Realist pragmatism in socialist Cuba
Cuba’s socialist-oriented mixed economy under state direction
The characteristics of Cuban socialism
In my August 7, 2021, commentary, I discussed the characteristics of Cuban socialism, including, among other issues, Cuba’s pragmatic approach to its socialist economy. See “Reflections on Cuban socialism: A people’s anti-imperialist revolution with conservative values,” August 7, 2021. I described the Cuban approach as a “socialist third way,” a synthesis of capitalism and socialism that, unlike the “third way” proposed by Bill Clinton and Tony Blair, is not ultimately an alternative form of capitalism, but a new form of socialism. Today, I elaborate on this theme.
The Cuban synthesis of socialism and capitalism was present from the beginning. At the time of the triumph of the revolution, Fidel proposed an autonomous industrial development led by the Cuban industrial bourgeoisie. However, Cuban industrialists did not accept Fidel’s call to join the revolution, and they instead abandoned the country and participated in the counterrevolution directed by the United States. Reacting to this development, the Cuban Revolutionary Government nationalized Cuban big industries, converting them into state-owned enterprises, leaving small economic enterprises in private hands.
With respect to foreign property, the Cuban Revolutionary Government nationalized foreign enterprises, a step made necessary by extensive foreign ownership, primarily U.S., of agricultural, industrial, and commercial companies and banks in Cuba. Nevertheless, Fidel saw the nationalizations as making possible a Cuban integration into the capitalist world-economy, not on the basis of a continuation of unequal exchange, but through new norms of mutually beneficial and just trade. He proposed that the USA increase its purchase of sugar above the existing sugar quota, thus enabling Cuba to appropriate the surplus to finance compensation for the nationalized U.S. properties as well for investment in Cuban industrialization. The USA, however, rebuffed the Cuban proposal, having previously initiated its policy of regime change.
These dynamics of the early 1960s with respect to Cuban big industry and foreign property in Cuba meant that the Cuban socialist economy in its early years had a much higher percentage of state-owned property than was initially intended by the revolutionary leadership.
Since the 1960s, there have been two historic moments in Cuba in which there was expansion of private property, both driven by practical necessity. The first was in response to the crisis generated by the collapse of the socialist bloc in the early 1990s, the so-called Special Period. During the period, Cuba reinserted itself into the capitalist world-economy, under highly regulated and controlled conditions. It established international tourism as the key economic sector, developing it with joint ventures by the Cuban state and foreign capital. And it expanded space for small scale Cuban private capital, particularly in restaurants and lodging related to tourism.
The second moment has been from 2012 to the present, during which private property has been expanded under a new socioeconomic model, in which privately-owned enterprises are conceived as motors driving productivity, and in which the salary structure incentivizes work and productivity. The new model was politically necessary, inasmuch as the increasing standard of living since the early 1990s (as a result of tourism and family remittances) has generated rising expectations with respect to the material conditions of life. The post-2012 model is formulated by the Communist Party of Cuba and the Cuban government as a socialist model, but with an evolving understanding of the characteristics of a socialist economy, such that the role of private property is recognized. The various forms of property were given juridical foundation in the new Cuban Constitution of 2019.
The adjustments of the Special Period of the 1990s and the new social and economic model of 2012 have been effective in slowly but surely elevating the standard of living. According to World Bank data, the Cuban per capita GDP (in constant 2015 US$) fell dramatically from 1990 to 1993, from $4978 to $3286, due to the impact of the collapse of the socialist bloc and the loss of commercial partners. However, from that time until the pandemic, as a result of new economic policies, the Cuban per capita GDP (in constant 2015 US$) grew steadily and consistently from $3286 in 1993 to $8031 in 2019. In 2019 and 2020, there was a contraction of the economy, as a result of the closing of tourism, the nation’s principal industry, due to the pandemic; and as a result of the intensification of the U.S. blockade, which is now blocking financial transactions and purchases with banks and companies of third countries. But beginning in 2021, with the partial recovery of tourism, the economy has begun to slowly recover. The GDP grew 1.3% in 2021; and the first trimester of 2022 registered a GDP 10.9% higher than the figure for the same period the previous year.
The Cuban per capital GDP for 2020 of $9,478 (in current US$, according to World Bank Data) compares favorably with other nations, especially if one takes into account: Cuba’s historic disadvantaged insertion in the capitalist world-economy during Spanish colonialism and U.S. neocolonialism; the six decades U.S. economic sanctions; Cuba’s limited natural resources; and the structures of social and economic support that the Cuban state provides, such that Cuba’s GDP understates the actual standard of living and quality of life. The per capita GDP for Latin America and the Caribbean countries is 8,340 US$; for the Middle East and North Africa, 7,697; for middle income countries of the world, 6,102; for South Asia, 2,177; and for Sub-Saharan Africa, 1,646. Cuba is ranked 100th of 216 countries in the world in per capita GDP, not taking into account the relative lower cost of living in Cuba due to state provision of services and subsidies.
The expansion of private property during the last ten years has not meant a reduction of state regulation and control of the economy. Private enterprises continue to operate in the context of a socialist economy, that is, an economy planned, directed, and regulated by the state, which includes an active role by the government ministries is seeking creative ways to integrate the public and private sectors and to integrate science and the economy, in order to increase agricultural and industrial production. In Cuba, the state, and not the market, directs the economy.
The active role of the state in the economy includes governmental efforts to guarantee health care, education, nutrition, and housing, constitutionally protected as human rights. The Cuban health system is one of the most advanced in the world, and health care is provided without charge, except for medicine at subsidized prices. When shortages in supplies of medicine occur, the state takes measures to increase production or importations. Education is fully funded by the state, from pre-school to graduate school. Basic food items are subsidized by the state, and in certain moments when the food market generates high prices, the state intervenes to control prices and to increase supply. With respect to housing, the reforms of the 1960s created a situation in which more than 90% of Cuban families inhabit dwellings that they own. In situations in which insufficient income has generated deterioration in housing conditions and availability, the state intervenes with programs of housing construction and improvement, developed with the active involvement of neighborhood mass organizations.
Reflecting the commitment of the Cuban state to social and economic rights, some 66% of the Cuban state budget is dedicated to the social sphere, including public health, education, social assistance for persons with insufficient income, and subsidies for home repairs. The Cuban state budget, it should be noted, operates on very low levels of deficit spending. Its belief is that deficit spending causes inflation, because it increases demand without increasing supply, unless the deficit spending is specifically targeted toward increasing productivity.
The economic sectors most important in driving the Cuban economy at the present time are tourism, nickel, crude sugar, honey, tobacco, rum, biopharmaceutical products, and telecommunications. Except for crude sugar and tourism, these products are considered manufactured goods, taking into account the characteristics of their productive processes. Their weight in the economy reflects the historic commitment of the Cuban Revolution to diversify and strengthen manufacturing in order to break the core-peripheral economic relation imposed by the neocolonial world-system. The development of tourism also reflects this commitment, inasmuch as tourism is a service industry, and in the case of Cuba, an industry that includes educational, ecological, and cultural tourism. The long-term plan is for the continued development of the pharmaceutical industry, a high value-added sector in the capitalist world-economy, so that it would become the leading industry in the Cuban economy.
One of the problems in the Cuban economy at the present time is a shortage of foreign currency, caused by insufficient exportation of Cuban goods and services. To address the problem, in addition to seeking to expand exportation, the government has created state-owned foreign currency stores, in which products are purchased either in person using bank cards tied to foreign currency accounts in Cuban state-owned banks, or online with international credit and debit cards. The plan calls for the channeling of the captured foreign currency toward investment in the domestic manufacturing of goods sold in national currency stores, where payment is made in Cuban pesos. At the present time, 76% of sales of goods and services are in Cuban pesos, while 24% are in foreign currencies.
Another challenge at the present time is inflation, which has been caused by deficit in supplies, higher costs, and the devaluation of the Cuban currency. The inflation to some extent is a distortion caused by the exorbitant prices of unscrupulous retailers. But the government stresses that the solution to the problem of inflation is an increase in supply, through increased production. The steps taken by the government have led to a recent reduction in inflation, from an accumulated inflation in 2021 of 56% to an accumulated inflation for 2022 of 13%, as of the end of June.
The Cuban Minister of Economy and Planning is Alexander Gil. He regularly reports to the National Assembly of People’s Power, providing comprehensive and knowledgeable explanations of the causes of problems, the reasons for shortages, the reasons for inflation, the steps being taken, and the long-term plan. His last two reports, in May and July of this year, stressed that the economy is gradually recovering from the pandemic, and that the key to advancing is increasing productivity, which would elevate the purchasing power of salaries. His reports are well received and appreciated by the Deputies of the National Assembly. These reports are covered live on Cuban television, and they are supplemented by Gil’s regular participation in the Cuban daily news program, the Mesa Redonda.
To remind, the National Assembly of People’s Power was established by the Constitution of 1976 and renewed in the Constitution of 2019. The 605 deputies of the National Assembly of People’s Power are elected by the delegates of the nation’s 169 municipal assemblies of popular power, who are elected in 12,513 voting districts across the island, following direct nominations by the people in neighborhood nomination assemblies. The National Assembly elects the executive branch of the government, including the President of the Republic and the Minister of the Economy and Planning, with the participation of mass organizations of workers, farmers, women, students, and neighborhoods. (See “Cuban people’s democracy at work: National Assembly of People’s Power approves eight new laws,” May 17, 2022).
Therefore, when we speak of state direction of the economy in Cuba, we are referring to a state that itself is controlled by the delegates and deputies of the people. In the West, where representative democracy has led to control of political processes by the corporate elite, it is difficult to imagine the possibility of a political process in which the people hold political power through their democratically elected delegates. But such is the reality in Cuba.
In Cuba, tied to the decades of efforts to develop a socialist economy, there has been an ongoing effort to develop a socialist alternative to bourgeois representative democracy, which in the 1960s was called “direct democracy,” and in the 1970s was institutionalized as “people’s democracy.” This alternative form of democracy consists of mass organizations and structures of people’s power, which hold elections without the participation of electoral political parties, and in which a vanguard political party plays a leading pedagogical role. People’s democracy is the political foundation to the Cuban economic system, such that Cuban socialism must be understood as a socialist political-economic system, which functions with political stability in a historical moment in which representative democracy is experiencing a legitimation crisis. For a full description of the Cuban political system, see “Political and civil rights in Cuba: The politicization of the issue of human rights,” June 24, 2021.
The general characteristics of Third World socialist economies today
In my commentary of June 7, 2022, I reported on the book by Alberto Gabrielle and Elias Jabbour, Socialist Economic Development in the 21st Century. Basing their analysis primarily on observation of China and Vietnam, Gabrielle and Jabbour maintain that a new form of socialism has emerged in recent decades, which they call “socialist-oriented planned market economies.” Such economies are mixed economies, in which capitalist and socialist production coexist, in the framework of a socialist-oriented development plan, through which the state exercises a high degree of control over the national economy. Gabrielle and Jabbour maintain that this new form of socialism is superior to the centralized state planning of the Soviet Union, and it also is superior to neoliberal capitalism, with respect to both increasing the productive capacity of the national economy and providing for the human needs of the people. The new form of socialism is demonstrating its capacity to permit stimulation of productivity by the market, while at the same time preventing the market from ruling the state. The new form of socialism stimulates productivity and directs the surplus generated by increased productivity toward the long-term economic development on the nation’s economy. See “Socialist socioeconomic formations: Lessons from real socialism in the global South,” June 7, 2022.
Cuba does not have the size or the productive capacity of China and Vietnam. And Cuba has had to endure decades of neocolonial and imperialist subservience to the USA, which makes it structurally and culturally different from the Asian nations. However, with these qualifications in mind, it can be said that Cuba has the characteristics of the “socialist oriented market economies.” As I indicate above, the Cuban state directs the economy in accordance with socialist goals, and it provides space for capitalist enterprises as it seeks to advance the productivity of the economy.
To be sure, the Cuban national industrial bourgeoisie is far weaker than the Asian nations, as a result of the flight of Cuban big industrialists in the early 1960s. This is why the private sector in the Cuban economic model of 2012 is dominated by small and medium scale enterprises. And it is the reason that big projects in Cuba tend to be state joint ventures with foreign capital.
Nevertheless, the Cuban socialist road has orientations and structures similar to the Asian socialist projects. Like China and Vietnam, Cuba seeks to channel the direction of capitalists, without stifling their productive contribution to the economy; and Cuba seeks to give capitalists the necessary space for contributing to economic development, without enabling them to take control of the political-economic system.
Cuba, China, and Vietnam are forging a new socialist road for the twenty-first century. It is not the centralized state socialist model of the Soviet Union. Rather, it is a model of a state directing the economy, in which both capitalist and socialist modes of production are marshalled in a development plan formulated by the state and implemented under state direction. Neither is it, on the other hand, the rule of the market, with its multiple negative consequences, as in neoliberal capitalism. It is a new socioeconomic formation, created in the breast of the projects of the socialist nations.
Cuban, China, and Vietnam have created the new type of socialism in revolutionary political practice, in the context of the need to resolve practical problems. They are making great gains, in a historical time-period in which the political-economic system of representative democracy and neoliberal capitalism is demonstrating its unsustainability. The perspective and achievements of the new type of socialism ought to be central to the discourse of Western socialists, as they seek to explain to their peoples that socialism is the necessary road.
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