Sunday, September 19, 2010

Deep roots of Cuba's dilemma

Deep roots of Cuba's dilemma
Published: Sunday | September 19, 2010
Dennis Morrison, Contributor

The late Dr Eric Williams would have been struck by the irony that after
52 years of the Cuban Revolution, which had been sparked in part by
chronic unemployment in the Cuban labour force, a whopping 500,000 state
employees are to be made redundant in short order. But this announcement
which came less than a week after Fidel Castro's reported admission that
Cuba's economic model no longer works would, perhaps, not have surprised

Dr Williams' assessment of Cuban economic policy
set out in From Columbus to Castro: The History of the Caribbean
1492-1969 had, after all, analysed critical mistakes made in the first
decade of the revolution, the effects of which are now blamed for the
mass redundancies.

International scholars have continued to document the flaws in Cuba's
state-directed economy and in its political system, and to analyse the
impact of the US embargo on trade in shaping economic realities in that
country. Despite these flaws, the system has survived sweeping changes
in the global economy and paradigmatic shifts in ideology and the
political economy of its former allies in Eastern Europe. Even China
which, like Cuba, is still politically directed by the communist party,
long ago modified its economic framework.

It is in this international context and broad-based stagnation in the
Cuban economy that the Raúl Castro regime is now forced to find a new
development dynamic and to "update the Cuban economic model". No doubt,
Cuba's economic problems, like those of many developing countries, have
been aggravated by the global recession and steep declines in commodity
prices in 2009. Major hurricane damage in the order of US$10 million
that it suffered in 2008, would also have added to the distress.

Deeply-rooted problems

Cuba's problems, however, have deep roots in the policy failures of the
early years of the revolution. Among the fundamental errors pointed to
by sympathetic economists such as René Dumont and Charles Bettelheim -
who observed policy-making in Cuba in the 1960s - was excessive
nationalisation, including land. They expressed alarm that Cuba had
"nationalised and centralised too much, too far, and too fast". Starting
with land reform laws that were meant to break the stranglehold of
American sugar companies on 75 per cent of Cuba's arable land, the Fidel
Castro regime soon found itself up against powerful US retaliation.

This confrontation released political dynamics that heightened
anti-Americanism and helped set in train wide-scale expropriation of the
private economy. The Castro regime and Cuba thereafter were on a
radically different ideological path from that which Fidel outlined in
the Declaration of the Sierra Maestra on July 12, 1957. As Eric Williams
noted, whereas Castro's initial political programme and the 1957
Declaration were typical of Caribbean nationalists, the conflict with
the US over land reform changed the course of the revolution and the
ideological stance of Fidel himself. This is summed up by Herbert
Matthews, Castro's great American adviser and 'friendliest critic' thus:
"Communism was not a cause of the Cuban Revolution; it was a result."

Nearly 50 years later, President Raúl Castro must confront the
consequences of excessive nationalisation that is reflected in the
reality, where about 95 per cent of the 5.1 million Cuban labour force
is employed by the government. By his own estimate, the Cuban state
supports businesses, production enterprises and services with inflated
payrolls, in a system where up to one million workers are superfluous.

This state-directed economy, built on the wholesale adoption of
Soviet-style central planning, was warned against by Dumont and other
Marxist economists who identified it as one of the "socialist errors"
that Cuba was committing as it repeated "the cycle of errors as the
USSR, starting from theories abandoned in their country of origin". The
Cuban economy still operates as an inefficient bureaucratic system, long
after those of the former Soviet Union and its East European allies

Cubans expecting too much

Another reality facing the Raúl Castro regime, which has been the
subject of frequent comments by him, is that Cubans expect too much from
the government which provides free education, free health care, as well
as heavy subsidies for housing, transport, and basic food. Again, the
policies on which this was based hark back to the days when
revolutionary fervour ran high and Fidel declared in 1967 that his aim
was "to give free sugar, free coffee, and free food" to the Cuban
population. Rather than money as the incentive for work as under
capitalism or as "practised in Russia or China", the incentive under the
Cuban system of Marxism/Leninism would be the guarantee of a decent life
in which workers and their children would be educated, cared for,
housed, and fed.

British development economist Dudley Seers and his team, which included
Chilean economist Andrés Bianchi, emphasised this as one of the serious
errors of the revolution, causing the allocation of too many resources
to social as opposed to economic investments
. Its distorting effect on the development of the economy and
contribution to low productivity are manifested in the severity of the
adjustments that must now be made in the workforce.

The dilemma in which the Cuban government is caught is how to reform its
development model while preserving the undoubted gains of the revolution
in health, education, medical technology, and other industrial fields,
as well as social discipline and social solidarity. Cuba's contribution
in assisting other developing countries to free themselves from colonial
domination is also notable, as evidenced by Nelson Mandela's recognition
of its role in the struggle to beat back the aggression of the apartheid
South African regime against countries in Southern Africa.

Dennis Morrison is an economist. Feedback may be sent to

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