Cuba’s New Socialism
In 1994 Raúl Castro, then defence minister, voiced a rare disagreement with his brother Fidel: “The main threat is not American guns, it’s beans – beans the Cuban people can’t get” (1). Fidel opposed liberalising agriculture, which would have boosted food production. But since the collapse of the Soviet bloc, GDP had fallen by 35%, the US had tightened the trade embargo and Cubans were suffering from malnutrition. Raúl was certain that if things did not change, he would have to bring the tanks out. At the end of the year, the government authorised free farmers’ markets.
Raúl is president now (2) and maintains Cuba is still not out of the “special period” (3). In 2008 three hurricanes caused $10bn worth of damage to infrastructure (equivalent to 20% of GDP) and the international financial crisis hit the strongest sectors of the economy, especially tourism and nickel. Unable to meet its obligations, Cuba froze foreign assets and restricted imports, although this slowed the economy further. In 2009 agricultural production fell by 7.3%; between 2004 and 2010 food imports soared from 50% to 80%.
In December 2010 Raúl told the National Assembly: “We are treading a path that runs along the edge of a precipice; we must rectify [the situation] now, or it will be too late and we will fall.”
The president of the National Assembly, Ricardo Alarcón (once rumoured to be a prime candidate to succeed Fidel Castro) said: “Yes, Cuba will open up to the world market – to capitalism.” Building “socialism in one country” is not easy, especially if its domestic market is small, so would Cuba abandon the revolution? Alarcón dismissed the idea: “We will do our utmost to preserve socialism; not the perfect socialism we all dream of, but the kind of socialism that is possible here, under the conditions we are facing. And we already have market mechanisms in Cuba.”
A flood of dollars
I went shopping with Miriam. Like 70% of Cuba’s population, she was born after the 1959 revolution and does not know how extraordinary it is that, in Cuba, there are no children trying to sell sweets or lottery tickets to drivers at the traffic lights, and no advertising billboards. Cuba is the only country in Latin America with no child beggars, and one of the few to have banned billboards. But Miriam is aware, and proud, of Cuba’s social conquests – things the state provides for free and which she believes are her right: education, healthcare, sport, culture, jobs, and food, which she claims using her libreta (ration book). Her ration includes 1.2lb (540g) of beans for 80 centavos; half a litre of cooking oil (20 centavos); 1kg of skimmed milk (2 pesos); 3lb (1.36kg) of sugar (15 centavos); 400g of noodles (90 centavos); and 115g of coffee (5 pesos). Each time she visits the bodega (shop), the shopkeeper writes the proportion of the ration handed over in the appropriate box in her libreta. This time she bought rice: every Cuban is entitled to 2.5kg for 25 centavos and a further 1kg for 90 centavos.
Miriam works in a government ministry and earns a near-average income of 450 pesos a month, which is about 20 CUC. A CUC, or “convertible peso”, is equivalent to 24 traditional pesos. This second currency was introduced in 2004 to replace the US dollar; economic realism had prompted the government to allow the use of dollars in 1993. After the collapse of the Soviet Union, the government believed it could reform the external sector of the economy without radical changes to the internal sector, “supporting capitalism abroad but socialism at home” (4). But opening Cuba up to investment and tourism, to secure the foreign currency needed to maintain the social fabric without changing the country, flooded the market with dollars, through tips, the payment of a part of salaries in cash, overseas remittances and the black market.
The government gave in, and opened hard currency stores (shoppings) to channel some of these dollars into the state coffers. A dual market developed, undermining monetary sovereignty and the egalitarian ethic of the revolution: only two-thirds of Cubans had legal access to the dollar, and later the CUC. The income gap between the best paid and worst paid widened from 4:1 in 1987 to 25:1 in 1997 (5). Today anyone is allowed to change pesos into CUC, but not everyone can. “The government still pays me in pesos,” said Miriam. “Have you seen the prices in the shoppings?” – 1 CUC (24 pesos) for a Coca-Cola, imported from Mexico; 500 CUC (12,000 pesos) for a PC.
Is the libreta enough to live on? “Yes,” said Miriam, “for 10 days, two weeks at most. But you still have to pay for all the other things.” Vegetables, transport, electricity, clothes – 130 pesos for trousers, 90 for a T-shirt, 10 for a pair of panties (not the sexiest). A car mechanic may earn 350 pesos; a lorry driver, 250; a young journalist, 380. Senior civil servants earn around 800 pesos a month, estimates Fernando Ravsberg, a BBC journalist in Havana. The average monthly income rose from 188 to 427 pesos between 1989 and 2009, but its real value fell to 48 pesos.
Lobster is for tourists only
Visitors ask how the Cubans manage. They answer: “Hay que resolver” – you have to resolve it. A tourist orders a beer on the terrace of a hotel for 3 CUC. The waiter will not necessarily take it from the hotel’s refrigerator; he may take it from his own stock, which he keeps barely hidden. Since he buys the beer at 1 CUC a bottle, this allows him to multiply his basic wages by 50 and bribe his boss to keep quiet. A hotel worker has toothache, and the dentist tells him there’s a two-week waiting list, then suggests: “If you want to come this evening, it’ll be 5 CUC.” The hotel worker makes a counter-offer: “Fit me in now and I’ll let you and all your family into the buffet this evening.”
Selling apartments is prohibited. Yet some families grow and others shrink. Intermediaries put them in touch with one another, for a fee. Prices are based on a market rate that everyone knows. A studio in the relatively smart Vedado district will cost 15,000 CUC; a five-bedroom apartment a little further from the centre, 80,000 CUC.
In Cuba, lobster is reserved for tourists or for export. Fishermen sell it on the black market and typically earn $700 a month. University staff who have internet access rent out their passwords in the evenings; teachers give classes at home; nurses visit patients’ homes; bus and lorry drivers siphon diesel. Many government employees use their position to supply the black market with chairs, tools or building materials.
Cubans learned to cope by using the market mechanisms that govern everyday life. The official rhetoric condemned them to put up with the situation. Fidel had said in 2003 that values determined the true quality of life, even more than food, shelter and clothing. A few years earlier, he had launched a battle of ideas to address Cuba’s problems, especially corruption. This was meant to strengthen revolutionary convictions, especially those of the young, by providing employment (students were assigned to monitor petrol stations). The ideas were effective for a time, then consciences became elastic once again. Recently it was revealed that the Ministry of Construction employed 8,000 construction workers and bricklayers – and 12,000 security guards to prevent theft.
In his first speech as (interim) president Raúl Castro said: “Wages today are clearly insufficient to satisfy all needs… This has bred forms of social indiscipline.” After an “extensive national debate”, he decided that people were expecting a different kind of reform. (Nobody knows how he reached this conclusion as no report, summary or extract of the debate was ever published.) It was no longer a matter of correcting things incompatible with Cuba’s ideological rigour, but of finding a socialism stripped of “erroneous and unsustainable concepts” and learning “even from the positive experience of capitalists” (6). Sly and unorthodox solutions were already turning some Cubans into entrepreneurs. The president rehabilitated private initiative by allowing people to work for themselves.
The publication of a list of 178 such activities to be permitted from September 2010 did not change anything in practical terms. Officially, bricklayers, carpenters, electricians, clockmakers and lighter repairers did not exist, yet everyone had used their services for years. Ricardo, another contact, said: “Getting a water leak mended through the state enterprise [in charge of building repairs] was incredibly difficult. In the end, people just asked a neighbour who knew what he was doing.” Now that neighbour pays taxes: a licence fee of just under 20 CUC, 25% on turnover, social security (25% of profits) and a progressive rate on income over 5,000 pesos a year (rising to 50% on income above 50,000 pesos a year). “A self-employed person can even hire other Cubans and pay them according to their productivity,” said Ricardo. The constitution disapproves of this, considering it exploitation; the taxman loves it – as a “boss”, the neighbour pays a 25% payroll tax.
A new rhetoric
Daily life hasn’t changed much; the rhetoric has. In 1968 Fidel Castro denounced the “small segment of the population that lives off the work of others, ... lazy persons in perfect physical condition who set up some kind of vending stand, any kind of small business, in order to make 50 pesos a day” (7). In two days, nearly all private businesses – bars, grocery stores, garages, carpenters, bricklayers, plumbers – disappeared. In 2010 the Communist Party daily Granma described the self-employed as responsible and high-minded people whose success would “play a large part in the successful and continued modernisation of the Cuban economic model” (8).
In 1995 enthusiasm for making money had to be curbed by restricting private restaurants to 12 tables, but Cuba is no longer frightened of the accumulation of wealth. “Let’s be honest: if, once he has covered all his costs, a self-employed person earns more than the current average salary, is there really anything wrong with that?” asked Granma. After all, “capital is something you build up little by little, by working hard, by being competent, by improving the quality of your service every day – even the smile that wins over your clients.” In January this year, a Catholic magazine rejoiced that Cuba could now face the future “without fearing wealth” (9).
The goal of Raúl Castro’s reforms is not just to legalise what was prohibited yesterday. It is also, as Alfredo Guevara explains, the “de-statification” of a planned economy whose rules and regulations no longer convince. Much of the 2009 tomato harvest was left to rot on the plant as government lorries were under instructions not to travel without a load and did not arrive in time. The crop could have been taken to a nearby factory to be made into purée, but the regulations did not allow for it.
“Is it really necessary for the government to set the price of a haircut?” asked Jorge Luis Valdès of the National Association of Economists and Accountants. “Before the April 2010 reforms, all the hairdressers in Cuba belonged to a single enterprise. Transferring them to the private sector not only saved the government 630m pesos in nine months but brought in 660m pesos of extra revenue.” He produced a notebook: “Before April 2010 the official price of a haircut was 80 centavos. That didn’t stop people charging 5 to 20 pesos for men and up to 100 for women. The government provided electricity, water and the telephone, which anyone could use if they paid one peso to the salon. For every four hairdressers, there were two security guards, a cleaner, an accountant, an administrator and one or two people to prop up the wall – all employed by the state. Now it has all changed. The hairdressers are independent and pay the government 990 pesos a month: 330 in rent for their premises, 330 in social security contributions and 330 in payroll tax. After that, they are free to do what they like and hire anyone they like: staff numbers usually fall.” In fact, 40% of the working population is to be transferred to the private sector by 2020 (at present, 90% of Cubans are government employees). Valdès summed up: “Lower costs, more revenue: it’s all profit for the state.”
Efficiency, productivity, savings: the language is familiar, even in countries where the word socialism is not automatically associated with Che Guevara. “Why should Cuba be different from other countries?” asked Valdès. “We need to do away with everything the government gives Cubans for free, from the cradle to the grave, to make sure they are equal.”
By reducing the role of income in access to welfare, the give-aways have sapped motivation and hindered economic development. Discussions of socialism in Cuba today rarely mention equality without criticising the error of egalitarianism. Raúl Castro explained in 2008 that the solution was to eliminate handouts and “give salaries their real value. There is no alternative.”
The government no longer pays for wedding cakes and honeymoon hotels. Four government ministries no longer have free cafeterias: their employees now get 15 pesos a day for food (enough, for the present). Even the libreta may soon go, since the lineamientos (policy guidelines) document submitted to Cuba’s Congress suggests replacing it with “targeted social assistance” reserved for “those who really need it”, as elsewhere in Latin America.
Cuba’s only trade union has announced that 500,000 government jobs are to be cut in the next few months. All those laid off will receive their current salary for a month. Those who have worked for 19 years or less will receive 60% of their salary for a further month, those who have worked for 26-30 years for three months, those who have worked more than 30 years, for five months (10). No doubt the intention is to motivate them to find private sector jobs quickly. But can people who have worked in ministries for years turn into farmers, barbers or bricklayers in just two months, knowing there will be no welfare system to take care of them after that? Economist Omar Everleny Pérez, whom many consider to be the father of the current reforms, said: “Yes, there will be some losers. Yes, some people will be out of work. Yes, there will be more inequality.” But the inequalities “are already there: what we have, at present, is a false equality. What we have to decide is who really deserves to be at the top.”
Attached to health and education
This February, workers at a clinic in central Havana met to discuss the lineamientos. Its 291 proposals include performance-based pay, legalising market prices and a review of social programmes. The document was approved unanimously, in just a few minutes. But the workers stressed their attachment to Cuba’s health and education systems – some things should change, but not those. The secretary of the meeting made a note of their comments, although nobody really knew whether or how they would be taken into account.
I asked if there was a risk the government would eventually judge it necessary to modernise Cuba’s social conquests. From the opening up of the Chinese economy to the reform of public services in France, there is no shortage of examples to suggest this is likely. Alarcón said: “It is quite possible to oppose such reforms and, if necessary, vote against them.” Does this mean Cuba has an opposition? Since its establishment in 1976 the National Assembly has not registered a single vote against a government bill.
A cartoon in Granma earlier this year showed a youth leaning on a lamppost asking an elderly passer-by: “Any change, Granddad?” He answers: “Yes – time for you to change and start earning an honest living.”