Cuba’s Socialist Economy
Socialism is a range of economic and social systems characterized by social ownership and democratic control of the means of production.
Cuba has a socialist economy wherein the government employs a large portion of the work force. It is a mixed command economy dominated by state-run enterprises better understood in Canada as Public Corporations. Each is a form of social ownership.
The U.S. has maintained a trade embargo (blockade) against Cuba for over 60 years which has negatively impacted economic development. The embargo has cause more than $144 billion in losses in the past six decades. This is huge for Cuba’s small ecpnomy. There can be no true evaluation of the Cuban economy without taking into account the economic, commercial, and financial costs of the U.S. extra-territorial embargo/blockade. The US blockade and other hostile actions imposes a very difficult and devastating constraint on Cuba’s modernization and development in general.
The international community, by way of the UN General Assembly, has repeatedly called for a lifting of the U.S. embargo against Cuba and a lifting of the embargo would do much to help the economy and the Cuban people.
An Economic Dialogue
The Cuban economy is often described as a complete failure. Facts and Figures suggest otherwise.
Over the ten-year period from 2009 to 2019 Cuba’s GDP grew an annual average of 2.23% and the growth rate per capita had risen from $5530 in 2009 to $9100 in 2019. This represents a significant increase but starts from a low baseline.
Another important indicator is the debt to GDP ratio. In 2019 Cuban debt to GDP stood at 18.4 percent; low by international comparisons. In 2020, with the advent of COVID and the loss of revenue from the shutdown of the tourist industry along with President Trumps additional crippling economic sanctions, maintained by President Biden, the Cuban economy contracted significantly and struggling to maintain services the debt to GDP rose significantly. This is not unlike other western democracies.
Inflation has also become an issue for the government with the elimination of the CUC tourist currency and full use adoption of the Cuban peso.
With the restoration of tourism and a forcast 11 percent growth in 2022, Cuba’s will likely return to near full employment.
Additional Positive Economic Factors
It is to be expected that a Socialist economy shielded from market forces will not experience the booms and busts of Capitalist market economies. As seen in the GDP figures of 2008/9 the Cuban economy did not experience the level of downturn experienced in the U.S. and other western capitalist economies.
In 2009, largely caused by the financial crisis, the World GDP growth ratio dipped to -1.719 and the U.S. GDP -2.8, but Cuba’s GDP in 2009 stood at 1.4.
Since the Cuban economy is largely dominated by state-run enterprises (social ownership) the country has relatively low foreign ownership, while Canada and increasingly the U.S. have relatively high levels of foreign ownership. Ownership of the economy provides a high asset value and is significant when planning an economy.
The health and education of the population are important in evaluating future economic prospects. Cuba, through thoughtful planning and investment has a highly educated and healthy population.
Cuba has one of the highest numbers of scientists per capita in the world. Women play a more than equal part in this. Tertiary education in Cuba today comprises of 65 centres of higher education, spread across more than 3500 campuses. (UNESCO 2010 Science Report)
Cuba does not have a drug problem and has a low crime rate. The costs of crime, imprisonment and related drug problems in the U.S. are immense.
Cuba has a high level of societal cohesion and social economic equality of wealth. Here again, this contributes to a healthy economy.
Both Canada and the United States have high levels of household debt. In Cuba, by comparison, a vast majority of Cubans either do not carry any debt or it is quite low. The height of private household debt in the U.S. and Canada is a negative factor.
Economic Problems and Issues
At the time of the revolution and till the early 90’s, Cuba had remained primarily a sugar based monoculture economy. The collapse of the Soviet east bloc coupled with a strengthened U.S. extra territorial embargo devastated the economy and left Cuba without a market for sugar. Cuba has had to diversify and restructure its agricultural economy. This process including the advent of urban agriculture continues today.
While there has been progress, it remains that much of the Cuban infrastructure, not unlike the U.S., needs upgrading and modernizing.
Cuba has a moderate corruption rate ranking 58th out of 176 countries. Much is relatively petty corruption as wages are low and residents naturally want to provide more for their families. Corruption is seen in small thievery and small payoffs for services or placement or with workers stealing from the government. This is often seen in the tourist industry. The government has engaged in an ongoing anti-corruption campaign that has resulted in the conviction of government officials, managers, officials, and foreign businessmen.
Every year there are increasing threats of destructive hurricanes such as the 2016 Hurricane Mathew which did tremendous damage to this relatively small island nation. Given the ferocity of the storm, it is an amazing story that there were no fatalities in Cuba while the hurricane took the lives of 14 Americans and over 900 in neighbouring Haiti. This is a testimony to the effectiveness of the much vaunted Cuban Emergency Response system and world-class Meteorological Institute.
Homelessness in Cuba is virtually non-existent. Still, there remains a housing shortage and overcrowding exists. This is largely due to increasing numbers of destructive hurricanes. In 2008 Cuba lost 20% of its housing stock resulting from three hurricanes.
Each year, thousands of Cubans will leave their country for what they believe will be a better life of personal wealth and materialism in the U.S.A. The relaxation of Cuban obstacles to travelling abroad has led to increased emigration. Given that many are highly educated, they usurp the resources the Cuban people invest into their education system.
Government planning has given emphasis to investing in, and developing, a socialist economy with great emphasis on education, health care, housing, and infrastructure. It heavily subsidizes arts and culture; it provides a subsistence level food program for all Cubans. With limited government revenues it prioritizes developmental investment over increasing wages. This leads to the saying that Cuba is materially poor and socially rich.
Cuban Biotechnology – An Industry of Excellence
After the Revolution Fidel Castro said, “Cuba’s future must necessarily be a future of people of science.”
Prior to 1959 Cuba didn’t have a single research centre. Change began when the Cuban Academy of Sciences was established on January 15, 1960. At the time the government did something economically miraculous given the wealth of the country. They Invested heavily into Science and particularly Biotechnology. Castro developed Cuba’s “Silicon Valley” without any venture capital other than public funding.
Currently there exists a network of over 230 research, development and innovation institutions. Today, they employ over 94,000 workers in scientific development. Cuba has won seven medals from the World Intellectual Property Organization.
Cuban biotechnology’s capacity to generate products has had a significant impact on the country’s health system. The industry has provided unique products to the nation and the world. An extrodinary example is Cuba’s development of a number of vaccines to address the CORONA Virus.
In the UNESCO 2010 report on science, it was explained that knowledge in Cuba isn’t in private hands – a situation that is almost unique in the world.
The road ahead is uncertain. After extensive consultation with the Cuban people the government has haltingly proceeded with economic and social reforms; a cutting back of subsidies; making agricultural reforms with greater emphasis on the creation of cooperatives and small private farms, the allowance of small private self managed enterprises and removing some restrictions on foreign investment are all in play. There remains intensive debate as to how to proceed without going beyond the limits of compatibility with their socialist project.
Socialist Cuba has created social, political, economic and environmental achievements unequalled by any other Third World country, and some unmatched by many First World countries.
Most important, environmental economists and scientists generally agree that Capitalism, because of waste and environmental degradation, is a growing threat to Planetary Health. Socialist Cuba represents an alternative.