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.

castrocastro2Cuba has a socialist economy wherein the government employs a large portion of the work force. While the most important sector of the economy is services (around 75 percent of GDP), mining, oil production, remittances, tourism and pharmaceutical products are crucial in supporting state revenue. Cuba’s medical industry continues to thrive; the sector trains foreign workers, accommodates foreign patients and sends medical workers worldwide. Cuba is a major producer of nickel and cobalt.

The U.S. has maintained a trade embargo (blockade) against Cuba for over 50 years which has negatively impacted economic development.

An Economic Dialogue

The Cuban economy is often described as a complete failure. Facts and Figures suggest otherwise.

exportIn 2008 President Fidel Castro stepped down and Raul Castro became the elected President. In Raul Castro’s 2015 remarks to the Eighth Session of the Legislature of the National Assembly, the President noted that despite the U.S. economic, commercial, and financial blockade, Cuba’s GDP (gross domestic product) grew by four percent (4.15) in 2015 and will continue to grow in 2016, albeit at a slower pace.

The annual growth rate in Cuba, as measured in GDP, averaged 2.18 percent from 1990 until 2015. This exceeds the growth rates of Canada and the U.S. over the same period.

In the last ten years. Cuba’s growth rate per capita has risen from $4228.8 in 2006 to $5351 in 2016, a 27% growth over this period.

Another important indicator reflecting the health of an economy is the debt to GDP ratio. The Canadian debt to GDP stands at 84.1, the American debt to GDP is 104.17. By comparison the Cuban debt to GDP is currently (2012) 17.10. Government Debt to GDP in Cuba averaged 18.19 percent from 2006 until 2012, reaching an all time high of 21.10 percent in 2010. These statistics are measured in the Cuban convertible peso which has equivalency with the U.S. dollar.

Additional Positive Economic Factors

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 very negative factor.

The Cuban interest rate is 2.25 percent. This, together with an inflation rate of 4.50 percent, is a highly acceptable indicator of economic performance.

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 very limited foreign ownership, while Canada and increasingly the U.S. have high levels of foreign ownership. Ownership of the economy provides a high asset value and is significant when planning an economy.

Other Economic Advantages

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.

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. and Canada, needs upgrading and modernizing.

As a result of U.S. aggression, Cuba must spend a much larger portion of its limited budget on defense and national security than most other developing country of similar size. Normalization of relations with the U.S. would reduce this need.

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 o 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.

Emigration coupled with an aging population and a lower birth rate is a concern. If not addressed this will increasingly become a problem.

The cost of the U.S. Embargo

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 or blockade. The Cuban government estimates the cost to the Cuban economy at $754 billion over the life of the embargo. During the Special Period referring to the early years after the collapse of the of the Soviet bloc coupled with the embargo imposed extraordinary suffering on the Cuban people. A lifting of this embargo would do much to help the economy and the Cuban people.

Economic Planning

Government planning has given emphasis to investing in, and developing, a socialist economy with great emphasis on education, health care, housing, and infrastructure. It provides for societal subsidies over the provision of a materialistic society. 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. More than 94,000 workers are now employed in this scientific development.

Currently there exists a network of over 230 research, development and innovation institutions. 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.

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.

Going Forward

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.

Final Notes:

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.