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John Passant

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May 2011



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Is Cuba heading towards the free market?

The Cuban Communist Party (PCC) finally held its sixth national congress on the 16-19 April. This congress, the first since 1997, was convoked to allow the PCC leadership to obtain endorsement for a whole plethora of changes to Cuban economic policies. Unsurprisingly the conference endorsed the 311-point reform package unanimously.

These changes to the economy, as always, are being driven from the top, in particular by Raul Castro, who has taken over as president from his ailing and ageing brother Fidel since 2006. Raul has said he wants to “update” their so-called socialist economy.

This involves implementing a neoliberal program of rationalisation, slashing state jobs and winding back welfare programs to achieve what some of the regime’s supporters on the international left have called a more “efficient socialism”. On top of these cutbacks, the Cuban state is trying to provide greater openings for small private business and foreign investment.

But while Cuba is heading down the road of opening up more and more to private enterprise and the global economy, the Cuban regime is not proposing a complete opening to the free market.

Instead they want the state to continue to centrally plan and control the overwhelming majority of the economy. At the moment approximately 90 per cent of the economy is still controlled by the state in Cuba, only 6 per cent of investment is from foreign investment, and around 80 per cent of the workforce is on the state’s payroll. The current reforms will only make a small dent in that reality.


The Cuban economy has been struggling particularly since the collapse of the USSR, Cuba’s main trading partner, in the early 1990s. This had a devastating impact on the economy. Between 1990 and 1993 national output in Cuba slumped by 35 per cent. These years were known as the “Special Period”, and they produced great hardships. Tractors were replaced by the ox, food and fuel shortages resulted in widespread malnutrition and constant blackouts, prostitution returned to the streets of Havana.

To further cripple the Caribbean island, the Americans saw in the Special Period an opportunity to tighten their criminal economic blockade on Cuba, which has been in place since 1960 to punish the Cubans for daring to overthrow a US-backed dictatorship and slip the leash of US domination in what they regard as “their backyard”.

However, the Cuban regime survived the terrible 90s, defying widespread predictions that it would collapse. Part of the reason it survived is that unlike similar regimes in the former Eastern Bloc, the Cuban state was the product of a home-based popular movement which had introduced some important reforms – like subsidised housing, guaranteed jobs, free healthcare and education – which gave the new regime a great deal of legitimacy in the eyes of ordinary Cubans.

At the same time, continued US pressure on the regime had the effect of winning it nationalist backing from people who remembered how the US had turned Cuba under the Batista dictatorship into a playground for the mafia and America’s rich.

To deal with the economic crisis of the 90s, Fidel moved to increasingly embrace sections of Western capitalism. He allowed a limited amount of foreign investment, especially in tourism, on quite favourable terms.

He also established free trade zones, known as maquiladoras, allowed a limited amount of legal self-employment and legalised the American dollar to take advantage of the billions of dollars flowing into the country in the form of remittances from the Cuban-American community.

Another factor that helped the Cuban economy to recover and, in particular, deal with fuel shortages has been its growing commercial relationship with Venezuela since 2000, whereby Cuba has provided medical workers in exchange for cheap oil.

When Raul Castro took over the presidency, the push to reform the Cuban economy received a boost. As he was a known admirer of the Chinese model, this wasn’t a surprise for anyone.

Despite these earlier reforms implemented by both Castros, the Cuban economy is once again back in the pits. The most important reason, of course, is the world economic crisis.

It’s meant a loss of income from tourism. There’s also been a decline in remittances coming in from Cuban families overseas. The nickel industry, which had surpassed tourism in the previous couple of years as the most important earner for the regime, was also hit hard by the dramatic drop in commodity prices on the world market.

On top of this the sugar industry, historically the single most important industry to the Cuban economy, has been in absolute disarray.

Current economic reforms

The centrepiece of the current economic reforms is the slashing of state sector jobs. The figures are quite dramatic. Raul wants to slash around 1.3 million “excess” workers from the state’s payroll over the next five years. That’s 20 per cent of the workforce.

In a speech that smacked of neoliberalism’s emphasis on “personal responsibility and hard work”, Raul Castro declared his determination to “erase forever the notion that Cuba is the only country in the world where one can live without working”. Indeed this speech sounded eerily similar to one Julia Gillard recently delivered about the need for welfare recipients in Australia to learn “a new culture of work”.

Raul is also attempting to end what he calls the “excessive subsidies and improper gratuities” to Cuban workers. In other words, he wants to end Cuba’s version of the “iron rice bowl”, by winding back the social benefits and guarantees that have made it possible for workers to survive in Cuba on a monthly salary that averages the equivalent of $20. Already Raul has moved on this by ordering the closure of workplace canteens which had provided free lunches to workers.

The reforms also call for the elimination of the ration book, the libreta, which has been in place since 1962. This is not the first attack on the ration book, which entitles all Cubans to a set amount of heavily subsidised food. It has been becoming increasingly miserly over the past two decades, with provisions covering only one to two weeks in a month. The quality is deteriorating and fewer and fewer items are available on the ration book. Most consumer goods like clothes, toys and household goods, have long been removed since the deep economic crisis of the 1990s.

These consumer goods are available in stores in exchange for Cuba’s second currency, the convertible currency (CUC), which is like a dollarised peso. However salaries of Cuban state employees are paid in Cuban pesos. Only 60 per cent of Cubans have varying access to the CUC, either from overseas remittances, jobs that intersect with the tourism industry or joint ventures with foreign companies. Of course, those who enjoy positions of power within the state bureaucracy have always had access to consumer goods.

For the 40 per cent of Cubans who have no access at all to the CUC, which is disproportionately the case for Afro-Cubans, without the canteens, the ration book and so on, life is set to get even harder.

Growing the private sector

A key element of the economic reform program is the growth of the private sector in Cuba. The government hopes that some of the “excess” 1.3 million workers will be absorbed into this sector. Raul has already made available 250,000 new self-employment licences.

The government is relaxing laws that forbid small businesses hiring and exploiting workers other than family members. In other words, the Cuban regime is trying to create a legal petty bourgeoisie for the first time since 1969, when it nationalised all small businesses.

The government is also proposing to absorb 200,000 workers into the co-operative system. This will mostly mean that the government will hand over small state-run firms, like beauty parlours and barber shops, to the workers.

By making them into co-ops, the state no longer has responsibility for their operation or for paying the workers’ salaries. They hope these workers will be driven by economic necessity to work harder and increase their own rate of exploitation. Many of these co-ops will fail or, to balance the books, they’ll be forced to reduce their own wages or eliminate jobs.

Another important aspect of the economic reforms involves seeking out greater foreign investment. In 2009 there were about 218 joint ventures and partnership agreements between foreign capital and the Cuban state, in particular, through the companies run by the Cuban army.

These investments tend to be concentrated in the tourism sector, with European companies leading the way constructing exclusive golf courses, luxury villas for tourists, marinas and so on up and down the coastline.

There’s also substantial foreign investment in the nickel industry by China. The country’s telephone system is partly owned by an Italian telecommunications company, while Havana’s water system is run by a public-private partnership with a Spanish company.

Interestingly, while Cuba claims to be a supporter of the Palestinians, the biggest citrus grove and juice company in the country is a joint venture between the Cuban state and Israeli capital. The CEO of this Israeli company, Rafi Eitan, was the former chief of the Mossad’s European operations.

No democracy in Cuba

These economic changes are clearly being driven from the top echelons of the Cuban state. But some defenders of the regime disagree and point to the fact that there has been widespread consultation of local party branches and neighbourhoods.

But consultation is not the same as democratic control, far from it. This consultation really only amounted to an exercise in testing the water to see if there was going to be substantial uproar. Indeed there was avalanche of criticisms at these meetings, helping to delay the implementation of some of the cuts.

For all the consultation, there is no mechanism for these discussions to be binding in any way on any of the ruling state bodies. What’s more there was no mechanism for individuals to put forward an alternative program to the regime’s, let alone organise a cohered political opposition to the reforms. The Communist Party after all is the only legal political party in Cuba. Organising any political current outside of and in opposition to the party is illegal.

The lack of any genuine say was obvious when the regime first announced that half a million jobs were to be cut by the end of March, before the Communist Party Congress had even met. Indeed, many of the reforms are already in place, something Pedro Campos, a Communist Party member and historian has criticised:

They have presented the discussion on some guidelines whose key points had been already approved by the Council of Ministers, put into legislation and are now being executed as part of a five-year plan that ignores the people and the party.

All of this reflects the general lack of democracy in the Cuban state. Many defenders of the regime try to argue that Cuba has a superior form of democracy to Western democracy. However, the truth of the paucity of democracy in the West should not blind us to the sham that is Cuban democracy.

Take poder popular. This structure only came into place in 1976 when a new constitution was introduced. But poder popular, which establishes local, provincial and national assemblies, only amounts to what Cuban Trotskyist Samuel Farber has called a “multi-level pseudo parliament”, a “democracy without substance”.

One of the most honest accounts of how Cuban “democracy” actually operates was written by a supporter of the Cuban regime, DL Raby. In Democracy and Revolution: Latin America and Socialism Today he argues that at the local level, elected municipal delegates are responsible for “all local affairs”. But he makes an important qualification, only within “parameters laid down at national level”.

These parameters are determined by the National Assembly. But elections to this body are a joke. Generally only one candidate is put forward for each position available and candidates are selected by Candidates Commissions, which are controlled by representatives of the Communist Party. As Raby argues, “The election is more like a popular ratification of a pre-selected list of candidates.”

On top of this, candidates who are on the officially sanctioned slates aren’t able to campaign. They can only put forward their political biographies.

In many ways how the National Assembly is elected is a moot point because it only meets twice a year for a few days. It’s not a governing body. Instead, real power is held by a ruling Council of State. And, as Raby points out, “basic policy is decided by the Communist Party leadership”.

Obviously, meeting twice yearly is a lot better than what the Communist Party has managed – a mere six national congresses in its 46 years of existence. Indeed it took 10 years after the formation of the party in 1965 to hold its first national congress.

While Cuba is no North Korea or Burma, any open political opposition to the regime is carefully monitored and frequently suppressed. The regime attempts to intimidate dissidents by threatening to sack them from state employment, by monitoring their homes day and night, or by organising “repudiation meetings”, where vigilantes are bussed in to surround dissidents’ homes to yell insults, throw objects etc.

Or sometimes political opponents of the regime are imprisoned. Today, it is estimated that there are still over 200 political prisoners in Cuba’s jails, the great majority of these jailed for activities of an entirely peaceful political nature.

These political prisoners are jailed alongside an enormous number of common prisoners. Indeed, Cuba has so many common prisoners that it has the unhappy title of having the fifth-highest prison population per capita in the world, hardly the marker of free society.

Cubans also don’t have the right to independent trade unions to defend their interests. The one legal trade union federation in Cuba is state-run and it acts like all state-controlled trade unions do – as an adjunct of management to promote productivity and labour discipline rather than defend workers’ rights. It was after all the head of the state-run union who announced the massive layoffs last September.

Just as Cuban workers don’t exercise any control over Cuba’s domestic economic policy, they also have no control over the county’s foreign policy. Workers have not even enjoyed the courtesy of consultation over the Cuban regime’s attitude to the revolutions unfolding against dictatorships in the Middle East.

This is particularly stark in the instance of Libya. When the rising against Colonel Gaddafi, a longstanding ally of Fidel Castro’s, happened in February, inspired by the movements in Tunisia and Egypt, he refused to support the popular movement, saying it was “too early” to criticise Gaddafi. The regime was also silent when Gaddafi was machine-gunning and bombing protesters demanding democracy.

Basically, Cuba’s rulers assess their foreign policy in the same way as other capitalist rulers do, on the basis of their own national interests. This is not a new phenomenon. In 1968 when the Russians invaded Czechoslovakia with tanks to crush the “Prague Spring”, Castro supported the invasion and denounced the protesters in Prague as “counter-revolutionaries”. Russia returned the favour by immediately increasing aid to Cuba.

In 2009 Castro disgracefully gave public backing to the Sri Lankan government when it was carpet-bombing Tamil areas. After all, he wouldn’t want to upset trading relationships.

These are but a few examples of Cuba’s supposed internationalism!

Why is all of this important? The utter lack of democratic control that Cubans exercise over domestic and foreign policy tells us conclusively that what the Cuban regime is doing today is not creating a more “efficient socialism”. Socialism, in which the mass of workers democratically and collectively control all aspects of society, does not and has never existed in Cuba.

As Karl Marx argued, socialism can only be the product of the conscious self-activity of the mass of workers. It can only come about through the actions of workers themselves, who create their own institutions for running society, workers’ councils, in the process of trying to challenge their exploiters. This is precisely what has happened in all mass upheavals that have been led by workers. But the 1959 revolution and its aftermath never produced anything approximating workers’ councils or organs of workers’ power.

Basically the Cuban state is a product of a revolution carried out by a few hundred or, at best, a few thousand guerrillas. While the guerrillas’ struggle against the widely hated US-backed dictator Fulgencio Batista was enthusiastically supported, what is striking about the Cuban revolution is the general lack of self-activity in the revolution itself either by workers or peasants. There was no “forcible entrance of the masses onto the stage of history”, to borrow Trotsky’s description of revolution.

Obviously this has implications for the kind of democracy that flows from the revolution. In Cuba it meant Fidel Castro substituted the highly centralised and authoritarian guerrilla command structure in the vacuum left by the collapse of Batista’s regime.

Castro himself made no pretences to being a socialist in the immediate aftermath of the revolution. On January 22 1959 he had declared, “I want to make it clear now that I am not a Communist.” But by December 1961 he had undergone a miraculous conversion. He now declared, “I am a Marxist-Leninist and will remain so until the end of my days.” All of a sudden the Cuban revolution was declared a socialist revolution.

What had provoked this conversion had nothing to do with what was going on inside the Cuban revolution. Rather it was a product of Cuba’s need to align itself economically and diplomatically with the only other major power at the time, the Soviet Union, in response to American aggression.

Therefore, the current economic reforms being embarked on in Cuba do not represent a transition from socialism to capitalism. Cuba never ceased being a capitalist society. Rather, the Cuban ruling class is attempting to deal with their economic problems by modifying their state capitalist economy.

This article, by Liz Walsh, first appeared in Socialist Alternative on 5 May this year.



Comment from juanR
Time May 20, 2011 at 2:20 pm

Hi John
I was a little disappointed to see this item in your blog given current national and international events. Not only is the item far too long but I think it is totally ill-timed.

Wasting space dissecting the Cuban situation, at a time when the US is at its most dangerous.
At a time when the US is wielding all kinds of weapons at its disposal including the fabrication and promotion of “democratic movements” sponsored by the CIA, Facebook and other subversive and coercive US agents in North Africa and the Middle East (and more recently Spain). At a time when the US is opening new military fronts everywhere including Libya, Syria, Yemen and, ultimately, Iran. At a time when the world is in consternation at the DSK’s conspiracy (the US is destroying whatever little solidarity there was within the EU). At a time when Julia Gillard is being put under the spotlight and Malcolm Turnbull is once again shaking the foundation of the liberals. What possess you?

As for the article itself, I am still searching for that mythical and increasingly elusive creature “the worker” referred to in the following paragraph:

“Karl Marx argued, socialism can only be the product of the conscious self-activity of the mass of workers. It can only come about through the actions of workers themselves, who create their own institutions for running society, workers’ councils, in the process of trying to challenge their exploiters. This is precisely what has happened in all mass upheavals that have been led by workers. But the 1959 revolution and its aftermath never produced anything approximating workers’ councils or organs of workers’ power.”

Obviously I have not read widely enough since I am not aware of any: “actions of workers themselves, who create their own institutions for running society, workers’ councils, in the process of trying to challenge their exploiters.” in the past couple of hundred years other than the ill-fated (and much criticised) soviets in the USSR, which, by the way, the SA does not subscribe to.

Comment from John
Time May 20, 2011 at 2:55 pm

Actually Socialist Alternative does believe the revolution in Russia in October 1917 to have been a democratic working class revolution. It takes the view that for a range of reasons the working class couldn’t retain power and a new capitalist class filled the void over time so that by about 1927 that class was in power. There have been many other examples of workers’ challenges and/or revolutions against the capitalist class – Germany 1918-19, 1923, China 1925 to 27, Spain of sorts, Hungary 1956, France 68, Italy 70, Iran 78/79 (with the workers’ councils or shoras), Poland 1980/81 etc. The success in 12917 of the workers revolution and the failure elsewhere can be in part explained by the existence in Russia of a mass revolutionary socialist party believing and practising revolution from below and its non-existence in the other countries.

Comment from juanR
Time May 20, 2011 at 4:47 pm

No, that response is not good enough. There are more important issues right now than dissecting the Cuban situation and you owe it to your readers to be “there”.

Comment from Ross
Time May 20, 2011 at 5:40 pm

In the real Western World John,the free market does not exist.We are subjuated by Banking, Oil, arms and drug cartels.There is nothing wrong with the free market,it keeps all the players honest.Armchel Mayer Von Rothschild,” Give me control of a nation’s currency and I care not who makes the laws.” Rockerfeller,” Competition is a sin.”These super elites have never wanted competition or a free market whether they be capitaliist or communist.All they want is absolute power and we are seeing the results of this now with the world in economic,social and political chaos.

The USA/European alliance is a collapsing empire.They are now fearful of their own populations so they will use war as a tool of unification and the means to expand the empire.

China is a the odd one out since its’ Govt Banking system is not enslaved by their private banking cartels.This is whyChina is being demonised along with any Arab state with oil and their own banking system.

Comment from John
Time May 20, 2011 at 6:35 pm

But other left newspapers are celebrating the Castro changes. Should they not do that? Maybe they should only be telling us about Castro’s support for the dictator Gaddafi. Why should US imperialism prevent us debating the very nature of what is socialism? In fact it shouldn’t and those who argue that are being simplistic. It is just convenient cover for those who support the Cuban ruling class.

Comment from Calligula
Time May 20, 2011 at 7:52 pm

I phoned Fidel’s number today.
Raoul answered the phone and cursed me for phoning at such an ungodly hour.

Stop there and analyse that carefully for the nuance. ‘Ungodly hour’?
If that isn’t a hint that Fidel’s age and infirmity isn’t resulting in a backslide – recidivism – then nothing is.

Anyway he passed me on to his youngest nephew, Franco, who assured me that everything is ‘regular’ – which doesn’t mean the same there as it does here.
Mind you – he insisted that ‘Sangre de dios’ Fidel still refuses to cash the lease cheque from Gitmo Bay.
They still have their pride and ‘watch this space’ was uttered at the end of the conversation in a gravelly, cigar chewing voice.

Best I can tell there’s life left in the old Cuba yet.

Comment from juanR
Time May 20, 2011 at 8:56 pm

John, the point here is that you have dropped on us a voluminous article about some inconsequential little tinpot Caribbean republic at precisely the same time that Obama was making an important announcement about the US’s middle east policies (read: atrocities) designed to enhance his reelection campaign. North Africa, Central Africa, the Middle East, Pakistan and Afghanistan burn, Europe disintegrates, Australia doesn’t have a migration/refugee policy and here we are, worrying about Cuba! Sorry to be so insistent.

Comment from John
Time May 20, 2011 at 10:27 pm

And I have dealt with all those issues on my blog and will continue to do so.

Comment from Calligula
Time May 21, 2011 at 12:24 am

JuanR –
Did I forget to shove my oar in here?
I happen to be rather, stupidly, fond of Cuba – that petty, inconsequential, little tinpot turnout that has stonewalled and without much fuss, completely infuriated the lurking monster just over the water, northwards.
Try to get a grip on it.
Over the last fifty years or so I can assure you that Fidel has had more damned good Sunday morning sleep-ins than the succession of presidents of the accursed UsofA.

Think deeply about that. It’s called work/life balance.
Consider – If the USofA ever behaved itself for a few months the rest of us might actually have a break from the unremitting bother they cause.

Crying out loud. I’ve got a mate who was born in Iowa and sometimes even he reckons they go too bloody far.

Comment from John
Time May 21, 2011 at 9:20 am

And another point juanR. US imperialism blockades the country so its development has to be seen in that context too. Of course the ruling class use tat an excuse for their state capitalism but nevertheless it is reality.

Should we not discuss Cuba then? Not Europe? Not Australia and concentrate solely on what you want?

Comment from juanR
Time May 21, 2011 at 9:51 am

No, John, that’s not what I was implying. My criticism was about the timing. Since you are usually on the ball, it came as a surprise. Consider that, as we speak, Spain runs the risk of being declared a “no flight zone” by NATO (read US) in support of the “indignados” of the Puerta del Sol who demand “Democracia Real Ya”. As you know, the US does not need a lot encouragement to intervene on the side of justice and democracy.

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