• This Blog on The Cuban Economy is dedicated to Cuba's Generation "A". Although inspired by Yoani Sánchez' 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 that was brought to my attention by Andrew Johnston of Ottawa: ".. ... 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."

    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.

New Essay by Pavel Vidal and Omar Everleny Perez on Fiscal Adjustment, Structural Change and Self-Employment

An essay entitled “Entre el ajuste fiscal y los cambios estructurales: se extiende el cuentapropismo en Cuba”
by Pavel Vidal Alejandro y Omar Everleny Pérez Villanueva of the Centro de Estudios sobre la Economia Cubana has just been published in the Digital Supplement of Espacio Laical,   the CONSEJO ARQUIDIOCESANO DE LAICOS DE LA HABANA, Suplemento Digital No.112 / Octubre 2010.

Here is the web address for the article:

( “Entre el ajuste fiscal y los cambios estructurales: se extiende el cuentapropismo en Cuba” . )

The web address for Espacio Laical is

Espacio Laical: http://espaciolaical.org. (Then if necessary go to the October 2010 edition first page.)

This essay is well worth reading, outlining the general economic situation in Cuba provoking the September 2010 liberalization of the restrictions on self-employment, summarize the regulatory changes, and present a number of comments on the policy changes, summarized below in Spanish:

1. Una gran parte de la población y especialistas coincide que la lista publicada en Granma de 178 actividades es aún demasiado precaria
y reducida para poder asimilar el medio millón de desempleados estatales. Son necesarias nuevas categorías y agilizar la creación de
las cooperativas no agrícolas.

2. Las categorías son demasiado específicas y ello frena la iniciativa individual. Sería preferible una lista de categorías generales que le
dieran espacio a los cuentapropistas y microempresarios para proponer y perfilar una oferta de bienes y servicios diversa. Esta tiene queser lo suficientemente flexible como para poder adecuarse a una demanda cambiante en el tiempo y heterogénea en lo local, y que es indescifrable para cualquiera que se lo proponga centralmente.

3. Las actividades permitidas son poco intensivas en conocimiento y no permiten aprovechar la inversión en educación que ha hecho el
país por décadas. Muchos de los desempleados estatales serán graduados universitarios que necesitarán una opción acorde con su
calificación.

4. Se permite el crédito bancario, pero el sistema financiero tiene problemas de liquidez, y habría que ver cuánto del ahorro todavía está comprometido en los créditos que se dieron para la sustitución de equipos electrodomésticos dentro de la llamada Revolución
Energética. Como alternativa, se requiere agilizar y promover la colaboración internacional en el tema del microcrédito.

5. No se va a crear un mercado mayorista de insumos para las PYME´s. Hoy los mercados de insumos para las empresas estatales sufren de desabastecimiento como consecuencia de los problemas económicos y financieros del país. Por tanto, es muy difícil pensar por ahora en un apoyo estatal en este aspecto. Pero si se promueve el microcrédito con colaboración internacional, ello significaría una entrada de divisas al país que posibilitarían abrir la importación para los cuentapropistas, microempresarios y cooperativistas. En Cuba operan suficientes proveedores extranjeros que podrían abastecer un mercado de insumos para las PYME´s. Los mismos mercados mayoristas que hoy existen para las empresas estatales podrían darle entrada a las PYME´s. La doble moneda no es un problema para las PYME´s pues tiene abierta la convertibilidad del peso cubano y el peso convertible en las casas de cambio (CADECA).

6. La medida considera pocos incentivos a la legalidad. Algunas actividades, por su naturaleza, son más visibles y tendrán por obligación ue legalizarse y pagar impuestos. Pero hay otras que tienen como único incentivo la incorporación a la Seguridad Social.
Evidentemente, para los que ya reciben una jubilación, este no tiene ningún efecto. El microcrédito y el mercado de insumos, precisamente serían incentivos a la legalidad, pues se necesitaría estar registrado y pagar impuestos para acceder a ellos. Las PYME´s internacionalmente son apoyadas tributaria e  institucionalmente. La asesoría legal, económica, informativa y otras ayudas promoverían la legalidad y el desarrollo de las mismas.

7. Falta acompañar estos cambios con leyes que creen confianza para la inversión de esfuerzos y dinero en emprendimientos privados, y que garanticen, tanto al Estado como a los ciudadanos, el cumplimiento de derechos y deberes.

8. El estancamiento económico que vive el país es otro de los obstáculos para la creación de nuevas PYME´s. La oferta de bienes y servicios de los cuentapropistas, las microempresas y las cooperativas necesita de una demanda. Con estancamiento económico y aumento del desempleo es muy difícil pensar en una demanda suficiente desde las familias o desde las empresas estatales. Una gran parte de la demanda ya hoy está cubierta con una oferta desde la ilegalidad

Omar Everleny Perez and Pavel Vidal

Posted in Blog | Tagged , , , , , , | 3 Comments

State Sector Lay-offs then Private Sector Job Creation: Has Raul Got the Cart before the Horse?

On Monday September 13 2010, the Cuban Labour Federation announced a new government policy on lay-offs in the state sector and expansion of self-employment and cooperative sector employment.( Pronunciamiento de la Central de Trabajadores de Cuba.) As is now well known, the policy calls for the lay-off of some 500.000 workers, about 10% of Cuba’s entire labor force and their re-incorporation into self-employment activities mainly, but also some co-operative activities. This of course marks a major strategic re-orientation of Cuba’s economic structure. The economy already was a “mixed economy” though with a small self-employment sector outside of agriculture, but it will now shift further towards a “marketization.” Raul basically is asking the small and harassed self-employment to come to the rescue of the Cuban economy by generating productive employment because the state sector ostemsibly has failed to do so. Many questions can be and have been raised by outside observers as to how this new approach will be implemented. A couple of questions are noted here. I. Has Raul Got it “Bass Ackwards”? 1.      Prior to any state sector lay-offs, would it not be wise to redesign the framework within which small enterprise operates so that it will be in a position to expand and absorb the laid-off state sector workers? Firing state sector workers and hoping that they somehow will be reabsorbed somewhere sounds distinctly un-socialist. 2.      If workers’ efforts and productivity are low, is this due mainly to sloth and laziness? Or is it instead due to a dysfunctional incentive structure in which workers are paid very little in Moneda Nacional, but somehow have to acquire  “Convertible Pesos” to survive with purchase in the Hard Currency (formerly dollar) stores? As the old saying goes:  “They pretend to pay us and we pretend to work.” Maintenance Workers at the Australia Sugar Mill, November 1994; Certainly working hard, but probably laid off in 2002 when the Mill was converted to a museum;  visited with Nick Rowe who “blogs”  at “Worthwhile Canadian Initiative” and Larry Willmore, who “blogs” at “Thought du Jour” (Photo by A. Ritter) 3.      Is low productivity also due to mismanagement that wastes human effort? Is inefficiency also the result of low capacity utilization in enterprises  for example, in state stores that have little to sell, in offices with little to do, or in industrial enterprises idled through poor maintenance, insufficient imported inputs, breakdowns etc.? (Note the diagram below that illustrates the reduction in non-sugar industrial output since 1989. Despite allegations of record economic growth in the late 2000s, industrial output remains around half of its 1989 level.) II.   Who will be laid off and how will it be done? 1.      Will those who are laid off be good candidates for creating their own self-employment small businesses? 2.      Will those laid-off be offered “severance packages” or “buy-outs” that would provide them with an amount of capital to begin their own small businesses? 3.      Will older workers be offered “early retirement packages” that would assist them in starting a small business or co-operative? 4.      Will workers be free to self-select – with a “severance package” – so that they can start a small business? 5.      Will those who are laid off be the truly redundant and unproductive workers, in which case they may not have the aptitude to start their own small business? 6.      If laid-off workers can self-select, will the state sector enterprises or bureaucracies then lose their more capable and industrious workers? 7.      How generous will the unemployment benefits be and how long will they last while workers look for new jobs or attempt their own job-creation? In any case, the process of laying people off will be most difficult. The anxieties generated among the population must be intense and the Workers Assemblies now discussing these issues must be acrimonious. III.   Creating an “Enabling Environment” for Micro, Small and Cooperative Enterprise Since 1995, public policy has been aimed at containing small enterprise – after liberalizing it in 1993 – by licensing limitations, tight and vexatious regulations, onerous taxation, harassment by inspectors and negative political and media stigmatization. This has not been an easy environment for the functioning of self-employed to operate. Major changes will be necessary if the small enterprise sector is to expand in order to be able to absorb the lion’s share of the displaced state workers. How can this be done? A previous Blog outlined some possible measures: Raul Castro and Policy towards Self-Employment: Promising Apertura or False Start? Here are some of the key policies that would be necessary to generate a flowering of the micro, small, and cooperative enterprise sector. Additional policies regarding advertising and vending 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.” Photographer, at the Capitolio circa 1996, (Photo by A, Ritter)

Posted in Blog, Featured | Tagged , , , , , , , | 4 Comments

New Publication on Cuban-Canadian Relations

A New publication has just appeared on Canadian-Cuban relations. It is a Special Issue of Canadian Foreign Policy edited by Professor Lana Wylie. Political Science, McMaster University, Hamilton Canada. The journal is produced by the Norman Paterson School of International Affairs, Carleton University, Ottawa. This issue is a bi-national production with Cuban authors as well as Canadians.

Canadian Foreign Policy: http://www.carleton.ca/cfpj/issue-current.html#1

Unfortunately the electronic version is available only by  subscription to the journal, but most University web sites provide  access to this.   What follows are the Abstracts – sometimes abbreviated – to the articles.Volume 16, Issue 1 (Spring 2010)

SPECIAL SECTION – The Politics of Canada-Cuba Relations: Emerging Possibilities and Diverse Challenges

INTRODUCTION

SHIFTING GROUND: CONSIDERING THE NEW REALITIES IN THE CANADIAN-CUBAN RELATIONSHIP

Guest Editor: Professor Lana Wylie

The articles in this issue of Canadian Foreign Policy consider the current relationship as well as survey the history of Canada’s association with Cuba, touching on the highs and lows of the relationship and making suggestions about the future direction of Ottawa’s policy toward the island state. In selecting the articles that would appear in this issue, the editorial team at the journal and myself, as special editor for this issue, strove to ensure that the issue reflected a range of approaches and perspectives. The nine scholars who penned the following articles thus write from the perspective of six different disciplines: Geography, Political Science, History, Spanish and Latin American Studies, Business, and Economics. Even more interestingly, they tackle the relationship from both the Canadian and the Cuban perspectives, and bring fresh epistemological approaches to the study of the issues.

Peter McKenna, John Kirk, and Archibald Ritter are well-established Canadian scholars with careers that have been  devoted to the relationship. Not only have each of them spent much time in Havana, but they have done so in many capacities, from being visiting scholars at the University of Havana to advising the Canadian government about the direction of policy. In this issue they give us important perspectives on how the history of Canada’s approach toward Cuba is likely to shape the current direction of policy. The various approaches taken by Heather Nicol, Calum McNeil, and Julia Sagebien and Paolo Spadoni both challenge established ways of making sense of the relationship and complement the perspectives taken in other articles of the issue.  Each of these scholars has contributed much toward our knowledge  of Cuba, and in this issue they make crucial observations about the  various ways in which we have to come to understand the relationship. However, it was especially important that an issue devoted to furthering our understanding of the Canadian-Cuban  relationship reflect on it from both the Canadian and Cuban  perspectives. Luis René Fernández Tabío and Raúl Rodríguez help  us appreciate the view from Cuba. The two articles by the Cuban  contributors further demonstrate that what Canadians take as  given facts about Cuba, or about Cuba’s relationship with Canada, are notsettled at all.

CANADA AND THE CUBAN REVOLUTION: DEFINING THE RULES OF ENGAGEMENT 1959-1962 RAÚL RODRÍGUEZ RODRÍGUEZ

The triumph of the Cuban Revolution in 1959 was a turning point in the history of the Cuban republic; a new Cuban government started a process of socio-economic and political transformations. The initial reaction of the United States government—with the additional support of the Cuban propertied class—led to the deterioration of  the United States-Cuba bilateral relation.

As the US economic sanctions were instituted, the Cuban government turned to other Western states, Canada among them, to try to minimize the economic impact of US policy. Canada’s export-oriented economy was poised to benefit from the new  opportunities offered by the Cuban market, and Cuba offered  Canada a means to assert its sovereignty by forging an independent  foreign policy stance. Canada was forced to observe  restraint and allegiance to its NATO partners, and especially to its closest ally, the United States—the state most hostile to the outcome of the Revolution in the context of Cold War. This complex scenario started to unfold in 1959, and was fraught with challenges and opportunities for Canada Cuba bilateral relations.

THE CHRÉTIEN YEARS:EVALUATING ‘CONSTRUCTIVE ENGAGEMENT’     PETER MCKENNA AND JOHN M. KIRK

For most of Prime Minister Jean Chrétien’s ten years in office, his approach toward revolutionary Cuba was predicated on a policy of constructive engagement, or principled pragmatism. The piece begins by outlining the nature and extent of Canada-Cuba engagement, exchange, and dialogue during the Chrétien period. The article will then identify what worked in terms of bilateral relations and what did not, and in light of the Chrétien highs and lows, it will highlight the key lessons learned and explain why. Lastly, it will conclude with a series of policy recommendations for Canadian governments (current and future) to contemplate if Ottawa—especially given the changing United States-Cuba dynamic—hopes to enhance and strengthen ties with a post-Fidel Cuba.

CANADA-CUBA RELATIONS: AN AMBIVALENT MEDIA AND POLICY     HEATHER NICOL

This study examines Canadian newspapers and Parliamentary texts dating from 2000 to 2009. It suggests that there is, and has been, a consistent relationship between media portrayal of Cuba issues since the mid-1990s, but that in recent years as Canada’s  certainty of, and support for, Cuba has declined, a contradictory press facilitates an ambivalence towards Cuba that reflects the current state of Canada-Cuba relations.

Since 2000, less than one percent of all newspaper articles published in all Canadian major dailies have discussed Cuba. This lack of media coverage is striking, considering that Canadian companies have invested largely in Cuba and that Canadians have been among the largest groups of vacationers to the island for quite  some time. The Canadian International Development Agency (CIDA) has invested millions in official development assistance, while the current Conservative Government plays upon human rights issues on the island and the inherent failures of former rounds of Canadian constructive engagement to resolve these. The maintenance of normalized relations with Cuba has been  consistently challenged in Parliamentary debates by Conservative MPs. The latter have linked human rights abuses on the island with an increasingly critical approach to Canada’s traditional policy of constructive engagement.

CANADA’S ECONOMIC RELATIONS WITH CUBA, 1990 TO 2010 AND BEYOND     ARCHIBALD R. M. RITTER

During the Colonial era, from Independence to 1959 and throughout the regimes of Presidents Fidel and Raúl Castro, Canada and Cuba have maintained a normal and mutually beneficial economic relationship. During the first half of the 1990s, this relationship was invaluable for Cuba as it adjusted to the loss of Soviet subsidization and to its disconnection from the former Soviet Bloc. In these years, Canadian participants were enthusiastic and optimistic about future economic relations. However, in the 2000s this was replaced by greater realism and some skepticism concerning the possibilities for deepening economic interaction.

Following a brief review of the evolving relationship from 1959 to 1990, the nature of the economic relationship between Canada and Cuba is analyzed in more detail for the 1990 to 2009 era. The future economic relationship is then explored, focusing on Cuba’s economic recovery and policy environment, and the probable impacts of normalization with the United States.

CANADIAN–CUBAN ECONOMIC RELATIONS: THE  RECOGNITION AND RESPECT OF DIFFERENCE      LUIS RENÉ FERNÁNDEZ TABÍO

Despite geopolitical and ideological obstacles, the economic relationship between Canada and Cuba has, for the most part, been characterized as a prosperous and positive exchange for the two countries and its people over time. This paper suggests that Canadian-Cuban relations hold the potential to function within a different framework as a kind of new paradigm for North-South relations in the Western hemisphere in the face of US hegemony and its confrontational policy toward Cuba. With Canada and Cuba having benefited from a practice of good business, perhaps this exchange has provided a stable and prosperous base for the two nations to critically analyze structures to build upon for future relations. The significance of this relationship could be explained as a kind of mutual understanding the two have in the making of a new history, the outcome of the two countries having shared a common geographic position in relation to the United States.

TO ENGAGE OR NOT TO ENGAGE: AN (A) EFFECTIVE ARGUMENT IN FAVOUR OF A POLICY OF ENGAGEMENT WITH CUBA     CALUM MCNEIL

This paper seeks to explore the role of emotion in Canadian and American policy toward Cuba, with specific consideration of the emotional and normative dynamics associated Canadian-Cuban policy during the 1990s, and with the Cuban Democracy Act of 1992 and the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996. A key point of comparison of this analysis is the assumption shared by both Canadian and American policy toward Cuba that regime change is inevitable, and that it will invariably correspond to the norms predominant in the domestic political systems of both states. It is my contention that a consideration of emotion allows us to gain insight into the decision-making behaviour in both states—and amongst the mass publics contained within them. It also allows us a means to more fully understand the possible particularities that distinguish the rational calculus of one state’s policies from another. By broadening our understanding of these, I illustrate how a policy of engagement is preferable to either embargo or constructive engagement.

THE TRUTH ABOUT CUBA?    JULIA SAGEBIEN AND PAOLO SPADONI

The search for truth in and about Cuba is an elusive and puzzling pursuit primarily affected by: 1) competing narratives of contested events; 2) the emotional distress that accompanies the experience of cognitive dissonance; 3) the Cuban cultural propensity towards vehement disagreement; and 4) the syncretic capacity of Cubans to inhabit several worlds at the same time. Canadian Cuba observers must strive to develop a balanced understanding of these competing narratives about Cuba and of the people who tell them.

Posted in Blog | Tagged , , , | 1 Comment

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

Posted in Blog, Featured | Tagged , , , , , , , , , , , , | 1 Comment

Fidel’s No-Good Very Bad Day

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.

Posted in Blog, Featured | Tagged , , , , , | 3 Comments

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

“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.

Posted in Blog, Featured | Tagged , , , , | 3 Comments

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

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

Posted in Blog | Tagged , , , , | Leave a comment

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

Posted in Blog | Tagged , , , , , , , , | 1 Comment

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

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?

Posted in Blog | Tagged , , , | Leave a comment

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

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.

Posted in Blog, Featured | Tagged , , , , | 2 Comments
Page 72 of 73« First...2550...64656667686970717273