Without state planning and investment it is unlikely that this could have been achieved in a poor country. Today, it leads in oncology drugs. In 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. 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. Their annual report to the United Nations provides a detailed account of that calculation. Castro pointed to these weaknesses in his own speeches to the Cuban people. Castro almost saw out 11 US presidents since , 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. Festival of Social Science — Aberdeen, Aberdeenshire. Edition: Available editions United Kingdom. Become an author Sign up as a reader Sign in.
The economic collapse bottomed out in and the economy started growing again. By , growth was nearly eight percent. However, progress on economic reforms came to a crashing halt in Self-employment licenses were reduced and new regulations and taxes imposed.
Reformist academics were demoted or purged. By , GDP growth had slowed to 2. It surged again in and because tourism was taking off and because of foreign investment in oil which, so far, has turned out to be a bust and mining, but the rest of the economy was stagnant. The regime just could not stand it anymore. Fidel especially saw these reforms as a pact with the Devil, a betrayal of the socialist promise, and he was determined to put a stop to reforms as soon as he could.
Then came By this time, foreign investors were getting fed up and were pulling out. Tourism was maturing and the Dot. The recession also caused remittances the Cuban diaspora sending money to family left behind in Cuba to fall. The sugar harvest came in well below targets. Yet, Cuba announced the following year that GDP in had increased 3 percent.
This was impossible. Cuba was clearly contracting and everyone knew it. Then in they recalculated the value of the medical services Cuba was providing to other countries like Venezuela resulting in an 80 percent increase in the health sector in a single year. Then in , Cuba claimed a GDP increase of Obviously, it was not. Then Cuba hit a brick wall. Fidel Castro suddenly entered a hospital in for abdominal surgery. Nevertheless, reform was clearly needed.
Reform could be put off for a time, thanks to the support of Venezuela, which was swapping its oil for health care services on terms that were very favorable to Cuba, much as the Soviet Union had once swapped oil for sugar, but it was becoming increasingly clear that that support was not going to last much longer. According to Carmelo Mesa-Lago , growth by was slowing dramatically, fixed capital investment had fallen to almost nothing, industrial production was 55 percent lower now than it was in , sugar production was down from 8 million tons in to 1.
Administrative reforms do not alter the structure of the system. Rather, they merely alter rules that are not directly related to the system without changing its basic character.
Structural reforms, on the other hand, are much deeper, to the point that the nature of the system itself is changed. Administrative reforms began early and continue.
They mostly have to do with lifting irritating prohibitions that effectively made Cubans second-class citizens in their own country. These include allowing Cubans to book rooms in hotels that had previously been reserved for international tourists only. Since most Cubans lack the income to stay in such hotels, this makes little difference as a practical matter, except for the few Cubans who have sufficient access to dollars who can now enjoy these facilities, which exacerbates the distinction between those who have access to dollars and those who do not.
Similarly, Cubans can now purchase computers and cell phones. Again, for most Cubans, these are simply out of reach. They can also buy new cars now, though the huge state markup places new cars far beyond the reach of almost all Cubans. The following is from a July 1, NBC online news article:. Cubans had welcomed the new law which removed limits on auto purchases, but many are in sticker shock at the percent markup.
In , Cuba started allowing people to buy and sell used cars from each other. Before then, only cars that were in Cuba before the revolution could be freely bought and sold, which is why there are so many U. In , Cuba abolished the exit permit that had been required to travel abroad. Cubans can now, in theory, come and go as they like subject, of course, to getting visas from the countries they want to travel to.
In practice, there are all sorts of ways to restrict travel and most dissidents are not allowed to travel. Also, most Cubans cannot afford the cost.
Cubans can now buy and sell houses. Previously, there was a system in which Cubans could trade apartments and houses. In other words, if I wanted a house closer to town, I would have to find someone who wanted a house where I live. The houses would have to be substantially alike, according to the rules.
As you can imagine, Cubans came up with all sorts of ways to get around these rules, and some Cubans made a living brokering deals in what developed into an almost full-blown real-estate market that barely bothered to even acknowledge the formal rules, so this reform basically legalized what had already become a de facto reality. Again, these reforms are more likely to go to the heart of socialism. They affect the nature of the system. They renege on the promises of socialism.
In no particular order, these reforms involve the distribution of idle state land to households, reduction of state expenditures, reduction of public-sector employment, and the expansion of self-employment. Usufruct gives the individual the right to use the land for profit but not own it. The farmer must get state approval for whatever he or she plans to grow. If approved, the state takes 70 percent of the harvest and pays the state-administered prices, which, of course, are below market price.
That is a pretty big disincentive. The farmer still has to purchase inputs, such as fertilizer and seed, from the state, which continues to monopolize inputs.
The farmer cannot hire labor, so the whole things has to be a family affair. And, until recently, the farmer was not permitted to build on the land. Even now that building is permitted, the state could always take the land away, along with the building, once the contract period is over. The upshot of all this is that food-production targets are not being met, which means Cuba continues to import most of its food. Cuba cut expenditures across the board.
One of the ways they did this was by closing work-place cafeterias that had been providing free lunches or converting cafeterias into worker cooperatives see below that charge for the lunches they provide.
This was hugely unpopular. For many workers, these free lunches were a substantial part of their diet. Similarly, the state closed universities and schools and made cuts in health care.
The monthly ration was also cut. Cubans have ration books right , called libreta , that permit them to purchase bulk staples each month at special ration stores at very low peso prices. Prior to this cut, these rations would typically last people about ten days. Maintenance, already sorely inadequate was further reduced. Unfinished investment projects were further delayed. All of this was an effort to reduce the budget deficit, since deficits have to be covered by borrowing, which is very hard to do for Cuba.
That is approximately one in every five state workers! This is a really dramatic retreat from the promise of guaranteed employment — economic security — in a socialist economy. So big, in fact, it keeps getting put off. There has been little headway on this. Self-employment goes hand in hand with the goal of reducing public-sector employment. The idea is that as workers get laid off from the public sector they find employment in the private sector as self-employed entrepreneurs.
The problem with this plan is that those who are entering self-employment are primarily those who were operating in the underground economy prior to legal self-employment, as well as retirees.
Thus, self-employment is not absorbing laid-off state workers and, as a consequence, lay-offs are being delayed. What is new is a renewed emphasis on self-employment specifically as a strategy tied to the retreat of the state sector.
In , the state published a new list of activities authorized for self-employment. These are practically all services and in low-priority sectors. It included hairdressing and taxi services.
Not only has self-employment meant more taxi services, it has also resulted in new business restoring these old clunkers. This list gets expanded from time to time and is now a little over but the general characteristics of the list remain unchanged. An occupation that competes with anything the State is interested in doing does not get on the list. Not included on this list, for instance, are most professional activities. A worker cooperative is a form of non-state ownership.
Formally, the workers in the enterprise own it and receive the income derived from the enterprise. This arrangement has long existed in the agricultural sector in Cuba, as well as other planned-socialist economies, including the Soviet Union.
While an alternative to a state-owned farm, the practical distinction between these two forms of ownership in agriculture was minimal.
The cooperative, just like the state farm, was required to deliver most, if not all, its output to the state at state-administered prices. It received all its inputs from state suppliers.
And it did not own land or capital, all of which was owned by the state. The idea is to expand the non-state sector and take a burden off the state budget but to preserve some aspect of socialist production. Hundreds of small to medium state enterprises have simply been handed off to their workers as worker cooperatives. I have already mentioned that cafeterias in some state enterprises have been converted into cooperatives that charge for lunches that had been provided free by the state enterprise.
Cooperatives can also be formed by private individuals. Preliminary research on cooperatives finds that those formed by individuals perform much better, on average, than those formed from state enterprises.
This is probably unsurprising. Those formed by individuals are probably indistinguishable from what we would call a partnership. These are persons getting together to form a business and sharing in the profits. On the other hand, think about workers in a state enterprise that gets converted into a cooperative.
One day the workers are working for the state; the next day they are supposed to be working for themselves. Nothing has really changed except that they can no longer get state subsidies. If the enterprise was unproductive before the change of legal status, it will continue to be unproductive after the change. With all these reforms, especially those that represent a retreat from the promises of socialism, one might wonder if Cuba is still socialist or, if it is, if it will be for long.
Employment is no longer a state guarantee. Is guaranteed employment — economic security — not a fundamental promise of socialism?
Social services, including health care and education, are being cut. The monthly ration, already woefully inadequate, is being cut. Is it not fundamental to socialism that the state provides, at least the basics? The private sector is being expanded, which, of course, means resource allocation being determined by price signals and motivation by profit.
Are not market allocation and profit seeking not anathema to socialist ideology? Thus, will these reforms save or ultimately destroy socialism in Cuba? Related Articles.
Economics What are the main differences between a mixed economic system and pure capitalism? Economics Market Economy vs. Command Economy: What's the difference? Partner Links. A command economy is a system in which a central governmental authority dictates the levels of production that are permitted. Socialism Socialism is an economic and political system based on public or collective ownership of the means of production that emphasizes economic equality.
What Is an Administered Price? An administered price is the price of a good or service as dictated by a government, as opposed to market forces. What Is the Austrian School? The Austrian school is an economic school of thought that originated in Vienna during the late 19th century with the works of Carl Menger. Subsidy Definition A subsidy is a benefit given by the government to groups or individuals, usually in the form of a cash payment or tax reduction.
Centrally Planned Economy A centrally planned economy is an economic system in which decisions are made by a central authority rather than by market participants.
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We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. A big one. At the beginning of this year, the Cuban government formally ended its dual currency system, devaluing its peso for the first time since the revolution. Yes, sometimes. But the Cuban government phased out a third currency — the Cuban convertible peso, known as the CUC — earlier this year, leading to problems.
The Cuban government created the CUC in for conducting state business and buying goods from abroad after it banned US dollars. Until this year, those working in the tourism sector, for example, were still paid in CUCs, leading to disparities with Cubans paid in CUPs. But the devaluation of the currency means they lost a significant amount of money in doing so, something that hit private-sector workers who have been paid in CUCs for years — workers like those in the tourism sector — particularly hard.
It has already been a tough year for those workers, as the coronavirus pandemic significantly curbed tourism and as former US President Donald Trump tightened the US embargo against the island. Resoundingly: end it. For years, the United Nations General Assembly has taken a vote, and the results are overwhelming.
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