Cuba: An Inexorable Spiral to Capitalism?

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Is Cuba headed towards capitalist restoration? The changes in Cuba signal that the future of the Cuban revolution is at stake. Despite the fatalism of many, the final outcome is still an open question and yet to be decided. This will depend not only on what happens in Cuba, but also on international dynamics.

Image from La Izquierda Diario

For those who uncritically support the policies of the Cuban regime, merely asking if Cuba is heading towards capitalist restoration amounts to playing the game of the right and imperialism. There is no remedy for those who do not want to think. At the other extreme, some left currents argue that capitalism has already been restored in Cuba and the task at hand is to overthrow the dictatorial regime similar to the ones that have plagued Latin America in the past. [[This is the position of the Brazilian Partido Socialista dos Trabalhadores Unificado (PSTU – United Socialist Workers’ Party) and its international organization the Liga Internacional de los Trabajadores (LIT – International Workers League), which argues that Cuba is a direct colony of Spanish and Canadian capital (sic) and that the key is to bring down the regime that they compare to the “dictatorship of [Argentine military dictator] Videla”.]] This position places them in the same political front as the Miami gusanos and imperialism (before Obama adopted his current stance).

The reality is much more complex. Since the end of the Soviet Union, the Cuban regime has alternated between opening and centralizing the economy in response to the backlash from changing internal and external conditions.

In the 90s, during the “special period of peace,” there was an economic opening alongside an iron grip over social life by the State. Mixed businesses and small property ownership was legalized, and with the exception of the areas of health, education and defence, the mechanisms of state economic planning were suspended[[Y. Martínez Pérez, “El proceso de planificación empresarial en Cuba” (The Process of Business Planning in Cuba), University of Cienfuegos, 2008 http://www.gestiopolis.com/el-proceso-de-planificacion-empresarial-en-cuba/]]. This move practically dismantled the state monopoly on foreign trade. The 1995 foreign investment law was enacted, which allowed for Free Trade Zones with exceptional conditions for capital. The government also implemented “business development,” a type of management with capitalist criteria of profitability and efficiency. This was alongside the payment of wages based on productivity and incentives.

At the begining of 2003, in the context of changing international economic conditions and the rise of populism in Latin America, the pendulum swung back towards centralization. Cuba received strong economic support from Chavez in Venezuela through subsidized oil and the purchase of Cuban medical services at preferential prices. During Fidel’s final period in government (the “Battle of Ideas”), the volume of the self-employed sector, joint enterprises, and foreign direct investment shrank. Although the structural measures adopted during the special period were not reversed the State regained control of areas of the economy by reintroducing state bureaucratic planning and the centralization of foreign exchange. This directly affected foreign trade although it did not restore the previous 100% state monopoly (that mostly exists in practice).

Raul Castro’s rise to power and the international economic crisis of 2008 occcured alongside a process of economic reforms called “Updating the Model” [[For an in-depth analysis of these measures, see “Transforming the Cuban Economic Model”, Mauricio A. Font Mario González-Corzo (comp), Bildner Center for Western Hemisphere Studies, The Graduate Center, The City University of New York, 2014. This interesting compilation brings together articles from important Cuban academics, including Pavel Vidal Alejandro, Omar Everleny Pérez Villanueva, Camilia Piñeiro Harnecker y Juan Triana Cordoví. See also J. Habel, “¿Será posible una reforma política?” (Will There be Political Reform?), Le Monde Diplomatique Explorador 1, Cuba. Los dilemas del Cambio (Cuba: The Dilemmas of Change), March 2016]]. These policies were based on a gradual, sustained reintroduction of capitalist relations in certain areas of the economy. This course was accelerated by the oil crisis and the enormous difficulties facing Venezuela, one of Cuba’s the main economic supporters. Measures that allow for greater social and cultural freedoms were passed and the government no longer required direct authorization for foreign travel (though this is still limited by the difficulty of obtaining overseas visas and the high costs that preclude travel for most of the population).

However, similar measures did not take place in the political arena. The document adopted by the Sixth Congress of the PCC in 2011, Economic Policy Guidelines for the Party and the Revolution, aimed primarily at shoring up the emerging non-State sector. Since then, important changes have occurred in the economic and social structure of the island: the self-employed sector[[According to the latest available official statistics, there are 4,949,800 state employees, 1,147,000 in the private sector and 483,400 self-employed, which must add an undetermined number of informal workers. The unemployment rate is 2.7% and the average wage is 584 CUP (US$24). Anuario Estadístico de Cuba 2014 (Yearbook of Cuba 2014), “Empleo y salarios” (Employment and Wages), 2015 Edition, Oficina Nacional de Estadística e Información (National Office of Statistics and Information).]] has expanded, around 500,000 state employees have been laid off (part of a plan to dismiss more than one million workers), along with cuts to ration cards and the expansion of private “usufruct”. This allows farmers or co-operatives to work unused government land and keep or sell the produce without affecting the property structure. The private sale of housing has also been authorized, sparking a process of capitalist accumulation in real estate, mainly for the purchase of properties to rent to tourists. In 2014 a new foreign investment law was passed which provides more ways to attract elusive foreign capital. [[In his presentation to the National Assembly of People’s Power at the end of 2015, Marino Murillo, Minister of Economy and Planning, reported that only 37 businesses have been established under the new regulations, of which around six are in the Special Devlopment Zone (SDZ) of Mariel (Granma, 28 December 2015).]]This law maintains the ban on the direct hiring of Cuban workers by firms, but allows them to be hired through a special state agency that keeps the bulk of the earned wages. It is expected that the Seventh Party Congress (which will occur as this article goes to print) will reaffirm this course, although this is more speculation than certainty as the Congress documents have not been made public. The economic situation is complicated. The regime has yet to deal with the dual currency system of the national peso (CUP) and convertible peso (CUC) and the dual exchange rate, which sets U.S. dollar-CUP parity for business and 24 CUPs to the dollar for the public.

The result of these oscillations is not neutral. On the one hand, the fact that the process has been gradual, and up to now at a snail’s pace, has prevented the generalization of the capitalist relations which have started to develop in certain areas of the economy. Even today, state ownership of the means of production is predominant: between 75 and 80 percent of the economy remains within the orbit of the State, which also continues to govern the mechanisms for control of foreign trade. At the same time, this gradual introduction of capitalist relations is utilizing pragmatic measures to implement a scheme of capitalist restoration à la Vietnam (praised by the ruling party leadership) that preserves the political monopoly of the Communist Party. [[This is pending a reform of the electoral law. Some speculate that the regime could establish a system that allows for satellite parties, as occurred in some countries in East Europe, but there is still no clear signal indicating that this will happen.]]

The principle restorationist forces are within the State – in particular at the top of the hierarchy of the Revolutionary Armed Forces (FAR), the Cuban military. There is also a substantial base in a minority sector of the self-employed that are benefitting from primitive accumulation. [[Richard E. Feinberg, Soft Landing in Cuba? Emerging Entrepreneurs and Middle Classes, November 2013. In this interesting study, the author discusses the heterogeneous character of self-employment (which runs from the “carretillero” – person who sell vegetables from the back of a cart – to small entrepreneurs that exploit manual labour). His analysis suggests that the majority the self-employed consider that they are only doing extra work to add to their meager family income, with only a small minority being able to overcome the initial stage of “primitive family accumulation” and become entrepreneurs. The wealthiest sector of the self-employed are those who emigrated to the U.S. and then return to invest in Cuba.]] Of the two proto-capitalist forces, those embedded within the FAR are undoubtedly decisive. These military leaders play a central role in both the economy and government. Their cadre are filling management positions at capitalist companies. The FAR’s main business is the holding company called Grupo de Administración Empresarial, SA (GAESA – Enterprise Management Group), which is in charge of tourism businesses, hotels, transportation (Cubanacán, Gaviota, Cubataxi, etc.), foreign currency recuperation stores (TDR-Caribe y Panamericana) chains of foreign currency exhange (CUC) stores as well as Almacenes Universales (Universal Storage, which operates in the Special Development Zone at the port of Mariel).

Another holding company is the Cuban Export-Import Corporation (CIMEX). Its operations include the provision of immigration documents, control of remittances, management of travel agencies (ie., Havanatur), car rentals (Havanautos), and the Cuban oil company (CUPET) [[Grupos empresariales del MINFAR” (Business Groups of the MINFAR [Ministry of the Revolutionary Armed Forces]), Foresight Cuba, January 7, 2016 [http://foresightcuba.com/grupos-empresariales-del-minfar/]], as well as retail stores, “paladares” (restaurants owned by the self-employed), bars, and other businesses. This is not to mention the specific companies that deal with areas of defense and communication. Heading up all these businesses is General Luis Alberto Rodríguez López-Callejas, the son-in-law (or former son-in-law) of Raúl Castro. [[According to Cuban Economist Omar Everleny Pérez, the FAR controls 50% of the income produced in Cuba. Other economists put this figure at closer to 80%.]]

Along with high-ranking state officials, the FAR hierarchy enjoys access to privileges forbidden for the rest of the population. They live in military neighborhoods complete with resorts and marinas, and have access to goods such as household appliances, computers and automobiles at subsidized prices.

This economic power of the top FAR leaders contains a clear contradiction: as individuals, they are company managers who have contact with foreign capital (and even bank accounts abroad), therefore in the best position to make the leap from bureaucratic caste to possessing class whenever the pace of restoration speeds up. However, at the same time, as a corporation, their interests lie in maintaining a gradual approach so as to avoid an indiscriminate opening up to foreign capital, or a generalized process of privatization (as in Vietnam). These top leaders have no desire to submit to further competition or give up their monopoly control of these strategic economic sectors

Just like any other country in the world, an increase in social inequality means an increase in injustice. The competition of the “NEPmen” has awoken the egalitarian conscience that has historically characterized the Cuban people, a conscience that has waned in recent years. While an enriched sector pushes for deeper measures for capitalist restoration, in other sectors there is increasing resentment against those who are getting rich without working and against the privileges of government employees and the military.This is entirely understandable when we consider the enormous difficulties that the majority of the population has in ensuring its daily survival on an average salary of around $24 USD per month. [[To put this into perspective, a liter of milk in a TDR costs more than 2 CUC, while one hour of internet costs 3 CUC.]]

Pro-capitalist reforms did not resolve the economy’s structural problems: low productivity and technological backwardness. Cuba continues to import around 80 percent of all the food it consumes. In the absence of any real prospects and the fear that the United States may end its preferential policies towards Cuban migration, many young people are choosing to migrate. [[The lastest major migration crisis is still ongoing. It involves over 1100 Cubans who at the end of 2015 were stranded in Costa Rica after attempting to reach the U.S. by land.]] Others simply abandon their university studies to work in shops or other private sector services, where they are sometimes forces to work for over 15 hours a day, but earn five times more than the average wage in the public sector.

Perhaps that is why US journalist Jon Lee Anderson – an expert on Cuban reality – said in a recent interview that “Cuba will not let McDonald’s open like they did in Prague and Warsaw,” predicting that the bureaucracy will opt for maintaining the balance between openness and control. This remains to be seen. The upcoming Congress is the final one in which the “old guard” will be present. It appears that Raul’s successor, Miguel Díaz-Canel, born one year after the revolution, will be the current First Vice President of the Council of State. He has yet to demonstrate that he can maintain the unity of the State and the Armed Forces if social tensions rise once Castro steps down.

According to the ruling bureaucracy’s discourse, in order to achieve “a prosperous and sustainable socialism,” it is necessary to update the model with necessary pro-capitalist reforms, which will produce a more unequal, but more just society. This is not dialectical sophistication but rather merely a contradiction in terms.

The situation is far from simple. The pressures to move towards capitalism are very powerful and arise from within the State, Cuban society, and the world. The ruling bureaucracy with its privileges and business deals creates within this same State a cynical moralism that spreads throughout society and undermines revolutionary ideals. On the other hand, there are the conquests that the revolution still conserves (free health, education and housing – even if the buildings are in poor condition, especially in Havana) – conquests that the population values highly.

Despite the advance towards restoration, the bourgeoisie has not begun to reassemble itself. It exists only in exile. An intense debate has developed around these points and despite being monitored by the regime a new Cuban left has developed on blogs and websites. [[One of the most dynamic is the Cuban Critical Observatory (www.observatoriocriticocuba.org) that unlike other alternative sites such as 14ymedio, more clearly confront capitalist restoration.]]

Some argue that the solution is a mixed model favoring cooperative self-management. Others look for alternatives to the one-party regime in anarchism. However the processes of restoration in Eastern Europe have shown that these variants are no alternative in the face of the advance of capital. In order to avoid capitalist restoration in all of its variations, it is necessary to raise a transitional program that includes an end to the economic embargo and the full re-establishment of the monopoly of foreign trade. Concessions made to imperialist capital must be reversed and genuine democratic planning of the economy must be established. This program must be based on the heartfelt and urgent demands of the masses: general wage increases and price controls by the population (the rise in prices are one of the main complaints of the workers), an end to the ruling bureaucracy’s privileges, end of the one-party regime through the legalization of parties that defend the conquests of the revolution, and freedom to form trade unions and political organization for workers. This must all be done with the perspective of transforming the working class into the true ruling class of the State and society.

Translation by Sean Robertson

This is a portion of an article published in Left Voice Magazine.

About author

Claudia Cinatti

Claudia Cinatti

Claudia is an editor of our sister site La Izquierda Diario and a leading member of the Party of Socialist Workers (PTS) in Argentina.