Cuba and the ‘updating of socialism’

Stephen Wilkinson asks what transforming Cuba’s economy will mean. Below, Sandra Lewis responds

December 1, 2011 · 13 min read

Cuba, for many on the left the most enduring socialist experiment in the history of the western world, has once again embarked upon a process of wide-ranging transformation. In an attempt to reverse the stagnation of the economy, the leadership of the Cuban Communist Party (PCC) at its sixth congress in April approved a raft of measures that will transform the economic landscape of the country, create a new petit-bourgeois class, open the island to greater foreign investment and fundamentally alter the role and nature of the state. Though the changes might rightly be called reforms elsewhere, in Cuba the process has been euphemistically labelled as ‘updating the Cuban socialist model’.

President Raúl Castro, who first began to exercise the powers of president in an acting capacity in 2006 (officially replacing of his brother Fidel as president in 2008), is one of the most enthusiastic advocates of the changes. He has overseen a process of consensus building, the scale of which has not been seen before. However, the motivation to make the changes is not merely ideological; necessity seems to be the mother of this invention.

In addition to the effects of the US trade embargo, Cuba has been hit by the global economic crisis, a reduction of exports by 15 per cent and the consequences of 16 hurricanes (three in 2008 alone) that have devastated the island since 1998. With the addition of a persistent drought in eastern areas, it is estimated that natural phenomena have caused a loss of almost half the annual GDP.

The Cuban government is simply no longer able to be the sole driver of the economy. With world food prices on an irreversible upward trend, it can no longer afford to provide subsidised food for its 11 million people. Opening the economy to private enterprise is the answer and it raises a number of issues for the worldwide left.

Is Cuba moving slowly towards capitalism? Is it adopting the Chinese model? Or is this an emancipatory process moving Cuba towards a new form of socialism with less paternalism and a more prominent role for the population? More importantly for some, the question arises as to whether or not the Cuban government is capable of overseeing the transformation without some kind of social rupture that might lead to a collapse.

To take the last question first, the possibility of a collapse is remote, although anxiety about the changes and their speed is undoubtedly evident. Foreign media reporting has been alarmist but the changes have in fact been incremental over the past four years. Raúl Castro hit the ground running in 2006 promising ‘structural reforms’ and immediately initiated a consultation process that involved every mass organisation. Some seven million people attended more than 160,000 meetings held across the country to debate and contribute to the process that culminated in the congress in April this year. After the congress, the party published a dossier in which the original proposals, amendments suggested to them and the final composited resolutions were listed for the population to see.

What this means is that although the ramifications of the changes have caused anxiety, they are not traumatic. The restructuring is taking place in calm and ordered fashion. If it works, increased productivity will improve living standards and therefore lessen the prospect of social disturbances.

Fundamental redirection

However, one should not underplay the significance of the measures. They imply a fundamental redirection in the way both the economy is organised and the ideology that underpins it. In short, they spell the end of the centralised Soviet model of social and economic planning and the introduction of ideas that have almost certainly been drawn from the Chinese and Vietnamese experiences.

Under the proposals the state will no longer be the administrator of small-scale, local enterprise and will instead become the regulator – allowing the work to be done by a new petit-bourgeoisie in the form of self-employed workers, privately owned businesses and workers’ cooperatives. Egalitarianism as a goal has been jettisoned in favour of the concept of ‘equality of opportunity’ – an idea with more in common with social democracy than Marxist-Leninism.

In the first part of a new economic strategy, some 500,000 state workers – around a quarter of the current workforce – are to be redeployed into the private sector. The idea is to improve productivity, reduce the state payroll and generate revenues through taxation. The process will be difficult, requiring the introduction of new regulations, supervisory mechanisms, revenue collection measures, credit systems, infrastructure for distribution and adjustment to the welfare system for those unable to find work. This is the phase that is currently under way.

The ultimate target is to redeploy more than one million of the 4.3 million state employees, increasing the proportion of Cubans working in the non-state sector from its current level of 16 per cent to around 25 per cent by the end of 2015.

All areas will be affected, including administration, public services and state-owned enterprises. The months before the congress saw a series of behind-the-scenes consultations involving senior figures from the government, ministries and trade unions. It is significant that it is the CTC trade union confederation that is administering the process of choosing which workers are to be redeployed. Layoff will not mean destitution. The high incomes earned in the existing private sector and the removal of the cap on earnings mean many will prosper. 200,000 workers will not, in fact, lose their current jobs but merely cease to draw a salary from the state and instead start to draw it from the revenues of their enterprise. These new co-ops will pay the state a rent for the property they use and a tax on their earnings. The new regulations also permit them to sell their services to the state, opening the way for all kinds of enterprises, from refuse collection to office cleaning and catering.

Workers are being encouraged to start their own businesses in some 125 new trades and occupations that have been legalised. It is widely assumed that a large number of state employees already have illegal or quasi-legal ‘off the books’ jobs and the expectation is that they will now be able to pursue these activities legitimately full-time. In another significant change, the self-employed will be allowed to employ workers, opening the way for small and medium sized private enterprises (SMEs) in both production and distribution. In addition, state land has been given to some 200,000 citizens to become small farmers, while the prices that the state pays for their produce has been increased to incentivise production.

An internal PCC document anticipates that 465,000 new non-state jobs will be created in 2011, with 250,000 new business permits issued. The rest of the displaced workers are to be absorbed into construction and an expanding state-owned business sector, principally in tourism, oil, biotech and pharmaceuticals.

Following China?

It is here that the next big clue as to where Cuba is heading can be found. The possibilities for foreign investment in property – especially in the construction of golf courses and marinas – were increased significantly by Raúl Castro when he increased the maximum length of a lease on state land from 50 to 99 years. Negotiations are underway with foreign investors for the construction of 16 golf courses across the island and the sale of leases on houses and timeshares in these areas. In addition, for the first time since 1959, foreign investment in agriculture has been allowed, with a deal being made recently for a Mexican agribusiness to start soya production in association with a state‑owned firm.

Is this the Chinese model? It is perhaps inevitable to make comparisons and point to official recognition of the Asian tiger. For example, on 17 November 2008, the daily newspaper Granma published an article entitled ‘China continues demonstrating the validity of socialism’, in which it cited Fidel Castro: ‘China has become objectively the most promising hope and the best example for all of the countries of the third world.’

To be realistic, in terms of territory, population, historical traditions and cultural identity, the differences between Cuba and China are so great that it is simply impossible for the island to copy the development model of the Asian giant. Cuba does not have a massive, impoverished rural peasantry ready to migrate to work for low wages in export-oriented factories in new enterprise zones. Nor is Cuba going to jettison its free education, health and welfare system, as has happened in China. More visibly, major multinational corporations are not evident on the advertising hoardings in Cuba cities as they are in Vietnam and China. It is Che, not Sony, that stares out of the billboards in Havana.

However, as the veteran Cuban diplomat and professor of international relations Carlos Alzugaray Treto has written, various aspects of China’s process are valid for Cuba. He lists these as: prioritising production to achieve socialist ends; accepting that socialism is constructed on the basis of the specific characteristics of each country; adopting market mechanisms under socialist control, and making adjustments constantly as needs arise. However, the most important lesson from China, says Alzugaray, lies in the famous Confucian phrase of Deng Xiaoping: ‘It doesn’t matter whether the cat is black or white, what’s important is that it catches rats.’

It is not a question, therefore, of Cuba copying the Chinese model but rather of it adopting a set of pragmatic principles. Whether what results is an ‘updated’ version of socialism or a Cuban variation of state capitalism remains to be seen. However, the most radical outcome might be in the sphere of diplomacy rather than domestic policy, where the cat might catch the biggest rat of all – an end to the US embargo.

The ‘updating’ will increase the demand from the business lobby and the Cuban-American population in the US for an easing of the embargo. Pressure is building on Obama to take steps to further ease restrictions on travel to Cuba by US citizens. If Obama wins a second term, this will become inevitable. Once significant numbers of Americans are allowed to visit, Cuba’s current economic woes will be over and other problems will take their place.

Dr Stephen Wilkinson is director of the Centre for Caribbean and Latin American Research and Consultancy at London Metropolitan University

Cuba in context

Sandra Lewis puts Cuba’s economic reforms against the backdrop of global austerity

Stephen Wilkinson (above) infers that the reforms in Cuba will spell the end of the centralised Soviet model. The state, he says, will no longer directly administrate a bureaucratic centralised economy but will become the regulator of an expanded private sector.

In reality the same centralised system will stay in place in regard to large-scale production, as well as within the governmental structures. Those making the decisions (and responsible for decades of inertia) will maintain their positions – and the ones who will suffer are the working people.

Much of what is taking place in Cuba is clouded by a smokescreen of propaganda. What we are actually witnessing is classic neoliberalism. It must be analysed in the context of global austerity and the theft of resources by those in power.

The truth is that the Cuban economy is bankrupt. The US embargo has certainly compounded the problems, but to treat it as the chief cause of today’s woes is far too convenient.

The government’s plan – like many states these days – is to ‘balance the budget’ by laying off 1.5 million state workers – a quarter of the total. Wilkinson implies that this will not be too traumatic for the Cuban people because the state plans to slowly ‘redeploy’ (to use his euphemism) these laid-off workers into the private sector.

Fortunately the plan is on hold because even the Cuban state realised that, at least right now, it is untenable.

Initially the layoffs were postponed because out of the 200,000-plus permits for ‘private sector’ work, which were made available early last year, two thirds were quickly taken by people already operating the same small businesses on the black market. Hence this new ‘private sector’ mainly comprised the legalising of black market enterprises, many of which had been functioning under the table in Cuba for decades. It therefore left little room for the expected mass of laid-off public workers.

What jobs there are in the private sector – from construction labourer to bathroom attendant – are hardly an easy transition for highly educated professional public sector workers to make. Shoe‑shiners and manicurists are now fully legalised, being brought ‘out of the shadows’ of the black market and getting widespread international press for being the new Cuban ‘petit-bourgeois’. But while the government did postpone the layoffs, it didn’t postpone its investment in large-scale industry and international joint ventures, primarily those related to tourism.

While many were touting the ‘expansion’ of the private sector and the ‘deconstruction’ of the centralised model, the industries that generate the most income for Cuba – tourism, agriculture, pharmaceuticals – remained highly centralised and controlled in the same top-down manner as before. The goal was always the maximisation of profits, even if this meant sacrificing many of the historic gains of the revolution. Advocates of an expansion of workers’ cooperatives and self-management were left sorely disappointed when they realised that those in power had no intention of reforming the centralised model. The plan, it appeared, was to scale down government to maximise profits on the backs of the Cuban workers.

Supporters of a more decentralised cooperative model were certainly involved in all levels of discussion – within the Communist Party as well as outside of its structures. But now that the decision has been made to maintain centralisation by those on high in the party, those who fight for a truly socialist Cuba, where working people enjoy the fruits of their labour, continue to fight for greater worker control of resources both within the party and autonomously.

We have seen recently worldwide resistance to the austerity measures being inflicted upon working people. Cuba is no different in this respect. The strategy of government is, as always, to centralise as much power and wealth into its own hands as it can. It is the goal of many in Cuba to decentralise the state structures – and once again return these resources and institutions into the hands of the Cuban people and to advance the revolution towards a truly liberatory socialism.

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