Fidel Castro has often been blamed for the state of the Cuban economy, but the longstanding US embargo and the question of what constitutes real economic success make the issue far more complex than that, argues Helen Yaffe.
Alongside his depiction as a “brutal dictator”, negative reflections on Fidel Castro since his death in November 2016 have focused on his “mismanagement” of the Cuban economy and the consequent “extremes of poverty” suffered by ordinary Cubans.
This caricature is problematic – not only because it ignores the devastating economic impact of the United States embargo over 55 years, but also because it is premised on neoclassical economic assumptions. This means that by stressing economic policy over economic restraints, critics can shift responsibility for Cuba’s alleged poverty on to Castro without implicating successive US administrations that have imposed the suffocating embargo.
This approach also ignores key questions about Cuba after the revolution. Where can medium and low-income countries get the capital to invest in infrastructure and welfare provision? How can foreign capital be obtained under conditions which do not obstruct such development, and how can a late-developing country such as Cuba use international trade to produce a surplus in a global economy which – many claim – tends to “unequal terms of trade”?
It was the search for solutions to the challenge of development that led Cuba’s revolutionary government to adopt a socialist system. They adopted a centrally planned economy in which state ownership predominated because they perceived this system as offering the best answer to those historical challenges.
But the commitment to operate within a socialist framework implied additional restraints and complications, particularly in the context of a bipolar world. My book, Che Guevara: The Economics of Revolution, examines the contradictions and challenges faced by the nascent revolutionary government from the perspective of Guevara’s role as president of the National Bank and minister of industries.
Literature on Cuba is dominated by “Cubanology”, an academic school central to the political and ideological opposition to Cuban socialism. Its emergence and links to the US government are well documented. Its arguments are that the revolution changed everything in Cuba – and Fidel (and then Raul) Castro have personally dominated domestic and foreign policy since, denying Cuban democracy and repressing civil society. Thanks to their mismanagement of the economy, growth since 1959 has been negligible. They simply replaced dependency on the US with dependency on the USSR until its collapse in 1990.
These ideas have also shaped political and media discourse on Cuba. But the problem with this analysis is that it obstructs our ability to see clearly what goes on in Cuba or explain the revolution’s endurance and Cuban society’s vitality.
What did Castro inherit?
Arguments about the success or failure of the post-1959 economy often hang on the state of the Cuban economy in the 1950s. The post-1959 government inherited a sugar-dominated economy with the deep socio-economic and racial scars of slavery. Cubanologist Jaime Suchlicki argues that Batista’s Cuba was “well into what Walter Rostow has characterised as the take-off stage”, while Fred Judson points to structural weaknesses in the Cuban economy: “Long-term crises characterised the economy, which had a surface and transient prosperity.” So while one side insists that the revolution interrupted healthy capitalist growth, the other believes it was a precondition to resolving the contradictions obstructing development by ending Cuba’s subjugation to the needs of US capitalism.
Following the revolution, Castro set out to bring social welfare and land reform to the Cuban people and to confiscate the ill-gotten gains of the Cuban elite. But when the defeated Fulgencio Batista and his associates fled Cuba, they stole millions of pesos from the National Bank and the Treasury. The country was decapitalised, severely limiting the capacity for public spending and private investments. Wealthy Cubans were leaving the island, taking their deposits and taxes with them. How was the new government going to carry out the ambitious socio-economic reforms without financial resources?
We have to consider these real circumstances at every juncture. For example, when the US embargo was first implemented, 95% of Cuba’s capital goods and 100% of its spare parts were imported from the US – and the US was overwhelmingly the main recipient of Cuban exports. When the Soviet bloc disintegrated, Cuba lost 85% of its trade and investment, leading GDP to plummet 35%. These events produced serious economic constraints on Cuba’s room for manoeuvre.
Putting a price on poverty
Moving on, we should also ask: how are we to measure Cuba’s poverty? Is it GDP per capita? Is it money-income per day? Should we apply the yardsticks of capitalist economics, focusing on growth and productivity statistics to measure “success” or “failure”, while paying little attention to social and political priorities?
Even factoring in its low GDP per capita, the Human Development Index (HDI) lists Cuba in the “high human development” category; it excels not just in health and education, but also in women’s participation and political inclusion. Cuba has eliminated child malnutrition. No children sleep on the streets. In fact, there is no homelessness. Even during the hungry years of economic crisis of the 1990s, Cubans did not starve. Cuba stuck with the planned economy, and it enabled them to ration their scarce resources.
Yes, salaries are extremely low (as both Fidel and Raul have lamented) – but Cubans’ salaries do not determine their standard of living. About 85% of Cubans own their own homes and rent cannot exceed 4% of a tenant’s income. The state provides a (very) basic food basket while utility bills, transport and medicine costs are kept low. The opera, cinema, ballet and so on are cheap for all. High-quality education and healthcare are free. They are part of the material wealth of Cuba and should not be dismissed – as if individual consumption of consumer goods were the only measure of economic success.
Operation miracle
The specific and real challenges Cuban development has faced has generated unique contradictions. In a planned economy, with an extremely tight budget, they have had to prioritise: the infrastructure is crumbling and yet they have first-world human development indicators. Infant mortality rates reveal a lot about the standard of living, being influenced by multiple socioeconomic and medical factors. Cuba’s infant mortality rate is 4.5 per 1,000 live births, which sits it among first-world countries – and above the US on the CIA’s own ranking.
It is not just Cubans who have benefited from these investments. Tens of thousands of Cuban doctors, educators and other development aid workers have served around the world. At present some 37,000 Cuban doctors and nurses work in 77 countries. They generate foreign exchange of some US$8 billion a year – Cuba’s biggest export.
In addition, Cuba provides both free medical treatment and free medical training to thousands of foreigners every year. As a direct initiative of Fidel, in 1999, the Latin American School of Medicine was inaugurated in Havana to provide foreign students from poor countries with six years of training and accommodation completely free. In 2004, Cuba teamed up with Venezuela to provide free eye surgery to people in three dozen countries under Operation Miracle. In the first ten years more than 3m people had their sight restored.
Prohibiting even trade in medicines, the US embargo led Castro to prioritise investments in medical sciences. Cuba now owns around 900 patents and markets pharmaceutical products and vaccines in 40 countries, generating yearly revenues of US$300m, with the potential for massive expansion. The sector produces more than 70% of the medicines consumed by its 11m people. The entire industry is state owned, research programmes respond to the needs of the population, and all surpluses are reinvested into the sector. Without state planning and investment it is unlikely that this could have been achieved in a poor country.
In the mid-1980s Cuba developed the world’s first Meningitis B vaccine. Today, it leads in oncology drugs. In 2012 Cuba patented the first therapeutic cancer vaccine. The US embargo forces Cuba to source medicines, medical devices and radiology products outside the United States, incurring additional transportation costs.
Sharing economy
Ecuador’s president, Rafael Correa, told me in 2009:
A great example provided by Cuba is that in its poverty it has known how to share, with all its international programmes. Cuba is the country with the greatest cooperation in relation to its gross domestic product and it is an example for all of us. This doesn’t mean that Cuba doesn’t have big problems, but it is also certain that it is impossible to judge the success or failure of the Cuban model without considering the US blockade, a blockade that has lasted for 50 years. Ecuador wouldn’t survive for five months with that blockade.
Let’s consider the embargo: the Cuban government estimates that it has cost the island US$753.69 billion. Their annual report to the United Nations provides a detailed account of that calculation. That’s a lot for a country whose average GDP between 1970 and 2014 has been calculated at US$31.7 billion.
Yes, Castro presided over mistakes and errors in Cuba’s planned economy. Yes, there is bureaucracy, low productivity, liquidity crisis, debt and numerous other problems – but where aren’t there? Castro pointed to these weaknesses in his own speeches to the Cuban people. But President Correa is right – to objectively judge Castro’s legacy, Cuban development and contemporary reforms today, we cannot pretend that the US blockade – which remains today despite rapprochement – has not shaped the Cuban economy.
Castro almost saw out 11 US presidents since 1959, but he never lived to see the end of the US embargo. New challenges face Cuba, with economic reforms underway and the restoration of relations with the United States. The next step, including for me personally, is to assess the Cuban revolution’s resilience in this post-Castro, Donald Trump era.
Notes:
• The views expressed here are of the authors rather than the Centre or the LSE
• This article was originally published at The Conversation
• Featured-image credit: cropped version of Chris Goldberg (CC BY-NC 2.0)
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This article is an insult to the cuban people and intellectual integrity and at best a poor defense of a failed system and a lack of integral honesty. While reading the article it became incredibly obvious the author has not visit Cuba let alone lived there at least 1 month. I was born in Cuba, and raised there most of my life, I can assure you if you have to endure what my people have for the past 60+ years your ideology and communist propaganda will fade. I would love to know how did you come to the conclusion that there is no homelessness or child malnutrition in Cuba, and what level of political inclusion you believe the cuban citizens possess. Please before publicizing another article or spread ing what seems like 1 hour of writting missinformation visit my country, talk to the people, and ask yourself why is the dream of every cuban child to leave the country. The answer is simple, the only hope the cuban has is that one day they will escape the tyrannical claws of a corrupt government and the crude reality of a failed economical system called communism.
This article is biased af. This article is no different from Americans talking about them being the number one country when the clearly have crushing problems. But at least most of it economy is still better than Cuba.
Note: “economic wealth” is used here as “generation” of economic wealth, not wealth accumulation by individuals. “Economic wealth” is defined as the surplus created by an economy after deducting ALL correctly allocated costs (adequate payment of inputs, cost allocation of capital and remuneration of labor in an adequate fashion -not resulting in rationing, …)
Cuba has defaulted on many of its commercial and sovereign debt. It is in a permanent state of cash crisis.
Since the communist regime has devastated the economy. in economic terms the Castro regime first “redistributed” the “economic wealth” “generated” by uncompensated expropriations.
Then the system lived of 35% of GDP subsidies by the Soviet Union. Subsidies that paid for health and education, but that were “gifts”, not economic wealth created in Cuba.
When the Berlin wall fell and the Cuban economy fell back to its “normal” state (having to pay its own way), the economy collapsed.
Now the regime is propping up an ailing economy with slave labor (renting out doctors) and lucrative deals for the elite while the people still endure hardship if they do not receive help from abroad (60%+ of Cubans get help from abroad to survive).
That is reality.
CUBAN ECONOMY: We were told that 90% of everyone’s wages goes to the Cuban government. In return the government provides free housing, education, medical and food subsidies for staples like rice and flour administered by a ration book. Everyone must have a job or they go to prison. We have no idea how things like minimum ages and wages are established in cuba but couldn’t help but notice the large crowds of people just loitering about in the middle of a weekday. Immigration to other countries is almost impossible since most of them don’t have Cuban Embassy’s and you can’t legally leave Cuba without a Visa.
Most establishments other than the Casino’s won’t take USD or credit cards which can make purchases outside of the stores at the pier kind of tricky. For purchases at the pier (mostly cigars, alcohol, t-shirts and souvenirs) you have to trade USD for monopoly type money. There is a 15% fee when you purchase the fake money and another fee if you sell it back to them. Totally worthless anywhere but at the pier. Our guide took some of us one of the few stores that would accept USD. I bought a couple of bottles Cuban rum (about $50) and 6 cigars ($85). The legal maximum for duty free return to the US for alcohol is two 100 ml bottles and 100 cigars. Not sure what I’m going to do with my six cigars but they came packaged in this awesome wooden box with Chi Guevara’s picture on it.
RECOMMENDATION: I would suggest that you visit this country as soon as you can. Especially those who think Socialism and Communism are swell ideas and that the government is here to provide for you. Our ability to visit could end tomorrow although I suspect the Cuban government loves the money we bring in. After that, if you are so blind as to not see what this subjugation of the Cuban population has done to its peoples then I feel sorry for you. Everyone is entitled to a job, everyone gets paid, and everyone is dead broke and living in poverty. I suspect that life in Cuba under Batista was awful as well but good god a’mighty there’s a lot of work to do and nobody has the capital or will to do it.
See:
http://econocuba.impela.net/
@Jose
I have visited three cities in Cuba but only for two weeks. I have some articles about the country. It is a poor country.
However, you are mistaken is calling it communism. It is not even socialism. Yes, it is ruled by a Communist Party, but Cuba has never had and cannot economically and technologically establish socialism. Furthermore, historically, the socio-economic context, similar to the one in Russia, allowed the development of a dictatorial bureaucracy, not democratic socialism.
People in other countries have endured conditions worse than what you have endured. Yet they have not lived in what you call ‘communist’ countries, but capitalist ones, poor capitalist countries.
Every child dreams of leaving the country. That is not an intelligent or an accurate thing to say on an academic blog.
Countless Mexicans, Syrians, Rohingyas, Africans and others have been killed fleeing wars, conflict, poverty, repression, in countries not governed by Communist Parties. The biggest humanitarian crisis since WWII is in Yemen, a country not governed by ‘communism’. The biggest genocide since the Holocaust was in 1996 Rwanda. Another non’-communist’ country.
In sum, what exists in Cuba, like what existed in the Soviet Union, has been an attempt to establish socialism in a specific international conjuncture in the 20th century. Objective conditions as well as subjectives one (the background of the leadership of the Cuban revolution) could not allow the realisation of the intentions. In fact, initially Castro was not in the Communist Party and he was looking at the American model. He was partly pushed to adopt a radical programme by the U.S.
I notice there are many comments that talk about the failed communist country, but no man is an island, nor is any country. All countries require some kind of economic interaction with other countries in global economies. Isolating a country based on its political ideologies and watching it whither away is cruelty to the extreme. All the while, as the strangled country flounders, those responsible for its condition knowingly lie about how it is the form of Government that has brought about it’s poor condition.
On the other-hand one does not go a day in NA without noticing the failure of Capitalism, homelessness, lack of homes for sale, high cost of living, the economic disparity between the haves and have-nots. Job creation exists, but jobs are low paying and no security, no health care plans nor retirement plans what does that say about the state of Capitalism. Who benefits from a burgeoning economy, not the people on whose backs it is built that’s for sure. Don’t kid yourself, Capitalism is not doing you any favors, Communism may not be the answer, but change is needed for the sake of the ordinary people.
while i agree on the article, there was way to much biased statements. also you forgot The bay of Pigs.
from a fellow socialist
The author is a person inclined to the Cuban revolution, it is her right, but nothing is as it is, the government has created and publicized an image of the country, health and education that does not correspond to reality.
I noticed that 1. the author did not disclose why the embargo was imposed – it was because Cuba expropriated (“stole” by a state actor) $1.6bn in 1960 dollars from US private interests. It’s quite an economic advantage to gain massive infrastructure assets without having to pay for them. 2. That the Soviet Union and then Venezuela provided significant subsidies to Cuba, which may have offset some or all or more than all of the value of trade with the US. 3. The use of the term “blockade” in the headline indicates an ideological bent possessed by the writer. 4. The use of statistics, such as infant mortality, by implication an indication of relative quality of health systems without addressing any other factor – such as low birthweight babies to teenage mothers in the US or counting early death as stillborn in Cuba, seems ideologically motivated as well. I can’t consider this a thoughtful, objective treatment of the topic.
Perhaps the apologists for the brutality of Communism can present ONE Communist country that has succeeded and has a free population – Just ONE… we’ll wait… (China was a disaster till they embraced a semi capitalist economy, but they retained oppressive control of its citizens)
Communism by its design stifles individual achievement, which is the single most robust component of successes of capitalist countries. BTW, the United States tried a communal economy in the Pilgrim days… when it nearly destroyed the Massachusetts colony, governor William Bradford incorporated capitalism and the country never looked back.
Why does this article omit discussion of Cuba’s thousands or tens of thousands of political prisoners, or that its most productive citizens have fled to the US while Castro himself became fabulously wealthy as a socialist dictator. If the government has been so successful in the face of the US embargo, why is it afraid to have free elections? Even Trump had to stand for election and the people voted him out.
Matthew,
The political system in Cuba is dictatorial. Don’t forget this statement when you read what is below so that you don’t accuse me of being a communist for example.
You need to mention your sources of the “tens of thousands of political prisoners.
What’s the nature of the Cuban state and the historical background that made it dictatorial?
What’s the role of imperialism in reinforcing that dictatorship?
Can a poor country build democratic socialism? Why even in order to build, ‘bourgeois democratic systems’ most African countries have not been able to do so.
You should mention your source that Castro became “fabulously wealthy”.
What would say about Wester allies like Egypt and Turkey? The two countries have a greater number of political prisoners than Cuba. Turkey has the biggest number of journalists in prison in the world after China. How much do you hear about that in the media or by the politicians?
But Cuba, because it’s not capitalist, not a ‘liberal democracy’ like us, we hear about it with drumbeats.
Finally, has a country the right ‘to choose’ its path outside foreign threats, embargo and invasion? Why has Cuba been considered a threat by the biggest military regime in the world, in complicity with other ‘liberal democracies’?
I liked the article until it said that Cubans didn’t starve. I was born in holguin 1993, trust me Cubans did indeed starve. My family had to eat whatever they could find. Cubans do not make enough to even buy a chicken, much less live off that.