MININD's achievement was to smoothly transition to a socialist industrial sector, start the process of diversification and consciousness-raising. even by bourgeois standards his term as director was extremely successful. but, his BFS was unevenly implemented and MININD was broken up into different ministries later.

[261] Yaffe summarizes the key features of his BFS, which we've gone over. Guevara's ideas have always been controversial, even in Cuba, and his ideas have only a partial, or contested, influence.

[263-266] but his basic premise that problems of underdevelopment cannot be solved by market means has remained popular and has framed many debates about the Cuban economy in Cuba since his time. in the 60's some aspects of the BFS were dismantled, and in 1976 the Soviet system was adopted, including financial autonomy for firms, trade/sales between enterprises, profit/loss and taxation. in the late 80's there was a move away from the Soviet model, including the return of voluntary labor and the closing of private markets.

the challenge of the special period forced Cuba to pursue joint ventures with outside capitalists, abandon mechanization of sugar for the time being, close industries, and modify the agricultural sector significantly. cooperatives and farmers markets were reintroduced. small private enterprise was legalized, and more liberalizing reforms were passed throughout the 90's.

[266-269] in the 2000's many of the worst excesses of the liberalizing period were reversed, like the recentralization of finance, and the introduction of convertible pesos to bring dollar incomes under the control of the central government. the 'Enterprise Perfection System' uses some elements of the BFS, like the state taking in all firm profits. the EPS is distinct from the Soviet AFS and Chinese full-bore capitalism.

[270] recent deals with Venezuela and Bolivia, on terms other than those dictated by the law of value, also represent another aspect of Che's legacy.

sources: 'Apuntes Criticos a la Economica Politica' by Guevara, and the 'Manual Para Administradores de Fabricas' - the MININD manual from the 60's.

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Pub: 11 Jan 2021 22:25 UTC
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