Wednesday, June 15, 2011

Cuba's economic reforms

Whither Cuba?
Written by Roger Keeran and Thomas Kenny

In April 2011, the Sixth Congress of the Communist Party of Cuba (PCC, Partido Comunista de Cuba) adopted bold new guidelines to deal with serious economic problems. Some of these guidelines involve reducing the size of state employment, giving more autonomy to state enterprises, encouraging cooperatives and private enterprise, and promoting production and efficiency.

As a result, some commentators have suggested that Cuban socialism is in trouble, or is failing, or is heading the way of the Soviet Union under Mikhail Gorbachev.

Though not specialists on Cuba, we have written a book on the causes of the Soviet Union’s downfall, Socialism Betrayed: Behind the Collapse of the Soviet Union. One of us visited the Soviet Union twice under Gorbachev. Both of us recently returned from a visit to Cuba. These experiences prompt several observations.

The betrayal of the Soviet Union consisted of the overthrow of socialism and the splintering of the Union state along national lines. This resulted directly from five concrete processes: 1) liquidation of the Communist Party of the Soviet Union, 2) the handover of the media to anti-socialist forces, 3) wholesale privatizing and marketizing the planned, publicly owned economy, beginning under Gorbachev and reaching a climax under Yeltsin, 4) unleashing nationalist separatism, and 5) surrendering to U.S. imperialism.

These processes are not going on in Cuba. Therefore, the short answer to the question “Is Cuba moving back to capitalism?” is no. But the matter deserves a fuller answer. Below is an outline of our views, a preface to a more extensive piece to follow.

To assess where Cuba is heading is somewhat premature, since the Cuban reforms have barely begun. Trying to assess the similarities and differences in the situations of Cuba and the Soviet Union is fraught with difficulty.

These are two very different countries of vastly different sizes, histories, and contexts. Nevertheless the building of socialism is shaped by general tendencies, as well as by national peculiarities. Just as capitalism has problems endemic to it, across time and borders, so socialism in different countries confronts similar problems. Comparisons are possible.

Socialist countries can face problems of motivation, productivity, efficiency, and quality. State control and planning can lead to bureaucracy, red tape and delay. Providing all people with employment can lead to overstaffing and inefficiency. Ensuring all people with the basics of a decent life – education, health care, food, housing, clothing and culture – can lead to rationing and lines and limitations on the quality and variety of consumer goods. Rationing and limited quantities of consumer goods can lead to a black market or second economy.

All these problems existed in the Soviet Union, and they exist today in Cuba, exacerbated of course by the fifty-year US blockade, by the collapse of the socialist bloc in the Soviet Union and Eastern Europe, and more recently, by the fallout from the 2008 global recession.

On the surface, Cuba’s initiatives to address these problems resemble Gorbachev’s in 1985-86. Gorbachev’s call for a move from “extensive” to “intensive” development resembles the slogans of the recent Congress of the Cuban Communist Party – “Production” and “Efficiency.” Gorbachev’s moves to develop joint ventures, cooperatives and private enterprise, sound similar to the new directions outlined by the recent PCC Congress.

Below the surface, however, the differences in the problems and approaches loom larger than the similarities.

Revolutionary Morale, National Unity

When Yuri Andropov and Gorbachev began to tackle the accumulated problems of Soviet socialism in the 1980s, they did so against a sixty-year historical backdrop that was much more stressful and contentious than Cuba’s.

The Soviets had had to undertake breakneck industrialization and forced agricultural collectivization. They had to forge multinational unity. They had to withstand the internal divisions generated by erstwhile revolutionary leaders who went over to the side of counterrevolution, some of whom who became conspirators with foreign enemies of the revolution. They had to undergo the trials and repressions of the 1930s. And, of course, they had to survive the supreme test of the Nazi invasion. As if that were not enough, then came the task of post-war reconstruction after a loss of perhaps twenty-seven million citizens, and the four-decade-long military burden of the Cold War.

Cuba’s road to socialism has been hard and long. The Cuban revolution beat back the US-sponsored Bay of Pigs invasion and recurrent acts of counterrevolutionary terrorism that cost the lives of some 3000 of its citizens. The revolution experienced defections. At times it had to impose repression. Above all it suffered – and suffers – the cruel, illegal, and relentless U.S. blockade. The blockade is not only a drag on Cuban economic development; it represents the US drive to strangle socialism in Cuba. That obstinate drive takes many non-economic forms: the funding of so-called “dissidents,” the sponsorship of bogus “democracy” movements, and a non-stop ideological campaign against Cuba. The ideological campaign against Cuba is reflected even in the struggle over how these latest reforms are to be interpreted.

But these travails never reached the scale or destructiveness of what the Soviet Union suffered, nor did they leave the legacy of division. To a remarkable degree the Cubans have been able to preserve revolutionary morale and national unity. They see the building of socialism as a fulfillment of national independence and national destiny outlined by Jose Marti in the struggle against colonial Spain and Yankee imperialism.

A Clear Focus

A second major difference has to do with the focus of reform. Almost every leftwing commentator, including Fidel Castro, viewed the initial economic reforms that Andropov and Gorbachev undertook to improve intensive development, efficiency, productivity and quality as sensible and long overdue. Almost immediately, however, Gorbachev lost the focus on economics and initiated reckless and sweeping changes in Soviet foreign and domestic policy, practices, personnel, and ideology with neither clear objectives nor the people’s consent.

Within a year after proposing the acceleration of economic development, Gorbachev launched from above a dubious anti-alcohol campaign, declared the Soviet foreign policy would no longer be guided by class principles but by universal human values, made unilateral concessions to the U.S. on armaments and Afghanistan, began undermining the Communist Party of the Soviet Union and turned the media over to elements opposed to the Party and socialism.

By contrast, the Cuban Guidelines are tightly geared to improving production and efficiency. No sign whatsoever has emerged that the Cuban Communist Party intends to follow the top-down, broad, unfocused, and undisciplined shock therapy that transformed the Soviet Union in five years from an imperfect socialism to gangster capitalism.

Public Property, Black Markets, Party Corruption

A third difference has to do with the treatment of private property. In both the Soviet Union and Cuba, a substantial black market or second economy developed. Its measurement is problematic, but it is safe to say that in the Soviet Union this cancer was much greater and more problematic in 1985 than it is in Cuba today, and the accompanying corruption had spread throughout the CPSU.

The real problem in the Soviet Union was that Gorbachev’s reforms not only legalized much previously illegal private economic activity, but that he rushed headlong to allow private enterprise under the guise of fake “cooperatives,” dismantled central planning, opened wide the door to foreign investment, and began the wholesale transformation of state property into private property.

It is true that the Cuban reforms imply a modest expansion of capitalist relations of production. This will inevitably reinforce petty bourgeois consciousness in a sector of the population. Such a policy has risks. However, unlike the Soviets, the Cubans, although encouraging some private enterprises and giving greater responsibility to the management of state enterprises, are doing so in a careful, disciplined, and measured way with guidelines and limitations.

The Guidelines which the PCC has forwarded to the National Congress of People’s Power declare, for example, that the socialist state enterprise will remain “the principal form of the national economy,” that the planning process will encompass both state and non-state entities, that “the concentration of property…shall not be permitted,” and that “the separation of state and enterprise functions will take place through a gradual and ordered process.”

The reform process in Cuba will entail a greater role for the PCC, a party that is clearly close to the Cuban people, not the weakening, disorganization, and elimination of the CPSU, which occurred in the USSR.

Previous Reform Experience

Cubans may speak of “changing their economic model,” but they use the word “model" differently than it is used in the US. By “model” they mean a set of economic policies suited to the concrete needs of socialist construction in a given period of medium duration.

Since 1959 revolutionary Cuba has reformed its “model" several times. The model in the early days of the revolution was to begin the socialist transformation: to nationalize the big foreign companies, distribute land to the landless, cope with the US blockade by diversifying trade to the socialist lands, and create the first planning institutions. In 1975 the Second PCC Congress debated new Socio-economic Guidelines. In 1976 these led to the first Five-Year Plan. In 1985, the Third PCC Congress began a “rectification process” that entailed dismantling some market mechanisms and enhancing economic centralization.

In the Special Period beginning around 1990 (its worst years were in the mid-1990s), the loss of Soviet aid and socialist markets and the tightening of the US blockade, caused Cuba to seek a new model. On an emergency basis, Cuba drastically altered its policies. It built up tourism, instituted two currencies, enforced belt-tightening wherever possible, conserved foreign exchange, turned state farms into co-ops, allowed limited private enterprise in the retail sector, but all the while conserved earlier advances in health care and education.

The present reforms address long-term and short-term problems, including, for example, the overstaffing problem at state-owned enterprises, the unlikelihood of the end of the US blockade any time soon, and the decline of exports stemming from the world economic crisis that began in 2008. In its new model, Cuba is mobilizing its unused reserves of labor, redeploying some labor, incentivizing labor to heighten output, fostering certain private enterprises in construction supplies and elsewhere, giving greater autonomy and responsibility to state enterprises, and fostering agricultural cooperatives on fallow land.

Not to tackle these problems would also pose risks.

Wide Democratic Discussion

After a year of discussion and revision of the initial Communist Party of Cuba’s Draft Guidelines by the people as a whole in study groups, work places, neighborhoods, trade unions and other venues, the Draft Guidelines were then discussed in the provinces. In April 2011 they were discussed and revised by the Party Congress itself. Many changes occurred in this process. For example, the redeployment of 500,000 workers, the original proposal, was reduced, after discussion, to 300,000. The Guidelines, now numbering 313, will be turned into laws and policy by the Cuban parliament, the National Assembly of People’s Power. The whole process is a dramatic illustration of the search for informed consent from below. No such process existed in 1985-1991 in the Soviet Union.


In short, the Cubans have learned from the disastrous course pursued by Gorbachev. They are cognizant of the uniqueness of their history and current situation, and aware of what went wrong in the Soviet Union. They are avoiding sweeping, unfocused, top-down, divisive changes. They are keeping the reform process democratic, measured and focused on improving economic performance. Though they intend to improve economic efficiency and increase production and productivity by giving greater autonomy and responsibility to state enterprises and by allowing the formation of non-state entities including cooperative and private businesses, they are doing so gradually and within a web of regulations, limitations and taxation.

The reforms represent, not opportunism, but a policy of struggle against existing economic conditions and contradictions: against imperialism, against the blockade, against the effects of the world recession. The Cubans give every indication of understanding the pitfalls into which the Soviet Union fell and of avoiding them. Without endangering the hard–won gains and unity of the past, without sacrificing the involvement of the people and the fundamentals of socialism, they are determined to find their own way forward.

Their reforms differ from the Soviet reforms as much as Varadero Beach differs from the Siberian tundra.

This, at any rate, is our early take on Cuba ’s new path.

May 28, 2011

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