Reports from Cuba: Cuba’s failed economic model

Dimas Castellanos writes from Havana in Diario de Cuba:

Cuba’s Failed Economic Model

The fact

The historical unfeasibility of a centralised economy has been confirmed once again by the manifest incapacity of the Cuban model.

Soviet subsidies – 65 billion dollars over 30 years, three times more than what Latin America received from the Alliance for Progress, and the millions lent by the Paris Club and other capitalist countries – all came to nought.

The evidence

1- Monetary duality has been slated. In 2011 it was incorporated into the Guidelines of the Communist Party, and in 2014 a ministerial resolution was issued for its execution. However, the inefficacy of the model and the fear of its impact on retail prices and the salaries of Cubans have prevented unification.

2- Sugar, after the fiasco of 1970, hit nadirs in 2010 and 2018, when it came to just over one million tons, an amount reached at the end of the 19th century, and seven times lower than in 1952. For the current harvest, scheduled to yield 1,700,000 tons, the plan had to be revised. On May 8, according to the newspaper Granma, one month after the date it was supposed to have ended, it is still going, in an effort to meet export commitments.

.3- With regards to Housing, after failing to follow through on plans for six decades, and with a recognized housing deficit of approximately one million houses, a new plan was drawn up to resolve the shortage in 10 years, at a rate of more than 100,000 per year. After the first quarter, on May 3 Granma reported that only 8% of this plan has been carried out.

4- Inefficiency has been confirmed by the Office of the Comptroller of the Republic. At a press conference, published last April in Cubadebate, it was reported that in 2018, of 402 companies reviewed, 39% were evaluated as poor, and 19% as deficient, with losses of more than 2 billion pesos in total currency (a distortion generated by the monetary duality that equates CUC and CUP in business calculations, although in current transactions the CUC is worth 24 times more than the CUP), twice the amount detected the previous year, when 369 companies posted losses of 1.057 billion. 

5- An effort was made to improve the capital’s deficient transport, for the umpteenth time, with restrictive measures and a high-profile experiment, to be widely replicated. On April 13, 2019 Granma published words by the Minister of Transportation: “The results obtained in the experiment have not been as expected and, as a result, it is not possible to move forward with its replication across the rest of the country.” He also recognized the “discontent generated, both among the population and private drivers”. 

6- At the last session of the Cuban Parliament, in the report on the Economic and Social Development Plan until 2030, the Minister of Economy and Planning acknowledged the existence of “severe financial restrictions, arrears in the payment of some debts, which impede the adequate operation of the economy, and the securing of the loans assumed in the plan; investment levels in recent years below those planned, exports that are not growing at the required pace, failure to attract the volume of foreign investment that was called for, and to follow through on the import plan for 2019, as the loans failed to materialize, among other reasons, due to unpaid debts, all compounded by the worsening of the blockade, and the siege by the US Government. “

The situation will become more critical due to the effects of the US Government’s measures. The Cuban economy depends on family remittances, the exploitation of professionals, and tourism; three extremely fragile categories that will be impacted, are uncontrollable by the Cuban Government, and that will further suffer should Maduro fall from power in Venezuela. 

What has happened reminds us of the missed opportunity offered by the Obama Administration, which might have eased the embargo, and paved the way for negotiations with the greatest economic power in the world, which would have had a positive impact on the Cuban model and fostered the empowerment of the people, for the good of the nation.

Why did this never happen? Due to an unjustified insistence on keeping the socialist State as an essential cornerstone of the economy; a structure of property under which the most active forms are subordinated to inefficient State property and subjected to obstacles to prevent the emergence of a national business community; the dearth of direct investments, the result of investors’ sense of insecurity, and the high risk of investments in Cuba; because Cubans have not been allowed to participate as entrepreneurs; the lack of an independent judicial system to settle disputes; and an infinity of bureaucratic obstacles that are a function of the economy’s subjection to ideology.

The Solution

After the failed special plans, countless experiments, timid and overdue reform efforts, logic and international experience indicate the need to accelerate and expand reform measures. This implies liberating the economy from the obstacles imposed by ideology. 

It is impossible to preserve the model and save the nation, because the model, due to its inhuman nature, is not reformable and, therefore, cannot be salvaged.

If the Cuban President, as he expressed on April 13, accepts “a mandate to change everything that needs to be changed and correct everything that hinders and delays the path to prosperity”, then he ought to: eradicate the primacy granted to socialist State businesses; reform the structure of property in Cuba so that its different forms can coexist under conditions of equality; promulgate an investment law without a surname, with Cubans and foreigners participating jointly; knock down all the barriers that obstruct private initiatives, grant them legal personality, and extend them to all forms of production and services; permit the free hiring of workers; and uphold the civil liberties contained in the international human rights agreements, for the viability of these measures.

Not doing so demonstrates its empty rhetoric and the absence of any real resolve to save the nation. It is as simple as that.

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