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Cuba: From State Socialism to a New Form of Market Socialism?

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Abstract

Cuba's post-revolutionary economic history was penalized by the twin sets of distortions stemming from its former, artificial trade relations with the Soviet Union and from the very nature of the state socialist model. Yet, Cuba's centralized resource allocation system and the consistent priority granted to the satisfaction of basic needs led to a remarkable accumulation of human capital and an extraordinary development of public services. Moreover, they serendipitously endowed the country with a lingering comparative advantage in some advanced, knowledge-based services sectors (SS). However, the tension between Cuba's exceptional human development achievements and the weakness of their material foundations cannot be maintained indefinitely. The central planning mechanism entails serious intrinsic deficiencies. The socialist principle of distribution according to work can no longer be ignored. The role of the market and monetary-commercial relations must be drastically enhanced. The shortcomings of the present system should be fully acknowledged and dealt with boldly, with a comprehensive structural reform program. The ultimate goal of such a program should be to definitively supersede the traditional state socialist model, leading to a transition towards a specifically Cuban form of market socialism.

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Notes

  1. The term underdevelopment is to be understood more as hinting to a distorted and hetero-directed unfolding of productive forces than to a sheer lack of it. By the late 1950s, Cuba was in fact relatively advanced with respect to its Latin American and Caribbean countries in terms of income per capita, standards of living and social indicators.

  2. Recurrent de-centralizing and re-centralizing, anti-market and (relatively) market-friendly trends were common in Cuba as in all state-socialist economies (see Domínguez, 1987, 2004; Ritter, 2004; Mesa-Lago, 2005a, 2005b).

  3. Pre-revolutionary Cuba, along with sugar and a few other agricultural commodities, also exported services, mainly tourism and related services. The role of services in Cuba's export structure would recover only in the 1990s.

  4. Lacking any sense of ownership, many agricultural workers had become estranged and apathetic, as they were deprived of the right to take most decisions on the production process by themselves.

  5. Like that of most countries’, Cuba's tourist industry had been affected in 2009 by the impact of the global crisis.

  6. Cuba also exports medical services and medical tourism services to mostly Western and Latin American customers on a basically ‘normal’ market basis, and is very active in promoting this kind of activity. The role of intra-sectoral and inter-sectoral cross-subsidization in the formation of the export price of these health services exports is difficult to gauge, but their very existence is a clear sign of effective international competitiveness.

  7. There have been, of course, attempts to reduce import dependency, and in particular to minimize the leakage effect in the tourism sector. Some of them have been successful. There are, for instance, several small and micro-enterprises specialized in the production and supply of fresh food and other inputs to hotels and restaurants.

  8. Estimated income inequality appears to be moderately higher in China, but lower in Vietnam (see UNDP, 2008, 2009).

  9. Infant mortality (already very low) has decreased further, recording a rate of only 4.5% in 2010.

  10. Cuba's ranking peaked at 39 in 1990, deteriorated during the Special Period, bottoming at 89 in 1994, and progressively recovered afterwards.

  11. Most resource-rich African and Asian countries exhibit a negative ranking differential.

  12. The rank differential in China and Vietnam is also positive, yet it is just about 1/4 of Cuba's. The rank differential for Mexico, Brazil and Colombia is barely positive.

  13. Think, for instance, at the positive impact on labor productivity of investments in health, women education and human capital in general.

  14. Under a certain set of conditions, including a deep reform of the island's economic system but also a conducive global geopolitical configuration, China might be willing to greatly expand the scope of the already-existing credit lines to Cuba. However, to gauge if, how and when such a development could happen would be at present a purely speculative exercise.

  15. Of course, human development gains would have been much larger if income inequality had increased less and the irresponsible public services reforms of the last quarter of the XX century had been avoided. While reining in the trend towards excessive income inequality would have been a difficult, although not impossible task, the destruction of the previously existent public health systems is to be seen as a major and relatively easily evitable policy mistake committed by the governments of both China and Vietnam. This mistake has subsequently been acknowledged, especially so in China, leading to a slow and still inadequate policy turn in favor of the fundamental principle of non-market public provision in the area of basic social services.

  16. For an earlier comparison between Cuba's and Vietnam's socialist models see Brundenius and Weeks (2001).

  17. Here the term ‘strategic’ is utilized in an ad hoc and tautological fashion to refer to those sectors where a strong and heavy-handed form of strategic state intervention makes economic sense. A more common meaning of ‘strategic sector’ refers to economic activities that are of key importance for the overall development of the economy as a whole.

  18. Think, for instance, at the enormous difference between overall health costs in the US and in Cuba, not matched by the barely identifiable gap between the two countries in terms of basic health outcomes indicators.

  19. Cuba cannot compete wage-wise in garments and other very labor-intensive manufacturing sectors with some Asian and Central American countries where class and caste-based inequalities, mass malnutrition and illiteracy, and the virtual non-existence of a national public health system contribute to a very low level of wages. In most medium-tech manufacturing sectors, Cuba's potential level of productivity would be far below that of major semi-industrialized Asian and Latin American exporters.

  20. The comparison is less straightforward in terms of infrastructure endowments. With respect to China and Vietnam in the late 1970s–1980s, Cuba has the advantage of a relatively well-developed network of paved roads, which are presently underutilized.

  21. Elite Cuban service and manufacturing SOEs operating in health-related sub-sectors already enjoy a higher level of autonomy than most other enterprises.

  22. Here I refer holistically to the whole health cluster, which includes a goods-producing component manufacturing vaccines, drugs, biotechnology products and medical equipment, as well as diverse health-related services such as health tourism and public health planning consultancies (see Cuba Health Tourism, 2010).

  23. Most of the growth potential in agriculture and industry is of an import-substituting nature.

  24. As in any other domain, Cuba's insertion in the global services value chain has been severely limited so far by the US embargo, which, in particular, is the main culprit for the island's virtual Internet apartheid. This constraint might become less binding in the future, thanks to the decline of the formerly hegemonic power of the US and the emergence of a multi-polar international economic scenario.

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Acknowledgements

The author thanks Dr. Lázaro Peña Castellanos, director of the Centro de Investigaciones de Economía. Internacional (CIEI) of the Havana University, and all his colleagues, for the help and support they gave him during a 3-month stay in Habana in March–June 2010, when he was on sabbatical leave from UNCTAD, Geneva.

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Gabriele, A. Cuba: From State Socialism to a New Form of Market Socialism?. Comp Econ Stud 53, 647–678 (2011). https://doi.org/10.1057/ces.2011.26

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