Cuba after Castro

On November 25, 2016, a true icon of the 20^th century passed away. Love him or hate him—and most people seem to pick one or the other—Fidel Castro remains one of the most recognized politicians of all time. The fact that he achieved such notoriety governing an island in an often forgotten corner of the globe is a testament to the intensity of the nerve he struck.

There are many reasons to hate the man who ruled Cuba from 1959 to 2006. From the execution of prisoners of war in the late 1950s, to decades of heavy handed limitations on basic human rights, Fidel Castro was a dictator, and one with bloody hands at that. At the same time, there are reasons to respect what he accomplished. Cuba is a significantly safer country than its neighbors, and boasts a highly educated society. Its medical infrastructure may be crumbling, but its doctors are top notch, and they travel the world serving some of the globe’s poorest communities in exchange for a pittance of a salary.

Ambivalence on Castro is matched by ambivalence regarding the success of his decades-long experiment. When I was in Cuba, I met college students who seemed to have one set of clothes and needed 35 cents for dinner, but could debate Dostoyevsky with fluidity. I walked the Malecon, Cuba’s famed beachfront boulevard, basking in the utter lack of commercializing – no neon lights, no posters of women in bikinis trying to sell me something, no McDonald’s. But I also saw the food lines at the grocery stores, and I struggled mightily to replace a part when my microphone broke.

Was it worth it? Were the decades of poverty, scarcity and repression worth a crack at a more egalitarian, enlightened society? And would that experiment have been more successful—would it have been less repressive—had the United States supported the upstart Castro in the early 1960s instead of isolating him? I am in no position to answer the first question – my guess is the answer is no, it was not worth it. It is probably not fair to conduct such an experiment without participants’ permission and as disappointed as I am in aspects of our strip-mall society, I feel very lucky to be from the US, and not Cuba. At the same time, I can easily imagine a compelling argument for why quality of life is better in Cuba then in near-by (capitalistic) Dominican Republic. Cuba is safer, its smarter, its more inquisitive, and healthier to boot.

In terms of the second question, the answer is, of course, yes. The historical record clearly demonstrates that US isolation of Castro ultimately pushed the Cuban leader towards the Soviet sphere, and that without the US trade embargo, the Castro economy may not have been crippled from the start.

But that is history. This is global economic dynamics—and the dynamics of Cuba’s economy are changing. These shifts could have increased acceleration as the dinosaurs of the Cuban revolution become extinct.

Cuba’s fundamental economic problem is a lack of productivity, particularly from a bloated public sector. In response, the government has implemented reforms designed to shed jobs from public roles, with the expectation that people will join an inchoate private sector.

In agricultural centers, for example, the government has granted farmers increased control over what they harvest and where they can sell their produce. While they still must deliver a majority percentage of their output to the government, they can now sell the remainder at a market price.

More recently, “cuenta propistas” have created opportunities in the cities for private enterprise and nonagricultural co-ops, from the barber, to the tire repairman, to certain craft and souvenir shops.

The Cuban government appears comfortable with these private operations, with entrepreneurs reporting generally unfettered activity. If anything, some private business owners claim, their taxes produce an important revenue stream for the government.

But with a 21st-century economy comes 21st-century problems. A key concern with Cuba’s economic reforms is that not all Cubans can take advantage of them, and some fear that inequality could be widening.

Productivity suffers from decades of underinvestment in infrastructure, equipment and machinery. This inattention is not surprising given the government’s hostility to larger private enterprise, as well as its own lack of funding. International direct investment and credit is also constrained by the US embargo.

With limited credit options, putting together the start-up capital for a private business is difficult for those without access to remittances or tourist revenue. The Afro-Cuban community, for example, may particularly lack access.

Another distorting factor in Cuba’s economy is the awkward dual-currency system. Two types of currency are currently traded in Cuba, one worth significantly more than the other

The Convertible Peso (CUC), used for example in the tourist industry, is worth more than the dollar. The National Peso (CUP), the currency of state salaries, is worth about four cents.

The result is a widening gap between those earning in CUC and those earning in CUP. Given the marked disparity, taxying a tourist across town can gross about as much as a state employee makes in two weeks. This creates incentives pushing Cubans into any activity that generates a cash flow in convertible currency regardless of productivity. Havana hopes to unify the regimes in the coming months, but this would not close the gap between those with access to tourism revenue and remittances, and those on state salaries.

So what now? I recall walking the Malecon and looking at the dilapidated 19th century Spanish architecture. I watched the waves cracking against the rocks on the beachfront. Cuba’s leadership, not to mention Cubans themselves, believe they can control their economic opening. I am not sure they understand the wave that is about to hit their shores – the wave of investment to turn those crumbling architectural gems into hotels and restaurants and vacation houses and Burger Kings; the wave of tourists and tourist attractions; the wave of internet accessibility; the wave of Miami money; the wave of inequality.

Cuba is certainly at the crossroads. And for the first time in over half a century, the country cannot look to Fidel Castro for direction.

Interested in more? Click HERE to read more about Cuba At The Crossroads!