Heroes of the Revolution, Part II

The Daily Reckoning PRESENTS: World improvers always have their reasons, convinced that they’re making the world a better place – when usually, the exact opposite occurs. Bill Bonner examines Che Guevara’s road to ruin…


During the 1950s, Cuba was no paradise, but it must have come close. American tourists – especially the rich – came by the boatloads. There, they could gamble, drink, swim in the warm sea, take drugs, smoke fine cigars, fish, and relax. Everything was cheap, sweet and warm: the hotels, the liquor…the women.

The island was growing rich off of tourism and exports to the United States. By 1957, Cuba had the lowest infant mortality rate in Latin America (the 13th lowest in the world), and the third-highest number of physicians and dentists per capita – more than Britain. In terms of literacy, daily nutrition, and access to mass media, Cuba was a leader in Latin America and crowding the heels of many developed, Western nations.

Of course, Cuba’s politicians were corrupt. Fulgencio Batista ruled without elections. Whether he ruled well or ill, we don’t know, but when, in the last century, the world improvers grabbed many countries by the throat; Cuba didn’t get away.

In today’s essay, we look again at one of the people who transformed Cuba from a playground to a penal colony. Again, we wonder: what was he thinking? Or was he thinking at all?

The logic that leads to modest changes for the better in a man’s private life, leads to monumental bamboozles in public life. We see it again today. America wants peace and prosperity in the Mideast, observes President Bush. Here in the West we have peace and prosperity, he notices acutely. Our governments are democracies, he muses. In democracies, people vote. Ergo, let us force people to vote in the Mideast and they will be peaceful and prosperous.

Or, he casts his eye on the country’s finances: America needs a stable currency, he thinks, but also one that is flexible enough to respond to financial crises. So, we will create a central bank whose job it is to make sure we have one.

Both propositions sound logical on the surface, but both are laced with ambiguities and adulterated by fat layers of uncertainty and wishful thinking.

Ernesto ‘Che’ Guevara played many different roles in his 39 years – a poseur and a clown in most of them. Last week, we pointed out that as an intellectual, Che made George W. Bush look like Heisenberg. And as a military strategist, he made Donald Rumsfeld look like von Clausewitz. But what intrigues us most is Che’s role as head of the Central Bank of Cuba. Of course, we know little about his actual performance as a central banker. We can merely guess from the results that no one ever did the job worse.

This is the man of whom no less a thinker than Jean Paul Sartre – and there is no other thinker we think less of – said was “the world’s most perfect human being.” Well, at least we can vouch that he was certainly a perfect failure. Of all his many roles, it was as central banker that might have been his most comical. At least he didn’t shoot anyone.

Of course, we never met the man. We should probably be glad we didn’t. That magnetic personality of his might have turned us into a piece of dumb iron, too. We might have clamped onto the glamorous guerilla like a calendar magnet to a refrigerator door, and followed him to Bolivia, where he was going to show the world how to run a revolution. We might have abandoned our family the way he did – leaving a wife and five children to the tender mercies of the Castro regime. We might have ended up in a dry Bolivian grave with holes in our chest, too.

We can only hope for the good fortune to have a gifted photographer take photos of us laid out on the table before we get dumped in our hole. Then, at least our family might get royalty payments from all the T-shirts and book sales. Che’s childhood friend, Alberto Granado, lives in Madrid and earns money by selling memories.

Che owes the Bolivian Guardia Civil a big thank you. He was on the way to becoming a pathetic fool. Actually, those who knew him well already thought he was a pathetic fool. But he still had those curls. He would still have made a fairly decent-looking corpse, if you ignored the flabby chest and paunchy stomach. But his career as revolutionary jester and gonzo-guerrilla jefe was clearly in decline, and if they hadn’t gunned him down when they did, people would have soon begun to laugh at him.

Ho Chi Minh would have made a perfectly good pastry chef, we recall. Robespierre was a decent lawyer. Stalin might have comforted souls as an Eastern Orthodox priest and Adolf Hitler could have sold his watercolors of Vienna. In every case, the world would have been better off. And was the world not impoverished once more when, in the mid-’50s, Ernesto ‘Che’ Guevara, a young man from a good Argentine family, abandoned the practice of saving people through medicine and took up the technique of destroying them through revolutionary politics? Wouldn’t the world clearly be a better place if Che had made a career treating skin disorders of the people who came to him rather than botching the good health of the whole planet?

Of course, the man had his own reasons. The world improvers always do. But here we pause to admire the addled grandeur of Che’s ambition. The world was not good enough for him. He wanted to make a new one. To Che, communism was not a fixed design for a new world, but merely an invitation to boss people around. He saw the world as an empty page of drafting paper and he wanted the only magic marker in his own fingers.

In 1960, Che took a trip around the world visiting crackpot communist regimes. It was a kind of Hellhole Tour for Revolutionaries. The country that impressed him “the most,” it is reported, was North Korea, a country where even 40 years later, people are struggling to get enough to eat. According to a UN study, “crop failures” have caused such a drastic cut in daily rations in 2003 that North Korean “households have to rely on alternative ways of getting food including rearing livestock, growing kitchen gardens and collecting wild foods like edible grasses, acorns, tree bark and sea algae.”

Of course, if Che liked North Korea so much, he might have considered staying on there and munching on the tree bark. But if you think that that was ever a possibility, you are missing the malignant imbecility that defines the world improver’s mind. It is not enough for him to live in a stifling prison; he insists that you live in one, too. This is why Che chose Bolivia for his last campaign; the country lies in the heart of South America, bordering Peru, Chile, Paraguay, Brazil and Argentina. He figured that if he could undermine the legitimate government of Bolivia, he could then export revolution to the entire continent and then, the world. He considered it the final showdown between capitalism and communism.

But his absurd hallucinations did not stop there. Che did not merely want a new world; he also insisted on a whole new race of human beings to put in it.

During the course of the guerilla war against the Batista government, Che took over the town of Sancti Spiritus and immediately issued a series of edicts that sounded like Oliver Cromwell bossing the Irish around. He imposed regulations covering everything: sex, drinking, gambling. You have to marvel at the swelling vanity of it all. What made Guevara think he knew better? Why were his drinking rules superior to the rules people imposed on themselves? But that is the world improver’s way: a road to ruin, paved with bad intentions.

But as soon as his back was turned, what did the ungrateful, fun-loving Cubans do? They went right back to pitching woo and getting drunk – just as they always had.

Thus, Che learned that edicts alone were not enough. Later, he would try to correct his heaving masses in a more familiar way – by sending them to concentration camps. As he explained, “[We] only send to Guanahacabibes those doubtful cases where we are not sure people should go to jail…people who have committed crimes against revolutionary morals.”

Guanahacabibes was the model for a whole gulag of labor camps set up to punish, confine, and eliminate people thought to be uncooperative. Dissidents, homosexuals, AIDS victims, Catholics, Jehovah’s Witnesses, Afro-Cuban priests – the victims changed with the revolutionary fashions – were forced at gunpoint to go to special Unidades Militares de Ayuda a la Producción, or Military Units to Help Production, camps. Some were tortured. Some were worked to death. Some eventually returned. Some didn’t.

The Soviets had been Che’s backers and his inspiration for his work camps, his kangaroo courts, and much of his appalling rhetoric. But no matter how much support they gave, it wasn’t enough. Besides, by the 1960s, the Russian revolution was already 40 years old. The old revolutionaries were dead and the new ones were party hacks – bureaucrats who looked forward to retirement. When the Cuban missile crisis exploded, Moscow backed down.

Poor Che was dreadfully disappointed. He’d wanted to fire the missiles himself and go out in a blaze of ersatz glory:

“This country [Cuba] is willing to risk everything in an atomic war of unimaginable destructiveness to defend a principle,” said Che. Then, he told the British communist newspaper, “If the rockets had remained, we would have used them all and directed them against the very heart of the United States, including New York, in our defense against aggression.”

Poor Che. Even the Russians let him down. The whole race had let him down. No, this sorry species was not good enough for him. He began to call for a “New Socialist man” to populate his new world. In his famous article, “Notes on Man and Socialism,” he argued, “to build communism, you must build new men as well as the new economic base.” The basis of revolutionary struggle is “the happiness of people,” he explained, helpfully. This required the creation of more complete and more fully developed human beings. But as far as we can tell, the New Socialist man was new only in his willingness to go along happily with any goofball idea Che came up with.

Readers will recognize the New Man; he is not that much different in essentials, actually, from the old one: ready to believe almost anything and ready to go along with almost anything. He is a good revolutionary, Che explained, because he hates the bourgeoisie, “which pushes a human being beyond his natural limitations, making him into an effective, violent, selective, and cold-blooded killing machine.” That is to say, Che saw the new world order as nothing more than the society he wanted to run himself. And the New Socialist Man? He saw him every time he looked in the mirror.

One of his friends asked how he could reconcile this line of thinking with his oath as a doctor. “Look,” he replied, sounding more like an unreconstructed hit man than a New Socialist man, “in this thing you have to kill before they kill you.”

For Che also had the old-fashioned habit of killing people who got in his way, no matter what class they were part of. Like his Bolshevik role models, he did not hesitate to kill peasants as well as factory owners when they became inconvenient or recalcitrant. He also had an old-world way of lying, cheating and stealing to get what he wanted. He murdered people on trumped up charges, stole their property, redistributed choice property to communist party cronies, and set up forced labor camps on the Soviet model. After Batista fled the country, Che seized an immigrant’s mansion for himself.

Opponents were hauled in front of the military court, which, like Stalinist courts, set about cleansing Cuba of counterrevolutionary elements.

Javier Arzuaga, a Basque chaplain who succored the condemned men, gives this recollection of life in the old stone fortress of La Cubana with Che in command:

“There were about eight hundred prisoners in a space fit for no more than three hundred: former Batista military and police personnel, some journalists, a few businessmen and merchants. The revolutionary tribunal was made of militiamen… I remember especially the case of Ariel Lima, a young boy. Che did not budge. Nor did Fidel, whom I visited. I became so traumatized that at the end of May 1959 I was ordered to leave the parish of Casa Blanca, where La Cabaña was located and where I had held Mass for three years.”

Che-as-central-banker was just as bad as Che-as-judge-and-jury

“[He] was ignorant of the most elementary economic principles,” said his deputy, Ernesto Betancourt. Whether that was a good or a bad thing, we don’t know. If he had understood economics, he wouldn’t have been a communist in the first place. Had he understood anything about economics, he wouldn’t have been in Fidel’s little band of sweaty revolutionaries and would never have gotten the job running the Central Bank of Cuba. In his case, not knowing anything about economics was a job requirement.

So, what does a man who doesn’t know a thing about economics do when he gets to be head of a central bank? Alvaro Vargas explains what happened:

“Guevara’s powers of perception regarding the world economy were famously expressed in 1961, at a hemispheric conference in Uruguay, where he predicted a 10 percent rate of growth for Cuba ‘without the slightest fear,’ and, by 1980, a per capita income greater than that of ‘the U.S. today.’ In fact, by 1997, the thirtieth anniversary of his death, Cubans were dieting on a ration of five pounds of rice and one pound of beans per month; four ounces of meat twice a year; four ounces of soybean paste per week; and four eggs per month.”

Of course, all world improvers depend on central planning; they know their plans are absolutely central to improving you. As Guevara explained in 1961:

“Another function of the ministry is planning…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 now.”

Planning was easy enough. It was getting a result that was difficult, as Che began to realize:

“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.”

Those masses! What a pain in the neck they were. You had to boss them around, but you had to get them on your side, too!

Che’s thinking develops:

“After 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.”

After a few more months, Che gave up. The economy was a wreck and Che longed for the good old days when “it was all a lot of fun, what with the bombs, speeches, and other distractions to break the monotony I was living in.”

So, in 1965, the now-famous revolutionary went to Africa, where he backed Pierre Mulele in the Congo. Nobel prize winning novelist V.S. Naipaul told how Mulele spiffed up things in the heart of darkness: by killing everyone who could read and everyone who wore a tie. Che’s intervention may have helped Mulele lose to Mobutu, who crushed the insurgents and ruled like a brutal oaf for decades.

When the Africans had failed him, Che decided to try his own people again…or, at least people who spoke his language. He went off to Bolivia and mounted another slapstick revolutionary movement. It ended when he was shot by a Bolivian firing squad.

That was when Che-the-pathetic-blundering-world improver died. It was not long after that he was resurrected as Che-the-romantic-revolutionary and T-shirt symbol.

Bill Bonner
The Daily Reckoning
March 3, 2006

Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).

In Bonner and Wiggin’s follow-up book, Empire of Debt: The Rise of an Epic Financial Crisis, they wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions. Daily Reckoning readers can buy their copy of Empire of Debt at a discount – just click on the link below:

“Now Perhaps Someone Will Listen!”

“How long can households sustain negative savings?”

USA Today posed the same question yesterday that we did, but the USA Today hacks had an answer: a long, long time.

Americans own about $62 trillion worth of assets, they tell us. Even if they were to sell them off, mortgage them, and squander them at the rate of $1 trillion per year, that would still give them 62 years. Then, the Chinese might own every light bulb, trailer, and Elvis painting in the entire country. But it would have been a fun 62 years, right?

If it only worked that way!

The trouble with wealth is that it is not distributed as neatly and equally as the hacks tell us. Some people are flush with assets; others have none. Most people have too few assets. There are millions and millions of people who are already only a step from being paupers. They already count on credit cards, mortgage refinancing, Christmas bonuses and extra hours of work just to keep going. As the national savings rate dips, these people do not calmly lower their own savings rate from, say 10% to 8%. They had no money to start with and now they will be forced to borrow just to keep up with bills.

But why should they have to save for a rainy day, they asked themselves distant years ago, when there is so much ready credit just lying around begging to be given away? Hey, if they get themselves in a jam there’ll always be another shiny plastic card in the mail to bail them out. The fine print can wait. They’ll just borrow and borrow.

And why shouldn’t they? They are urged by economists to do so. Americans don’t really need to save…because Asians save enough for themselves and everyone else in the world. And these poor Asians desperately need someone to take all that money off their hands. What could be nicer than doing them a favor? It’s as if we blasted a hole in the back wall of some Asian bank and can take their money whenever we want.

“Suffering from the greatest domestic saving shortfall in modern history,” explains Stephen Roach, ” the United States is increasingly dependent on surplus foreign saving to fill the void. The net national saving rate – the combined saving of individuals, businesses, and the government sector after adjusting for depreciation – fell into negative territory to the tune of 1.3% of national income in late 2005. That means America doesn’t save enough even to cover the replacement of its worn-out capital stock. This is a first for the US in the modern post-World War II era – and I believe a first for any hegemonic power over a much longer sweep of world history.”

Well, there’s a first time for everything. This is also the first time any people have ever had such ready access to so much credit. But is a credit card really as good as money in the bank? Are Asian savers really prepared to lend us as much money as we want whenever we need it? On those two questions dangles the empire’s financial future. But who bothers to ask?

We do, dear reader. We will even bother to answer them.

If a rainy day were to come, the difference between savings and credit is the difference between owning a snug pair of galoshes of your very own and having to borrow a pair from that strange lady next door. Will she have a pair that will fit you? Will she be home when you ring the bell? What will she ask in return? Does she even have any galoshes?

You just don’t know…

Which brings us to the second part of the question: can America count on Asians for its savings needs? That question answers itself readily, too. The Chinese, of course, are such dear and trusted neighbors. Helping rich capitalists finance their extravagant lifestyles is what they live for; we all know that. It just warms the heart of the Chinese laborer – a selfless soul, working 12 hours a day in an unheated factory – to know that it is his savings that help Americans pay for their air-conditioned garages and for cable TV in every room. And the Japanese…have they not been reliable allies and helpmates ever since Admiral Perry discovered them?

Yes, dear reader, you can stop worrying on that score. Asians have too much money. They will always be only too happy to lend it to us at less than 5% interest.

But wait, you say. At 5%, the poor fellows are losing money. Domestic inflation in America is said to be 3%, but who believes it? And on the world market, prices for the things Asians need – oil, copper, wheat, gas, beef, tungsten, silver – are exploding. Gold rose 30% in the last 12 months. The U.S. balance of trade is $700 billion in deficit. The U.S. federal budget is $500 billion in deficit. Why would he continue to lend money to the world’s biggest debtor at 5%…when his own hard costs are rising at 10% to 20% per year and when he can get 30% just by holding safe, sure gold?

Well, say the economists, because the U.S. dollar is the world’s reserve currency and because he needs it to buy oil and those other things. But does he? This month, Iran has promised to start selling its oil for euros. And even if oil were still sold for dollars, there’s no guarantee that the price won’t change. The foreigner may be better off holding his money in euros, yen, yuan or better yet, in gold. He can always exchange for dollars at the last moment and at, perhaps, a better rate.

How long can Americans sustain negative savings? We don’t know, but when Asian savers figure out that that they are better off in gold than dollars, U.S. householders are bound to start wondering about it.

[Ed. Note: Investors in the know have increasingly been looking to the yellow metal to safeguard themselves against our unstable economy – and you can, too! Our good friends at EverBank have the easiest – and safest – way to get in on this market – their 5-Year MarketSafe Gold Bullion CD. Click here for all the details:

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More news from Aussie Joel and The Rude Awakening…


Eric Fry, reporting from New York City:

“So it’s time once again for another “Rude Awakening Group Research Project.” Between today and next Friday, we would ask you to share with us your favorite “alternative energy” stocks.”

For the rest of this story, and for more market insights, see today’s issue of The Rude Awakening:

Sell Stocks, Buy Gas


Bill Bonner, with more thoughts from France…

*** This has been quite the year thus far for precious metals…the price of silver broke through 22-year highs this week, anticipating the launch of the silver ETF.

Although the SEC has not yet approved the ETF, Barclays Global Investors’ spokeswoman Christine Hudacko confirmed the SEC had begun the standard procedure for financial products in registration, but it does still need to be approved.

According to Barclays, “the silver ETF appears structured similarly to the pair of existing gold ETFs – the precious metal is held in a vault and investors trade shares that represent ownership of a fraction of an ounce.”

The silver ETF will be good news for investors who have not gotten involved in the market before this, due to storage costs and shipping fees.

We’ll keep you updated…

*** The chains grow heavier…the lies grow more absurd…and the delusions more preposterous.

At first, the chains are so light they can’t be felt and then, they’re so heavy they can’t be broken.

A great empire degenerates into deceit and delusion, imagining that its government is the same modest republic of 1776, with the same simple virtues of the founding fathers. The empire imagines that its businesses are still the energetic, freewheeling enterprises of Gould, Rockefeller and Vanderbilt.

We note, for example, that the CEO of Citigroup earned $23 million last year. What were the shareholders thinking? They must have been thinking about what a great thing capitalism is because it permits people to earn far more than they are worth.

And this little note from correspondent Byron King:

“The bureaucrats forbid even the taking of photos of the flag-draped caskets at Dover. It is, in its own way, the same sleight of hand that is now doing away with the reporting of M-3 by the Federal Reserve.

“For a mundane example of the foregoing, I was talking with a young graduate student last weekend. He is studying architecture and urban design. I asked him if he had visions of one day becoming another master builder or planner in the likes of Palladio or Christopher Wren. He said no, much of what they learn in school deals with how to fill out forms at the building code office, and write zoning approval applications. He barely even understood my question.”

And here cometh our favorite columnist, Thomas L. Friedman, praising the Land of the Free, and imagining that a little more central planning is just what it needs.

“The Energy Question is the big strategic issue of our time,” he writes, “overtaking 9/11 and the war on terrorism. If a leader from either party would correctly frame the issue – that a gas tax is the single more important geostrategic move we could make today – a solid majority would support it.”

*** At least we both agree that energy is a big thing.

From the New York Times:

“The Age of Oil – 100-plus years of astonishing economic growth made possible by cheap, abundant oil – could be ending without our really being aware of it. Oil is a finite commodity. At some point even the vast reservoirs of Saudi Arabia will run dry. But before that happens there will come a day when oil production ‘peaks,’ when demand overtakes supply (and never looks back), resulting in large and possibly catastrophic price increases that could make today’s $60-a-barrel oil look like chump change. Unless, of course, we begin to develop substitutes for oil. Or begin to live more abstemiously. Or both. The concept of peak oil has not been widely written about. But people are talking about it now. It deserves a careful look – largely because it is almost certainly correct.”

The days of cheap energy may be over. The world will have to adapt. But how could you make a bigger mess of it than by allowing Thomas L. Friedman come up with a solution – not just for himself, but also for the entire empire?

The Daily Reckoning