April 18, 2013
Socialism With Cuban
Characteristics: Part I
William M. LeoGrande
Since becoming president, Cuba’s Raul Castro has been on a cr usade to bring
the countr y’s economy into the 21st centur y, and he has not hesitated to blame
its failures on Cuba’s policies, rather than the U.S. embargo. Having already
built political capital with popular measures to reduce excessive regulation,
the government is now car r ying out a much more profound reorganization of
the Cuban economy.
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Socialism With Cuban
Characteristics: Part I
William M. LeoGrande
18 Apr 2013
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Editor’s note: This is the f irst of a t wo-part series on Cuba’s economic reforms. Part I looks at
the reforms to date. Part II will examine the challenges facing f uture ef forts.
Since assuming office in July 2006, Cuban President Raul Castro has been on a cr usade to bring
the Cuban economy into the 21st centur y. The hyper-centralized model impor ted from the Soviet
Union in the 1960s “doesn’t even work for us anymore,” Fidel Castro admitted.
When Raul took over, the Cuban economy had yet to fully recover from the “Special Period” -- the
deep depression that followed the Soviet Union’s collapse and the loss of $3 billion in annual aid.
Although Cuba’s economy has been growing gradually since the 1990s, the gains have been concentrated in tourism and medical services for expor t. The actual production of goods on the island
still lags below 1989 levels, and many state enter prises operate at a loss. Agricultural production
has been so poor that this agriculturally well-endowed island has to impor t 70 percent of its food
at a cost of $1.5 billion ever y year.
The central problem, Raul bluntly points out, is low productivity. “No countr y or person can spend
more than they have,” he reminded the Communist Par ty Congress in April 2011. “Two plus two is
four. Never five, much less six or seven, as we have sometimes pretended.”
Raul Castro was a communist before his brother, but he has always been more pragmatic. Even
before the collapse of European communism, Raul pushed Cuba’s defense industries to adopt Western management techniques to improve productivity. During the Special Period, he convinced a
reluctant Fidel to utilize market mechanisms to restar t the economy, opening free farmers markets
and legalizing small business. But with Fidel in charge, such reforms were strictly limited.
As soon as Raul assumed the presidency, however, he began a bar rage of candid criticism of the
economy, blaming its failures on Cuba’s own policies, rather than on the U.S. embargo. Cuba
needed to “untie the knots holding back the development of the productive forces,” star ting with
excessive regulations. In 2008, the government began eliminating prohibitions that Cubans found
especially exasperating, legalizing the sale of computers and cell phones, for example, and eliminating r ules against Cubans staying in tourist hotels. In 2011, the government legalized private
real estate and automobile markets, allowing Cubans to buy and sell directly to one another,
without a state intermediar y. And most recently, the government eliminated the “tarjeta blanca,”
the exit permit required for travel abroad; now, Cubans with a passpor t can travel whenever and
wherever they like. The popularity of these changes has built political capital for the government
to car r y out a much more profound reorganization of the Cuban economy, with its attendant social
disr uption.
That grand strategy was unveiled in November 2010 with the distribution of the “Guidelines of the
Economic and Social Policy of the Par ty and the Revolution,” which outlined 291 proposals for
“updating” Cuba’s economic model. After popular discussion, a revised version was approved at
the 2011 Par ty Congress. Since then, the National Assembly has been hard at work on implementWPR BRIEFING | WWW.WORLDPOLITICSREVIEW.COM
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The guidelines’ most impor tant change is philosophical: the “nonstate sector” -- private enter prise
and cooperatives -- is treated as a permanent and dynamic par t of the economy, not just a barely
tolerated appendage. In preparing its political strategy to sell the guidelines, the Communist Par ty
emphasized, “leaving behind prejudices against nonstate sectors of the economy” -- an imperative
aimed as much at its own cadre as at the population generally.
In fact, the reform process began in agriculture even before the guidelines were drawn up. In a
2008 bid to boost agricultural production, the state decentralized the distribution system so local
produce could be sold locally, adjusted the prices it pays to private farmers and star ted leasing idle
state land to them. By the end of 2012, 3.5 million acres had been distributed. State farms became
cooperatives, and cooperatives have divided their lands into family farms. Farmers markets have
proliferated across the countr y, from huge covered marketplaces in Havana to road-side stands in
Oriente, with prices set by supply and demand.
Restrictions that constrained small business growth since the 1990s are also being relaxed. A
confiscator y tax code was revised, and the prohibition on employing nonfamily members was
eliminated. Size restrictions, like one limiting private restaurants (“paladares”) to 12 chairs, have
also been lifted, so there is no longer any preordained limit on how large a “small” business can
grow. The government has also legalized nonagricultural cooperatives, which along with private
businesses are allowed to contract with state enter prises, opening a huge potential market for them.
Before the reform process began, only 15 percent of the labor force was employed in the nonstate
sector, almost exclusively by private farms; by the end of 2012, that had risen to 23 percent, and
Cuban economists predict that by 2016, it will be as much as 40 percent. Among the obstacles to small business growth have been the lack of wholesale markets and credit.
The guidelines promise to remedy both problems, and banks are already providing small business
loans. Remittances from the United States provide an alternative source of capital. Prior to 2009,
the U.S. government limited remittances to $1,200 per year, and surveys on the island indicated
that recipients used the money to supplement consumption rather than saving or investing it. Since
U.S. President Barack Obama lifted the limits in 2009, remittances have jumped from an estimated
$1.4 billion to $2.3 billion annually. Miami has become both the banker and the wholesale market
for Cuban small businesses, the embargo notwithstanding.
As a package, these reforms look ver y much like the early stages of Vietnam’s “Doi Moi” (“renovation”) reforms, begun in 1986, aimed at creating a “socialist-oriented market economy,” and Deng
Xiaoping’s 1978 reforms aimed at building “socialism with Chinese characteristics.” With a smile,
a retired Cuban official described the Cuban model to me as “socialism with Cuban characteristics.” But that’s as far as it will go, Raul insists. “I was not elected president to restore capitalism
in Cuba nor to sur render the Revolution,” he has said. “I was elected to defend, maintain and
continue improving socialism, not to destroy it.”
To do so, however, he faces a number of challenges, the most difficult of which is how to make
state enter prises productive. □
William M. LeoGrande is professor in the Department of Government, School of Public Af fairs at
American Universit y in Washington, D.C.
Photo: Cuban President Raul Castro (Agência Brasil photo by Roosewelt Pinheiro, licensed under
the Creative Commons Attribution 2. 5 Brazil license).
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ing legislation.