We Are Cuba!

This book is about how Cuba is surviving despite the fall of the Soviet Union, when it’s GDP was slashed to a third of what it used to be and when other Soviet Bloc countries collapsed. Here are my notes.

The Challenge of (Socialist) Development

“By stressing economic policy over economic restraints, critics have shifted responsibility for Cuba’s poverty on to ‘the Castros’ without implicating successive US administrations that have imposed the suffocating US blockade. The crippling effect of the blockade on every sector in Cuba has been ignored or dismissed by many commentators who blame shortages and inefficiencies on ‘mismanagement’ or even cynically credit it with keeping the Castros in power”

The central fact about the Cuban economy before the Revolution was neither its one-crop concentration on sugar, nor the monopoly of most of the agricultural land by huge latifundia [plantations], nor the weakness of national industry, nor any other such specific characteristic. Until the Revolution, the central fact about the Cuban economy was its domination by American monopolies – by American imperialism. It was from imperialist domination that the specific characteristics flowed. Unless this is recognized, the Cuban revolution cannot be understood

The US’ historical determination to colonize Cuba was for profit (like from the Cuban sugar industry which was globally dominant at the time). They tried buying Cuba from Spain for $100,000,000 in 1848 which failed. Many US citizens established residence there and many factories were absorbed, augmenting Cuba’s importance for US elites.

Cuban bourgeoisie were heavily dependent on US exploitation of Cuba:

In 1898, when Spain was losing control of Cuba to the independence movement, the United States intervened, effectively preventing the triumph of a social revolution. The United States subsequently managed the construction of a Cuban Republic in which the traditional elites, threatened by the radicalism of the intended independence, maintained a privileged position. The Cuban oligarchy was willingly incorporated as a subordinated component in a US-centred power structure, becoming in the process a key tool in producing and reproducing US hegemony.

There was a Trade Reciprocity Treaty in 1904 that gave Cuban agricultural products to the US a 20% tariff discount, and in return US goods received up to 40% tariff discount in Cuba.

By 1929, US investments in Cuba had soared to USD 919 million, 62 per cent of which was invested in agriculture, mainly the sugar industry.

During the Great Depression, Cuban sugar industry fell back into domestic ownership. Production collapsed.

The impact on Cuba was traumatic, leading to a period of political upheaval: strikes took place and workers’ ‘soviets’ were established in sugar mills throughout the island, culminating in the overthrow of General Gerardo Machado’s dictatorship with the Revolution of 1933 and the ‘Sergeant’s Revolt’, which brought Batista to the centre stage for the first time.

Sugar was 86% of Cuban exports, and 80% of that went to the US. Sugar harvest is not year round–it’s 2 to 4 months a year. The rest is “dead season”.

After the Second World War, US investment poured back in.

Thus, when US investment poured back into Cuba it was channelled principally into public utilities and to a lesser extent into petroleum, manufacturing, mining and other industries.21 Consequently, in the 1950s Cuba’s power, railway, highway, port and communications facilities were among the most developed in Latin America.22 Cuba was the third greatest recipient of US direct investments in Latin America, receiving USD 713 million of direct investment in 1955. US investors controlled 90 per cent of the telephone and electric services, 50 per cent of public service railways and 40 per cent in raw sugar production.

When Batista took power through a military coup supported by the US, there was massive inequality. Only 3% of Cubans owned the land they worked on.

In 1957, the Catholic University Association reported: ‘Havana is living in extraordinary prosperity while rural areas, especially wage workers, are living in unbelievably stagnant, miserable, and desperate conditions.’ Nearly 35 per cent of the working population was unemployed. ‘The specter of unemployment affects all thinking on labor and manpower problems in Cuba,’ noted a US government report, adding that ‘Cuba has been fortunate that chronic unemployment has not created a more critical situation.’ Only 3 per cent of rural Cubans owned the land they worked and the average annual income of the largely rural population was USD 91

The revolutionary government took power on Jan 1 1959. Old elites were replaced by unqualified young revolutionaries who took over as the managers and administrators of the country. Wealthy Cubans were leaving the island, taking their deposits and taxes with them (many live in Miami).

1959–1962 was a tumultuous period during which the country experienced nationalisations, an almost complete shift in trade relations, the introduction of state planning, new institutions, new social-relations of production, the mass exodus of managers and professionals, imposition of the US blockade, sabotage and terrorism, invasion and the threat of nuclear conflagration. The revolutionary government’s first redistributional measures spurred a period of economic growth, but by 1962–3 national output and worker productivity began to decline as the shocks of profound structural change set in.

Cubans of a certain age recall this period with nostalgia as a time of plenty and rising standards of living. Isabel Allende, Director of the Higher Institution of International Relations, recalled: ‘I lived that prosperity in the 1980s … People had money and people went on holidays. There were no tourists here. The hotels were for Cubans … We went on our honeymoon with money.

Gorbachev did economic restructuring that harmed Cuba

Thus, from 1984, before Mikhail Gorbachev became the Soviet premier and launched glasnost and perestroika, Fidel Castro began seeking consensus within Cuba to reform the system. The purpose? To rectify ‘the errors and negative tendencies’ associated with the Soviet system. Essentially, it was a parting of ways: as the Soviets were liberalising, opening up to market mechanisms, the Cubans were radicalising, falling back on the plan and political mechanisms.

In 1984, Cuba’s overall trade deficit increased by a record 155 per cent and international reserves fell by 21 per cent.72 To arrest this deterioration, imports were reduced, exports promoted, import substitution pursued and efforts made to reduce the island’s dependence on the Soviet Union and CMEA, particularly by increasing domestic oil production

In 1985, Gorbachev took over as premier of the Soviet Union and the following year began to terminate all special deals between the USSR and other socialist countries. This included unilaterally ending the indexing between Cuban exports and USSR exports; the price paid for Cuban sugar exports was cut from 900 peso per ton to 850 (5.5 per cent).

Cuba had to reduce the country’s dependence on exports and deal with the foreign exchange crisis. There had to be cuts in government spending on state subsidies for electricity, transportation, and food. There was a recentralization of control over the economy to bring existing investment projects to completion. This includes domestic food production:

In 1986, the private farmers’ markets were closed down and farmers were instructed to sell produce to the state collective agencies (called acopio).

The share of sugar in Cuba’s total exports declined from 86% in 1979 to 74% in 1987. Cuba also opened up tourism in 1986. When the Soviet bloc collapsed, 86% of Cuba’s trade was obliterated.

Surviving The Crisis: The Special Period

The “Special Period in Time of Peace” was a form of crisis management without military confrontation, and was a consequence of the disintegration of the USSR.

After 5 years of the Special Period, the black market was the only way to survive as rations decreased. Neighbors shared a single tap of running water, and there were growing class divisions based on access to dollars.

From the outset, the Cuban government ruled out the option of a transition to capitalism. Remaining socialist meant retaining a planned economy; it meant maintaining ‘los logros’, welfare achievements, of the Revolution in health, education, public infrastructure and social services. But how to achieve this when the economy is in free fall, the US blockade is tightened and the island is politically isolated? The closer the Special Period is examined, the more remarkable the Revolution’s survival into a post-Soviet world appears.

Many people in wealthy, consumerist countries struggle to accept that, while the Cuban people suffered extremely difficult conditions, most Cubans did not seek the restoration of capitalism. Cubans with better housing and more resources “were more anti-Fidel and more angry at their current economic situation” than poorer Cubans.

Rodríguez attributes this resilience to political consciousness: a strong commitment to national sovereignty with an understanding of the benefits thirty years of the socialist Revolution had brought to Cuba in comparison with neighbouring third-world countries. This awareness was at the heart of the population’s ability to tolerate extremely difficult economic conditions while remaining committed to building socialism, which they saw as the only road to authentic economic and social development in a world dominated by large capitalist powers and as necessary to maintain real national sovereignty.

The US blockade constituted a severe, additional economic constraint. According to Cuban estimates, it cost the island USD 15 billion dollars just between 1990 and 1995.

Between 1990 and 1993, manufacturing capacity was down by up to 90 per cent, construction down 74 per cent and agriculture 47 per cent. Overall imports fell by 75 per cent; imports of machinery and transportation equipment fell by 91 per cent, manufactured products by 70 per cent, fuels and lubricants by 65 per cent and food and oils by 51 per cent. Government spending nose-dived, on investment by 86 per cent, and on defence by 70 per cent. State administration was slashed with the elimination of 15 ministries. Real wages fell 50 per cent between 1989 and 1993 and both household consumption and average calorie intake fell by one-third.

Nominal spending on health and welfare payments was maintained. To shield Cubans from the shock, the government kept official prices, wages, and the exchange rate fixe. Spending above their means was unsustainable but politically essential.

By 1992, oil imports from Russia were reduced to 1 million tons, down from 13 million tons imported from the USSR a few years earlier. The informal economy ballooned, creating opportunities for black market activities. The value of the Cuban peso collapsed, with an inflation rate of around 2000%.

By the next year, state ownership of arable land was reduced from 75% to 33% as state land was distributed to workplaces and public institutions.

The number of activities in which Cubans could be self-employed was raised from 41 to 158, with priority given to retirees, the disabled, and the poorest applicants.

Self-employment shot up from 15,000 people to 208,000 within three years, sliding down to 157,000 by 2000 – around 4 per cent of the workforce

In 2003, the self-employed earned five times more, after tax, than workers in the state sector.

Foreign Investment

Foreign investment is a particularly politically charged issue in Cuba. In the 1950s, US investors had controlled 90 per cent of the telephone and electric services, 50 per cent of public service railways and 40 per cent of raw sugar production.

Foreign direct investment (FDI) was the cheapest way to raise capital and the only source available to Cuba, which is outside the IMF and World Bank (pillars of western capitalist exploitation). Contracts came from Spain, Canada, Italy, France. An employment agency was set up for Cubans working in joint ventures with foreign enterprises. Foreign partners paid state enterprises in hard currency, but Cuban workers received their salary from the state.

Tourism increased and became Cuba’s largest source of foreign revenue, accounting for 40% of total earnings from goods and services in 2000. This is despite the US government maintaining its ban on tourism in Cuba.

Economic Restructuring

Sugar exports fell from 80% to 26.7%. Sugar was replaced by mining, tobacco, and medical products.

Employment

Low monetary wages do not determine the standard of living, or level of consumption, because the state provides and heavily subsidizes so much of what in most countries would be purchased with a wage. Work in Cuba is a means of political participation and contributing to social development.

During the Special Period:

The decision was taken to keep state workers on the payroll, or temporarily laid off on 60 per cent of their salaries until alternative employment could be found. The burgeoning tourism industry absorbed excess workers, including employees of the armed forces and the Communist Party, the first institutions to undergo severe cuts. Spending on the military was halved between 1989 and 1993, with personnel slashed to one-fifth by the end of the decade. Military historian Hal Klepak explains: ‘Air force pilots were given tasks as pilots for tourist firms, army drivers for car hire companies, and naval personnel for yacht hire. More officers were sent to rapid courses in management techniques before being sent to head companies. The number of central government administrative bodies was cut from 50 to 30.

The Social Sphere

The Cuban revolutionary government introduced the ration in 1962 and for almost 30 years provided basic goods–called libreta–at highly subsidized prices. The libreta was slashed during the Special Period and nutritional intake had dropped to one-third per person and the average adult lost 5.5kg in weight. There was a 50% increase in deaths from infectious diseases and parasites, and immune systems were weakened by malnutrition.

Public transport decimated. The government imported and distributed bicycles from China–everyone from party officials to factory workers got to work on a bike.

There were also other forms of transportation that were adopted:

An official system of collective hitch-hiking, or carpooling, was established; state-owned vehicles were obliged to pick up passengers at highway junctions. Less formal hitching became a way of life throughout the country; hitchers lined the main roads in Havana waiting for a ride. Old trucks were converted into buses with metal benches and steps welded onto the back. In cities, trucks were melded with buses, to make the famous camel buses, which could cram in 300 people. In small towns and cities, people turned to horses for transportation.

Thousands of Cubans risked the shark-infested waters in makeshift rafts to reach the US.

On 5 August that year, two policemen were killed stopping hijackers from seizing a ferry in Havana harbour, sparking the most significant anti-government demonstration in Cuba since 1959. Crowds gathered on the Malecon, the broad esplanade, roadway and seawall that runs along the Havana coast.

Fidel Castro headed to the scene and addressed the crowd: ‘We are in a Special Period … one of the most difficult periods of our history. Why? Because we’ve been left alone to confront imperialism. Alone. What is needed to confront imperialism alone?’ People in the street and on balconies shout ‘unity’, Fidel continues: ‘It requires unity. It requires courage. It will need patriotism, it requires revolutionary spirit. Because a weak people, a cowardly people, surrenders and returns to slavery. But a dignified people, a courageous people, like ours, does not surrender, will never return to slavery.’

Fidel later announced that the Cuban police would no longer stop people leaving Cuba (unless they were hijacking boats or planes.b f