Saturday, March 29, 2008

Cuba's Post-Soviet Socialism

Cuba's Post-Soviet Socialism

Daily Article | Posted on 5/13/2002 by Antony Mueller

On January 1, 2002, the Cuban government celebrated the 43rd anniversary
of the revolution that put Fidel Castro in full control of the state.
With the dictatorship still in place and the economy under tight central
planning, not only has Castro's rule survived the breakdown of the
Soviet Union but the government has been able to establish new trade
relations and foreign direct investment agreements with several European
countries, Canada, and the transition countries in Eastern Europe and in

Venezuela's Hugo Chavez is a declared friend of Fidel Castro, and Lula
of Brazil, who is currently heading the polls in that country's upcoming
presidential election, has frequently expressed his sympathies for the
Cuban model. Measured by the goal to remove Castro and to establish
democracy and a market economy, the U.S. policy toward Cuba must be
regarded as a total failure.

The U.S. embargo is ineffective and counterproductive. By pointing to
the "blockade," the Cuban people, whose affection for the American way
of life is still very much alive, can be taught by their government that
the embargo is proof that the United States must be regarded as their
enemy. In the 1960s, the endeavors of the U.S. government to isolate the
country threw Cuba right into the arms of the Soviets. Since the
breakdown of the Soviet Union, and with the maintenance of the embargo,
it is now the Cuban people who suffer most from the sanctions.

Misjudging Castro and the Cuban revolution has its roots in
misunderstanding the ideological foundation of revolutionary Cuba.
Although Fidel declared himself a communist early on, the ultimate
character of the Cuban revolution has always been as much
nationalistic-paternalistic as socialistic. Castro is a master at
playing the tune of anti-Americanism and anticapitalism together with
the promise of a better alternative beyond capitalism and Yankee dominance.

Understanding Castro's political survival requires understanding that he
was able to arouse strong feelings of national pride by standing up
against the perceived suppression and hegemony of the United States. By
rhetorical talent and charisma, and with massive help from the Soviet
Union, Castro created a unique system with a specific ideology. This
political ideology equalizes socialism with welfare and a socialist
welfare state with social justice. Anti-imperialism and anti-Americanism
is seen as equivalent to national independence, and national
independence is the foundation for national pride that puts the Cuban
people apart from the rest.

Putting these two equations of Castro's ideological algebra together,
the alternative appears as the threat that, should socialism disappear,
the Cuban people would lose their welfare state and, with it, social
justice. The widely held belief is that the end of socialism would mean
the loss of national independence, and that with the new dependence,
national pride and personal dignity would disappear as well. In Castro's
rhetoric, "socialism or death" is logically equivalent to "patria o muerte."

For more than 40 years, Fidel Castro has almost exclusively dominated
politics and the economy of the island. But Fidel Castro is neither the
exploitative nor the militaristic caudillo-type Latin American dictator.
In his own intention,[i] he probably follows more the paternalistic
traditions of his country. His view of socialism also has ingredients of
the pre-Columbian tribal "Taino-Socialism," and he also follows the
tradition of taking full advantage of Cuba's geostrategic position,
which dates back to the colonial period, when Havana became the place
where Mexican gold was spent before the rest was shipped to Spain. In a
historical perspective, living on foreign money under a paternalistic
leader who "justly" distributes the funds among his followers may be a
better shorthand description of Cuba's system than the connotations that
come with the concept of "socialism."

As the country's prime leader, Castro is also its top economic manager.
He acts as the final authority even in scientific affairs, and he is an
active adviser for his countrymen in all matters of life; his word
extends to judicial courts, the press and education. It is not the
Communist Party or any other group but Castro himself who is the glue
that holds the parts of the Cuban system together. He is the incarnation
of Max Weber's ideal type of a charismatic leader: able to negate all
aspects of reality outside of his own vision and capable of imposing his
view upon his followers.

Despite the global changes since the breakdown of the Soviet Union,
Cuba's leadership continues to bank on a centrally planned economy as a
viable way into the future and to maintain that it is not the
inefficiency of the socialist system but primarily the U.S.-American
blockade that is the prime culprit behind Cuba's economic problems.

Although admiration for Castro is in decline among the Cuban people,
particularly among the younger generation, there is the tendency to
accept the present rule out of fear about alternatives that could be
worse. The sympathies that associate a general level of welfare
equality, which the regime accomplished in the past, are still vivid,
and additional loyalty is brought about by the refined system of
privileges that typifies dictatorial and authoritarian regimes.

While Cuba has established new foreign-policy ties, the internal
economic reforms it has initiated since the breakdown of the Communist
trading bloc (Comecon) are based on the premise of keeping the
government in total control of the economy. Following the Lenin-Guevara
economic model, the government regards the economy as one large factory,
with the government as the prime management authority at its heart. All
profits are accrued by the central government, which acts as the
redistributive agency and delivers the goods to the population. Castro
follows this economic policy strategy of maintaining socialist planning
as the way to preserve his power. Flexibility is introduced into the
system in a pragmatic form and is allowed only as long as its
consequences remain under central control. The government also does all
it can to prevent that tourism or the presence of foreign companies
would have larger spillover effects to the rest of the economy.

Cuba's economic system represents as a three-dimensional structure, with
the centrally planned economy at the center, surrounded by a small
foreign sector and a semi-legal private economy. The system is
controlled from above, with the government as the unrestricted prime
decision maker and Fidel Castro as the final authority in all matters.
While the center of the economy, concentrated in sugar production, is a
permanent loss maker, the foreign sector's tourism industry and foreign
direct investment compensate somewhat for the internal inefficiencies.
The limited private sector works as an auxiliary stabilizer for the
provision of the most basic private needs. But as soon as it became
apparent that permission of free farmers' markets and small family-owned
businesses would revive the entrepreneurial spirit in the country, the
government began to impose severe sanctions and suffocating taxes on
these entities, practically wiping them out.

Castro wants to maintain these structural characteristics of the Cuban
economy despite the profound transformation of the international
environment and the obvious failures of socialist economic planning.
Maintaining a centrally planned economy is seen as the key to preserving
Cuban socialism, while tourism and foreign direct investment serve to
generate additional convertible currency, and the private economy is
allowed to alleviate somewhat the deficiencies of the centrally planned

The Cuban economy suffers from profound distortions, and inefficiencies
are paramount. Poverty is everywhere, extending to food, health, and
education. The withdrawal of Soviet subsidies has exposed the "Cuban
model" as a mere window dressing. Now the deception is crumbling like
the buildings in old Havana. Nevertheless, Cuba's leadership hangs on to
its vision, expecting some turn of fate.

"Socialism or Death": not accepting defeat has become the prime motto of
political propaganda in the past years. Like the population--which
throughout the country spends most of its time repairing all kinds of
obsolete things ranging from American cars (1950s models) to old Russian
trucks--the government is desperately trying to repair its obsolete
regime. At an increasing speed, the series of ad hoc interventionism is
making the internal contradictions more severe. While some of the
younger bureaucrats and party followers cling to the hope that Cuba is
"imitating the Chinese way," reality does not bear out this perspective;
in contrast to China, Cuba's policy of change is focused, not on
transition, but on preserving Castro's specific view of socialism and
his power.

After the end of Soviet subsidies, the government initiated a series of
reform measures, such as opening the economy to foreign investment,
establishing free-trade zones, fostering tourism, reorganizing
companies, and legalizing the possession of the U.S. dollar. These
efforts have helped to halt the downfall of the economy. But growth has
been anemic, and the two upsurges in the growth rates, which occurred in
1996 and, more recently, in 1999 and 2000 (see table below), do not
reflect balanced growth; instead, they are the result of sharp
variations in sugar production, of short-lived economic liberalization
measures, and, for 1999, of highly concentrated investment,
predominantly in the tourism sector.

In recent years, Cuba's economy profited somewhat from a rapid increase
in tourism, with 1.7 million visitors coming to the island, mainly from
Canada and Western Europe. In the second half of the 1990s, foreign
direct investment grew markedly, particularly in tourism,
telecommunications, and nickel and oil exploration. Additional sources
of foreign exchange come from private transfers from abroad,
predominantly from Cubans in the United States.

But these revenues could in no way compensate for the massive Soviet aid
that had subsidized the system. With the decline of tourism and foreign
direct investment already being felt, the Cuban economy is set for a new
downturn in the coming years.

Entering the 21st century, Cuba represents a highly imbalanced economy,
with the tourist sector as the most modern and most of the rest of the
economy in contraction and decline. Almost a decade into the período
especial, the standard of living for large parts of the population is
deteriorating rapidly, the productive system remains weak, and the
distribution of essential goods is highly defective and very uneven.
Shortages in the medical and school system have become more common.
Given that living standards may have fallen by about half compared to
the 1980s, a further deterioration of the economic situation could mean
a complete breakdown of the economy with an increased radicalization of
the political system.

Up to now, Cuba's system has been totally dependent on the person of
Fidel Castro. In contrast to the former Soviet Union, the Cuban regime
is a "one-man show" and represents neither "dictatorship of the
proletariat" nor the "rule of party." Fidel Castro Ruz is Comandante en
Jefe and Primer Secretario del Comité Central del Partido Comunista de
Cuba; he is Presidente de los Consejos de Estado y de Ministros; and he
is, since January 1, 1959, the líder máximo of currently more than 11
million Cubans. No one has come close in terms of his charismatic
leadership. It seems fairly safe to presume that Cuba's current system
will come to an end once Fidel Castro disappears. The most likely
successor would be Fidel's brother, Raúl Castro, who heads the military
and the internal security apparatus. If he should inherit the role as
leader, he could maintain his rule only by more suppression.

Given the deteriorating state of the economy and the tendency to
increase political suppression, Cuba's future looks quite grim. This
outlook should alarm the United States in particular, because a bloody
internal conflict on the island would have ramifications beyond Cuba's
borders. Given the instability of the countries at the northern fringe
of the South American continent, turmoil in Cuba could serve as a
trigger for conflict in the whole region. The United States may be well
advised to initiate détente and more intensive trade relations with Cuba
and to get rid of the embargo now.

Dr. Antony Mueller is a professor of economics at the University of
Erlangen-Nuremberg, Germany, and is currently a long-term visiting
professor under the German-Brazilian academic exchange program at the
Universidade Federal de Santa Catarina in Florianópolis, Brazil. He has
visited Cuba frequently in the 1990s and most recently in January 2002.
Send him MAIL, and see his Articles Archive.

[1] See Fidel y la religión: Conversaciones con Frei Betto. By Fidel
Castro and Frei Betto (La Habana, Cuba, 1997); and La Historia Me
Absolvera. By Fidel Castro (La Habana, Cuba, 1993).

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