Associate professor of Political Science at Amherst College
Posted: September 28, 2010 05:30 AM
Cuba's Latest Reforms Won't Work
In early September Fidel Castro, former president of Cuba and now 
opinion-maker-in-chief, stunned the world twice by declaring, first, 
that the Cuban model "doesn't work for us" anymore, and second, by 
arguing a few days later that he didn't really mean what he said. While 
Fidel Castro seems confused, his brother Raúl, Cuba's official 
president, seems pretty clear about the issue. With the set of 
market-oriented reforms that he recently announced, Raúl Castro has 
essentially confirmed that Fidel's original statement was 
correct--Cuba's current model needs overhaul. The key question is 
whether the announced reforms will save Cuba. The answer is no.
Raúl Castro's reforms are no doubt significant. Ten percent of public 
sector employees will be let go. Self-employment will be allowed in 178 
activities. Private restaurants will be allowed to add more tables. 
Rental markets will be expanded. And for the first time ever, Cubans 
will be able to hire non-relatives, and Cubans living overseas will be 
allowed to take part in these new economic liberties. In total, the 
government expects to authorize 250,000 new businesses, tripling the 
size of the current self-employed private sector.
There is no question that Cuba needs reform. Cuba is the one country of 
the Americas that has had not one, not two, but six lost decades, 
experiencing a deterioration of living relative to its peers steadily 
since the mid 1950s. Something must change. However, the current reforms 
won't do the trick. This is not because the reforms are, economically 
speaking, too modest (they are), but because the most vital political 
factor that is required for market reforms to be effective is still 
missing--societal trust in the state.
Cubans mistrust the state for a simple reason: every time the state 
opens the economy, sooner rather later, authorities unilaterally change 
their mind, decide to take those liberties away, and end up punishing 
those who tried to take advantage of the small breathing space that had 
been provided. This promise reversal has taken place four times under in 
the Revolution's history.
The first occurred two years after the triumph of the Revolution. 
Initially, Fidel promised to create a favorable climate for private 
investment. The first major law of the Revolution, the "Fundamental Law 
of Cuba" of February 7, 1959, even stated that "Confiscation of property 
is prohibited" (Art. 24) and recognized the "legitimacy of private 
property" (Art. 87). There was so much trust in the state that Bacardi, 
one of the largest Cuban-owned multinational ever, paid its 1959 taxes 
all at once. But in December 1961 Castro declared himself a 
Marxist-Leninist and launched the most aggressive confiscation drive 
ever in the Americas, collectivizing almost 70 percent of the total 
economy by 1962.
The second promise reversal was the Revolutionary Offensive of 1968. 
Initially, small retailers were exempted from the nationalization drive 
of 1961-62. This made many Cubans feel that the revolution was 
supportive of economic rights for the little guys even if it punished 
the big capitalists. But in 1968, the state changed its mind again and 
proceeded to nationalize 55,636 small businesses (groceries, butcher 
shops, laundries, barber shops, boarding houses), essentially 
eliminating all non-agricultural retail still left in Cuba.
The next broken promise came in 1986 with the "rectification of errors" 
campaign. That year, a few markets that had been allowed to reopen 
earlier in the decade were suddenly shut down. This policy reversal was 
so severe that two scholars described it as "a return to 
totalitarianism," inexplicably at a time when economic totalitarianism 
was waning in the big communist powers of China and the USSR.
Finally, and most gravely, the unprecedented market reforms of 1993-94 
(dollarization, opening to foreign investment, and legalization of 
self-employment) were also terminated--more gradually but also equally 
decisively--by the early 2000s. By then, most foreign direct investments 
failed to materialize due to unfavorable business conditions, possession 
of dollars was penalized again, and most self-employment activities were 
reregulated, or altogether banned, legally or extralegally.
Cuba thus has a history, as economist Carmelo Mesa-Lago always points 
out, of introducing modest economic openings, only to reverse them soon 
thereafter. The brief reforms allow the state to weather a momentary 
fiscal crisis. But when the fiscal crisis subsides, the state re-imposes 
draconian measures. This return to totalitarianism is something that all 
college-level Cubans have seen once; older Cubans have seen multiple 
times. It is the way that the Cuban state conducts business, or rather, 
chooses to interrupt business. The result is that Cubans have learned 
not to trust the state.
Without this trust, Castro's microeconomic reforms won't amount to much. 
No doubt, Cubans will try to take full advantage of the new 
openings--many will open new businesses, retool themselves to work in 
different trades, and borrow money from relatives abroad. This will 
bring some economic relief. But these will be baby steps. The much 
bigger steps that are required for market reforms to deliver 
transformative effects--firms making large investments in capital and 
technology, conducting research to develop new markets, borrowing 
long-term to pursue high returns projects--won't happen in Cuba. All 
these activities require citizens to think long term, which in turn 
requires citizens to have state institutions in which they can believe, 
such as property-defending courts, reliable and balanced legislatures, a 
legal system that is predictable and committed to protecting contracts, 
and a state that governs by negotiation rather than decree. These 
institutional conditions are absent in Cuba, and nobody believes that 
the current state will ever deliver them or guarantee their survival.
Analysts have begun to debate whether the current round of reforms goes 
too far or fails to go far enough. But focusing on the reforms alone 
misses the point. The key problem is that Cubans have a long history of 
being cheated by their state, and the current reforms do nothing to 
address this problem. Contrary to press accounts, the current reforms 
are not new. The Cuban state has made similar promises in the past, only 
to change its mind arbitrarily, abruptly, punitively, and always in a 
reactionary direction.
The Cuban state has been trying to bring revolution to Cuba's society 
since 1959. But what Cuba needs is no more revolutions at the level of 
society, but a revolution at the level of the state. The conditions that 
allow the state to act so arbitrarily and imperiously must end. This 
behavior has been the hallmark of the Cuban state since 
pre-Revolutionary times--arbitrariness expanded under the Fulgencio 
Batista regime (1952-1958) and became more pronounced under the Castros. 
The current reforms do nothing to strip the state of arbitrariness, and 
until that changes, it is hard to imagine that this round of reform will 
be more than another failed déjà vu.
Javier Corrales is professor of political science at Amherst College, 
Amherst, MA.
http://www.huffingtonpost.com/javier-corrales/cubas-latest-reforms-wont_b_741392.html
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