• The objective of this Blog is to facilitate access to research resources and analyses from all relevant and useful sources, mainly on the economy of Cuba. It includes analyses and observations of the author, Arch Ritter, as well as hyper-links, abstracts, summaries, and commentaries relating to other research works from academic, governmental, media, non-governmental organizations and international institutions.
    Commentary, critique and discussion on any of the postings is most welcome.
    This Blog on The Cuban Economy is dedicated to Cuba's Generation "A". Although inspired by Yoani Sánchez' original blog "Generation Y" this is not dedicated to those with names starting with the letter "A". Instead, it draws from Douglas Coupland's novel Generation A which begins with a quotation from Kurt Vonnegut at a University Commencement:
    "... I hereby declare you Generation A, as much as the beginning of a series of astounding triumphs and failures as Adam and Eve were so long ago."

Fidel’s No-Good Very Bad Day

Posted on September 15, 2010 by Arch Ritter

A “Senior Moment”? On Wednesday September 8, former President Fidel Castro was quoted as saying: “The Cuban model doesn’t even work for us anymore”, when asked if Cuba’s economic system was still worth exporting to other nations, by Jeffrey Goldberg, of The Atlantic. A few days later, Friday September 10, Fidel said that it was a misunderstanding though Jeff Goldberg and Julia Sweig insisted that this is what he said. Had Fidel been experiencing a “Senior Moment?” Had he been speaking in jest- a throw-away line in a jocular conversation, but also revealing concerning his legacy to Cuba and the world? Was he misunderstood or misheard or mistranslated?

Fidel’s Economic Legacy: Rejected by Brother Raul and Questioned by Cuba’s Government

Then on Monday September 13, the Pronunciamiento de la Central de Trabajadores de Cuba announced the new policy on lay-offs in the state sector and expansion in the self-employment and cooperative sector employment. This statement outlines a new direction for the Cuban economy, namely towards greater reliance on the market mechanism, private ownership and entrepreneurship and a reduced role for the state and (attempted) planning. Cuba already had a “mixed economy” with a substantial private sector in agriculture and some 143,000 in non-agricultural activities, not to mention all those in the underground economy. However, the statement by the Cuban Federation of Labour indicates a major shift of emphasis towards a more marketized, decentralized, private-sector economy. This shift in direction for the Cuban economy negates all that Fidel has stood for regarding the economy in the past. Fidel was responsible for

  • the initial nationalizations of almost all the private sector, including self-employment in 1961-1963 and 1968 (with the “Revolutionary Offensive” )
  • the continuous fulminations against the self-employment and “capitalism” from a variety of perspectives
  • the shut-down of the farmers’ markets in 1986 with the “Rectification program”
  • the tight containment of self-employment after 1995 and
  • discrimination against self-employed Cuban citizens vis-à-vis foreign enterprise in joint ventures in terms of tax regimes.

President Raul Castro’s new approach instead is placing its faith in the small enterprise and cooperative sector, hoping that these will to come to the rescue of the economy by absorbing the underemployed labour in the state sector to be laid off in the next six months. . This is strong confirmation that President Raul Castro himself is convinced that the Cuban model is not working any more – if it ever did. It also is likely that the Communist Party and the National Assembly will not contradict Raul on this. I argued earlier that none of the variants of the “Cuban Model” had worked effectively. (The “FIDEL” Models Never Worked; Soviet and Venezuelan Subsidization Did) Many foreign analysts and observers had of course questioned the value of Fidel’s legacy in the economy as well as politically and in terms of human rights. It now appears that Fidel’s legacy is questioned by his own Government. President Raul Castro has implicitly rejected Fidel’s life work regarding the economy of Cuba.

A Difficult Day – and Situation – for Fidel

Fidel Castro allegedly said to the judges in his famous 1953 speech in his own defense at his trial after the unsuccessful attack on the Moncada army barracks “Condemn me, History will absolve me.” However, “History” will not absolve Fidel. It appears also that even the official versions of “history” under Cuba’s current Communist system will not absolve Fidel either. Small wonder that he is attempting to portray himself as the elder statesman, altruistically offering advice and warnings on international issues, many of which appear to him to be apocalyptic in character. How will Fidel respond to the official Cuban rejection of his vision of “socialism” that he has been attempting to impose on Cuba for almost half a century? . PS. It is instructive that the labour federation, the CTC, is placed in charge of implementing the lay-offs on the part of the government rather than trying to defend the interests of the state sector workers. This pretty much confirms the view of the CTC as an arm of the regime not an organization to defend workers’ rights and interests.

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

Posted on September 9, 2010 by Arch Ritter

“The Cuban model doesn’t even work for us anymore” stated former President Fidel Castro, when asked if Cuba’s economic system was still worth exporting to other nations, by Jeffrey Goldberg, of  The Atlantic magazine during an interview in Havana. (JIM WYSS ,  AND LUISA YANEZ, Miami Herald, September 9, 2010), broken.html.

Was this a throw-away line? A rare moment of candor and  self-criticism? Or a mis-translation? Or is the implication that Raul can’t make things work anymore. but he, Fidel, could if he were back in charge?

In fact, the “Cuban Model” was a series of “FIDEL” MODELs. None of them ever worked effectively. They were all characterized by a dictatorial, overpowering and personal control by Fidel himself. From 1959 to 2006, the central feature of Cuba’s economic existence was Fidel’s micro-management of the economy. This was observed and analyzed in 1962 by the French agronomist Rene Dumont who lamented Fidel’s itinerant and ill-informed decision-making on every issue or problem that came to his attention. We saw it in January 2006, shortly before he left office, with “La Revolucion Energetica” in which again he micro-managed the issue.

The abolition of private enterprise in 1961, 1963 and 1968 (with the “Revolutionary Offensive”) has been a continuous disaster, suppressing and wasting the energies and entrepreneurial capabilities of the Cuban people. The 1961-1963 “Instant Industrialization” strategy was a disaster, quickly aborted. Likewise, the 1964-1970 “10 Million Ton Sugar Harvest” plus “New Man” plus Hyper-Centralization were all fiascos that also were aborted in 1970.

The Cuban economic expanded steadily from 1970 to 1985. Unfortunately this success was ephemeral, based as it was on Soviet support as well as a convertible currency debt build-up that led Cuba ultimately to declare a moratorium on debt servicing in 1986.

Cuba’s “Golden Age” of economic prosperity from 1970 to 1986 or so was one of Soviet economic Orthodoxy under-girded by massive Soviet subsidization.  This subsidization of the Cuban economy occurred mainly through the pricing of merchandise trade products. The USSR paid a ruble price for its sugar imports from Cuban that was a multiple of the prevailing world price at official exchange rates for many years. At the same time, Cuba paid a price that was below the prevailing market price for its petroleum imports from the USSR. The accompanying chart, derived from the work of William Leogrande, and J. M. Thomas illustrates the magnitudes of the assistance. My own quantitative estimates placed the value of this subsidization at around 23% to over 36% of National Income in the 1980 to 1987 period. (See the Table at the bottom of this note for the detail of the calculations.)

When economic stagnation set in 1985, Fidel designed the “Rectification Process” which was supposed to correct previous errors, re-centralize and de-marketize the economy and reignite economic expansion. This also failed.

Then with the termination of Soviet subsidies came the economic melt-down and the “Special Period in Time of Peace”. The latter in fact is not “special” but instead is the real world. In the “Special Period” the expansion of 2004 to 2008 is in large part due to the special relationship with Venezuela and the subsidization that this has produced. President Chávez supports Cuba through low-cost oil exports to Cuba, export and investment credits, and generous foreign exchange payments for Cuban exports of medical services.

In summary, the various development models and approaches that have dominated in Cuba have been Fidel’s personal models. Fidel Castro is correct in stating that they don’t work anymore. However, they have never worked.

Source:

Ritter, Archibald R. M. “The Cuban Economy inb the 1990s: External Challenges and Policy Imperatives.” Journal of Interamerican Studies and World Affairs, 32:3; Fall, 1990.

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New Publication on US-Cuba Relations: Cuba-Estados Unidos, tan lejos, tan cerca

Posted on September 8, 2010 by Arch Ritter

Revista TEMAS, Cultura, Ideologia Sociedad, La Habana,

número 62-63 abril-septiembre de 2010

Web Address: http://www.temas.cult.cu/index.php.

After some three or four years trying to win approval within Cuba, a joint US-Cuba project on the relations between the two countries has finally come to fruition.

Rafael Hernandez, Editor of Revista TEMAS in Havana and Jorge Dominguez, Professor of Mexican and Latin American Politics and Economics, and Vice Chancellor for International Relations at Harvard University have succeeded in bringing together a multinational team of authors and in producing a study already published in Revista TEMAS in Cuba.

An English-language version is in process of publication in the United States with the title Debating U.S.-Cuban Relations: Shall We Play Ball? This is Jorge Dominguez second successful collaboration with Cuban authors in recent years, the first being The Cuban Economy at the Start of the Twenty-First Century, edited with Omar Everleny Perez Villanueva of the Centro de Estudios sobre la Economia Cubana, Universidad de La Habana, and Lorena Barberia also of Harvard.

An essay of mine is included in the collection, namely Estados Unidos-Cuba: potenciales implicaciones económicas de la normalización,

I must confess that I was surprised – but pleasantly surprised – that my essay was included in the collection. My expectation was that the essay would be rejected for ideological reasons.This article contains criticism of current economic policy and institutional structures. though couched in terms of an argument that the gains to Cuba from normalization with the United States would be significantly greater if a series of economic reforms were adopted. The reforms considered include

  • legalization of small, medium and cooperative enterprises,
  • relaxation of taxation and restrictions on self-employment,
  • modification of foreign investment policy to permit majority foreign ownership,
  • relaxation of controls on financial flows from abroad, and of course
  • monetary and exchange rate unification, among other things.

The absence of labor rights – the right to form independent labor unions, to bargain collectively, and to strike – is also discussed as a possible impediment to direct foreign investment in view of the opposition that US groups will have to US firms investing in Cuba under current conditions of the absence of labor rights.

The vetting process that the article underwent was rigorous but surprisingly un-ideological. A long series of critiques were made of the draft that arrived in Havana by the editorial advisors of TEMAS. Some of the criticisms were useful, some were ideologically oriented and a few were neither ideological nor useful. However, following Jorge Dominguez advice, I answered all the queries and criticisms as carefully as I could. Some I accepted. I changed some wording to be less inflammatory. Some criticisms I rejected as diplomatically as I could. In the end, my revisions were accepted by the TEMAS Editor, Rafael Hernandez.

One interesting change that the editors proposed and that I accepted was to remove the name of president Fidel Castro who I had referred to in mentioning the ambiguity of Cuba’s policies towards direct foreign investment, promoting it on the one hand but pronouncing against “globalization” – of which DFI is a part – with President Castro taking lead roles at the podium of the “Anti-Globalization” conferences that occurred for a number of years. The editor wanted Castro’s name removed from that discussion, but did not object to the discussion itself. This seemed to be a version of the hesitancy of many Cuban citizens to  mention Fidel’s name, but to use the hand motion of stroking a beard instead.

I will have to modify my criticisms of freedom of expression within Cuba – though only somewhat!

Below is the Title, Table of Contents, and Web address for the issue. The essay titles are hyper-linked to the TEMAS Web site though the connection often seems very slow.

Cuba-Estados Unidos: tan lejos, tan cerca

Reconfiguración de las relaciones de los Estates Unidos y Cuba, Jorge I. Domínguez, Profesor. Universidad de Harvard.

Enemigos intimacy. Paradojas en el conflicto Estados, Unidos-Cuba, Rafael Hernández, Politólogo. Revista Temas.

Cuba y los Estados Unidos en  las esferas de la defensa y la seguridad, Hal Klepak, Profesor. Royal Military College of Canada.

La seguridad nacional de Cuba frente a los Estados Unidos: conflicto y ¿cooperación?, Carlos Alzugaray Tret, Profesor. Centro de Estudios Hemisféricos y sobre Estados Unidos, Universidad de La Habana.

El terrorismo y el acuerdo anti-secuestros en las relaciones de Cuba con los Estados Unidos, Peter Kornbluh, Investigador. National Security Archive, Washington, DC

La política de la Unión Europea en el triángulo Cuba-Estados Unidos-España, Susanne Gratius, Investigadora. Fundación para las Relaciones Internacionales y el Diálogo Exterior (FRIDE), Madrid.

La Unión Europea y su papel en las relaciones Estados Unidos-Cuba, Eduardo Perera Gómez, Investigador. Centro de Estudios Europeo. Universidad de la Habana

Estados Unidos-Cuba: potenciales implicaciones económicas de la normalización, Archibald R. M. Ritter. Profesor. Universidad de Carleton, Ottawa.

Las relaciones económicas Estados Unidos-Cuba. La normalización pendiente. Jorge Mario Sánchez Egozcue, Investigador y profesor. Centro de Estudios Hemisfericos y sobre Estados Unidos, Universidad de La Habana.

Cuba, su emigración y las relaciones con los Estados Unidos, Lorena G. Barberia, Investigadora. Universidad de Harvard.

Los Estados Unidos-Cuba: emigración y relaciones bilaterales, Antonio Aja Díaz, Historiador y sociólogo. Centro de Estudios Demográficos, Universidad de La Habana.

Corrientes académicas y culturales Cuba-Estados Unidos: temas y actores, Sheryl Lutjens, Investigadora. Universidad del Estado de California, en San Marcos.

La diplomacia académica: los intercambios culturales entre Cuba y los Estados Unidos, Milagros Martínez Reinosa, Profesora. Universidad de La Habana.

Jorge Dominguez and Rafael Hernandez

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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

Posted on August 31, 2010 by Arch Ritter


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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Review of Amelia Weinreb’s Cuba in the Shadow of Change: Daily Life in the Twilight of the Revolution

Posted on August 10, 2010 by Arch Ritter

Cuba in the Shadow of Change: Daily Life in the Twilight of the Revolution. By Amelia Rosenberg Weinreb. Gainesville: University Press of Florida, 2009. Pp. 272. $69.95 cloth. ISBN: 9780813033693.

An excellent book has appeared recently on Cuba by Amelia Rosenberg Weinreb (Professor of Anthropology, University of Texas at Austin.)

In Cuba in the Shadow of Change: Daily Life in the Twilight of the Revolution Weinreb explores and analyzes the lives, behavior, and views of “ordinary Cubans” or the culture of the silent majority or “shadow public.” These Cubans are familiar to those who have come to know Cuba during the Special Period and probably constitute a large majority of the population. These “unsatisfied citizen-consumers,” as Weinreb calls them (2 and 168.), strive to survive with some access to basic “modern” goods, above and beyond what the ration book provides in an amount insufficient for life maintenance since 1990. These modern goods perhaps include some luxuries, but they also include basics such as women’s hygiene products that are available only in the “dollar stores” or tiendas de recaudación de divisas (stores for the collection of foreign exchange).

This “silent majority” has remained under-analyzed by scholars, perhaps—as Weinreb suggests—because they do not seem to merit special attention relative to indigenous peoples, the poor, or labor unions, or perhaps because they do not fit the orientations of “New Social Movement” and “Structuralist Marxist” approaches. Weinreb’s sociological-anthropological analysis of Cuba’s silent majority therefore fills a major vacuum in works on Cuba over the last 20 years, focusing as it does on the character, aspirations and behavior of a group that has been almost ignored even though it probably constitutes a majority of the population of Cuba.

Weinreb’s ethnographic participant observation succeeds in producing an analysis from about as deep within Cuban realities as it is possible for an outsider to get. Her success can be attributed in part to her research assistants and neighborhood ambassadors, namely her three young children, Maya, Max, and Boaz, who helped to establish rapport, friendship, and shared parenting bonds with Cubans who empathized and wanted to help a young mother. This “family fieldwork” provides a unique window into Cuban society and the lives of Cubans.

Weinreb’s focus is a “shadow public,” somewhat analogous to the shadow economy, as the following explains:

[U]nsatisfied citizen-consumers . . . share interests, characteristics, a social imagery and practice, but their political silence, underground economic activity, and secret identity as prospective migrants casts a shadow over them. They are therefore a shadow public, an un-coalesced but powerful group that engages in resistance to state domination but without a public sphere, and only in ways that will allow them to remain invisible while maintaining or improving their families’ economic welfare. (168)

The roots of the shadow economy of course predate the Revolution. Indeed they go back to the colonial period and its unofficial economy of smuggling and contraband that predominated for a number of centuries when the Spanish crown attempted to enforce a bilateral trading monopoly on its Spanish colonies – plus heavy economic restrictions and con trolls from Spain.  Colonial disregard for Spanish officialdom was encapsulated in the expression “Obedezco pero no cumplo” (I obey but do not comply). This saying has a modern ring to it in the Cuban context.  Cuba’s underground economy has deep historical roots.

However, the expansion and pervasiveness of today’s shadow economy were generated by the character of central planning itself, and by the circumstances of the Special Period, as analyzed in chapter 1. Indeed, the rationing system, installed in 1962 allocated the same bundle of products to every citizen regardless of their tastes or preferences. It was normal that people would exchange or selling the products provided by the rationing system that they did not want for things they did want. Thus everyone became a micro-capitalist exchanging, buying and selling various products. Furthermore, because the planning system was always imperfect, enterprise managers had to improvise solutions “outside the plan” to their supply problems, by buying or selling inputs or outputs in a quasi-market” – also part of the shadow economy. Indeed managers the success of enterprise managers and their reward depended on how well they could improvise in this unofficial – and indeed technically illegal – market environment. The problems of the “Special Period” also required citizens to find additional sources of income above and beyond the state sector wage that would purchase the food requirements for about 10 or 14 days of each month.

Chapters 2 and 3 examine how citizens strive to maintain private space and personal control within the context of the state’s domination of personal life and economic activity. Chapters 4-6 explore a range of survival strategies. Chapter 4 focuses on the concepts and practices encapsulated by the terms resolver, luchar, conseguir, and inventar, each with unique connotations in the context of the Special Period. The significance of material things—and the lack thereof—are investigated in chapter 5. Chapter 6 treats the importance of access to foreign exchange or “convertible pesos.”

Weinreb here presents a Cuban class system that puts the “red bourgeoisie” at the top, followed by artists with privileged access to travel and foreign exchange earnings, “dollar dogs” or cuenta propistas (own-account workers) with access to tourist expenditures or remittances from relatives or friends abroad, “unsatisfied citizen consumers,” and finally, at the bottom, the “peso poor” who lack access to foreign exchange and additional earnings.

The final chapters examine the broad-based phenomenon of feeling trapped and the dream of escape via emigration. Chapter 8 explores “off-stage” expressions of dissatisfaction, criticism, and resistance, which remain purposely hidden, unorganized, and outside public space. This state of affairs may be changing, however, with the Damas en Blanco and bloggers courageously breaking into the public arena, spearheaded by Yoani Sánchez. Finally, chapter 9 draws together the strands of Weinreb’s analysis and explores the relevance of the concepts of shadow public and unsatisfied citizen-consumer in the broader context of Latin America.

Weinreb succeeds admirably in describing and analyzing Cuba’s silent majority, those “ordinary outlaws” who are decent, hard-working, entrepreneurial, and ethical, yet must defend themselves and their survival through a myriad of economic illegalities within the framework of a dysfunctional economic system. These people live within the doble moral, effectively cowed into acquiescence by a political system whose main escape valve is criticism, innocuous at first, but then increasingly bitter,  followed by emigration. The shadow public perhaps constitutes a potential “shadow opposition,” but seems to be easily contained and controlled by the governments of the Castro brothers.

One might conclude from Weinreb’s work that this population—currently disengaged and thinking incessantly about emigration—is ripe for public reengagement and that in time there may occur a surprisingly rapid mobilization for change.

Weinreb’s analysis raises some additional questions.

  • Under what circumstances might a shadow opposition become organized, finding a strong voice to become a real opposition?
  • Will the new citizen-journalists of Cuba’s blogging community—plus critics such as Vladimiro Roca, Oscar Espinosa Chepe, Marta Beatriz Roque, Elizardo Sánchez, the Damas en Blanco, and some Catholic organizations—be able to break the control of the Communist Party and the current leadership?
  • Will normalization of relations with the United States and the ending of the “external threat”—a siege mentality long used as a pretext for denying basic political liberties—further erode control of the Party and create new political alignments within Cuba?

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Raul Castro and Policy towards Self-Employment: Promising Apertura or False Start?

Posted on August 4, 2010 by Arch Ritter

In his speech before the National Assembly on August 2, 2010, President Raul Castro stated that the Council of Ministers had agreed to expand self-employment by eliminating various prohibitions in the granting of licenses and on some types of goods and services. and by making the employment of workers in such enterprises more flexible. At the same time, he referred to a strengthening of taxation on such enterprises.

If the policy environment is indeed liberalized, it will be a great thing for the Cuban economy and for people’s material levels of living. However, the reference to strengthened taxation is worrisome.

Advantages of an Apertura for Small Enterprise

What might be the impacts of the liberalization of self-employment as well as small enterprise (to five or ten employees)? Here is a quick listing of the benefits:

  • An increase in small enterprise would Increase competition, lower prices, improve quality and broaden diversity of the goods and services produced.
  • Productive employment  would be created
  • Incomes would be generated.
  • The average levels of incomes would be lowered in the small enterprise sector if it were opened up for free entry by anyone wanting to enter the area
  • Citizens would gain when reduced effort and time was necessary to obtain the goods and services necessary for survival.
  • Improved productivity of small enterprises would permit higher material well-being throughout Cuban society.
  • The massive underground economy would shrink.
  • Tax revenues from the sector would increase as it expanded .
  • Foreign exchange earnings and savings would occur as domestic products replaced imported products and as markets for tourists and for export expanded.
  • Innovation and Improvement would be promoted.
  • Urban and rural commercial revival would occur.
  • Improved general quality of life.
  • The culture of compliance and respect for public policy rather than regulation avoidance and illegality would in time take effect.

If one doubts the advantages of small enterprise liberalization, consider the arts and handicrafts sector. Before these areas were liberalized in 1993, the souvenirs and craft products available for purchase by tourists or Cuban citizens were of abysmal quality and without diversity, coming as they did from a number of state workshops. However, following liberalization, this area sprang to life. Very quickly the Place de la Catedral and Avenida “G” (de los Presidentes) were filled with vendors providing a rapidly widening range of crafts and arts. Very soon there were too many vendors for these locales and they were relocated to the Malecn, La Rampa, and the park between Avenida del Puerto and the Cathedral. They now constitute a major tourist attraction and earn significant amounts of foreign exchange for Cuba.

The apertura for the arts and crafts liberated the creativity, innovativeness, entrepreneurship and energies of Cuban citizens who quickly seized the opportunities available. They earn a living for themselves and make a valuable contribution to Cuban society. An apertura in all areas of the economy to small entrepreneurship would make similar contributions.

Art Market, Plaza de la Catedral, 1994

Market Stall for Sculpture, Malecon, circa 2002

 

Disadvantages of an Apertura for Small Enterprise

There are always disadvantages as well as advantages – costs as well as benefits – in economics and in the evaluation of public policy. However, I have trouble finding any disadvantages or costs in a liberalized policy environment for small enterprise.

There are three concerns, however.

First, would such an aperture worsen income distribution? In time, as some small enterprises increased in size, this would indeed likely occur. However, Cuba already has an income tax and system for taxing small enterprise so that this effect could be managed. But opening self-employment and small enterprise up to all possible entrants would also increase competition in the sector and push prices and thence incomes towards average levels.

Second, would an aperture encourage pilferage of inputs from the state sector – as has happened in the past? This is a possibility that has to be managed. It can be managed by establishing a market for inputs for the sector that is reasonable and fair. At present, it is difficult for small enterprises to obtain their necessary inputs – except at the Tiendas para la recaudacion de Divisas (TRDs) or (former) dollar stores – leading to purchases of inputs that have found their way out of the state sector. A reasonable market for the provision of inputs to the sector is thus vital.

Third, would an aperture lead to an expansion of “infractions” and illegalities as small enterprises tried to evade rules and taxes? This could indeed occur if regulations remained asinine and if tax burdens were impossible.  However, if an aperture to small enterprise were accompanied by the dropping of silly regulations and controls, and if the tax regime was made reasonable and fair, it is likely that compliance would improve. However, building a culture of respect for regulations and taxes will also take some time as the self-employed have come to view government as an enemy force imposing rules and regulations that are aimed not just at their containment  but also their elimination.

Current Policy towards Self-Employment

The current policy environment within which the self-employed operate is particularly difficult.

There are a variety of controls and prohibitions that seem designed to obstruct, contain and eliminate the “Cuenta-Propistas”. Here is a summary of the policy environment:

Controls and Prohibitions:

1. All activities are prohibited except those specifically permitted

  • All professional self-employment is prohibited
  • Of the initial 156 legalized activities 41 were prohibited in around 2005

2. The number of the self-employed is strictly controlled through the granting of licenses (See Chart 1.)

3. Taxation is onerous and indeed is much heavier than that facing foreign multi-national corporations in joint ventures. This is  a shocking type of discrimination against Cuban citizens (See Chart 2.)

4. There are numerous prohibitions

  • No access to credit;
  • No access to foreign exchange or imports (except through state “TRD” stores)
  • No advertising
  • No intermediaries
  • Limits on numbers of employees;

5. There are innumerable petty restrictions (See Chart 3.)

6. The political and media environment has been negative since 1995.

For these reasons, the self-employment sector has stagnated over the last 10 years following the initial expansion of 1993-1994 following its initial liberalization (See Chart 4.)

Possible Policies towards a Small-Enterprise Apertura

If President Raul Castro wished or was able to provide a definitive aperture for small enterprise, here are the types of policies that would be under consideration.

1. Liberalize Licensing: Let anyone and everyone open a small enterprise (  Result: competition will push prices downwards and quality upwards;

2. Permit All Types of Self-Employment, including Professional and High-Tech while maintaining state medicine and health systems intact;

3. Raise the limit on employees to 5, 10 or 20;

4. Provide legal sources for the purchase of Inputs;

5. Permit Access to Imported Inputs (outside TRDs and at the exchange rater available for the state sector);

6. Eliminate silly and vexations restrictions;

7. Make Microenterprise Taxation Simpler and Fairer;

8. Establish Micro-Credit Institutions;

9. Establish a Ministry for the Promotion of Small Enterprise.

However, needless to say, former President Fidel Castro undoubtedly would disapprove of any aperture judging from (a) the Initial near shut-down of small enterprise during the 1968 Revolutionary Offensive; (b). the further tightening of the prohibition on self employment during the “Rectification Program” of 1986-1990; and (c) His statement lamenting the 1993 opening to Self-employment in 1995.

On the other hand, Raul Castro has displayed a streak of pragmatism that seems to be lacking in his elder brother, witness his initiative in re- opening the farmer’s markets in 1994.  Moreover, his reputation is more for talking quietly and eventually acting rather than talking with grandiosity and making false starts. Time will tell.

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A Citizen’s Perspective: Jorge Gonzalez on the Cuban Economy

Posted on July 23, 2010 by Arch Ritter

From Oliver Blatch,  Guardian Weekly, Series: First person Thursday 31 January 2008
http://www.guardian.co.uk/world/2008/jan/31/cuba

Oliver Blatch published this statement from Jorge Gonzalez describing his and his family’s existence in Cuba and the general attitudes towards low wages, food shortages, the dual economy, and the political paralysis that prevents meaningful change.

Gonzalez is an ex-member of the Foreign Ministry.

I feel like a real revolutionary – someone who desires to see things change for the better. Here in Cuba, nothing ever improves. It only stays the same or gets worse.

Imagine, my daughter is 23 years old and she’s never ever stayed in a hotel. Not one night in her whole life. If she did go, the police would probably think she was a prostitute anyway.

Tienda, La Habana circa 1969, Photo by Arch Ritter

My wife works as a doctor. She was one of the first doctors to go to Venezuela to help Hugo Chávez with his socialist revolution. She earns 400 Cuban national pesos (£7.60) a month. That’s all we receive. She works six days a week, with one night shift included.

A pair of shoes is worth around 30 Cuban convertible pesos (£7.66). So if we need some shoes, how are we supposed to wash or eat or pay for electricity? Sure, we get basic rations every month, but they only last about 10 days.

Tienda, circa 2007, Photo by Arch Ritter

At the moment my son is in the United States. He’s a ballet dancer. He escaped there illegally after a tour in Mexico; on the last day, he just disappeared. Now he has a car, laptop, mobile phone and an apartment that he rents.

And here I am, 46 years old, never having owned my own car. Just think about it. I have a beautiful beach less than half an hour away from my house and I haven’t visited it for three years because I can’t afford the transport.

That is why there’s a clandestine economy going on in every household. Everyone is on the make, selling things on the side. I graduated as a lawyer and worked in a variety of government positions, but now I earn my living as an odd-job mechanic. If the inspectors found out, I’d get severely fined.

Read More, directly from  from the Guardian:
http://www.guardian.co.uk/world/2008/jan/31/cuba



“Thank you Fidel for all you have given us”

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The Marketing of “Che” Guevara: A Review of “Che’s Afterlife: The Legacy of an Image”, by Michael Casey

Posted on July 21, 2010 by Arch Ritter

Review of Che’s Afterlife: The Legacy of an Image. By Michael Casey. New York: Vintage Books, 2009. Pp. 388. $15.95 paper. ISBN: 9780307279309.

Michael Casey, from Perth, Western Australia, and recently the Dow Jones Newswires Bureau Chief in Buenos Aires, has written an excellent book on the commercialization of Che Guevara. In Che’s Afterlife, Michael Casey follows Korda’s famous photograph of a Christ-like Ernesto “Che” Guevara into the consciousness of people around the world. This image is a well-defended and trademarked icon (copyright VA-1-276-975) owned by Korda’s daughter, Diana Díaz, and used in collaboration with the government of Cuba.

Korda’s “Che”

For some, the Korda image of “Che” is a quasi-spiritual symbol of hope for a better future. For others – those sporting the Che T-shirts for example – it is a symbol of undefined but earnest youthful rebellion. But for still others, it is an abhorrent symbol of the kangaroo justice meted out in La Cabana fortress – converted to a prison – in East Havana where Che as commander of the prison presided for 11 months over the summary trials and executions of somewhere around some 220 prisoners or of many more.

For me, Che may be all of the above and more. But he is also the economic czar who damaged the Cuban economy immensely. First, as President of the Central Bank, he presided over the loss of convertibility of the Cuban peso which has continued for half a century. Convertibility of the Cuban peso now appears far from current realities.  Second, as Minister of Industry he  amalgamated five sub-units into a behemoth Ministry responsible for running some 1,800 work units with 150,800 employees. Attempting to run so many enterprises from office towers in Havana was a central planning folly of immense proportions. Third, he was the prime mover of the attempt to use the “New Man” concept as a means of mobilizing the work efforts of Cuban citizens in the second half of the 1960s and also the author also of the so-called “budgetary system of finance” that abolished accounting and the financial autonomy of productive enterprises. Implementation of these approaches was in President Castro’s hands, not Guevara’s. These two dimensions of running the economy from 1965 to 1970 compounded the problems and dislocations of the attempt to produce 10 million tons of sugar. These three interlinked dimensions of running the economy met with such disastrous results that they were reversed in 1971. Cuba then moved to Soviet economic orthodoxy – plus Soviet loans and hidden subsidization – which produced surprisingly better results.

Casey has written an intriguing history of the image’s trajectory over the last half century. He brings together research into the lives of both Korda and Guevara, a command of the history of Revolutionary Cuba, knowledge of countries where the Guevara mythology is important, an understanding of copyright law, and original investigative interviewing and reporting.

Casey begins his narrative with the instant when the photo was taken on 5 March 1960. He sketches Che’s role in the new government—notably as chief of La Cabaña prison and overseer of the swift executions of prisoners—his secretive and disastrous Congo operation, and his guerrilla campaign in Bolivia, putting the launch of Che as icon and of the “Heroic Revolutionary” brand at the 18 October 1967 memorial ceremony at the Plaza de la Revolución.

Casey also presents an account of Korda’s activities in Havana, the first publications of his photograph, and the cultural ferment of the early years of the Revolution, followed by the disillusionment of many in the mid-1960s.

Alberto Korda

He traces the peregrinations of Korda’s “Che” through Argentina, Bolivia, Venezuela, and Miami, as well as in the student ferment of 1968 from Paris to Berkeley. His later chapters focus on the use of Che’s image as a brand by the government of Cuba; here, it no longer signifies a heroic guerrilla promoting revolution, but has instead become an advertisement, selling Cuba in the international tourist marketplace. The essence of the image ia now “the idea of revolutionary nostalgia” (306). After some thirty-seven years during which the photograph was freely available for use by anyone, copyright ownership now applies and control is exercised through legal means when necessary.

Casey takes us on a fascinating journey through the life and afterlife of Che and through a half century of international social and political history, using Che’s image as a prism. His book should find a wide readership, of all political stripes, who have an interest in Cuba or in major political and social movements. Those with interests in marketing, branding, and copyright law will also find this volume illuminating.

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

Posted on July 7, 2010 by Arch Ritter

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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Pavel Vidal Alejandro, “Cuban Economic Policy under the Raul Castro Government”

Posted on July 6, 2010 by Arch Ritter

An excellent  study on Cuban economic policy has recently been published by Pavel Vidal Alejandro of the Centro de Estudios sobre la Economia Cubana, University of Havana.  “Cuban Economic Policy under the Raul Castro Government” is published through the Institute of Developing Economies of the Japan External Trade Organization. Attached is the Hyperlink:

http://www.ide.go.jp/Japanese/Publish/Download/Report/2009/pdf/2009_408_ch2.pdf

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