Editor's introduction: Cuba's socialist economy toward the 1990s

World Devrlopmenr. Vol. Printed in Great Britain.

15. No.

I. pp. I-t.

03&7jOX/R7

1987

S3.00 + 0.00

Psrgamon Journals Ltd.

Editor’s Introduction: Cuba’s Socialist Economy Toward the 1990s ANDREW ZIMBALIST Smith College, Northampton, Mnssnchrtsetts

Cuba has the oldest (save China) and most developed economy among the group of Third World socialist nations. As such, Cuba serves as an economic model as well as a source of aid, guidance and inspiration to many countries identifying with this expanding group. For this reason and because of Cuba’s prominent international political trajectory, Cuban economic performance and structure have been the subject of considerable interest as well as ongoing controversy. In late 1974 one US government report characterized the Cuban economy as being “on the verge . . . of constructing a socialist showcase in the Western Hemisphere.“’ By the 1980s US. government portrayals of the Cuban economy had changed appreciably, either declaring the entire economy to be an utter failure or acknowledging significant achievements in the social sphere but attributing the same to massive Soviet aid.’ In part these differing evaluations of Cuba’s economy reflect the political prejudices of the various authors and of the government they represent; in part they reflect the generally poor state of existing scholarship on the Cuban economy. That is, without systematic treatment of the subject and absent a scholarly consensus. politicians have been less constrained in constructing an interpretation of Cuba in accordance with their own political biases and interests. Part of the problem here belongs to the scholars themselves, but an important part also belongs to (a) the paucity, until recently, of timely economic data from Cuba, (b) the lack of access for investigators to Cuban policymakers and economic institutions, and (c) the absence of scholarship by Cubans on the subject. With economic institutionalization, financial internationalization and healthy economic growth since the early 1970s. however, the Cubans progressively haye devoted more resources to the generation and dissemination of consistent statistical series as well as to the scholarly

investigation of their economy.’ They also have gradually opened up, albeit cautiously. to foreign researchers. The last five years. then. have witnessed a more serious, detailed discussion and evaluation of the Cuban economy. This special issue of IVorltl Developtnettt exploits this propitious scholarly development. It also presents articles by Cuban economists analyzing their own economy. Although the standards of independent. critical analysis are not the same. Cuban economists increasingly are producing interesting and useful accounts and interpretations of their economy. It is important to establish a dialogue between Western development economists and their Cuban counterparts and the Cuban-authored pieces are included in that spirit. This issue begins with an overview essay on Cuban development since 1959. It then proceeds from the specific to the general: considering first the agricultural sector, then the industrial sector. next basic needs and labor issues and. finally. central planning and foreign trade, aid and debt. The overview essay by Zimbalist and Eckstein describes the evolution of development strategy and records the changing economic performance over the first 3 years of Cuban socialism. It endeavors to recast the conventional intcrpretation of shifting development strategy by showing how both ideological and material considerations impacted on policy formation. This reinterpretution is not only of historical interest but can shed light on the current 1986 renewal of the debate concerning the appropriate use of moral versus material incentives in the construction of socialism. This reconsideration of incentives surely has an ideological component. It is less often recognized. however. that material incentives are severely limited in their usefulness in a nonmarket. shortage-type economy. Given their limitations, it is imperative for the effective functioning of centrally-planned economies to develop as well moral and internal incentives (i.e.. workers’ internalization of goals via greater

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participation in goal formulation).’ The limitations of material incentives become more pressing during periods of severe foreign exchange difficulties, as Cuba is currently experiencing.’ The next three articles deal with agriculture. Rodriguez, one of Cuba’s leading economists, analyzes the deficiencies in Cuban agricultural development prior to 1959 and sketches the post-1959 evolution of agricultural policy and structure, demonstrating leadership flexibility in accepting a sizable private sector and ingenuity in promoting new forms of organization. Stubbs analyzes the complex matrix of distinct organizational forms in agriculture, cultural patterns and their impact on the growing economic role of women. She focuses her attention on the development of tobacco cooperatives in two different communities and concludes that cooperatives can potentially play a progressive social and economic role. Her treatment offers an insightful firsthand account of the dynamic functioning of the new cooperative form which has come to dominate the private sector of Cuban agriculture. Feuer discusses the central, yet changing, role played by sugar in Cuba’s economy. He critically analyzes dependence on sugar and the role of Soviet price subsidies as well as the progressive linkages sugar has provided to the industrial sector since the Revolution. Recent developments in labor policy and organization, the role of women, the growth of sugar byproducts and the introduction of agronew technology, industrial complexes as well as implications of present sugar policy for the future of Cuban economic development are skilfully treated. One important change in agricultural policy is not treated in these articles, namely, the May 15, 1986 decision to abolish the free farmers’ markets which were begun in 1980 and had become an increasingly important outlet for the sale of foodstuffs to the population.h From the leadership’s point of view, however, these markets were being exploited by middlemen and price gougers who were profiting from the labor of others and generating excessive inequality in rural areas. Further, their activities engendered resentment and undermined the development of socialist consciousness. The elimination of these markets, however, presents a challenge to the state distribution system. The great majority of peasant producers should not be directly threatened by this change because they should be able to sell to the state the same excess production they had been selling to private wholesalers or taking themselves to the market. State procurement (acopio) prices for

above plan output are similar to those on the free markets for most commodities and where they are lower they can be raised. The more pressing problem will be for the state procurement system to expand its transportation, distribution and storage capacity sufficiently in the short run to be able to service all the producers previously handled through the peasant market system. Some difficulties will persist, but the leadership reported in early July that the process is under control, that most peasant producers have responded positively to the new measures and that the pros ects for agriculture in the near term are r: positive. The next two articles deal with Cuban industrial development. The Zimbalist piece critically evaluates recent, independent estimates of Cuban industrial growth and, then, based on new data offers its own estimate. It discusses price formation in Cuba and the effect of Cuban, non-market prices on growth measurements. The Zimbalist estimates are very close to (though slightly below) the official growth rates for the 1965-84 period and tend to lend heightened credibility to the official statistics suggesting strong growth since 1970. The Brundenius essay is an in-depth look at the capital goods branches of Cuban industry. Brundenius explains the evolution of Cuban policy toward these branches as well as the basis for its achievements. His independent estimates suggest annual growth in excess of 15% for capital goods between 1965 and 1985. As Brundenius argues, capital goods provide the basis for mechanization, autonomous technological growth and higher productivity throughout the economy. The success in these branches helps to explain the broader economic success in Cuba since 1970. Together the articles make clear that the industrial sector has become a dynamic and central part of the Cuban economy.” The next three articles discuss labor and social issues. The Santana piece focuses on the Cuban strategy for health delivery and analyzes the bases of its well-known and remarkable success.’ The present policy to develop neighborhood family physicians is seen, inter ah, as a function of existing health care structures, the changing role of women in society and the emergence of a new generation of physicians. The decentralization of health care delivery implied by this policy has been the subject recently of much criticism in the Cuban press. Specifically, the problems of labor indiscipline have increasingly taken the form of workers presenting unwarranted medical excuses from family doctors to absent themselves from work. The tensions engendered by decentralization in a centrally-planned economy are

EDITOR’S

INTRODUCTION

thus manifested even in the most successful spheres of Cuban society. Codina outlines the evolution of the policy and worker incentives. Using practice regarding official documents Codina is able to clarify the complexity of implementing material bonus schemes for workers in a planned economy and, thus, sheds light on the present reevaluation of the appropriate balance between moral and material incentives. Codina also discusses at some length the experience with Cuba’s newest workplace experiment, production brigades. The by decentralizing the locus of brigades, decisionmaking as well as the unit of account, offer the prospect for both greater worker participation and productivity. There is, of course, also a potential danger in the brigade experiment. With more independent financial units now functioning within each enterprise, the quantity of monthly reports, general paperwork and meetings is multiplied severalfold. The Cubans already complain about the excess of burocratisrno and reunionismo that has accompanied efforts to rationalize their planning system. “’ Nevertheless, the brigades do offer the possibility of transforming social relations in Cuban enterprises. Given the stubborn problems with individual output norms and bonuses which have been thoroughly evaluated in recent public discussions,” identifying alternative forms of motivating work effort and creativity become all the more important. Fuller, based on personal interviews, public documents and newspaper accounts, provides a careful and detailed look at one aspect of workplace social relations grievance resolution. This proves to be a useful vantage point for evaluating the relative power of workers in enterprise management and for assessing the claim of greater worker rights under socialism. Fuller emphasizes the importance and subjective character of the local union in establishing the balance of power between management and the workers. She also treats the close relationship between shifting grievance procedures and regulations and the prevailing macroeconomic conditions. The final two articles deal with Cuba’s macroeconomy. White describes briefly the operation and reform of Cuban central planning. He

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analyzes the weaknesses of Cuba’s young (post1976) planning system and the systemic constraints it imposes on increasing substantial worker participation and on improving efficiency. At the same time. White acknowledges the arguments in favor of strong central planning to promote economic development. Nonetheless, White looks for increasing use of markets and parametric controls as Cuba struggles to perfect its economic mechanism. While this indeed may be the long-term direction for Cuban planning. since May 1986 the pendulum seems to have swung. temporarily at least, in the other direction. East Germany rather than Hungary would appear to be the operative model. to the extent that there is one, for the present. Insofar as further decentralization is pursued, then, it is likely to assume an administrative rather than a market form. Turits presents and analyzes the experience of Cuba’s foreign sector. Regional and political patterns in Cuba’s external trade. the persistence of Cuba’s current account deficit. the management of her hard currency debt and Cuba’s special status within the CMEA are carefully explored. Turits argues that CIA estimates of Soviet aid employ a faulty methodology and are misleading. Although falsely inflated by these estimates. Soviet aid is still very large and important to the Cuban economy. He identifies both failures and successes, looming difficulties and positive prospects for Cuba’s foreign sector over the coming years. Together the essays in this volume offer a balanced, up-to-date discussion of Cuba’s e.conomic model and performance. It is important to underscore the fact that the Cuban model is in process. Ongoing debate and experimentation have characterized the Cuban economic experience for 27 years and there is no indication that the Cubans have grown complacent either with .their achievements or their institutions. If the articles contained herein are successful, they will have conveyed to the reader a sense of the effervesence and evolving quality of the Cuban political economy. They will also make clear that Cuban economic reality is considerably more complex than has been suggested by the simple and ideological characterizations of many politicians and some academics.

NOTES I. US Senate Committee (1974). p. 1. 2.

on Foreign

See. for instance. Theriot (1982).

Relations

3. On the rapid development of the economics profession in Cuba and its professional journals. see Fitzgerald (1985, Chap. 8).

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-1. This argument is elaborated in Zimbalist (198-t Chaos. I and 7) and Brus I IY73. Chao. 3). Also see, Kornai (1980). ‘Cuban difficulties in apply&g material incentives have been candidly reported in the press during the present discussions and reevaluation of economic policy. See. for instance. the lengthy articles concerning the Retmiones de Empresus (enterprise meetings) at the provincial level in Granmu (15 July 1986. pp. 3-6). 5. In 1985. 42% of Cuba’s hard currency earnings came from the reexportation of Soviet petroleum. The precipitous drop in world oil prices is costing Cuba over $200 million per year in lost earnings. Together with the low level of sugar prices (below six cents a pound in late July 1986) and the reduced IY86 sugar harvest occasioned by the ravages of Hurricane Kate, Cuba is experiencing severe cash flow problems and did not meet here scheduled debt principal or interest payments on 7 July 1986. It has been reported that in response to the falling commodity prices the 198~90 trade and aid agreement between the Soviet Union and Cuba increases the “direct aid package to Cuba by $3 billion. 50% more than in the previous five-year neriod” I Wall Srreer Journul. 2-l Julv 1986. D. 27). The 50% increase itself was reported earlier in the’ Party newspaper. Granmu (1 I April lY86. p. I). 6. Despite its growing role, in 1985. according to one study, the share of free peasant market sales in total retail sales in Cuba was only one percent. See Cepal (1986). p. 33. 7. See, for instance. the extensive discussion of this issue in the report on the Tenth Assembly of Popular Power held in early July I986 (Grumnu 5 July 1986, pp. 2-6). Also see Castro’s closing speech at the Second National Meeting of Agricultural Production Coopcratives. reprinted in the Grunmu B’eekly Review (1 June 1986, pp. l-3). 8.

The importance

and share of the industrial

in Cuba-s economy has been the subject of a recent scholarly debate. Mesa-Lago. by misinterpreting the impact of turnover taxes as well as current foreign trade prices, argues that the industrial sector’s share h Gross Social Product has fallen since the earlv 1960s. In fact, the share of industry has grown appreciably. See Brundenius and Zimbalist (lY8Sa; IY85b) and the Comite Estatal de Estadisticas (1985). pp. 83~. 95.

9. There have been some recent efforts to challenge Cuba’s success in the health area. Eberstadt (198-t) makes such an effort by, imer aliu. misrepresenting a study of the National Academy of Sciences, overlooking the 1965 change in the definition of infant mortality from the Spanish (ignoring deaths in the first 24 hours of life) to the Western (counting all deaths from the first breath), and ignoring the severe underregistration of infant deaths prior to 1959. The quarterly report on Cuba by the Office of Research and Policy of the US government-funded Radio Jose Marti points to the increase in infant mortality from 15.0 per I.000 in 1984 to 16.8 in 1985 and suggests that due to systemic factors this increase will become a long-term trend. They present no evidence regarding the alleged systemic factors and the annualized figures for the first five months of 1986 suggest a rate below 15.0 per 1.000 for 1986. 10. Notwithstanding its pretensions to decentralize and increase efficiency, the SDPE has engendered new bureaucratic entanglements. At the meetmg to analyze enterprise management in Havana and City of Havana provinces held on 2.5-26 June 1986, hlarcos Portal. Minister of Basic Industrv. reoorted that in 1973 there were 90.000 administrative personnel in the country while in 198-t there were 250,ooO an increase of 178%. Portal’s statement was cited in Gr~nmr~ Weekly Review (6 July 1986, p. 2). Il. See the sources in note 4. On the early realization of some of this potential. also see Veiga (1986).

sector

REFERENCES Brundenius, on Cuban

Claes, and A. Zimbalist, “Recent studies Economic Growth: A review,” Compurulive Economic Studies. Vol. 27, No. 1 (Spring . . _ 1985a). pp. 21-46. Brundenius, Claes, and A. Zimbalist, “Cuban economic growth one more time: A response to Imbroglio;,” Comparalive Economic Sk-lies, Vol. 27. No. 3 (Fall 1985b). pp. 115-132. Brus, Wlodomierz, The Economics and Politics of Socialism Ilondon: Routledge & Keean Paul, 1973). Cepal. Noras paru el esrudio -econdmTco de Am&i& Larina y el Curibe. IY85: Cuba (Mexico, julio 1986). Comite Estatal de Estadisticas. Anuario Esrudisrico de Cuba. 1984 (Habana. 198.5). and health: The Cuban Eberstadt. Nick, “Literacy TIIt- Wall Srreer Journal (10 December model.” 1984). Fitzgerald, Frank, Politics and Sociery in Revolutionary

Cuba: From rhe Demise of the Old Middle Class IO rhe Rise of rhe New Professionals. Unpublished manuscript (1985). Kornai, Janos. “The dilemmas The Hungarian experience.”

Economics, Theriot.

No.

of a socialist economy:

Cumbridxe Journal of

4’ (1980).

Lawrence.

Faces rhe Economic

US

Dent.

Real&s

of commerce,

Cuba

of rhe 1980s (Washing-

ton. DC: USGPO, 1982). US Senate, Committee on Foreign Relations, Staff Report, Cuba (Washington, DC: USGPO, 1974). Veiga, Roberto. “Discurso de Clausura del Encuentro National de la CTC para examinar la labor de la Brigadas Permanentes e Integrales,” Grunma (30 de enero, 1986). Zimbalist. Andrew (Ed.). Comparurive Economic Sys-

tems: An Assessment of Knowledge. Theory and Practice (Boston: Kluwer-Nijhoff, 198-t).