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Nicaragua The Sandinista Era, 1979-90
The new government, formed in 1979 and dominated by the
Sandinistas (see Glossary),
resulted in a new model of
economic
development. The new leadership was conscious of the
social
inequities produced during the previous thirty years of
unrestricted economic growth and was determined to make
the
country's workers and peasants, the "economically
underprivileged," the prime beneficiaries of the new
society.
Consequently, in 1980 and 1981, unbridled incentives to
private
investment gave way to institutions designed to
redistribute
wealth and income. Private property would continue to be
allowed,
but all land belonging to the Somozas was confiscated.
However, the ideology of the Sandinistas put the future
of
the private sector and of private ownership of the means
of
production in doubt. Even though under the new government
both
public and private ownership were accepted, government
spokespersons occasionally referred to a reconstruction
phase in
the country's development, in which property owners and
the
professional class would be tapped for their managerial
and
technical expertise. After reconstruction and recovery,
the
private sector would give way to expanded public ownership
in
most areas of the economy. Despite such ideas, which
represented
the point of view of a faction of the government, the
Sandinista
government remained officially committed to a mixed
economy.
Economic growth was uneven in the 1980s (see
table 5,
Appendix A). Restructuring of the economy and the
rebuilding
immediately following the end of the civil war caused the
GDP to
jump about 5 percent in 1980 and 1981. Each year from 1984
to
1990, however, showed a drop in the GDP. Reasons for the
contraction included the reluctance of foreign banks to
offer new
loans, the diversion of funds to fight the new
insurrection
against the government, and, after 1985, the total embargo
on
trade with the United States, formerly Nicaragua's largest
trading partner. After 1985 the government chose to fill
the gap
between decreasing revenues and mushrooming military
expenditures
by printing large amounts of paper money. Inflation
skyrocketed,
peaking in 1988 at more than 14,000 percent annually.
Measures taken by the government to lower inflation
were
largely wiped out by natural disaster. In early 1988, the
administration of Daniel José Ortega Saavedra (Sandinista
junta
coordinator 1979-85, president 1985-90) established an
austerity
program to lower inflation. Price controls were tightened,
and a
new currency was introduced. As a result, by August 1988,
inflation had dropped to an annual rate of 240 percent.
The
following month, however, Hurricane Joan cut a devastating
path
directly across the center of the country. Damage was
extensive,
and the government's program of massive spending to repair
the
infrastructure destroyed its anti-inflation measures.
In its eleven years in power, the Sandinista government
never
overcame most of the economic inequalities that it
inherited from
the Somoza era. Years of war, policy missteps, natural
disasters,
and the effects of the United States trade embargo all
hindered
economic development. The early economic gains of the
Sandinistas
were wiped out by seven years of sometimes precipitous
economic
decline, and in 1990, by most standards, Nicaragua and
most
Nicaraguans were considerably poorer than they were in the
1970s.
Data as of December 1993
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