Economy, and Che
Joseph R. Stromberg
"Che" Guevara’s writings show a certain understanding
of the advantages of decentralized structures and localized decision-making
in guerrilla warfare, yet the same historical actor failed completely
to acknowledge the advantages of like phenomena in other fields
of human action. Instead, Guevara believed that whole economies
could be rationally planned by clever fellows with a social conscience,
just as soon as they hit on the right mixture of methods. But it
was, in practice, one thing to develop a strategy leading to revolutionary
victory; it was quite another thing to run the country afterwards.
The Cuban revolutionaries’ rather unreflective decision to adopt
socialist economics soon set insoluble dilemmas before Guevara.
As Castro’s Economics Minister, he quickly found himself dealing
with problems for which he – and socialists in general – had no
answers. It is fascinating to see how his writings and speeches
reflected this confrontation with hard realities.
a speech given in April, 1961, Guevara expressed his faith that
state economic management was a straight-forward endeavor:
function of the ministry is planning. We speak of an economic plan
for the country, a socialist plan. The fundamental condition for
this is control of the means of production. We already control the
means of production, but is this enough? No! We must know all the
statistics, all the economic factors. As we know, the capitalist
system left no statistics, so the government is working on them
touching preoccupation with statistics reflected the pseudoscientific
assumption that an all-knowing state could in principle "plan"
an entire economy, provided it had enough proper information. But
Minister Guevara soon admitted there had been some problems. These
he attributed to lack of revolutionary participation:
made our production plans on the assumption that we would have all
the raw material needed and all the spare parts we would require.
We started to work enthusiastically on our plan, which had not been
announced because it was a preparatory plan. The real development
plan will begin in 1962."
made an error similar to the one made by our comrades in the sugar
industry. We did not go to the masses. We made a laboratory plan.
We estimated the production, and this was our working plan. Today
we can see clearly that the masses did not participate in the plan,
and a plan that lacks the participation of the masses is a plan
that is always threatened with defeat."
attempts to make the planned economy work through sheer revolutionary
fervor and mass exhortation – so-called "moral incentives"
– did not address the real problem. By February 1963, Guevara was
blaming bureaucracy – but not the ideal of central planning.
He wrote in "Against Bureaucratism":
a year of painful experience, we came to the conclusion that it
was most essential to change our whole style of operating and to
reorganize the state apparatus in the most rational way, following
the planning methods known in our sister socialist countries [!]….
Obviously, ‘bureaucratism’ does not stem from the inception of socialist
society, nor is it its expected component. The state bureaucracy
had existed since the time of the bourgeois regimes with their atmosphere
of patronage and servility, for behind the budget a large number
of opportunists used to hang around making up the ‘court’ of the
politician of the moment."
who would deny that the "bourgeois" regime of the American-supported
caudillo Fulgencio Batista had a few bureaucracies in place
and that those were notoriously corrupt? Having shifted some of
the blame to the old regime, Guevara now proceeded to fault the
practice, but not the principle, of socialist planning:
the sake of honest self-criticism, we ought never to forget that
the economic direction of the Revolution is responsible for most
of the bureaucratic evils: State structures were not set up according
to a master plan of which the inner workings had been thoroughly
studied…. The… General Planning Board… lacked sufficient authority
over the other bodies."
far, so good. It is not surprising, after all, to find a socialist
planner asserting that more "authority over… other bodies"
is needed, so that the otherwise rational economic plan can succeed.
That same month, Guevara spoke of "socialist competition"
as a means of increasing sugar production. He was not referring
to competition in an open market, however, but of emulation and
competition for glory among cadres of sugar workers within the framework
of a state economic plan.
June 1963, the poor, bedeviled Economics Minister was coming face
to face with the fundamental problem of socialist economics: the
nature of economic calculation – costs, prices, and "value."
He seemed blissfully unaware that in 1920-1921 Austrian economist
Ludwig von Mises, the great German sociologist Max Weber, and the
Russian Populist economist Boris Brutzkus had independently
of one another made the case that without markets and real-market
price formation, rational economic calculation is impossible. Hence,
attempts to abolish markets and to plan whole national economies
were doomed to frustration, while leading to massive misallocation
of resources. Socialists responded to this argument, as they understood
it. Meanwhile, F. A. Hayek, Lionel Robbins and others contributed
to the discussion without actually improving on Mises’ insights
– and, indeed, perhaps weakening them. Having "replied"
to the softer, "knowledge" formulation of the issue, the
socialists assumed that they had won the debate, and went off blithely
ignoring the actual case made by Mises
problems confronting central planner Guevara illustrated Mises’
full claim that socialism simply could not calculate rationally
and was, therefore, not an economy but organized chaos. In his essay
"On Production Costs" (June 1963), Guevara sought, once
again, to square the circle:
of the many problems a planned economy has to face is how to measure
the economic performance of an enterprise under the new conditions
created by the development of the socialist revolution…. In the
case of Cuba, the shortage of certain goods could have produced
a rise in prices in the market until supply and demand reached a
new level of coincidence. Instead, we established a strict price-freeze
and maintained a system of rations in which the real value of
the goods [whatever that might be!] could not express itself
in the market. Although rationing is a transitory stage, with the
passage of time a planned economy in a given country begins to develop
its own internal laws, distinct and apart from the laws of the outside
world. A given price level is established through the interplay
of raw material and other costs in the process of production
was very promising because:
"When all products function in accordance with prices that
have certain internal relationships among one another – relationships
that differ from the relationships of these products in the capitalist
market – a new price relationship is created that cannot be compared
to the worldwide one[!]. How can prices be made to coincide with
value? How can a knowledge of the Law of Value be consciously wielded
so as to achieve a balance between the underlying mercantile evaluation,
on the one hand, and the faithful reflection of the true value [!]
on the other? This is one of the most serious problems confronting
the socialist economy."
Having admitted the difficulty of doing without the "law of
value" – Marxist jargon for price formation in real markets
– the Minister now argued that "socialist accounting"
based on imaginary prices which "have a purely mathematical
function" was the answer. Artificial pseudo-prices serving
as "measuring rods," a constant indexing of these "variables,"
occasional glances at world market prices for specific commodities,
and a better and more dedicated planning bureaucracy seemed enough
to Guevara His notions about fictitious "prices" with
"a purely mathematical function" were in line with the
general misunderstanding of Enrico Barone’s and Vilfredo Pareto’s
turn-of-the-century strictures on socialist planning and did nothing
to answer the Misesian challenge. A recourse to phantom prices serving
as the "parametric" boundaries of supposed macroeconomic
"equations" was the best the socialists had been able
to do in the widely misunderstood calculation controversy of the
1930s. That real economics has to do with human action and not with
algebraic functions between, or among, reified theoretical aggregates
never quite came into Guevara’s mind – not that he was the least
bit alone in this. Maurice Dobb, the English economic historian,
was such a Marxist fundamentalist that he brushed aside the whole
problem with a few technocratic asides. Perhaps he thought calculation
"in kind" was feasible. That calls to mind Lenin’s remark
in State and Revolution that socialist managers would only
need to know the four basic mathematical operations – addition,
subtraction, multiplication, and division – the late capitalist
class having simplified the problem so by combining the means of
production into trusts and monopolies. But at least Dobb saw through
the pseudo-marketry of "liberal" or "market"
socialists like Oskar Lange.
is clear from Che Guevara’s economic writings that, hard as he wrestled
with the nature of prices, markets, and economic calculation, he
never rightly grasped the essentials of the matter. Even the sidelong
glances at world-market prices were but a palliative to the nearly
complete economic chaos built into so-called "planning";
such a palliative could do little to offset the massive costs stemming
from abolition or repression of real prices and markets. To put
it another way, destitution and calculational chaos were the unsought
but unavoidable outcomes of an abolition of individual freedom to
engage in human action. It was probably a relief for Guevara to
be packed off to Bolivia to spread the revolution. Too bad he didn’t
have Human Action in his knapsack, although having sealed
his own doom by losing track of his own insights on guerrilla warfare,
he probably did not have enough time left to finish such a lengthy
Joseph R. Stromberg is a frequent contribution to LewRockwell.com,
a weekly columnist for Antiwar.com,
and an adjunct scholar with the Ludwig
von Mises Institute and the Center
for Libertarian Studies.