Does economic reform fit into the concept of “changing everything that needs to be changed”? Are these mutually exclusive paths? Does reform save or destroy Cuban socialism?
Once again, voices advocating for economic reform in Cuba are being heard. At the same time, others are rising to disqualify it or simply deny its necessity. All of this is happening during the most serious economic and social crisis of the revolutionary period, while the United States is intensifying its economic war, which, after the kidnapping of Nicolás Maduro, threatens to prevent the entry of the few remaining sources of fuel.
But what exactly is the economic reform? It is not simply a change or a correction. Although these concepts share the idea of modifying an existing situation, they differ in depth, scope and direction.
Reforming the economy implies intentionally redesigning its rules of the game through a coordinated range of policies and institutions, to do away with structural inertia and facilitate stable and lasting growth.
Sounds good, doesn’t it? So why does it generate so much support as well as resistance?
Previous experiences with reforms
Like the debate surrounding them, economic reforms in the revolutionary period are not new. To mention just a few examples:
- First Agrarian Reform Law (1959). Four months after the triumph of the 1959 revolution, the first Agrarian Reform Law was enacted. It eliminated large landholdings, expelled large U.S. companies and nationalized 50% of the land. More than 100,000 farmer families received land ownership. The law radically changed economic relations in the countryside and represented the first direct confrontation between the nascent Cuban Revolution and U.S. interests on the island.
- Second Agrarian Reform Law (1963). If the first agricultural reform dismantled large national and foreign private property in the countryside, the second further reduced its size. As a result, state ownership rose to 70%.
- The 1990s reform. The Soviet implosion left Cuba isolated in a world that shifted from bipolarity to U.S. hegemony. The global socialist system and the exceptional terms of trade with Cuba disappeared. The economic crisis caused a 35% contraction of GDP, comparable only to countries in wartime conflicts. The country’s leadership, headed by Fidel Castro, implemented an economic reform based on allowing foreign investment, boosting the tourism industry, developing biotechnology, expanding self-employment, authorizing free markets in agricultural sales, decriminalizing the possession of foreign currency, reorganizing the state enterprise system, eliminating free services and subsidies, among other measures.
- The attempted reform of 2011. The effective economic policies of the 1990s reactivated the economy, and it emerged from the worst stage of the Special Period, but the economic model continued to show signs of exhaustion. Raúl Castro was the main driving force behind the “updating of the Cuban economic model,” a reform process approved by the Communist Party of Cuba in April 2011.
The reform was ambitious, but its implementation quickly faced resistance, delays and countermarches. The postponement of key changes such as monetary unification, the transformation of state-owned enterprises and the expansion of the private sector, along with the inherent contradictions of the change, ultimately stalled this attempt to perfect Cuban socialism. The concept of “updating,” omnipresent in policies, speeches and the media, disappeared.
There are substantial differences in the four examples above. The agrarian reforms were partial, focused on a single sector. They were implemented to dismantle the pre-revolutionary model in the countryside, which was based on the dominance of U.S. private capital. They were the natural and logical response to their historical moment. Along with other measures in the first three years of the Revolution, they laid the foundations of the socialist system.
For their part, the reforms of the 1990s and the attempted reforms of the past decade were more far-reaching and comprehensive. They encompassed various economic sectors and aimed at a structural transformation of the model. They share a fundamental characteristic: they were implemented while the socialist system was still in power. Their objective was not to dismantle it, but to improve it in order to guarantee its preservation.
Economic reforms are also not uncommon in other socialist experiences. What else is the Reform and Opening Up policy that guides China’s economic policy? Thanks to it, in half a century the Asian giant has lifted 800 million people out of poverty and transformed China into the world’s second-largest economy, surpassing Europe and Japan and competing directly with the United States.
What else is the Vietnamese Renovation (Doi Moi)? A reform that transformed an underdeveloped and war-torn country into a global exporter of rice, coffee and manufactured goods. Vietnam aspires to be one of the 30 largest economies on the planet by 2030.
What else was the New Economic Policy (NEP) in Bolshevik Russia? A bold reform driven by the most pragmatic and revolutionary Lenin, who understood the urgency of doing what he himself acknowledged as a tactical retreat to save Soviet power and rebuild the economy.
At this point, it is worth asking whether the Government Program to correct distortions and boost the economy entails a reform process. In a previous article, I explain why it does not.
However, at this moment, terminology is probably the least important discussion. There should be a consensus that the Cuban economic model needs a profound transformation. The debate is about how to do it. Therefore, let’s discuss the content instead of the form.
What kind of economic reform are we talking about?
There are as many reform proposals as there are economists and experts who champion them. Here I only speak for myself, but the economic reform I advocate, like many other colleagues, does not imply a “return to capitalism,” but rather developing the profound changes necessary to preserve the socialist system. It is not correct to classify everyone who defend it as a manipulator, sellout or annexationist. On the path of disqualifications, many valuable ideas from people committed to the country risk being discarded.
The economic reform must be bold. This involves principles and structural transformations that include, but are not limited to, the following:
- The role of the State. The reform must be a state policy, driven, guided and implemented by the country’s leadership. It is not possible to implement such a process without the leading role of the State.
- Macroeconomic stability. Correcting macroeconomic distortions is equivalent to having a calm ocean for ships (enterprises and other economic agents) to navigate without difficulty. The sustained reduction of the fiscal deficit achieved in recent years is worth acknowledging. Fiscal discipline is an essential pillar of stability for the real economy.
- Productive transformation policy. The productive transformation policy must concentrate the country’s limited resources on strategic sectors with high added value. It must include special incentive mechanisms that encourage cooperation among all domestic and international economic actors. In this regard, it is fundamental to change the investment pattern, which is currently too high in the tourism sector (17.3% of the total) and extremely low in agriculture (2.1%).
- Transformation of the state-owned enterprise sector. State-owned enterprises require reform in their governance, incentives and size. They must gain real autonomy to decide on investments, prices, wages and staffing, be subject to rules of competition and transparency, and stop receiving automatic, perpetual subsidies. Some will have to merge, others will have to be restructured and still others will have to be closed, so that the State can concentrate resources on an efficient core of state-owned enterprises that will continue to control strategic sectors, because this is what essentially defines its role as the main economic actor. All of this was foreseen in the draft Law on Enterprises, which, without explanation, has been postponed indefinitely.
- Promotion and development of the national private sector. Private enterprises must cease to be the “unwelcome guest” of the economic model and be recognized as an essential component of the economy. This implies a national policy of promotion and development that does not currently exist, and which is one of the reasons why private enterprises imported $2.2 billion worth of goods, mostly finished products, instead of investing capital in domestic production.
- A new approach to foreign direct investment. International capital investment in the Cuban economy is one of the few sources for attracting foreign currency into the productive sector. It requires genuine bureaucratic simplification. With a law that clearly defines the approval powers, foreign investment projects could be decentralized from the central government to direct authorization by local governments, where chambers of commerce, planning departments, experts and other qualified resources exist. Furthermore, the focus should shift from attracting only multi-billion-dollar investments to also attracting smaller amounts, ranging from tens to hundreds of thousands of dollars. Foreign investment should be allowed not only in the state sector but also in the emerging private sector, which also requires capital.
The Cuban case involves a characteristic different from other contexts that cannot be overlooked: U.S. aggressiveness, which, more than a blockade, is a full-fledged economic war, as I always describe it in my articles. But with it and despite it, we must think about and build development.
The myth of the opportune moment: now or later?
With GDP declining for three consecutive years, agriculture at its lowest levels in decades, a productive sector practically paralyzed, sustained emigration and a combination of external shocks, where the economic war is the main one, we are far from the “best moment.”
The best moment was to continue the 2011 reform without the usual interruptions. The myth of the “opportune moment” will always find reasons to postpone changes. Therefore, regardless of the complexity of the current scenario, the opportune moment is precisely now.
The reform is not only about reactivating the economy, but a strategic commitment to establishing a productive, efficient and sustainable economic model. Economic growth puts Cuba in a better position to address pending social debts, from public service infrastructure, the quality of health and education, to poverty reduction. A healthy economy supports the entire system, even a robust defense system against the danger posed by the fascist tendencies of the U.S. regime.
Nuancing the effects of the economic reform
If reforming the economy seems to be the right path and there are successful experiences in socialist countries, then why do some give it a negative connotation?
First, the dilemma of “revolution or reform” has permeated the historical struggles of socialism: Marx and Lenin confronted, each in their own time and way, the reformist ideas that sought to avoid revolutionary upheaval. As happened in 19th-century colonial Cuba, reformism advocated maintaining Spanish domination over the island in exchange for economic and political concessions. The same occurred in the pseudo-republican 20th century, when conservative forces repeatedly attempted to reform the system to curb the revolutionary processes of the 1930s and 1950s. Reformist positions have clashed head-on with the ideals of independence, which do not conceive of a Cuba subjugated to any foreign power. Revolution and reformism have been irreconcilable positions.
However, there is a fundamental difference in context. Reform at that time was presented as an alternative path that implied renouncing the struggle for political power; in other words, it did not guarantee the nation’s independence. Reform now presents itself as an opportunity for socialism in power to perfect the model and preserve its essence.
Second, economic reforms in socialist processes involve the introduction of market mechanisms. This generates “ideological tensions” among the “more orthodox,” because the market evokes capitalist exploitation and the risk of “restoration,” and is associated with political concessions that undermine the revolution, fosters visible inequalities and forces the justification of “bourgeois” tools. This phenomenon is not negative by nature, but rather part of the transition period, but in the eyes of the purists, it becomes the perfect argument to reject it.
Third, the failure of very symbolic reforms such as perestroika, which ultimately led to the collapse of the USSR, generates an understandable fear of undertaking a process so risky for the very survival of the system. However, we must understand that not undertaking reform also leads to the path of implosion.
Economic reform is not a bed of roses. It involves risks and contradictions, just as the period of transition to socialism is risky and contradictory. The crisis of the 1990s made Cuban society more heterogeneous. The following decades have deepened inequalities. At the same time, it is not rational to believe that the egalitarian model of the 1980s will return, sustained by a virtually inexhaustible source of resources from the generous Soviet aid that we will always remember, but which will not be replicated again.
Therefore, the contradictions of the process cannot be a pretext to halt it, as happened with the “updating” process. These must be addressed by public policies.
For example, the growing economic inequality is criticized, but in the distribution of products from the scarce subsidized basic food basket, the same basic goods are given to the owner of a 50,000-dollar vehicle as to a single mother with three children living in a shelter. This is just one very concrete example of how the current model reproduces egalitarianism and is unsustainable, reflecting a society that no longer exists.
Nor is reform a “leap” to development. It is not a promise of immediate prosperity. Changes take time to be agreed upon, implemented and produce results. Hence the strategic importance of having started a long time ago. On the other hand, a reform policy does not create wealth in itself, but rather creates the conditions to reproduce existing wealth. Consequently, the starting point is an economy in very deteriorated material conditions.
Despite all this, some disqualify the reform by equating it to the “return of capitalism.” In their counterarguments, they use little or no economic basis to support their claims. They reduce the discussion to an indiscriminate attack on the private sector, which they accuse of almost all the country’s ills.
Contradictorily, they also offer no concrete solutions. They do not have a real economic project. The calls to “multiply good practices,” “change mentality,” or “ask ourselves what else we can do” address the issue from a voluntarist perspective. We must address subjectivity, yes, but at the same time we must change systemic mechanisms, not just individual ones.
Offering opinions on economic issues without a grasp of basic economics is irresponsible. Correcting this is also the responsibility of all economists: to teach, explain and build an economic culture that allows for elevating public debate to another level. Economists must also be careful not to fall into the trap of “economic determinism,” which is the tendency to overemphasize the economic factor above any other social, human, political or cultural aspect. Constructive debate must involve everyone.
None of the arguments justify rejecting and hindering the economic reform of the Cuban model. Those who take this stance become, whether they intend to or not, champions of an immobility that neither offers solutions nor inspires enthusiasm. No option is without cost, but while reform entails risks, immobility carries a certainty: collapse.
Economic reform to save the essence
I myself answer the initial question of this article: “changing everything that must be changed” includes the economic model. This is achieved through reform, the most far-reaching process.
The experience of fifteen years of sluggish and interrupted quasi-reform demonstrates that, in addition to a strong political will to implement it, it is essential to “ challenge powerful dominant forces within and outside the social and national spheres.”
Immobility does not guarantee the preservation of socialism. Annexationism does not even guarantee the preservation of the Cuban nation. For Cuban socialism, economic reform is a matter of national security, not an ideological concession. In a few years, we will look back on this period and have two options: to rejoice at having made the right decisions, or to regret not having seized the opportunity.
Let us ask ourselves honestly: if we continue doing the same thing, will we be better off?
