Still a messiah?

Forty years after his death, Che Guevara has little to offer as a guide for making revolution. So wh

In 1968, when the photographer Don Honeyman was experimenting with Alberto Korda's iconic image of Che Guevara, he discovered something curious. Honeyman had been experimenting with a process of solarisation as a way of making fashion images more exciting and had been asked by a poster company to try the same thing with Korda's photograph of Che - said to be the most reproduced photo in the world. But he was having trouble duplicating the look of the image as it had first been published in Europe by the revolutionary press.

"I worked over the image for several days," Honeyman wrote, "but couldn't seem to get the same idealistic gleam in Che's eyes. I finally compared the first Che with the second, and discovered that some canny designer, presumably at [the original Italian printers], had made Che slimmer and his face longer, by about one-sixth. It was so effective that I, too, stretched him, and it worked like a charm. It doesn't really do to have a revolutionary who's too plump."

There is something fitting about the world's most iconic revolutionary image having been manipulated. Che's legacy, 40 years after his death in a failed attempt to ignite revolution in Bolivia, rests heavily on an image so powerful and so plastic that it still serves both as a generalised inspiration to rebel and as a vehicle for the sale of everything from ashtrays to T-shirts.

The photograph was taken in March 1960 at the funeral of the victims of an explosion on board the French freighter La Coubre in Havana harbour, in which 81 people had died. The Cuban leadership suspected sabotage by the CIA and the funeral, attended by Simone de Beauvoir and Jean-Paul Sartre, among others, became an anti-American rally. Guevara did not speak, and came into view only briefly for Korda, who was recording images of the event from the crowd. Korda had started out as a fashion photographer, but was then Fidel's personal photographer. He managed two shots with his Leica before Guevara disappeared from view.

The pictures were not published in the reports of the event, but Korda pinned them up in his studio in Havana, and in 1967 gave two of them to the Italian publisher Giangiacomo Feltrinelli, who was planning to publish Che's Bolivian Diary. Within six months Che had been assassinated in Bolivia and both Feltrinelli and the Cuban government published the first posters.

Even in death, Che was lucky with his photographers. Freddy Alborta, the only professional photographer allowed to see his body shortly after his execution in Bolivia, wired a haunting photograph of the corpse, lying on a table, surrounded by military men. The image is Christ-like and has been compared both to Andrea Mantegna's Lamentation Over the Dead Christ and to Rembrandt's Anatomy Lecture of Dr Nicolaes Tulp. But it was Korda's lucky shots that ensured Che Guevara was not for gotten. Korda's photograph, suitably doctored, took on a life of its own, creating an irresistible combination of celebrity and rebel glamour that gave Che an influence in a world that had long forgotten the details of his exploits.

Through the image, the complexities of Che's life and thought are reprocessed into an abstraction that can serve any cause. It was later used in a fake Warhol, a fake that Warhol authenticated, on condition that the revenues go to him. Che's transformation from revolutionary martyr to pop celebrity, with all that it implied in ubiquity, was complete. Forty years on, it is still going strong: when the Victoria and Albert Museum in London mounted an exhibition last year of the history of the Korda image, the curators assembled objects from more than 30 countries, used in contexts as diverse as Madonna's album American Life and Ricky Gervais's Politics DVD to Jean-Paul Gaultier's sunglasses campaign. It has been painted as graffiti in Bethlehem, carried in demonstrations from Palestine to Mexico and borrowed by such artists as Pedro Meyer, Vik Muniz, Martin Parr and Annie Leibovitz. It has been used to represent causes as diverse as world trade, anti-Americanism, teenage rebellion and Latin American identity. It has sold dolls, French wine, model cars, cigarette packets, stamps, Swatch watches, Austrian skis, ashtrays, mugs, keyrings and nesting Russian dolls. Nor is it under capitalism only that Che's image stimulates sales: souvenir shops in Cuba are festooned with Che tourist tat, and in Bolivia, where the left-wing president, Evo Morales, has installed Che's image constructed from coca leaves in his presidential suite. Tourist agencies even offer package tours to the spot where he died.

Emotional appeal

Che's durability owes little to his revolutionary achievements, though his revolutionary credentials are authentic. He was radicalised as a young man by the US-backed coup in Guatemala that overthrew the elected government of Jacobo Árbenz and he played a central part in the Cuban revolutionary struggle. After the revolution he served as finance minister, but grew increasingly alienated from the Castro brothers. He went to the Congo to support revolution there before setting out on the fatal Bolivian adventure, hoping to spread revolution across the subcontinent. Ernesto Guevara was certainly a revolutionary, but so were many others whose names have long been forgotten and whose records inspire more critical assessment.

Che's appeal is emotional. His death in Bolivia as a relatively young man created Che as secular Christ, the man who took upon himself the sins of the world and gave his life for the cause of the oppressed. His memory remains available to the oppressed; his image continues to inspire the hope of change and the virtue of rebellion, enhanced rather than diminished by his defeat. Christ, too, was defeated on earth and, again like Christ, Che's death conveys a promise of redemption through inspiration. He is the rock-hero biker revolutionary, the martyr to idealism, a James Dean in fatigues. When Pope John Paul II celebrated mass in Havana's Revolution Square, the giant image of Che that hangs there served as a revolutionary counterpoint.

But beyond his quality of universal icon of rebellion, what survives of Che's life's work? The promotion of Marxism and violent revolution? Forty years after his death, it is hard to imagine what an octogenarian Che would have felt about his younger self or about the world that he did not live to see. Would his personal and political asceticism have survived in an age in which rampant consumerism has captured the mass imagination? Would he have been distressed or gratified that the USSR, embraced by Fidel Castro against his objections, had collapsed? In 1964 he called Russia a "pigsty" because of the conditions in which it kept the workers. Would he have been any more gratified by the conditions of Cuban workers, nearly 50 years after the revolution? Would he have been encouraged by the rise of China, whose revolution he praised, or appalled at China's new character as a state-managed market economy?

In Cuba his image serves the mythology of the revolution that is used to glamorise a sclerotic state structure: old men in freshly laundered fatigues preside over a dollarised economy, heavily dependent on tourism, in which young women turn to prostitution to buy the consumer goods their counterparts in Miami take for granted.

In wider Latin America, his legacy is mixed. The perceived failure of the neoliberal reforms of the 1990s has intensified opposition to the Washington consensus and produced a series of left-wing victories at the ballot box that guarantee his name is honoured - as in 2006, when Daniel Ortega's Sandinista movement, now a party of dubious revolutionary credentials, was elected to power and the party faithful wore Guevara T-shirts to the victory party. Hugo Chávez, the populist leader of Venezuela, who is known for his eagerness to wear the clothes of the Cuban revolution, often dons a Che T-shirt. Some of his ideas, too, are back in vogue with Latin America's new left: pan-Americanism, support for the region's popular movements, nationalisation and centralisation of government. The various "expressions of the popular will" that he favoured over ballot-box democracy - neighbourhood courts and the Committees for the Defence of the Revolution - have found new expression in Venezuela and Bolivia.

But even here, Che might have felt a little unease. He was critical of much of the Latin American left for its rejection of the armed struggle, and grafted his Stalinism on to the tradition of revolutionary petit bourgeois nationalism in Cuba exemplified by José Martí, much as the Sandinistas were to use Sandino as an inspiration in Nicaragua. Yet many of those now most enthusiastic about his memory came to power through the ballot box. Only in Colombia, where he remains an inspirational figure for the dissident Farc, would he recognise true heirs.

Politically, there is no movement that could be called Guevarist. In Peru, Fidelistas and Guevarists are in opposing camps, as they are in Panama and Mexico. For contemporary intellectuals of the left, Che's legacy, with its romanticism and heroisation of the guerrilla, is problematic. For instance, Jorge Castañeda, the Mexican writer and sociologist, wrote in his biography of Che that Che's ideas had nothing to offer present generations. For Castañeda, his "refusal of ambivalence" and his unwillingness to understand life's contradictions were relics of a damaging era in Latin America. In an age in which the absolutes of Marxism and market capitalism were judged to have failed, Che had nothing to say.

Nor has his popularity in the west translated into any coherent politics. Che's image is still carried by the left, but is also adopted by thousands who have only the vaguest idea of his life, beyond the Hollywood version of The Motor cycle Diaries. In London, a small torchlit rally held in Trafalgar Square to commemorate the 35th anniversary of his death gave a flavour of the portmanteau character of Che's image. In the heroic prose of the participants, "banners and placards were held high" and "chants and speeches rang out from the megaphone across Trafalgar Square to the listening ears of the demonstrators and the passing public and readings from Che's writings were read out". Speakers came from Rock Around the Blockade, Fight Racism! Fight Imperialism!, Victory to the Intifada, the Colombia Solidarity Campaign, the Africa Liberation Support Campaign and the people's movement of the Philippines.

To this assorted list, as to oppressed peoples elsewhere, Che has little to offer as a guide to making revolution. What he does have is the messianic image of sacrifice for the sins - or sufferings - of others. Regardless of his failures and contradictions, or the obsolescence of his methods and ideology, the potency of that image, with its symbolic, religious quality, continues to inspire.

As the Portuguese writer José Saramago wrote, in characteristically mystical terms: "Because the photo of Che Guevara was, before the eyes of millions of people, the image of the supreme dignity of the human being. Because Che Guevara is only the other name of what is more just and dignified in the human spirit.

"He represents what sometimes is asleep in us. It represents what we have to wake up to know and to learn to know even ourselves, to add the humble step of each one of us to the common road of all of us."

This article first appeared in the 08 October 2007 issue of the New Statesman, Election fever

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The optimism error

We are told that austerity has triumphed and that the British economy is running full steam ahead. The reality is more alarming.

In Cardiff last Thursday, 7 January, George Osborne warned of a “dangerous cocktail of new threats” to Britain’s prosperity. These include collapsing global stock-market and commodity prices, weak growth in China and Latin America, stagnation in Europe and turbulence in the Middle East. Osborne was right to prepare us for “headwinds”. What he could not admit was that the fragility of the British recovery he now discerns – just two months after his triumphal Autumn Statement – is due, in no small measure, to his own austerity policies.

The unpalatable truth is that austerity in the face of the private-sector collapse of 2008-2009 has weakened our ability to produce output. Britain has been left overfinancialised, overborrowed and underinvested. It is not surprising that it is exceptionally exposed to any global downturn.

Before John Maynard Keynes it was believed, by economists at least, that a competitive market would normally produce full employment. As the facts of experience appeared to indicate otherwise, economists, prompted by Keynes, sharpened up their theory. A market economy would ­always lead to full employment provided wages and prices were flexible. Workers, if facing unemployment, had only to accept wage reductions to “price themselves back into work”.

However, as it seemed unrealistic to suppose that workers would do this – or do it quickly enough – government policy could short-circuit the painful process of adjustment. When a slump threatened or occurred, a government could stimulate spending by cutting interest rates and by incurring budget deficits. This was the main point of the Keynesian revolution.

This policy ran from the 1950s to the 1970s. It was overthrown in the 1980s, when unemployment prevention became confined to interest-rate policy, eventually run by the central bank, not the government. By keeping the rate of inflation constant, the monetary authority could keep unemployment at its “natural rate”. This worked quite well for a time, but then, following the widespread failure of the banking system, the world economy collapsed in 2008.

In a panic, the politicians, from Barack Obama to Gordon Brown, took Keynes out of the cupboard, dusted him down, and “stimulated” the economy like mad. When this produced some useful recovery they got cold feet. “Keynes,” they said, “you’ve done your job. Back in the cupboard you go.” I wrote a book at the time called The Return of the Master. A reviewer pointed out that the Master had returned for six months only.

Why had the politicians’ nerve failed and what were the consequences?

The answer is that in bailing out leading banks and allowing budget deficits to soar, governments had incurred huge debts that threatened their financial credibility. It was claimed that bond yields would rise sharply, adding to the cost of borrowing. This was never plausible in Britain, but bond yield spikes threatened default in Greece and other eurozone countries early in 2010. Long before the stimulus had been allowed to work its magic in restoring economic activity and government revenues, the fiscal engine was put into reverse, and the politics of austerity took over.

Yet austerity did not hasten recovery; it delayed it and rendered it limp when it came. Enter “quantitative easing” (QE). The central bank would flood the banks and
pension funds with cash. This, it was expected, would cause the banks to lower their interest rates, lend more and, by way of a so-called wealth effect, cause companies and high-net-worth individuals to consume and invest more. But it didn’t happen. There was a small initial impact, but it soon petered out. Bank lending, an important index of recovery, in fact went down as the institutions sat on piles of cash and the wealthy speculated in property.

So we reach the present impasse. Events have confirmed that a competitive market economy is subject to severe collapses, and the effects of these linger in the form of elevated unemployment, lower output, lower productivity and increased poverty. At the same time, however, counter-cyclical policy is disabled. Monetary expansion is much less potent than people believed; and using the budget deficit to fight unemployment is ruled out by the bond markets and the ­Financial Times. The levers either don’t work, or we are not allowed to pull them. Where do we go from here?


The present situation

The first thing is to establish where we now are. How much recovery has there been in Britain? Economists try to answer this question with reference to the output gap – the difference between what an economy is actually producing and what it can produce. The OECD’s most recent estimate of this gap in the UK stands at a negligible -0.017 per cent. We might conclude from this that the British economy is running full steam ahead and that we have, at last, successfully recovered from the crash. This is the basis of George Osborne’s triumphalism. His critics, including myself, have been proved wrong. His austerity policies have worked. Or so we are told.

But such a conclusion would be premature. Although we are producing as much output as we can, our capacity to produce output has fallen. This can be shown by comparing the current economic situation to where we would expect to be, according to the historic trend.

From this perspective, championed by the Oxford economist Simon Wren-Lewis, the position is far less rosy. Growth in output per person in Britain (roughly “living standards”) averaged 2.25 per cent per year for the half-century before 2008. Recessions in the past have caused deviations downward from this path, but recoveries had delivered above-trend growth, lifting us back up to the previous path. One can say that the “business cycle” oscillates between errors of pessimism and errors of optimism. In other words, the loss of output is temporary.

This time it was different. The recovery from the financial crisis was the weakest on record, and the result of this is a yawning gap between where we are and where we should have been. Output per head is between 10 and 15 per cent below trend.

We are faced with a puzzle. If the output gap is as small as the OECD believes, then the British economy appears to have lost much of its productive potential. It is no longer a case of demand falling short of supply, leaving a surplus of workers and capital equipment. The supply is no longer available: we have lost eight years’ growth of productivity. Between 1971 and 2007 productivity growth averaged 2-3 per cent a year. Since the recession started it has been close to zero. Why is it that the recession turned spare capacity into lost capacity? One answer lies in the ugly word “hysteresis”.



This is an idea borrowed from physics. If an insulated wire is wrapped around an iron bar, and an electric current is then passed along the wire, the iron bar becomes magnetised. Some of this magnetism remains even after the current has been switched off. A shock has a long-lasting effect. This is labelled hysteresis.

An economy experiences hysteresis not when output falls relative to potential output, but when potential output itself falls as a result of a recession. What happens is that the recession itself shrinks productive capacity: the economy’s ability to produce output is impaired.

The intuition behind it is simple enough: if you let a recession last long enough for capital and labour to rust away you will lose growth potential, on account of discouraged workers, lost skills, broken banks and missing investment in future productivity. By not taking steps to offset the negative shock of the recession with the positive shock of a stimulus, the coalition government cost the country 10 per cent or more of potential output.

The phenomenon of hysteresis is not ­necessarily captured by high levels of “headline” unemployment. In fact, low levels of unemployment may reflect low productivity growth, as employers prefer to use cheap workers to investing in machines: unemployed workers may be re-employed in part-time or minimum-wage or zero-hour contract jobs. Much of the new private-sector job creation lauded by the Chancellor is exactly in such low-productivity sectors. The collapse of investment is particularly serious, because investment is the main source of productivity.

The challenge for policy is to liquidate the hysteresis – to restore supply. How is this to be done?


Blockage of policy

An economic recession is precipitated by a fall in private spending, be it investment or consumption. It can be countered by monetary and fiscal policy, aiming either to stimulate private spending or to replace it temporarily by public spending. On the monetary front, the bank rate was dropped to near zero; this not being enough, the Bank of England pumped out hundreds of billions of pounds between 2009 and 2012, but too little of the money went into the real economy. As Keynes recognised, it is the spending of money, not the printing of it, which stimulates productive activity, and he warned: “If . . . we are tempted to assert that money is the drink which stimulates the system to activity, we must remind ourselves that there may be several slips ­between the cup and the lip.”

That left fiscal policy. Fiscal policy can fight recession by cutting taxes or increasing public spending. Both involve deliberately budgeting for a deficit. In Britain, any possible tolerance for a deficit larger than the one automatically caused by a recession was destroyed by fearmongering about unsustainable debt. From 2009 onwards, the difference between Labour and ­Conservative was about the speed of deficit reduction. The contribution that deliberate deficit budgeting might make to recovery was never mentioned, except by unreconstructed Keynesians.

So we now have a situation in which the main tools available to government to bring about a robust recovery are out of action. In addition, sole reliance on monetary policy for stimulus creates a highly unbalanced recovery. The money the government pours into the economy either sits idle or simply pumps up house prices, threatening to re-create the asset bubble that produced the crisis in the first place. We already have the highest rate of post-crash increase in house prices of all OECD countries. This suggests that the next crash may not be far off.


The public accounts trap

From 2009 onwards the main obstacle to a sensible recovery policy has been the obsession with balancing the national budget. A government can finance its spending in one of three ways: it can raise taxes, borrow from the private sector, or borrow from the Bank of England (that is, “print money”). Each has advantages and disadvantages, but public opinion has decided that the first of these – covering all spending by taxes – is the only “honest” way. In popular discourse, borrowing signifies a “deficit”, and a particular horror attaches to deficits, because they suggest the government is not “paying its way”. “We must get the deficit down” has been the refrain of all the parties.

Printing money to finance public investment has been suggested by both the Labour leader and the shadow chancellor as a way to get round the borrowing constraint. Its advantage is that it wouldn’t directly increase the national debt, because the government would only owe the money to itself. On the other hand, it might destroy confidence in the state’s ability to control its spending, and it would jeopardise the independence of the central bank. So, printing money to pay for public spending should only be a remedy of the last resort.

It is right to be concerned about a rising national debt (now roughly £1.6trn). But the way to reverse it is not to cut down the economy, but to cause it to grow in a sustainable way. In many circumstances, that involves deliberately increasing the deficit. This is a paradox too far for most people to grasp. But it makes perfect sense if the increased deficit causes the economy, and thus the government’s revenues, to grow faster than the deficit. If the economy is in the doldrums, practically all forms of government expenditure should be welcomed, as they utilise idle resources.

In our present situation, with little spare capacity, the government needs to think much more carefully about what it should be borrowing for. Public finance theory makes a clear distinction between current and capital spending. A sound rule is that governments should cover their current or recurrent spending by taxation, but should borrow for capital spending, that is, investment. This is because current spending gives rise to no government-owned assets, whereas capital spending does.

If these assets are productive, they pay for themselves by increasing government earnings, either through user charges or through increased tax revenues. If I pay for all my groceries “on tick” my debt will just go on rising. But if I borrow to invest in, say, my education, my increased earnings will be available to discharge my debt.

Covering current account spending by taxation is at the heart of the balanced budget rule. But as Thomas J Sargent, certainly no Keynesian, wrote in 1981 (Federal Reserve Bank of Minneapolis, Research Department Working Paper W): “The principles of classical economic theory condone deficits on capital account.”

Now is an ideal time for the government to be investing in the economy, because it can borrow at such low interest rates. But surely this means increasing the deficit? Yes, it does, but in the same unobjectionable way as a business borrows money to build a plant in the expectation that the investment will pay off. It is because the distinction between current and capital spending has become fuzzy through years of misuse and obfuscation that we have slipped into the state of thinking that all government spending must be balanced by taxes – in the jargon, that net public-sector borrowing should normally be zero. George Osborne has now promised to “balance the budget” – by 2019-20. But within this fiscal straitjacket the only way he can create room for more public investment is to reduce current spending, which in practice means cutting the welfare state.


A British Investment Bank

How can we break this block on capital spending? Several of us have been advocating a publicly owned British Investment Bank. The need for such institutions has long been widely acknowledged in continental Europe and east Asia, partly because they fill a gap in the private investment market, partly because they create an institutional division between investment and current spending. This British Investment Bank, as I envisage it, would be owned by the government, but would be able to borrow a multiple of its subscribed capital to finance investment projects within an approved range. Its remit would include not only energy-saving projects but also others that can contribute to rebalancing the economy – particularly transport infrastructure, social housing and export-oriented small and medium-sized enterprises (SMEs).

Unfortunately, the conventional view in Britain is that a government-backed bank would be bound, for one reason or another, to “pick losers”, and thereby pile up non-performing loans. Like all fundamentalist beliefs, this has little empirical backing. Two relevant comparators – the European Investment Bank and Germany’s KfW (Kreditanstalt für Wiederaufbau) – show that, in well-regulated financial systems, such banks pay for themselves. Neither bank has had to go back to its shareholder(s) to raise fresh money to cover losses. The EU is setting up a European Fund for Strategic Investments, which, with a capitalisation of €21bn, is expected to lever at least €315bn of investment over the first three years.

George Osborne has rejected this route to modernisation. Instead of borrowing to renovate our infrastructure, the Chancellor is trying to get foreign, especially Chinese, companies to do it, even if they are state-owned. Looking at British energy companies and rail franchises, we can see that this is merely the latest in a long history of handing over our national assets to foreign states. Public enterprise is apparently good if it is not British.

Britain already has two small state investment banks – the Green Investment Bank (GIB) and the British Business Bank. But the Treasury is so obsessed with avoiding any increase in the deficit that, up to this point, it has deprived these newly formed institutions of any power to borrow. This has restricted their investment potential. The Green Investment Bank was capitalised with £3.8bn of public funds in 2012; it has so far invested £2bn. Now the government proposes to privatise the GIB, because “it is necessary to move the bank off the public balance sheet if it is to arrange additional funding through borrowing”. The same fate no doubt awaits the British Business Bank, set up to channel money to SMEs.

Apart from exposing its unjustified belief that public investment must be loss-making, the Treasury’s stance is an artefact of its insistence that there should be no net borrowing. It was to avoid this grave effect on public investment that Gordon Brown, as chancellor, was drawn into the large-scale Private Finance Initiative, when there were cheaper financing mechanisms available.

Setting up a British Investment Bank with enough borrowing power to make it an effective investment vehicle is the essential first step towards rebuilding supply. Distancing it from politics by giving it a proper remit would create confidence that its ­projects would be selected on commercial, not political criteria. But this step would not be possible without a different accounting system. The solution would be to make use of comprehensive accounting that appropriately scores increases in net worth of the bank’s assets. The British Investment Bank I envisage would only finance investment in productive assets: although its borrowing would show up in the public accounts, it would be financed by revenue from its own activities. This is fundamentally different from tax-financed debt, and fully in line with the conventional theory of public finance outlined above.

Has the Chancellor the courage to grasp the opportunity?

He can justifiably congratulate himself on having avoided the worst disasters to which Treasury accounting rules and narrow ideology could have led him. But in the non-political recesses of his mind he must understand that the recovery over which he has presided is incomplete, fragile and, above all, unfair.

The first necessary step is to reform the way we do our national accounts, in order to dispel the deficit and debt phobia that blights sensible policy.

Robert Skidelsky is a cross-bench peer and a leading biographer of J M Keynes. His most recent book is “Britain Since 1900: a Success Story?” (Vintage)

This article first appeared in the 14 January 2016 issue of the New Statesman, David Bowie