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What's Left of the Left?
Latin America Thirty Years After Che
Prospects for the Cuban Revolution in the Post-Communist Era
Paper presented by Dr George Lambie
University of Wolverhampton
8 October 1997
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021-Lambie-Cuban-Revolution.txt
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Dr George Lambie
Department of Public Policy and Managerial Studies
De Montfort University,
Leicester UK
Tel. +44 116 2577792
Fax +44 116 2577809
Email •••@••.•••
Introduction
^^^^^^^^^^^^
The effect of the disintegration of communism and the breakdown of the
CMEA was catastrophic for Cuba and perhaps no other country in peacetime
this century has suffered such a dramatic and sudden downturn in its
economy. Between 1988 -1993 there was a total fall in the island's
imports from $8 billion to $1.7 billion, a decline of over 80 percent.
Faced with unprecedented economic and social problems, in 1991 the Cuban
government launched the "Special Period in Peacetime", which contained a
"zero option" contingency plan for total isolation of the economy. In
the medium term Cuba has began to reorient its economy towards the
market, which includes a drive to attract foreign investment and
increasing emphasis on hard currency exports such as tourism and
bio-technology products, combined with a series of internal reforms,
including the legalisation of certain areas of self employed private
enterprise, the re-introduction of food markets, granting permission for
the population to transact in US dollars and the establishment of
Western style taxation and budgeting systems.
Unquestionably those in charge of economic strategy have done an
outstanding job to rescue the Cuban economy from total collapse and the
measures that have been taken so far have in the main been essential and
unavoidable. For Cuba to have overcome the immediate crisis and now be
registering modest levels of economic growth is a testament to the
strength of its political and social system and distinguishes the
revolution from the fragile socialist experiments of its former allies.
However, now that Cuba has clearly proved that the collapse of Soviet
communism will not automatically mean the end of the revolution, what
options are open to the island?
One thing is clear, Cuba cannot return to the conditions which existed
during earlier decades of the revolution, or sustain itself by clinging
on to the remnants of the old economic system. Change is inevitable, but
the form it should take is the subject of much dispute both inside and
outside Cuba.
The Rejected Model: Neo-liberalism and Free Market Economics
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Over the past decade since the collapse of communism Cuba has been able
to observe the effects of the free market formula for transition and the
signs are not encouraging.
The Red Cross have recently predicted that in the winter of 97/98
millions of people in the former USSR will face malnutrition and
starvation because of increasing levels of poverty. Society has begun to
break down and the Mafia control much of social and economic life.
Foreign consultants working in the Ukraine talk of a country with no
hope and no prospects for the future. In Eastern Europe, particularly
the former East Germany, Hungary, the Czech Republic and Poland things
are not so desperate but after a decade of market reforms,
democratisation, and foreign investment, there is still no clearly
sustainable economic development model emerging. On the one side the old
state system still supports in some form the majority of the population
but is in continuous decay and its ability to provide deteriorating, on
the other side a combination of foreign and domestic capital has begun
to stimulate economic activity in certain areas but this process has
tended to be fragmentary and not geared to any kind of national recovery
plan. Economic activity cannot be measured by new factories, five star
hotels and shops full of brand name goods. The real indicator of a
healthy economy its the rate of capital accumulation and domestic
retention and from this perspective performance is poor as domestic
capital haemorrhages out through foreign luxury imports, capital flight
and profit repatriation by foreign investors. The additional cost these
countries have had to pay for the dubious privilege of receiving foreign
investment is to make their banking and financial systems completely
open to international market regulation and accept Structural Adjustment
Packages from the multilateral agencies.
These are superficial economies without a basis for integrated and
sustainable development or a viable accumulation strategy. Their
exposure to the world market and global capital has made them the
sources of cheap labour and the risk takers for the mature capitalist
economies. In the global economy of the late 20thC there can be no
market solution to underdevelopment because transnational capital is
too restless and free to scour the world for returns and will not commit
itself to medium or long term investment. Even FDI is affected by this
short termism and the demands it places on recipient countries are often
so great that its real value is debatable.
The most advance example of transition is the former East Germany but
many studies have emerged which suggest that even with vast flows of
benign investment for reconstruction and unification, conditions for the
majority of the population have not significantly improved and the
decline of the welfare state is causing poverty and insecurity for many
. The integration process is beginning to equalise conditions across
Germany as it unfolds but this means a falling standard for West German
workers.
Neo-liberal economic programmes as developed
in Latin America also offer little hope for Cuba.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The power of the market cannot be denied, nor is it easy to condemn
those former socialist countries which have chosen to confront the
seemingly intractable problems of the collapse of communism by embarking
on neo-liberal strategies. Advocates of the market can also provide
evidence of the success of the neo-liberal model, as in the case of
Chile, or simply by pointing to the apparent efficiencies which the
market brings to production and distribution systems and the provision
of some services. However, less attention is paid to the inequalities
the market generates, its inefficient use of resources or the creation
of a mass consciousness motivated by levels of consumption which are
environmentally unsustainable. Moreover, crude economic indicators like
GDP which are used to measure market performance are increasingly being
discredited, and such performance is less impressive when set against
alternative standards like the UNDP's Human Development Index which
reflects human values and gains in life quality.
The market is presented by its advocates as a neutral economic mechanism
that can be developed and perfected with the right technical expertise,
but in practice it is a political device for achieving certain outcomes
which are usually stratified along class lines. The intellectual and
philosophical foundations of free-market economics are also based on
untested assumptions about human nature and a fairy tale called "perfect
competition" The quest for an imaginary utopia is at the core of market
orientated beliefs, although the system that is erected on these beliefs
is presented as reality and it is other systems that are deemed to be
utopian.
Despite the lack of evidence that free-market economics offers a viable
route for post-communist or developing countries or that such principles
were employed by the capitalist powers in their most dynamic phases
Cubanologists like Ritter and Pérez López continue to advocate the
neo-liberal route for Cuba and see the island's insertion into the world
market and "allowing world prices to guide domestic economic actors", as
a road to prosperity.
Pérez López in a recent article shares the view of many analysts when he
talks of Cuba's "inevitable transition to the market" Pérez sees this
transition coming about through the gradual strengthening of the "second
economy" consisting of the black market, the new self-employed
businesses and other sectors of the dollar economy. For him this economy
is a reservoir of entrepreneurs. He acknowledges however that the
consequences of its increasing strength will be growing corruption,
disobedience to state regulation, use of political power to gain
property, growing crime, increased inequality which have already been
experienced by Cuba's former allies in the socialist camp. But this is
seen as a natural and inevitable process, a reality that Cuba must face.
Once the market is victorious and the state run economy has been
defeated and transformed by the "second economy" it is presumed that
recovery and "economic growth" will naturally follow.
Problems with the neo-liberal prescription
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
In practice the difficulty with the market prescription, and the
establishment of representative democracy and political pluralism as
experienced in the rest of the Caribbean, Central and South America,
and in the former socialist countries, is that while in some cases it
may have brought technical economic growth, it does not seem to have led
to improvements in the standard of living of the majority of the
population. Besides, in contrast to Cuba, the concept of growth with
equity has been abandoned
One could argue that if Cuba took the neo-liberal option the US embargo
would end and capital would flood into the island and stimulate rapid
economic growth. However, if this were to happen the island's
"Cinderella" status may not last, nor would the current advantages it
offers to investors in tourism, skilled workforce and viable exports,
and soon Cuba would be competing for investments against very low wage
economies like Haiti and China. Besides it is not clear if Cuba would be
able to take back its pre-revolutionary sugar quota displacing other
suppliers or fully establish a relationship of "natural" exchange that
is sometimes presumed to exist between the two countries. The most
likely scenario is that the gains of the revolution would be swept away
and the Cuban economy organised to suit the restructuring needs of US
capital in the global environment, as is the destiny for the rest of the
region under such programmes as NAFTA, the most advanced component of
the far more ambitious Enterprise for the Americas Initiative (EAI). In
this context independent regional initiatives such as the ACS and even
MERCOSUR have a limited shelf life.
The free market gives no guarantee of development and would certainly
undermine the principles of the revolution. However, the market is a
powerful force and it is "real" in the sense that it represents the a
dominant mode of thought and a prevailing economic system. These
"realities" will inevitably affect, but need not necessarily determine,
Cuba's development.
2) The Structuralist or "Market Socialist" Option.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Clearly the Cuban government want to avoid the negative social and
economic effects that a rapid transition would engender and a
neo-liberal route seems to have been rejected. It would appear at the
moment that the Cuba is experimenting with market mechanisms to test
their effects and clearly many Cuban economists and intellectuals have
been influenced by Western debates on market socialism.
Market Socialism, the Prescription
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
In this mixed economy formula the state would retain firm control over
key sectors of the economy, while allowing private enterprise and
foreign investment to function in designated areas. According to
Carranza this model would be based on:
"... a decentralised market economy with high level of state
participation. State and private enterprises alike would operate
according to a market dynamic that would demand a high level of
efficiency and profit"
But market regulation need not be at the expense of the socialist
achievements of the revolution:
"...the theory is intended...to increase the rate of economic growth and
economic efficiency, and to reintegrate the Cuban economy into the world
economy, without diminishing or threatening the achievements of the
revolution or compromising Cuba's independence"
In this model primary export industries such as sugar, nickel and
tobacco would be structured down and emphasis placed on import
substitution stimulated by foreign productive investment. The model
supposes a form of compromise between planned prices and market forces -
some might argue a combination of the worst of both worlds. Although
there is no single Asian transition model the experiments in China and
Vietnam may be taking a similar route.
Externally this view is partly supported by Keynesian economists such as
Andrew Zimbalist. Zimbalist, however, is less sanguine about the
potential of foreign investment, realising that it will produce
diminishing returns and cannot be relied upon as the driving force
behind the reconstruction of the Cuban economy. He therefore argues that
Cuba's recovery should be founded principally on increases in internal
economic activity and production, which he believes could be achieved by
releasing the entrepreneurial spirit of the Cuban people. Fundamental to
this strategy would be the encouragement of small businesses through a
freeing up of current restrictive legislation on this sector and the
provision of state incentives in the form of loans and training etc.
This perspective is underlain by a "technical" approach to Cuban
development which in its crudest form consists of replacing Soviet
manuals with Western ones. Finding the right expertise and applying it
to Cuban circumstances is seen as the way forward. In this context
Cuban's are often surprised to find that a clear set of rules and
techniques do not exist in the west: a set of accounts presented in
Berlin by a German firm which appears in profit would represent a
deficit if presented in New York. What has not become sufficiently clear
is that the technical is ideological, including economic theory.
However, a technical solution to the problems Cuba faces is attractive
to certain sectors of the population as perceptively noted by Dilla who
states:
"... in Cuba there is the emergence of a potentially hegemonic
technocratic bloc, who have privileged access to the world market. This
bloc has the capacity to appeal to wide sectors of the population,
including the traditional bureaucracy, the self employed salaried
workers in the most dynamic sectors of the economy and intellectuals"
Of course there are some technical solutions which may be applied to
the challenges Cuba faces as it engages the world market, and skills in
negotiating contracts with foreign capital, and an understanding of
western accounting methods, budgeting techniques, banking regulation
etc. are important whatever economic model the island chooses, but such
methods alone do not constitute a development programme in themselves.
As Castro himself has pointed out:
"We must appeal to people's consciousness, and the other mechanisms, the
economic factors,...we must use these economic mechanisms in material
production, but with this concept, as an auxiliary means or instrument
of political and revolutionary work; because believing that these
methods will give us the miracle of efficiency and economic and social
development is one of the most ridiculous illusions there could ever
be."
However, in some ways the market socialist route is an attractive soft
option, and some analysts might argue that Cuba seems to be moving in
this direction at the moment.
Problems with Market Socialist Option
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Firstly, there are considerable theoretical weaknesses in attempting to
blend socialism and the market and this option is based on wishful
thinking rather than any rigorous analysis. Secondly, a radical
Keynesian strategy along these lines may no longer be feasible in a
globalising world economy in which capital reigns supreme, diminishing
the powers and controls available to the nation state. Commenting on
this problem, and the effects of the market in general, Dilla again
perceptively notes:
"The market is a too powerful mechanism to incorporate as a docile
instrument of socialist construction"
In a recent study of financial strategies open to Cuba an international
specialist in fiscal policy arrived at a similar conclusion:
"The more Cuba enters the international economy, and the more dependent
it becomes on international markets to rebuild its economy, the more
control that these market actors will have on the nature of Cuban
development. As these actors tend to harbour an underlying bias against
socialist economic designs, and they have a fairly narrow (and
short-term) conceptions of what constitutes "healthy economic
fundamentals", this market control will be in sharp contrast to the
ambitions of Cuba's current policy makers"
In this strategy foreign investment would continue to play a key role
and every attempt would be made to attract such investment in a
competitive market. This would mean presenting Cuba as a country with
good infrastructure, cheap labour, liberal rules on the repatriation of
capital, an educated workforce etc. Investment on these terms has been
essential to bring collapsed and undercapitalised sectors of the economy
back to life and develop new sectors like tourism, however how far
should this process be allowed to grow? What is the critical point where
Cuba begins to seek foreign investment as a habit and forgets to assess
whether it is still a viable vehicle to achieve socialist objectives?
In Britain FDI over recent years has increased dramatically and is seen
by all political parties as a positive development. However, such
investment is a double edged sword and recent studies show that it
brings no medium or long term economic benefits but is a drain on
resources and produces a net financial loss rather than a gain.
Multinational investors are also now not satisfied with favourable
economic conditions such as skilled labour, and good infrastructure they
also seek to influence high level political decision makers to serve
their interests.
Moreover, such ideas as a Cuban stock market, free trade zones and other
trappings of the market that the market socialist option assumes, hold
enormous dangers for Cuba's socialist project and very few benefits. A
Cuban securities market would require a totally convertible Cuban
currency to minimise investor risk, but by the same measure it would
leave Cuba with little control over foreign investments or its own
currency, exposing the economy to the whims of the market. Foreign
investment must be managed by a centralised bank based system or
monetary policy and hence economic policy controls will be lost.
One could conclude therefore, that the ultimate result for Cuba of
taking the structuralist option would eventually be the same as that
offered by the free market option: loss of national control and
integration into the international system dominated by the rule of money
and its concomitant (global) class divisions. As noted earlier even
developed nations which have attempted to maintain a social democratic
Keynesian model in the period of neo-liberalism and globalisation have
had poor results. In every case the role of the state in guaranteeing
minimum standards of social welfare and employment has been compromised,
because of pressures to maintain the profitability of enterprises and
satisfy the demands of currency speculators and global capital. As Mark
Wickham-Jones very convincingly argues in the era of globalisation and
enhanced capital mobility, social democratic politics is almost
synonymous with capital flight. The prospects therefore look bleak for
a small and weak developing country entering the same system.
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