Cuba’s Begrudging March Toward Capitalism

In 1975 Fidel Castro said, “There is no doubt that in

the organization of our economy we have erred on the
side of idealism and sometimes even ignored the
reality of the objective economic laws we should
comply with.” This realization was not purely
organic. Cuba’s overreliance on economic and military
assistance became apparent when the Soviet Union
collapsed two decades ago and the country’s leaders
were forced to come to terms with a new reality.

Now under the direction of President Raúl Castro, Cuba has begun to slowly inch
towards a capitalist free-market system.

“The extent of Cuba’s reliance on Moscow and its satellites became dramatically
exposed with collapse of the Soviet bloc in 1989. In just four years, from 1989 to 1993,
the Cuban economy suffered a 35-45 percent fall in GDP as commercial relations with
the former Soviet Union declined by more than 90 percent; trade with Eastern
European countries ended almost completely…Not only did Cuba loose [sic] its
principle trading partner, but it also lost Soviet economic subsidies and aid,” writes
Agnes Martha Wierzbicki.

Recently, the Cuban government has issued new guidelines and regulations that
ostensibly open the Cuban economy to free market principles. Included will be
guidelines on the selling and buying of private homes, private farming is admissible
and automobiles may be sold. Also, importantly, ration books will be trimmed. The
ration books provide Cubans with subsidized food and other necessary items.

“I can assure you that the Guidelines are an expression of our people’s will, contained
in the policy of the Party, the Government and the State, to update the Economic and
Social Model in order to secure the continuity and irreversibility of Socialism as well as
the economic development of the country and the improvement of the living standard
of our people combined with the indispensible formation of ethical and political
values,” President Raúl Castro said in announcing the new changes.

The very fact that the changes are being made by the government acknowledges a
certain reality. Many of the changes will allow Cubans to legally sell homes and
automobiles. These economic activities have been ongoing for decades on the Cuban
black market where people previously bought and sold automobiles and houses.

The Cuban black market or the mercado negro is viewed as importantly as the ration
cards issued by the government. Following the collapse the Cuban economy after the
collapse of the Soviet Union, by some estimates transactions from the black market
outpaced legal or formal transactions. As a result, Cuban officials began enacting
limited reforms aimed at resuscitating the Cuban economy.

Arch Ritter of Carleton University in Ottawa suggested of the changes, “These are very
important steps…To have a housing market, for example, will be of tremendous
importance to Cuban citizens, because there hasn’t been a market in 50 years. In Cuba,
people are born in the same house they die in.”

Raúl Castro, in an attempt to address the absurdities of a system that rations coffee to
newborns and cigarettes to smokers and nonsmokers alike said, “Undoubtedly, the
ration book and its removal spurred most of the contributions of the participants in the
debates, and it is only natural. Two generations of Cubans have spent their lives under
this rationing system that, despite its harmful egalitarian quality, has for four decades
ensured every citizen access to basic food at highly subsidized derisory prices.”

Castro continued, “Since the ration book is designed to provide equal coverage to 11
million Cubans, there are more than a few examples of absurdities such as allocating a
quota of coffee to the newborn. The same happened with cigarettes until September
2010 as they were supplied to smokers and non-smokers alike thus fostering the
expansion of that unsafe habit in the population.”

The economic changes reflect the reality that there is no self avowed communist state
in the international system that can sustain itself by adhering to old outdated
economic models. North Korea relies on huge subsidies from China to stay afloat even
as tens of thousands of its citizens starve to death from malnutrition.

Cuba realizes that its economic model is not sustainable and that its neighbors have
disavowed their various forms of socialism in favor of capitalism. In very real terms,
Cuban economic growth has stagnated and it must confront this reality by allowing
free-market capitalism.

As the international system becomes more interdependent Cuba realizes that it can no
longer adhere to purely communist economic principles. Cuba lacks vast tracks of
natural resources like oil to sustain its economy and it has had to turn to its neighbors
for assistance to avoid a complete economic catastrophe.

However, despite some signs that Raúl Castro was prepared to tackle fundamental
problems inherent in the Cuban economy, there are some indications that the
president might not be as revolutionary as some have thought. Despite earlier
announced plans by the government to eliminate roughly 500,000 state jobs it has since
abandoned those plans.

Even as Fidel Castro initiated some limited reforms in the 1990s the standard of living
for many Cubans remained precariously low compared to other regional states. The
changes included land reforms and other changes that attempted to address pervasive
shortages of food and a lack of consumer goods and services.

However, with Russian assistance gone Cuba has still relied on assistance from others.
Venezuela has provided Cuba with discounted oil since the 1990s. Presently, President
Hugo Chavez provides Cuba with about 100,000 barrels of oil a day. To pay for this
oil, Cuba has provided Venezuela with approximately 30,000 medical personal.

However, as Raúl Castro and other Cuban officials allow free-market principles they
still attempt to portray the changes as an organic process and not as a repudiation of
communism per say. “For this reason, I can assure you that the Guidelines are an
expression of our people’s will, contained in the policy of the Party, the Government
and the State, to update the Economic and Social Model in order to secure the
continuity and irreversibility of Socialism as well as the economic development of the
country and the improvement of the living standard of our people combined with the
indispensible formation of ethical and political values,” Raúl Castro argued in
defending these fundamental changes.

Even as Raúl Castro implements these changes he ostensibly is offering a rather blunt
assessment of Cuba itself and is challenging basic long held assumptions. No longer,
as he has said can the Cuban economy support itself at is current pace. Cuban
economic activities have not kept pace with Cuba’s growing population.

As is the case in the United States, the Cuban social safety net can no longer support
an elderly population without fundamental changes. Cubans age 15-64 constitute
roughly 71.1% of the population with Cubans ages 65 and older constituting 11.4% of
the population.

However, despite the fundamental changes proposed by the government, skepticism

remains if the changes will in-fact alter the daily lives of Cubans. Cuban, Johan
Rodríguez commented, “We have a way of making changes but keeping everything
the same…The basic problem is we have no money. I am hoping what they are
discussing will change that.”

Moreover, the mere fact that changes are being considered to the very foundation of
the Cuban economy offers the clearest signs yet that the country is willing to
reconsider its identity in the face of a changing world.

Of the island’s 11,087,330 residents, 823,000 work in some sort of private sector job
while 85% of Cubans are employed by the state. This is not a sustainable economic
model and Raúl Castro knows this.

Perhaps the most significant development for Cuba was in July 2006 when Fidel
Castro ceded power to his brother Raúl Castro due to health concerns. Not that the
world wished Fidel ill, with the exception of jailed and exiled Cuban dissidents, but
many knew at the time what many Cubans are aware of now. It was time for the old
standard bearer of the Cuban revolution to step aside while fundamental changes
were instituted that either Fidel refused to address or was unaware that they needed
to be implemented.

John Lyman is the Editor-in-Chief of Foreign Affairs Journal.