Che Guevara: The Economics of Revolution

Helen Yaffe explores impact of Che Guevara as an economist and politician
June 2009

In my first A-level economics class, at the age of 16, I was taught these guiding principles; people only produce if they can make a profit, humans have infinite desires, while resources are limited, so everything must be rationed through the price mechanism - demand and supply.

No concept of production for need or socialist economics appeared on the curriculum. This was the early 1990s, the socialist bloc had collapsed and neo-liberalism was triumphant, or so we were told. Over the previous ten years, British Telecoms, the British water industry, British Rail, British Gas and British Coal had been packaged up and sold off to corporations and share holders.

Rational economic man, it was said, would ensure efficiency through privatisation and competition, even while, in the following years, prices rose and accidents increased in these fundamental services of the economy. Darwinism was recruited to the cause, as underdeveloped countries were forced to 'liberalise' their economies, selling their natural resources to foreign investors, rolling back the state, and removing obstacles to the 'revolutionising' power of market forces. In Latin America, the 'lost decade' of the 1980s and the 'Washington Consensus' of the 1990s saw debt crisis, restructuring and liberalisation plunge millions more into destitution, with or without inflated GDP statistics.

Amidst this neoliberal onslaught, Cuba stood almost alone. The collapse of the socialist bloc countries between 1989 and 1991 cut off 80 per cent of Cuba's trade, GDP plummeted by 35 per cent and food shortages decreased caloric intake by nearly 40 per cent. The crisis was exacerbated by punitive laws tightening the US blockade in 1990, 1992, and 1996. Despite entering a 'special period in time of peace', the Cuban revolution did not renege on political commitments to socialist welfare, state planning and the predominance of state property, even while forced to introduce pragmatic reforms - limited concessions to market forces - to stimulate the economy and get vital goods to the people.

Following my A-levels, in the mid-1990s, I lived in Cuba with my sister - an austere time during the 'Special Period'. Cubans dug deep to find what they needed to survive, as individuals and as a socialist society. In December 1995, we participated in the first solidarity brigade of the campaign from Britain, Rock around the Blockade, staying in an agricultural camp where hundreds of young Cubans had volunteered to labour in the fields, conscious that the revolution's future depended on the population's ability to feed itself. This was my first glimpse of the important relationship between consciousness and production, which lies at the heart of the economics of revolution.

Like anyone who has visited Cuba, I felt the omnipresence of Che Guevara on the island. What became clear, however, that Cubans recognised a more multifaceted individual than the one caricatured outside the island; the romantic guerrilla fighter with idealistic notions of how human beings are motivated and how social change is brought about. In the mid-1980s Cuba had pulled back from the Soviet model of socialism, entering a period known as 'Rectification'. This involved an overt return to the ideas, approach and symbolism of Che. Two Cuban academics, Fernando Hernandez Heredia and Carlos Tablada, published seminal works providing the theoretical basis for this move - linking Che's promotion of voluntary labour and consciousness to his Marxist analysis of capitalism and his critique of the Soviet system which had relied on capitalist tools to build socialism.

Che was not alone in the 1960s in criticising the USSR for neglecting questions of consciousness and failing to put human beings at the centre of development - many Marxist intellectuals in Western Europe and the US had done the same. Having seized state power, however, the Cuban revolutionary leaders moved beyond the critique to the task of transformation. Che faced the challenge of demonstrating that there was an alternative approach - the possibility of carrying out the transition to socialism in an underdeveloped country, without relying on capitalist mechanisms (the law of value, the profit motive, competition, material incentives, and all those A-Level principles). What practical policies could be implemented to transform the consciousness of individuals and put the working class in control, whilst increasing the wealth of the country?

My historian's curiosity was stirred. Hardly any information about Che's practical work as a member of the Cuban government between 1959 and 1965 was available. Che had created a system of economic management which was unique to socialism - the budgetary finance system; but what did that involve and how was it different? I set out to Cuba to find out.

This book is the result of six years of research, analysis, writing and editing. My investigations uncovered new archival material, including the internal transcripts of the bimonthly meetings in the Ministry of Industry headed by Che from 1961 and his critical notes on the Soviet Manual of Political Economy, predicting the return of capitalism to the socialist bloc; a document so controversial that it was kept under lock and key for 40 years. I met and interviewed fifty of Che's closest colleagues and compañeros, some of whom had never spoken formally about their experiences of working at Che's side while he served as President of the National Bank, head of the Department of Industrialisation and Minister of Industries between 1959-1965.

The early 1960s in Cuba was a period of turmoil and transition; nationalisations, the shift in trade to the socialist bloc, the introduction of planning, the exodus of professionals, the imposition of the US blockade, attack, sabotage and the threat of nuclear conflagration. Yet under Che's leadership, Cuban industry stabilised, diversified and grew - testimony to his capacity for economic analysis, structural organisation and the mobilisation of resources, both human and material. His approach was based on his study of Marx's analysis of the capitalist mode of production, his engagement with socialist political economy debates and his recourse to the managerial and technological advances of capitalist corporations. Che's promotion of voluntary labour and his emphasis on consciousness were not idealism but part of the search for ways to undermine the law of value, moving away from capitalist mechanisms in the construction of socialism.

As Minister of Industries, Che set up nine research and development institutes, studying everything from the mechanisation of the sugar harvest and a sugar derivatives industry, nickel production, green medicine, oil exploration, the chemical industry, to computing and electronics (at a time when there was just one computer on the island - a betting machine for the greyhound races). He integrated psychology as a management tool, secretly organised the printing of new banknotes, devised a new salary scale, promoted workers' management, inventions and innovations. In six tumultuous years, Che made an indelible contribution to Cuban development.

There have been few more poignant moments in history to talk about the economics of revolution. 2009 is the 50th anniversary of the Cuban revolution - contradictions and challenges persist, but the Revolution remains vibrant. We see the growing radicalisation of social movements and governments in Latin America and the consolidation of the Bolivarian Alternative for the Americas (ALBA) trade and cooperation agreements between them. This is also a period of acute crisis for the global capitalist system.

In late September 2008, George W Bush, perhaps the US's most neoliberal, anti-regulation, aggressively imperialist frontman in history declared: 'The market is not functioning properly.' Bankers, entrepreneurs, and moneyspinners, went from being hailed as the good guys who kept the economy dynamic, to facing public opprobrium and shareholder rage over the bonus systems which rewarded incompetence and greed.

Bush's successor, Barack Obama, has poured enormous sums of money into the US economy, propping up failing banks and financial services, car manufacturers and the housing sector. Rational economic man has given way to an unprecedented level of state intervention in a desperate attempt to save the capitalist system - well beyond the state subsidiaries so mocked and criticised in the socialist countries by neoliberal commentators.

Huge companies like General Motors are going bankrupt, not because they are technologically stagnant or unproductive, but because of the restraints imposed by capitalism's financial mechanisms and the crisis of profitability. Workers, skilled and manual, are being made redundant. Hundreds of US citizens join tent cities scattered around the capitals of highly industrialised US states, not because there are insufficient houses, but because families are thrown onto the street when they can't afford to pay rent and mortgages. Where is the rationality in any of this? In London, at the G20 in April, Obama and Prime Minister Brown recognised the end of the Washington Consensus. After years of rolling back the state, governments around the world are now impelled to intervene.

Guevara was right to recognise the technological advances of the capitalist corporations and aspire to their high productivity and efficiency. But he was also correct in the view that state planning and centralised budgets are the only rational way to organise the economy; with production for people's need, not for financial profit. In rescuing Guevara's work as a member of the Cuban government, this book hopes to place his economic ideas firmly on the table for consideration in the search for alternatives to the bitter legacy and human suffering of collapsing market economies.

Che Guevara: The Economics of Revolution by Helen Yaffe,

Palgrave Macmillan, 2009, 368pp, hbk £70, pbk £17.99

Debate this article and the Cuban revolution's relevance for the left in our forums

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Faz 5 March 2011, 22.14

Hi there, can I just say what an excellent book you have written. The general consensus of socialism has always been a system based on taking away individual freedoms. After reading this book, I understood that not only was the system a transitionary processs which attempted to instigate conscious change in men from rational actors to socially embedded individuals, but also that the main alternative to Capitalism has generally been misrepresented. Again well done on the book, and thank you for enlightening me. I am hoping to apply to economics this year and would like to pursue this understanding further.

Anonymous 29 April 2011, 04.52

I just found this:
On Cuba’s budgetary finance system. A critique of Helen Yaffe’s account

Mark 24 August 2012, 11.41

H. Yaffe should address the challenge posed by Agafonow’s “On Cuba’s budgetary finance system.”

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