Tag Archives: Labor Rights

Fidel’s Phenomenal Economic Fiascoes: the Top Ten

Fidel Castro recently clarified an allegedly erroneous quotation and stated something to the effect that “Yes the Cuban Model does indeed work”. It would have been difficult for Fidel to do a “Mea Culpa” and agree that half a century of his own management of the Cuban economy had been erroneous and counter-productive.

However, as the grand economic “strategizer” as well as the micro-manager of many issues that captured his attention President Fidel Castro was responsible for a long list of economic blunders. Here is my listing of Fidel’s most serious fiascoes.

Next week I will try and produce a listing of Cuba’s Greatest Achievements under President Castro. Unfortunately I find this more difficult than to identify the failures.

Top Ten Economic Fiascoes

Fiasco # 10     The Instant Industrialization Strategy, 1961-1963:

Fiasco #9        The 10 Million Ton Sugar Harvest Strategy, 1964-1970

Fiasco #8        The “New Man”

Fiasco #7        The “Budgetary System of Finance”

Fiasco #6        The “Revolutionary Offensive” and the Nationalization of Almost Everything

Fiasco #5        Revolucion Energetica

Fiasco #4 Shutting Down Half the Sugar Sector

Fiasvco #3 A Half Century of Monetary Controls and Non-Convertibility

Fiasco #2        Suppression of Workers’ Rights

Fiasco #1        Abolition of Freedom of Expression


Fiasco # 10     The Instant Industrialization Strategy, 1961-1963:

Cuba’s first development strategy, installed by the Castro Government in 1961, called for “Instant Industrialization”, the rapid installation of a wide range of import-substituting industries, such as metallurgy, heavy engineering and machinery, chemical products, transport equipment and even automobile assembly.

The program proved unviable as it was import-intensive, requiring imported machinery and equipment, raw materials, intermediate goods, managerial personnel, and repair and maintenance equipment. Because the sugar sector was ignored, the harvest fell from 6.7 million tons in 1961 to 3.8 in 1963 generating a balance of payments crisis. The end result was that Cuba became more dependent than ever on sugar exports, on imported inputs of many kinds and on a new hegemonic partner, the Soviet Union.

The strategy was aborted in 1964.

Fiasco #9        The 10 Million Ton Sugar Harvest Strategy

The failure of the “Instant Industrialization” strategy led to an emphasis on sugar production for export with a guaranteed Socialist Bloc market for 5 million tons per year at a price well above the world price – from 1965 to 1970. The over-riding preoccupation became the 10 million ton goal, which according to President Castro was necessary for “defending the honor, the prestige, the safety and self-confidence of the country” (February 9, 1970.)

Fidel seemed happiest when conducting a campaign military style as he did during the effort to produce 10 million tons of sugar.

If it had been implemented in a measured way, a strategy to increase export earnings from sugar would have been reasonable. However, as 1970 approached, the implementation of the 10 million ton target became increasingly forced. Other sectors of the economy were sacrificed as labor, transport capacity, industrial inputs, energy, raw materials and national attention all focused on sugar.

This strategy was aborted in 1970.

Fiasco #8        The “New Man”

In order to mobilize human energies for the 10 million ton harvest a radical “Guevaraist” approach was adopted involving the construction of the so- called  “New Man.” The idea behind this was a vision of the Cuban Nation as a guerrilla column marching behind Fidel – somewhat like his marches down the Malecon in 2000-2006 – single-mindedly pursuing a common objective, willingly sacrificing individual interests for the common good and with the esprit de corps, discipline and dedication of an idealized guerrilla band. To promote this revolutionary altruism, the government used public exhortation and political education, “moral incentives” instead of material incentives and proselytizing and enforcement by the Party and other “mass organs” of society.

By 1970, it was apparent that people could not be expected to sacrifice their own and their family’s material well-being and survival for some objective decreed and enforced by the Party. The approach was dropped in 1970.

Fiasco #7        The “Budgetary System of Finance”

In a simultaneous experiment, a so-called “budgetary system of finance” was installed under which enterprises were to operate without financial autonomy and without accounting, neither receiving the revenues from sales of their output nor paying for their inputs with such revenues – somewhat like University Departments.

Without a rational structure of prices, and without knowledge of their true costs or the value of their output, neither enterprises nor the planning authorities could have an idea of the genuine efficiencies of enterprises, of sectors of the economy, or of resource-use anywhere. The result of this was disastrous inefficiency.  In President Castro’s words:

“..What is this bottomless pit that swallows up this country’s human resources, the country’s wealth, the material goods that we need so badly? It’s nothing but inefficiency, non-productivity and low productivity.” (Castro, December 7, 1970)

This system was also terminated in 1970.

Fiasco #6        The “Revolutionary Offensive” and the Nationalization of Almost Everything

In the “Revolutionary Offensive” of 1968, Fidel Castro’s government expropriated most of the remaining small enterprise sector on the grounds that it was capitalistic, exploitative, and deformed people’s characters, making them individualistic instead of altruistic “New Men”. The result was true living standards were impaired, product quality, quantity and diversity deteriorated, enterprises were pushed into the underground economy,  theft from state sector and illegalities become the norm and citizen’s entrepreneurship was suppressed. This policy was changed in 1993, then contained by tight regulation, licensing and taxation after 1985,.

Again in September 2010, the government of Raul Castro appears ready to expand the small enterprise sector in hopes that it will absorb most of the 500,000 workers to be laid off from the state sector.

Fiasco #5        “Revolucion Energetica”

President Castro’s “Revolucion Energetica” included some valuable elements such as conservation measures, re-investment in the power grid and the installation of back-up generators for important facilities such as health centres. A questionable feature of the plan is the replacement of large-scale thermal-electric plants with numerous small generators dispersed around the island. But the use of the small-scale generators likely constitutes a major error for the following reasons:

  • The economies of large scale electricity generation are lost;
  • Synchronizing the supply of electricity generated from numerous locations to meet the minute-by-minute changes in electricity demand is complicated and costly;
  • Problems and costs of maintaining the numerous dispersed generators are  high;
  • Logistical control and management costs escalate as the national grid is replaced with regional systems.
  • Expensive diesel fuel is used rather than lower cost heavy oil:
  • Diesel fuel has to be transported by truck to the generators around the island;
  • Investments for the storage of diesel fuel in numerous supply depots are necessary;
  • Problems of pilferage of diesel fuel may be significant, and costs of security and protection may be high.

No other country in the world has adopted this method of generating electricity, suggesting that it does not make sense economically.

The energy master-plan also ignores a possible role of the sugar sector in producing ethanol and contributing to energy supplies. The experience of Brazil indicates that at higher petroleum prices, ethanol from sugar cane becomes economically viable. The shut-down of some 70 out of Cuba’s 156 sugar mills in 2003, the moth-balling of another 40 and the contraction of the whole sugar agro-industrial service cluster is also a major loss for electricity generation.

Fiasco #4        Shutting Down Half of the Sugar Sector

In 2002, Castro decided that there was no future in sugar production, a decision prompted by low sugar prices at the time and undoubtedly the continuing difficulties in the sector. He decreed the shut-down of 71 of 156 sugar mills, taking some 33% of areas under sugar cane out of production and displacing about 100,000 workers. It was hoped that land-use would shift to non-sugar crops, that remaining mills would become more productive, and that displaced labour would be reabsorbed elsewhere.

In any case, sugar production has continued to decline which is unfortunate given high prices in recent years. There has not been a shift into ethanol production. The physical plant has continued to deteriorate. The cluster of activities surrounding sugar must be near collapse.  The sugar communities are left without an economic base and some face the prospect of becoming ghost towns.

Fiasco #3        A Half Century of Monetary Controls and Non-Convertibility

Responsibility for Fiasco #3 is shared in part with Che Guevara, who as President of the Banco Nacianal de Cuba, presided over imposition of monetary controls and implementation of the policies that made Cuba’s peso non-convertible for half a century.

Cuba’s monetary system has been and is a serious obstacle to the freedom of Cuban citizens. Citizens’ incomes have had purchasing power outside the country only when permitted to be exchanged for a foreign convertible currency and then only at a discount for some decades. As is well known, the official exchange rate for Cuban citizens has been in the area of  22 pesos (Moneda Nacional) to US $1.00, so that the purchasing power of the average monthly salary – 415 pesos in 2008 (Oficina Nacional de Estadisticas, 2009, Table 7.4) is about US$20.00.

Fiasco #2        Suppression of Workers’ Rights

Thanks to the regime implanted by President Castro, Cuban workers do not have the right to undertake independent collective bargaining or to strike. Unions are not independent organizations representing worker interests but are official government unions. Independent unions and any attempts to establish them are illegal.

Cuba has signed the Universal Declaration of Human Rights and is a member of the International Labor Organization.  The basic United Nations Declarations support freedom of association for labor. The International Labor Organization’s Declaration on Fundamental Principles and Rights at Work includes, as the first fundamental right of labor, “freedom of association and the effective recognition of the right to collective bargaining”

The central function of independent labor unions is to provide countervailing power to oligopolistic or monopolistic employers in wage determination and in the setting of the terms and conditions of work. Unions have been successful in western countries in raising wages, improving the equity of income distribution and improving work conditions.

In the Cuban case, workers have confronted a monopolistic employer – the state – that also controls their unions which are in effect “company unions.” By controlling the unions and containing their wage demands, wages have been held down. The absence of independent unions has permitted the government to implement counterproductive economic policies year after year and has muted the urgency of undertaking economic reforms.

Fiasco #1        Abolition of Freedom of Expression

An important requirement for the sustained effectiveness of an economic system is the ability to freely, openly and continuously analyze and criticize its functioning.  Open analysis and criticism in a context of free generation and diffusion of information provide a necessary spur for self-correction, exposing illegalities, flawed policies and errors.  Free analysis and criticism is vital in order to bring illicit actions to light, to correct errors on the part of all institutions and enterprises as well as policy makers and to help generate improved policy design and implementation. This in turn requires freedom of expression and freedom of association, embedded in an independent press, publications systems and media, independent universities and research institutes, and freely-functioning opposition political parties.

Unfortunately this has been lacking, thanks to the Castro regime.  The media and the politicians have largely performed a cheerleader role, unless issues have been opened up for discussion by the President and the Party.

The near-absence of checks and balances on the policy-making machinery of the state also contributes to obscuring over-riding real priorities and to prolonging and amplifying error.  The National Assembly is dominated by the Communist Party, meets for very short periods of time – four to six days a year – and has a large work load, so that it is unable to serve as a mechanism for undertaking serious analysis and debate of economic or other matters. The cost for Cuba of this situation over the years has been enormous.  It is unfortunate that Cuba lacks the concept and reality of a “Loyal Opposition” within –the electoral system and in civil society.  These are vital for economic efficiency, not to mention, of course, for authentic participatory democracy.

NOTE: For additional articles on various aspects of Fidel Castro’s presidency, see:

Fidel Castro: The Cowardice of Autocracy

Cuba’s Achievements under the Presidency of Fidel Castro: The Top Ten

Fidel’s No-Good Very Bad Day

The “FIDEL” Models Never Worked; Soviet and Venezuelan Subsidization Did

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An Analysis of Cuban Democracy and the Potential Roles of Diplomats in its Promotion, from the “DIPLOMAT’S HANDBOOK” for Democracy Development Support


The “Diplomat’s Handbook for Democracy Development Support” project of the “Community of Democracies” has just released a study of democracy and democratization in China. It also includes an older Case Study on Cuba that I had never seen and that may be of broad interest.

The Web site of the Diplomat’s Handbook is  http://www.diplomatshandbook.org/

The complete case study on Cuba can be seen on an Adobe file accessed at the above web site.

Below is the Introduction to the study.

Cuban Exceptionalism

INTRODUCTION

This Handbook presents individual country case studies in order to record the practical activity that diplomats from democratic countries have performed there in support of civil society, democracy development, and human rights. Situations can and often do resemble each other in some recognizable respects, and our aim is to enable diplomats and civil society partners in the field to obtain insights and guidance from actions taken elsewhere, without, however, suggesting that the experiences in one country can simply be transposed directly to another, since the trajectory of each country’s development is singular.
The case of Cuba is extreme, and in many ways unique. Cuban history since the late 19th Century is intertwined in a relationship with one country, the United States. The mutual enmity between the two governments for much of the last 50 years has had a direct impact on conditions inside Cuba. Anything that diplomats of democratic countries can do in support of Cuban democracy development pales in significance to the potential effect of placing US-Cuba relations on a normal basis, possibly for the first time.
The only country in the western hemisphere that does not practice some form of electoral democracy, Cuba’s government remains in principle a Marxist-Leninist throwback and a resolute holdout more than two decades after the abandonment of communism in Europe and adoption of the market economy in China. Expectations that Cuban communism would be merely the last domino to fall failed to recognize a signal difference with Eastern Europe where the regimes were judged to be collaborating with an outside oppressor, the USSR. The Cuban government presents itself as the patriotic defender against an outside threat.
The regime has from the outset been symbiotically identified with its Comandante en jefe who led the revolution that propelled it into power on January 1, 1959. Descriptive labels scholars employ to capture its essence range from “extreme paternalism” (Prof. Carollee Berghdorf, Hampshire College, UK) to “charismatic post-totalitarianism” (Prof. Eusebio Mujal-León, Georgetown University, Washington, DC). Exile adversary US Congressman Lincoln Díaz-Balart, has called it “the Fidel Castro regime,” pure and simple. Although an orderly succession has obviously occurred as Fidel Castro retired from public office in July, 2006 and ostensibly turned power over to Raúl Castro, the question arises whether anything significant has changed. Fidel Castro’s moral influence over the country remains, though he is without direct control of all details as before. Having described himself in 1961 as a “Marxist-Leninist until I die,” he recast himself in post-retirement writings as a “utopian socialist,” adding that “one must be consistent to the end.”
The regime he built over the decades, “is not the German Democratic Republic,” as one diplomat in Havana phrased it, but it is an authoritarian one-party state that has used an Orwellian security apparatus to rein in and quash democratic impulses over five decades, often citing the threat from the US as the rationale. Much of the world acknowledges the ability of Castro’s Cuba to have stared down and survived determined efforts by successive US governments to end the regime, by invasion, attempted assassination, a CIA program of subversion, and a punitive economic embargo.
But increasingly, democrats rebuke the regime for its invocation of these real threats to Cuba’s sovereignty to justify the continued and even tighter suffocation of human and civil rights of Cuban citizens.
60
The case study that follows attempts to identify activities by diplomats and democracies in support of Cubans’ efforts to secure rights at home, including discussion of a more open and democratic system. But the study reports the view that these efforts tend to bounce off a tightly controlled and controlling regime that veers between self-confidence and paranoia, and discounts the pertinence of mutual leverage.
Diplomatic efforts meant to support democracy development are in consequence especially challenged in today’s Cuba. Diplomats have to manage seemingly competing professional obligations of non-interference, official engagement, a long-term developmental perspective, and immediate democratic solidarity.
This challenge, familiar to diplomats and international NGOs working in other authoritarian and repressive states, is made especially vexing in Cuba by an authoritarian government that is fearful of change. But some signs of change are present in Cuba. Coming years will engage democrats in support of efforts by the Cuban people to pursue aspirations for more significant change that is theirs alone to accomplish

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Employment, Labour, Distributional and Equity Issues

James K. Galbraith, Laura Spagnolo and Daniel Munevar, “Pay Inequality in Cuba: the Special Period and After,” ECINEQ WP 2006 – 52, The University of Texas Inequality Project, August 2006

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Freedom of Expression, Economic Self-Correction and Self-Renewal

An important requirement for the sustained effectiveness of an economic system and society is the ability to analyze and criticize – freely, openly and continuously – its functioning.  Open analysis and criticism in a context of free generation and diffusion of information provide a necessary spur for self-correction, exposing illegalities, flawed policies and errors.  Free analysis and criticism are vital in order to bring illicit actions to light, to correct errors on the part of all institutions and enterprises as well as policy makers and to help generate improved policy design and implementation. This in turn requires freedom of expression and freedom of association, embedded in an independent press, publications systems and media, independent universities and research institutes, and freely-functioning opposition political parties.

The absence of free economic criticisms means that major policy errors or indeed fiascos are not “nipped in the bud” and terminated quickly but steam ahead to disaster. Some major examples of this in Cuba have been

  • The 1961-1963 instant industrialization strategy, aborted in 1963
  • The 10 Million Ton Sugar Harvest effort, from 1964 to 1970;
  • The attempt to use the “New Man” ideology as a labour mobilization device, 1966-1970
  • The shut-down of half of Cuba’s sugar agro-industrial complex (2002)
  • The billion dollar mini-generator component of the “Revolucin Energtica (2006)

Pluralistic democratic countries have free presses and open debate on the issues of the day.  Opposition political parties, academics, interest groups and NGOs, and journalists continuously analyze and critique public policy issues and proposals and the functioning of private and public enterprises and institutions.  Indeed, there is major competition among economic and business journalists as well as academics to be the most perspicacious analysts and critics of public policy.

Unfortunately much of this has been lacking in Cuba.  The media largely performs a cheerleader role, unless issues have been opened up for discussion by the President and the Party.  For example, there was virtually no public discussion or debate concerning the shut-down of half of the sugar sector in 2002, the attacks on self-employment, the dysfunctional parts of the “Revolución Energética” or of the imprisoning of the critics  – or so-called “dissidents” –in  2003.This means that public policies get announced and implemented full-blown without critical input into their formulation, and without subsequent criticism and early correction.

Are the restrictions on freedom of expression becoming more or less severe in recent years? Some indications suggest that there is some relaxation of such restrictions, notably:

  • On June 16 to 20, the Catholic church was able to organize the Semana Social Católica including a Panel on “Economy and Society” with Pavel Vidal Alejandro, Omar Everleny Perez, Carmelo Mesa-Lago y Cristina Calvo.
  • The presentation of information on the economy has improved over the last 10 years. The web site of the Oficina Nacional de Estadisticas is now surprisingly good and the Anuario Estadistico Economico is quite comprehensive and appears in a timely way. (However, the methodologies for the measurement of some fundamental economic data such as labor force, employment and unemployment, consumer price index, and national accounts are opaque and ambiguous so that the analyses based on them are not as strong as they could be.)

But on the other hand, there are also some indications of a hardening of the restrictions on freedom of expression.

  • The containment and harassment of the bloggers continues. They have been denied access to the web. They have been harassed and intimidated – unsuccessfully – by actions of state security. They have been vilified as “mercenaries” in the service of foreign powers. They have been denied the right to travel abroad. They are often denied the right to participate in relevant domestic events such as a conference on civil society and the new media! Their web sites and therefore their commentaries are available within Cuba only with difficulty. But they have not been shut down as of mid-2010, though this could change.
  • The expulsion of Esteban Morales, Professor of Economics and Political Science, University of Havana, from the Communist Party also represents a hardening of restrictions on freedom of expression. Morales comments on the character of racism in Cuba, Challenges of the racial problem in Cuba seemed reasonably innocuous. His April 22 essay entitled “Corruption: The True Counter Revolution” was more hard hitting. But being expelled from the Party looks to me like a reward, not a punishment. Of course, this is not correct, because expulsion from the Party usually means exclusion from foreign travel which is vital for academics as a means of buttressing their inadequate Moneda Nacional incomes.

  • Certain areas of the economy appear to continue to be off limits to analysis and scrutiny, notably the bio-technological industry and the conglomerate enterprises that straddle the peso and the convertible peso economies.
  • The political decision-making process on economic and other matters within the highest levels of the Government continues to be a “black box,” the workings of which we can only speculate about.  Cuban Universities need some real Departments of Political Science!

The near-absence of checks and balances on the policy-making machinery of the state also contributes to obscuring over-riding real priorities and to prolonging and amplifying error.  The National Assembly, dominated by the Communist Party, meets for very short periods of time – four to six days a year – and has a large work load, so that it is unable to serve as a mechanism for undertaking serious analysis and debate of economic or other matters. The cost for Cuba of this situation over the years has been enormous.  It is unfortunate that Cuba lacks the concept and reality of a “Loyal Opposition” within the electoral system and in civil society.  These are vital for economic efficiency, not to mention, of course, for authentic participatory democracy.

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