Home > Iván García > Which Economic Model Will the Cuban Regime Adopt’ / Ivan Garcia

Which Economic Model Will the Cuban Regime Adopt’ / Ivan Garcia

September 5, 2015

Raúl-Castro-en-China-_ab-620x330Ivan Garcia, 28 August 2015 — When it comes to making a market economy work in a nation where social and political control rests with the communist party, China and Vietnam are acknowledged experts. In both countries political rights are restricted and opposition is suppressed.

In 1986 — one year before Mikhail Gorbachev introduced perestroika in the former mecca of global communism — the government in Hanoi initiated its own economic reform, dubbed Doi Moi.

In 1978, two years after the death of Mao, China’s Deng Xiao Ping gradually began a transformation that shook the country to its foundations.

Neither China nor Vietnam respect the essential freedoms of Western democracies but under government control their economies have enjoyed unprecedented growth, reduced levels of poverty and increased consumption.

While China’s economy is the second largest in the world, its salaries and living standards are not comparable to those of the world’s twenty-five most prosperous and stable nations.

Nevertheless, people are better off than during the period of famine and ideological madness brought on by Mao’s misguided Great Leap Forward. The state now brags about the number of millionaires, which grows every year.

There are as many high-rise buildings as in New York. Despite some restrictions, the internet is available to all. And people line up to buy the Louis Vuitton bags and the latest iPhone.

But limits on freedom mean it must transform itself politically or face collapse. As Lincoln said, you cannot fool (or handcuff) all the people all the time.

When General Raul Castro came to power after having been handpicked by his brother Fidel in the summer of 2006, he kept a detailed study of the Vietnamese and Chinese models in his desk drawer.

Raul and a group of his military advisers have been running the Cuban economy since the mid-90s. After the fall of the Berlin Wall, with no money to finance military campaigns in Africa or subversive activities in Latin America, the armed forces — the regime’s de facto praetorian guard — began conducting business and establishing corporations.

Today they control 80% of businesses in Cuba. The top economic advisers come from the ranks of the Revolutionary Armed Forces. “Before studying the Chinese and Vietnamese models, they studied Japanese business systems,” says one journalist familiar with people steeped in Japanese know-how of the 1980s.

“The most widely read books in the upper echelons at the time were Made in Japan by Akio Morita, and An Autobiography and Talking Straight by Lee Iacocca, one of the most iconic figures of US automobile industry,” he recalls.

Raul and his military advisers have had it in their power to adopt a market economy and to decentralize the economy since 2006. Why have they not done it? The United States has been the problem. When China and Vietnam launched their reforms, they had Washington’s blessing.

But the US embargo is an obstacle to greater openness. While the regime can certainly conduct negotiations with all other countries on the planet, big capitalist conglomerates are not going to do business with Cuba knowing full well it could mean losing access to the biggest and best market in the world.

Is the embargo responsible for scuttling the Cuban economy? Of course not. The names attached to this disaster are Fidel and Raul Castro. The catastrophe is systemic.

The anti-imperialist speeches have not produced added value, increased agricultural production or reduced bloated government bureaucracy. There are two things blocking reform in Cuba: the government’s fear of losing control of the process and the country’s eccentric judicial system and institutions.

The Castros confuse democracy with personal loyalty but they are not fools. Raul Castro was never the brightest student in class, but he knows how to listen and his advisers have thoroughly dissected the unsustainable Cuban economy for him.

Repairing it will be a monumental task, one that must start from the ground up. Real reform will not begin until Raul Castro leaves power in 2018.

What has been happening has more to do with political showmanship than practical relevance. Crops grow poorly and yields do not increase. A glass of milk is still not seen on the Cuban dining table.

In 2014, one-hundred twenty-three state-run enterprises had losses totalling 829,000,000 pesos. The state pays more than 2,000,000 dollars annually to buy food from abroad. The agricultural sector is in chaos and thousands of cattle die every year from hunger.

The Cuban population is aging. The most qualified professionals pack their bags, creating a noticeable gap in society, with several generations choosing to emigrate to escape the ideological madhouse of Castroism.

In the first phase of the vaunted reforms absurd regulations that showed Cuba to be an anachronistic dictatorship were abolished. Cuban citizens were allowed to stay in hotels, have access to mobile phones, travel abroad, buy and sell homes, and purchase automobiles.

Some businesses and private enterprises were legalized to provide a kind of cushion for the million and a half workers who were to be laid off from government sector jobs.

Burdened by the excessive taxes and government regulations which prevent the accumulation of large capital, half a million private business owners can contribute little to economic growth. With the exception of government sanctioned business cooperatives, private entrepreneurs cannot invest, import or access foreign credit.

The second phase of the reforms was key. In the short-term negotiating a favorable treaty with the United States allows for the possibility of a profusion of foreign investments, preferably by the US technology industry, which would be the icing on the cake.

The third phase will begin when the Communist Party nomenklatura relinquishes power. Raul Castro is not resigning in 2018 because of a sudden democratic impulse. It is crucial that the Castro name gradually fade from the political scene to placate those in the Miami exile community and a faction of the US Congress who are not buying into the purported new openness.

It is yet to be seen what move the neo-Castros will make after 2018. At the moment they do not seem to be banking on either the Chinese or Vietnamese models. If there is one thing the regime of Raul Castro has shown itself to be good at, it is being creative and bold when it comes to foreign policy.

The possible options are a low-key authoritarianism, a behind-the-scenes military junta or, ultimately, a move towards democracy. Any scenario is possible.

Photo: In July of 2012, Raul Castro visited China for the first time. Among others, he met with then president Hu Jintao and prime minister Wen Jiaboa. From November 2012, the president of the People’s Republic of China has been Xi Jinping and since March 2013 the premier has been Li Keqiang. Taken from Zimbio.

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