Cuban Revolution: challenges and changes

 

[For more analysis and discussion on the economic changes in Cuba, click HERE.]

By Dave Holmes

[This article and slideshow were presented as a talk to the Geelong branch of Socialist Alliance on October 6, 2010.]

Before we begin, let's get oriented by looking at the map of Cuba in the Caribbean. Cuba is almost 1200 kilometres long and very narrow (generally it is only about 100 kilometres across).

From Havana it is 175 kilometres across the Florida Straits to the island of Key West, the nearest part of the USA; Miami, the centre of so many counter-revolutionary plots, is 370 kilometres away. Jamaica and Haiti are close neighbours. And as the crow flies, some 2180 kilometres away is Caracas in Venezuela, where a revolutionary process is underway.

An inspiring revolution

For more than 50 years tiny Cuba (its population is currently about 11.25 million) has punched well above its weight in world politics. That's because it carried out an authentic socialist revolution and has ceaselessly fought to defend and extend it in the teeth of remorseless pressure from its giant neighbour.

The Cuban Revolution has been marked by its tremendous internationalism, the high points of which have been its armed intervention in Angola in support of the struggle against the South African apartheid regime and its unstinting medical aid to the Third World.

The Cuban Revolution has shown that a Stalinist bureaucratic degeneration is not inevitable. There are bureaucrats in Cuba but the Fidelista leadership has largely managed to contain this danger by its constant vigilance, mass campaigns and appeals to the people.

Revolution faces biggest challenge

Today the Cuban Revolution arguably faces its biggest challenge. It is confronting severe economic problems. There appears to be a growing bureaucratic danger, an alarming growth of corruption, widespread popular recourse to the black economy in order to survive and a growing social differentiation among the population.

What makes all this even more challenging is that the historic generation which led the original revolutionary process is slowly passing from the scene. The imperialists (and more than a few people on the left) are convinced that the passing of Fidel and Raul will signal the collapse of the revolution.

In this talk I want to present this crisis in its context, to explain where it comes from, the current situation in broad outline and what changes the Cuban government is proposing.

Enormous external pressures

Whatever weaknesses that exist and mistakes that may have been made, the key background to Cuba's current economic woes is the absolutely enormous external pressures bearing down on them — pressures of this magnitude would have destroyed any other country.

US blockade

Foremost among these is the US blockade. Begun in 1960 after Cuba nationalised US enterprises, it is all-encompassing. As Cuban foreign minister Bruno Rodriguez Parrilla recently described it, the blockade is an "economic, commercial and financial siege that has lasted half a century".

A report prepared to be presented to the next session of the UN General Assembly puts the direct economic cost of the blockade to Cuba at US$750 billion.[1] To put this figure in perspective, it is approximately seven times Cuba's current GDP of $110 billion![2] That is, the blockade has cost Cuba seven years of development!

We might well wonder where would Cuba be today if there had been no blockade.

The innumerable bourgeois commentaries on Cuba's economic problems rarely dwell, if at all, on the impact of the blockade. The imperialists and their flunkeys go on about how socialism doesn’t work but make absolutely no acknowledgement of their own — far from insignificant — contribution to Cuba’s problems!!

Collapse of USSR

Almost from the start, the Soviet Union's support for Cuba was hugely important to its survival. For instance, the USSR bought Cuba's sugar and citrus crop at preferential (i.e., fair trade) prices and supplied oil and other aid in return.

Of course, Cuba was negatively influenced by various Soviet ideas and practices but if it had not had Moscow's backing it might not have survived.

The 1991 collapse of the USSR meant Cuba immediately lost 80% of its exports and imports. This ushered in a desperate struggle for survival — literally. GDP fell by a third. People almost starved. These years are called in Cuba "the special period in time of peace". The worst time was the early to mid-nineties.

Today, living standards on the island are still below the 1989 level.

'Natural' disasters

If all this were not enough, in 2008 Cuba was severely affected by climate change. Three hurricanes — Gustav, Ike and then Paloma — pounded the island, causing around $10 billion of damage.

Ike was the most destructive hurricane in Cuba's history. The nickel plants were damaged, crops were hit. The already bad housing situation was seriously worsened; hundreds of thousands of homes were destroyed and a great many dwellings remain in dire need of repair.

And on top of the devastating hurricanes, Cuba is in the grip of drought. Although Cuba is normally lush and wet, in the face of climate change that doesn't mean what it used to. The country's water storages are currently only about 40% full and the population is being urged to save water. In 2004 a severe drought hit agriculture hard in the east of the island.

Collapse of nickel price

Cuba is a major world supplier of nickel and cobalt. It has a third of the world's proven reserves of nickel, which is essential in the production of stainless steel and other corrosion-resistant alloys. Cuba also produces about 10% of the world’s Cobalt, a critical metal in the production of high-performance alloys.

In April 2007 the price of nickel reached $52,000 per tonne but at the end of 2008 it had crashed to about $9000. It has since climbed back to around $20,000. In 2007 nickel brought in $2.8 billion and was Cuba’s leading export earner but this figure fell to $1.5 billion in the following year.

Cuba's nickel is sold mainly to Canada, China and the Netherlands. (The Canadian multinational Sherritt operates a big nickel plant as a joint-venture with the Cuban government.)[3]

Development of tourism

Tourism has developed massively in the last two decades and in 2009 some 2.4 million holidaymakers visited the island. Tourism earns the country about $2 billion per year although receipts dropped 12% in 2009 due to the global financial crisis (the number of visits held up but stays were shorter and less money was spent).

Most of the hotels and resorts are joint ventures between Spanish and Canadian operators with the Cuban government.

However, important as tourism is to the national economy, it also brings with it some very serious problems. Especially worrying is the social differentiation which results as some Cubans have access to higher earnings and foreign currency (tips, payments in kind, selling services and goods to tourists). Prostitution has also staged a certain comeback, although it cannot be compared to either the past or to other Latin American countries.

Tips of tourism workers are meant to be handed over to the state but this is probably unenforceable.

The importance of nickel and tourism as export earners takes place against a backdrop of the decline of the once mighty sugar industry. Production was 8 million tons before the collapse of the USSR, the projection for 2010 is only 1.2 million tons. The government is trying to attract foreign investment.

Venezuela

The development of the revolutionary process in Venezuela has been a life-saving boost for Cuba. Apart from the enormous lift in morale — the feeling that they are no longer alone — there have been very material benefits.

Venezuela is now Cuba's main source of imports (31% in 2008). The special relationship with Venezuela has also meant credits for projects at low interest rates and various joint ventures.

Cuba has sent tens of thousands of health workers to Venezuela (in 2006 the figure reached 33,000) and these have been vital in enabling the key medical "mission" Barrio Adentro to get off the ground.

Cuba is also helping to train Venezuelan doctors and thousands of Venezuelans have received surgical treatment in Cuba (50,000 got free eye surgery in 2005). In return Cuba gets vital oil cheaply from Venezuela.

A fibre-optic cable is being laid from Venezuela to Cuba via some other island countries. When this is finished Cuba will at last have access to cheap high-speed internet connections. (At the moment Cuba pays a Canadian company through the nose for a slow connection.)

China-Cuba relations growing

Developing economic relations with China has also been very important. China has supplied Cuba with buses and trains and household goods, it has provided long-term credits and takes a significant amount of Cuba’s nickel output. China is also playing a role in helping Cuba prospect for oil offshore.

Having a trade relationship with China is very important in offsetting the US blockade. China is simply too big to be pushed around by Washington.

Economic problems

Current economic situation

Here are some basic facts about Cuba's economic situation:

1. Between 2001 and 2003, the Cuban economy grew at an average annual rate of 2.9%; between 2004 to 2007, the figure was 9.3%. In 2008 GDP growth dropped to 4.1% and in 2009 to 1.4%.

2. Cuba's earnings from the export of goods have been hard hit by the fall in commodity prices — primarily nickel (40% of total exports in 2009) but also sugar (13%).

3. At the same time the cost of key imports (fuel and food) has risen significantly. As a result, Cuba's balance of payments for the export and import of goods is heavily in deficit — in 2009 it was $6.5 billion.

4. This deficit is only balanced by the massive export of services. This is made up of tourism receipts ($2.2 billion gross in 2007) and payment (mainly from Venezuela) for the provision of medical personnel (estimated at over $5 billion in 2007). One inescapable problem of this heavy reliance on the export of services is that it is largely dependent on factors outside Cuba's control, i.e., Chavez and the Venezuelan revolutionary process and the vagaries of the tourism market.

5. Another very important source of hard currency is remittances from Cubans living abroad, mainly in the US. These are estimated at $600 million to $1 billion annually. The downside, however, is that the remittances create a division between those Cubans who have access to them and those who don't.

6. Food comprises a large part of Cuba's imports (17% in 2009). 70% of its food is imported. In 2008 it spent $2.2 billion on importing food — 567,000 tons of rice and 246,000 tons of dried beans cost it $700 million. Replacing expensive imports with locally produced food is a major objective of the Cuban government. A big part of this is to encourage more people to take up farming and make the conditions of agriculture much more attractive.

7. At the beginning of 2009 a crisis in servicing its foreign debt ($19.5 billion) led the government to freeze around $1 billion in the bank accounts of foreign firms. A lot of these funds are still frozen.

Two-tier currency

Cuba has a two-tier currency system, designed to impose a hefty tax on all foreign currency brought into the country, whether by tourists, remittances or business.

There are ordinary pesos and convertible pesos (CUCs). All foreign currency has to be converted in CUCs. US dollars attract fees and taxes of about 20%; other currencies only 10%.

There is a network of special shops ("dollar shops") selling all sorts of goods at much higher prices. These stores take only convertible pesos.

This system is very unpopular with those ordinary Cubans who have no access to CUCs. The government has pledged to eliminate the CUC and has made a small start this year.

Daily struggle

Eighty-eight per cent of Cuban workers are employed by state. Only 12% work in the private sector (private farmers, artists) — this includes 142,000 self-employed (less than 3% of total workforce).

The average wage in Cuba is about $20 per month. However, there are no taxes on this income, healthcare and education are free, people own their homes or pay a only a very small rent to the state.

In addition there is the libreta, the ration system. In place since 1962, the libreta allows everyone to purchase from list of basic commodities at subsidised prices.

But today the ration only covers about half the month. Furthermore, over the last few years it has been reduced. For instance, last November potatoes and peas were removed from the libreta. Previously Cubans could buy 4 pounds of potatoes per month at about 1 cent per pound. Now they can buy as much as they like but at 5 cents per pound.

The government simply cannot afford to keep the libreta going as before and there is even talk of phasing it out completely.

The net result of inadequate wages and pensions and the inadequate libreta is that most people are forced to supplement their income with various kinds of activities.

Social inequality is growing as some people are better placed, that is, their jobs enable them — one way or another — to more easily get precious CUCs.

Black economy

The black (non-official) economy encompasses a whole range of activities, from the largely harmless to the seriously criminal and everything in between. There is a very informative study on this by Canadian academic Arch Ritter (although he is very anti-Fidel).[4]

Some examples include: Selling homemade crafts to tourists, selling homemade food on the street; paying extra or bribes to get scarce goods or services; stealing goods from the state and selling them; using a state car as a private taxi; selling jobs in the lucrative tourist sector with prized access to dollars (tips and services).

A 2007 study by the Communist Youth (UJC) found that more than 282,000 young people in Cuba neither worked nor studied; a lot of these are concentrated in Havana. Obviously they get by one way or another. But such facts cause great popular resentment and undermine social morale.[5]

Mere prohibitions and increased vigilance by police and law enforcement bodies won’t solve the problem of the black economy when weighty economic realities are driving people towards it en masse simply to survive.

Reform plan

Raul Castro argues for reform

On April 4, 2010 Raul Castro addressed the congress of the Communist Youth League (UJC). He set out the main considerations behind the reforms which have been announced throughout the year:

Today, more than ever before, the economic battle is the main task and focus of the ideological work of the cadres, because the sustainability and the preservation of our social system rest upon this work.

Without a sound and dynamic economy and without the removal of superfluous expenses and waste, it will neither be possible to improve the living standard of the population nor to preserve and improve the high levels of education and health care ensured to every citizen free of charge.

Without an efficient and robust agriculture that we can develop with the resources available to us — without even dreaming of the large allocations of times past — we can’t hope to sustain and increase the amount of food provided to the population, that still depend so much on the import of products that might be cultivated in Cuba.

If people do not feel the need to work for a living because they are covered by excessively paternalistic and irrational state regulations, we will never be able to stimulate a love for work nor will we resolve the chronic lack of construction, farming and industrial workers; teachers, police and other indispensable trades that have steadily been disappearing.

If we do not build a firm and systematic social rejection of illegal activities and different manifestations of corruption, more than a few will continue to enrich themselves at the expense of the labour of the majority, while spreading attitudes that directly attack the essence of socialism.

If we maintain inflated payrolls in nearly every sector of national life and pay salaries that fail to correspond to results achieved, thus raising the amount of money in circulation, we cannot expect prices to cease climbing constantly or prevent the deterioration of people’s purchasing power. We know that the budgeted and business sectors have hundreds of thousands of excess workers; some analysts estimate that the surplus of people in work positions exceeds one million . . .

In summary, to continue spending beyond our income is tantamount to consuming our future and jeopardizing the very survival of the revolution.[6]

Reform plan

There are a number of key points to the reform plan:

1. 1 million workers are to be cut from the state payroll over five years; half a million by next March.

2. Many smaller state enterprises in light industry and agriculture are to be converted to worker cooperatives so hopefully a lot of workers will remain in their current workplaces but under different ownership and remuneration arrangements.

3. 178 occupations are now open to private enterprise; in 83 of these owners can hire workers other than relatives.

4. Previously announced agricultural reforms aim to make farming easier and more attractive: land is freely available in usufruct to those who want to farm; purchases of equipment and supplies is to be localised and made easier; produce prices raised; restrictions on selling are to be significantly eased.

5. An essential corollary of this is that the tax system is to be revamped so that the government can profit from all the increased private activity — without, of course, killing it off.

Reforms: aims and risks

The economic reforms have a number of interrelated objectives:

1. To trim the state payroll and increase the productivity of the state sector.

2. To increase economic efficiency by stimulating people's self-interest.

3. To draw people out of the black economy into open legal economic activity which can be regulated and taxed.

4. To increase make Cuban agriculture a lot more productive, increase food production and reduce or eliminate the huge food import bill.

5. To make daily life less stressful by making things easier: having services that work, food readily available.

6. Obviously, along with the reforms, the state will need to significantly raise wages and pensions.

There are very real risks. We know that the market always creates inequality and a stronger petty-bourgeois layer. There will need to be a strong regulatory and tax regime. Of course, bourgeois critics — and Cuba has whole armies of them — never worry about such things: the right to exploit and profit is presumably an inalienable human right.

However, despite the risks, Cuba has no real choice. It is trying to establish a clear framework so that it can improve the country's economic performance and maintain all the gains of the revolution.

Bureaucracy and corruption

Over the past year or so there have been a number of very disturbing incidents which show there are some real problems in the party and state apparatus. But they also show that no one, even the most high-ranking officials, is unaccountable or above having to answer for their actions.

Top leaders dismissed

In March 2009 a number of central leaders were dismissed from their state and party posts for serious errors. Most prominent among them were Carlos Lage Davila, Politiburo member and effectively Cuba's prime minister since 1986, and Felipe Perez Roque, Central Committee member and foreign minister.

According to a June 29, 2009 Inter Press Service article:

Raúl Castro’s moves were aimed at eliminating "test tube" leaders — a term that refers to young people who leapt from youth organisations to powerful positions — and at putting an end to parallel structures of power in order to strengthen the country's institutions ... Disloyalty, erratic behaviour, dishonesty and abuse of power are the main charges against those involved ... [7]

Lage and Perez did favours for Lage's lifelong friend Conrado Hernández and talked with him far more freely than they should have. Hernández was a representative for Basque businesses in Cuba. He was also an informant for Spanish intelligence (CNI). Through him the CNI made recordings of Lage and Perez slagging off Fidel, Raul and other top leaders.

Lage had ambitions to the post of first vice-president of the Councils of State and Ministers, which was instead given to José Ramón Machado Ventura in February 2008.

In one of his periodic "reflections" touching on the affair, Fidel said that "the sweet nectar of power for which they hadn’t experienced any type of sacrifice awoke ambitions in them that led them to play out a disgraceful role. The enemy outside built up their hopes with them."[8]

Reportedly, Lage now works as a pediatrician, Perez as an electrical engineer.

In fact, a large part of the Cuban cabinet was replaced in the first part of last year, either for being too close to foreign business or being ineffective in dealing with corruption.

Rogelio Acevedo

In April 2010 the head of the Civil Aeronautics Institute of Cuba, General Rogelio Acevedo, was dismissed. As a teenager he had fought in the Sierra Maestra and was a veteran of the war in Angola.

He and/or people in his department sold space on Cuban airliners to foreign companies and kept the proceeds for themselves. Apparently, they even planned to buy a plane themselves for several million dollars to cater for their growing business. The ripples of the investigation have spread wider and wider.[9]

Inspection department set up

In August 2009 a Comptroller General's Department was established. Its charter is to monitor government departments and crack down on corruption. The current Comptroller General is Gladys Bejerano Portela.

An inspection department like this is obviously needed but is only part of the solution to a problem with deep roots. Hopefully if the new reforms work and the material situation of the population eases, some of the pressures promoting corruption will also ease. But of course a lot of corruption seems to take place where foreign companies interact with Cuban entities and that is not going to change.

In a widely noted speech in 2005 Fidel warned that while the revolution could not be overthrown by external intervention, it could be undermined from within — by corruption and the spread of a self-seeking culture in the apparatus.

Esteban Morales affair

In April this year, 68-year-old academic and longtime Communist Party member Esteban Morales was expelled from the party because of an article he wrote — "Corruption, the True Counter-Revolution". Here are some passages:

When we closely observe Cuba's internal situation today, we can have no doubt that the counter-revolution, little by little, is taking positions at certain levels of the state and government.

Without a doubt, it is becoming evident that there are people in positions of government and state who are girding themselves financially for when the revolution falls, and others may have everything almost ready to transfer state-owned assets to private hands, as happened in the old USSR ...

... corruption is a lot more dangerous than the so-called domestic dissidence. The latter is still isolated; it lacks an alternative program, has no real leaders, no masses. But corruption turns out to be the true counter-revolution, which can do the most damage because it is within the government and the state apparatus, which really manage the country's resources.

He refers to the Carlos Lage and Perez Roque cases as well as Rogelio Acevedo. He stresses that the US and other intelligence services are keenly studying what happens in Cuba:

They're looking for confirmation for the words of the commander-in-chief, watching closely what happens every day in Cuba, digging into everything that may allow them to find out where is the real counter-revolutionary force in Cuba, a force that can topple the revolution, a force that appears to be not below but above, in the very levels of government and the state apparatus.[10]

The alarming thing is that this trenchant antibureaucratic polemic from the left got its author expelled from the party. Morales appealed but this was rejected. What is going on? This is hardly a good sign. It can only serve to intimidate those Communist Party members who want to raise real concerns.

Other problems

'Dissidents'

In March 2003, 75 people were jailed as paid US agents. From that moment on they were 75 "political prisoners" to the West and its media. Most have now been released, the latest batch were freed in July and went to Spain — where a number of them subsequently complained that the authorities seemed to have lost interest in them!

Another manufactured "prisoner of conscience" was Orlando Zapata Tamayo who starved himself to death in prison in February. He was not a political prisoner but had been jailed for fairly serious criminal acts. Cuban doctors did everything possible to save his life (as acknowledged by his mother). But he was hailed by Washington and the European Union as a "political prisoner". (A trenchant article by French academic Salim Lamrani sets out the issues.[11])

Party congress

The Communist Party congress (the last one was held in 1997) was to have been held in November 2009 but at the Central Committee meeting in August 2009 it was postponed without any new date being set. As Raul said: "Because of the laws of life, this will be the last [congress] led by the historic leadership of the revolution."[12]

The reason given for the postponement was the need to decide on how to tackle the problems of the economy. Also, arrangements for the post-Fidel and Raul era will have to be finalised and all this needs more preparation.

Transition of leadership

The leadership generation that led the original revolution is slowly passing from the scene. They have fought world imperialism without flinching for over 50 years but they can't defy the laws of physiology.

There are many people on the left who think that when Fidel and Raul gone and if the embargo is lifted, the Cuban Revolution will be finished. I don't think this is anything like a certainty; there are many possibilities. There is a significant part of the population which fervently believes in the revolution and will fight to preserve it. But it is undeniable that Fidel has played an historic role. He has been an enormous factor in the equation of the struggle, just like Lenin before him.

The leadership transition that has been going on for some time is critical. A number of "test-tube communists" who looked very good for a while revealed fatal weaknesses. Hopefully, this is a relatively limited phenomenon and the Communist Party will push forward the leaders that the hour demands.

A useful chart and review showing the personnel making up the central Cuban party and state bodies as of April 16, 2009 has been prepared by the Open Source Center, a US government intelligence body. Since this was published there have been some changes due to death (e.g., Juan Almeida), change of responsibilities or sacking (e.g., Rogelio Acevedo).[13]

Conclusion

Imperialists howling

Imperialism will never be reconciled to the Cuban Revolution. The reason is simple. Notwithstanding all its problems, Cuba shows what a socialist revolution can do. It is a constant negation of the madness of capitalism, a demonstration to the Third World — and not only it — that there is indeed an alternative path of development, that it is possible to build a society which really does put people’s needs first.

George Bush set up his Cuba "transition office" to plan for the restoration of the "free market" once the revolution has been overthrown or collapsed. Obama is less crude but we can be absolutely sure the US is still plotting and scheming to effect regime change in Cuba.

As Esteban Morales pointed out, the imperialists are undoubtedly counting on the internal weaknesses of the revolution. They hope that the current forced turn to the market will provide openings for capitalism.

And imperialism will keep banging on about human rights in Cuba. Considering the record of the United States, both at home and abroad, this is hypocrisy on a truly cosmic scale!! But with the media behind you, mere facts don't present any insurmountable obstacle.

Revolution still fighting

The Cuban revolutionaries will struggle no matter what. But as we know, there is no socialism in one country and Cuba's future is tied up with development of the international struggle — particularly with the progress of the revolution in Latin America.

That said, making the necessary reforms at home remains vital to easing some of the most pressing problems bedevilling Cuba and giving it a much needed breathing space.

It is also important to understand that if the Cuban Revolution has its problems so does the other side. US imperialism's quest for world domination has not been going so well lately ...

Ever since 1959 the Cuban Revolution has been a tremendous example and inspiration to the revolutionary and progressive forces around the world. It has shown the power of the people united behind a revolutionary leadership. It has shown that bureaucratic degeneration is not inevitable, that the danger of Stalinism can be contained. And in an historically unprecedented way, Cuba's medical aid abroad has shown what human solidarity is capable of.

The Cuban Revolution is our revolution too and we should do everything we can to spread the truth and support it.

[Dave Holmes is a leader of the Socialist Alliance in Melbourne. This and other writings are also available at Dave Holmes' blog, Arguing for Socialism.]

Notes

1. See "US Blockade Causes Billions in Losses to Cuba".
2. Cuba’s GDP at the official exchange rate is US$56 billion but calculated at PPP (purchasing power parity) it is $110 billion according to the CIA website at https://www.cia.gov/library/publications/the-world-factbook/geos/cu.html.
3. For some basic facts on the Cuban economy see http://www.traveldocs.com/cu/economy.htm.
4. See http://www.cubasource.org/pdf/economic_illegalities.pdf#search=.
5. Patricia Grogg, "The Challenge of Boosting Productivity", Inter Press Service, April 30, 2008, http://ipsnews.net/news.asp?idnews=42191.
6. See http://machetera.wordpress.com/2010/04/05/raul-castros-address-to-cubas-young-communist-league/.
7. See http://ipsnews.net/news.asp?idnews=47421.
8. See http://www.juventudrebelde.co.cu/cuba/2009-03-04/healthy-changes-in-the-council-of-ministers/.
9. See http://www.havanatimes.org/?p=22348.
10. See http://progreso-weekly.com/2/index.php?option=com_content&view=article&id=1589:corruption-the-true-counter-revolution&catid=36:in-cuba&Itemid=54.
11. See http://www.voltairenet.org/article164489.html#article164489.
12. See http://www.france24.com/en/20090801-raul-castro-postpones-key-communist-party-congress-.
13. See http://www.fas.org/irp/world/cuba/chart.pdf and http://www.fas.org/irp/world/cuba/overview.pdf.