A Marxist analysis of Cuba's new economic reforms

There has been much discussion lately about the reforms taking place in Cuba. The following is a perspective from one left organization in the United States.

A Marxist analysis of Cuba's new economic reforms
Tuesday, September 21, 2010
By: Brian Becker

PSL's view of Cuba's plan to eliminate 500,000 state-sector jobs

It is more important than ever for communists, in general, and the
Party for Socialism and Liberation, specifically, to state our
position on the Cuban Revolution.

The capitalist media, the government, legions of academics and think
tank policy “experts” are busy at work defining the current stage of
the Cuban Revolution, and assessing major political and economic
pronouncements made by Cuba and its individual leaders in recent
weeks.

Unlike the capitalist government and its “thinkers,” we in the PSL are
partisans of the Cuban Revolution. The capitalists look at any
weakness in Cuba as an opportunity to attack, weaken or subvert the
Cuban Revolution and the cause of socialism. We seek to promote a
militant defense of Cuba and socialism. We seek to evaluate its
problems, contradictions and policies with a different aim than the
Empire. Thus, the “battle of ideas” on the question of Cuba is part
and parcel of the global class struggle that is intensifying daily.

The Cuban government recently announced a major economic
reorganization that will involve the reduction in employment in the
state sector by as many as 500,000 workers. The reforms will also
promote the enlargement of what is called the “private sector,” which
means the formation of privately owned enterprises organized to
generate profits for the private owners of the businesses.

There already is a private sector in Cuba, but it is limited and based
on self-employment rather than employing the labor of others. Taxi
drivers, restaurants, barbers and hairstylists, mechanics, and farmers
are some of the occupations and areas of private business. The number
of people working in the private sector is in the hundreds of
thousands.

An unanswered question so far is whether the Cuban government is
preparing to change its laws on the rights of privately owned business
to hire labor—and thus exploit labor—and to generate and accumulate
capital.

Russia and the New Economic Policy

This is not the first time that a communist-led government has
reverted to the expansion of a private market.

Russia under Vladimir Lenin pursued such a policy in 1921 as a
response to a dire economic crisis. Lenin characterized the reversion
to capitalist methods as a bitter and temporary “retreat” imposed on
the Bolsheviks.

Let us examine the Bolshevik experience. In 1921, the Bolsheviks under
Lenin’s leadership introduced the New Economic Policy (NEP), which
allowed for a dramatic expansion of a private capitalist market. After
three years of civil war, the new socialist economy had collapsed and
the state sector was unable to provide the resources to sustain a
planned economy. Economic output by 1921 had fallen by 86 percent from
1914, and the peasants were turning against the socialist government.

The introduction of NEP laws successfully stimulated production the
old-fashioned way. Some got very rich off of the exploitation of
others’ labor. Still, the NEP allowed the communist-led government to
survive. It also led to the division of rich and poor. A rural
bourgeoisie became especially powerful and hostile to the
socialist-led government.

The Bolsheviks in 1928, by then under the leadership of Stalin, ended
the NEP and began widespread farm collectivization and rapid
industrialization. A virtual civil war ensued in the countryside for
several years, as did a fierce and bloody internal struggle inside of
the Bolshevik party.

During the 1930s, Soviet industrial production took off, growing at an
unmatched pace, while around the capitalist world private-sector
industry was plunged into near paralysis by the Great Depression. The
Soviets emerged by 1939 as a world power.

‘Cuba is not China’

The government in Cuba today is cutting back on its existing
obligations, and trying to reduce its deficits by laying off 500,000
state-sector workers and cutbacks in entitlement programs or subsidies
for the population.

A depressed economy makes it impossible for Cuba’s state sector to
maintain its current deficits. How will the 500,000 people who lose
their jobs in the next few months survive? The Cuban government is
suggesting that the future of the 500,000 dismissed workers depends in
large part on the “private management and initiative of the
individual.”

The Cuban government is indicating that it hopes those unemployed
workers will be absorbed by an expanded private sector. What is still
unknown, at least to the outside world, is how the Cuban government
plans to proceed with the expansion of a private sector.

When the Communist Party of China introduced a vast private sector in
1978, they described it not as a temporary retreat from socialism, but
as a strategic, long-term policy that was desired. They called the
creation of a vast capitalist market “socialism with Chinese
characteristics.”

Foreign corporations were invited in. These corporations were offered
the chance to make mega profits from the employment of low-wage labor
in China, while China has sought to harness economic benefits,
increase income and acquire technology as part of the terms of the
deal. The Communist Party of China is aware that the creation of a
Chinese bourgeoisie constitutes a political danger, and that the U.S.
government will inevitably seek to overthrow the government in China.
But China feels that it is strong enough to manage the situation.

Cuba is not China. China is huge and far away from the United States.
The U.S. capitalist establishment believes that Cuba should belong to
it—as it once did—and the capitalists are enraged over the
perseverance and tenacity of the revolutionary government.

The Cuban government is well aware that a sector of privately-owned
businesses—unless they are tiny and revolve around
self-employment—will inevitably develop as a nexus for U.S. banks and
corporations (and for the CIA), and for the capitalist governments and
corporations of Europe.

There is divided opinion in Washington about how best to overthrow the
revolution. The Miami-based fascists have one program. Another is
represented by those who favor relaxing the blockade and connecting to
Cuba’s private sector.

Time Magazine published an article on Sept. 14, “Cuba’s Big Layoffs:
What to Do with the Unemployed,” which reports on the effort to change
U.S. policy with the aim of fostering a private sector in Cuba: “The
U.S. can play a role in that effort [helping private businesses in
Cuba] as well. The Washington-based Cuba Study Group, a nonprofit
headed by Cuban-American business leaders, has already proposed, along
with Mexico's Banco Comportamos, a $10 million microloan program for
Cuban entrepreneurs. Study Group executive director Tomás Bilbao says
the Obama administration should explore something similar, as well as
a change in embargo regulations to let Americans invest in private
Cuban businesses.”

The private sector

The development of a private sector presumes the generation of profits
for individual owners by employing other individuals who will be paid
wages in return for the hours of work they perform. The value created
by wage labor, or more precisely the surplus value created by those
who work for wages, will become the property—the capital—of the
individual owners.

The private ownership of capitalist enterprises means the exploitation
of humans by other humans. It is the foundational feature of
capitalist property relations. As mentioned, very small private
businesses may also be a case of self-employment. But the tendency
inherent in successful business is accumulation based on the creation
of surplus and then the requisite need for additional investment—the
employment of more wage labor. Capital accumulation in the private
sector is a spontaneous phenomenon.

Cuba is a socialist country in the popular understanding of the term.
It is not functioning according to the dynamics and tendencies of
capitalist production, although it cannot escape the vicissitudes of
the global economy. It is a planned economy. Its government was
created by a dynamic multi-class revolution that smashed the old state
apparatus and broke apart the capitalist state institutions: the army,
police, courts and prisons. Although the revolutionary leadership that
initiated the armed struggle against the old Batista regime was not a
proletarian communist party, but rather a multi-class formation—the
July 26 Movement—the new revolutionary state that came into existence
after 1959 represented the class interests of the workers and poorest
peasants.

When the class character of the state became evident between 1959 and
1961, the bourgeois nationalist sectors of the July 26 Movement
abandoned the revolution and made common cause with the pro-Batista
counterrevolutionaries. Most importantly, they became the agency
through which U.S. imperialism employed a campaign of terror,
subversion and invasion against the revolution.

Evaluating the reforms

Fifty years after the victory of a socialist revolution, the Cuban
government and the Communist Party of Cuba are today retreating from
some socialist methods and reintroducing some capitalist methods.

1) How do we, as communists, evaluate these reforms that are designed
to accelerate production in the sector of the economy that is based on
private ownership while diminishing the number of Cubans who are
employed in the state sector?

Since the reforms have just been announced, and since we are not privy
to the internal discussions and debates inside the Communist Party of
Cuba, it would be reckless to lose a sense of modesty about our own
assessment at this stage of a complicated process. Still, it is
necessary for the socialist and communist movement to possess its own
independent view and to vigorously promote that view to counter the
anti-communist interpretations and analysis of the imperialist
establishment. A sincere, honest and correct evaluation of these
reforms has to address a number of interrelated issues:

What is the actual goal of the reforms? Are they designed to stimulate
production and economic growth as a temporary measure based on
emergency crisis circumstances or is the Communist Party of Cuba
embarking on a long-term reorganization of the Cuban economy,
transforming it into a fundamentally capitalist model? So far, at
least, the explanation given by the Cuban Workers’ Confederation (CTC)
is specific and particular to the identified problems of the current
economic mechanism: “Our state cannot and should not continue
maintaining enterprises with inflated payrolls, losses that pull down
our economy and make us counterproductive, generate bad habits and
distort worker behavior.” The CTC statement does not indicate any
sweeping reversion to private markets similar to the Chinese model,
but rather it states that the layoffs will “make the Cuban production
model more efficient.”

2) Do the mass layoffs signal the beginning of an NEP-style reform,
which is unknown at this time, or the creation of a hybrid economy
that substantially diminishes the state or public sector in favor of
the private sector? How will it be explained politically by the
Communist Party of Cuba? Will it be explained as a step forward in the
development of early-stage socialism akin to the orientation of China
(“Socialism with Chinese Characteristics”), or rather as a forced
retreat from socialist methods imposed on the revolution because of
the global economic crisis, internal economic imbalances, drought and
damage caused by hurricanes, and the economic blockade of U.S. and EU
sanctions.

3) How will the Cuban state and Communist Party cope with the
formation or further development of a nascent bourgeoisie in Cuba,
which is the inevitable consequence of the promotion of the private
sector? The formation of a bourgeoisie accelerates class divisions and
reinforces the other attendant evils of class society, such as racism.
Of course, a nascent bourgeoisie forms spontaneously through the
illegal underground economy and corruption, and in proportion to the
extent that the state sector of the economy cannot provide the
population with many desired and necessary goods and services. The
expansion of the private sector legalizes these currently underground
commercial activities, allows them to flourish, and makes their
profits a source of taxable revenue for the government and state.

Scarcity vs. surplus

The core economic problem facing Cuba today is scarcity. The state
sector of the economy is unable to produce or import sufficient
quantities of goods and services to meet the needs of society. This is
true both for consumer goods—especially food but many other basic
consumer products too—and in the realm of industrial materials,
including factories, heavy and specialized equipment, raw materials
and energy.

The problem of generalized scarcity is a crisis far different from the
current crisis of the advanced capitalist economies. The problem of
mature or developed capitalism is not that of scarcity, but of
surplus.

In the United States, for instance, new home construction took place
at a record rate between 2002 and 2006. The effect was the collapse of
the housing market and the precipitous and sudden decline of housing
prices. Banks, including some of the largest in the world, collapsed
overnight. Millions of workers lost their jobs. Whole industries, like
auto, were unable to sell cars, causing a surplus of inventory to
build up. These core corporate giants then went into bankruptcy and
masses of workers lost their jobs. Again, the problem was not that of
scarcity of goods, but rather a surplus that could not be dispensed of
at a profit.

Today, following the mind-boggling U.S. government bailout of banks
and industries, it is estimated that corporate coffers are overflowing
with an estimated $1.8 trillion in surplus cash. Yet, the corporations
are not using those surpluses to hire or rehire laid-off workers, or
to extend credit for business investment. Why not? Because they fear
that the employment of millions more workers will only produce
additional surplus commodities—at least at this stage in the business
cycle—that will not be able to be sold in already saturated or
depressed markets.

The problem of modern, advanced capitalism is the opposite of
scarcity. It is rather the crisis of so-called overproduction. That is
another way of saying that capitalism, the social order based on
private profit, has become a relative hindrance or fetter on the
forward march of production. The reduced production of goods, and with
it the reduction in the employment of labor, is caused because too
much rather than too little has been produced. Productive capacity
lies idle because of surplus rather than scarcity.

Surplus in the United States leads to poverty. This is a bitter irony
for the unemployed and an absurdity unique to advanced capitalism.

The new U.S. Census report reveals that poverty is spiking in this
country today after years of indisposed of surpluses. The Sept. 16
Associated Press report on the recent U.S. Census figures stated: “The
ranks of the working-age poor climbed to the highest level since the
1960s as the recession threw millions of people out of work last year,
leaving one in seven Americans in poverty.

“The overall poverty rate climbed to 14.3 percent, or 43.6 million
people, the Census Bureau said Thursday in its annual report on the
economic well-being of U.S. households. The report covers 2009,
President Barack Obama's first year in office.

“The poverty rate increased from 13.2 percent, or 39.8 million people, in 2008.

“The share of Americans without health coverage rose from 15.4 percent
to 16.7 percent—or 50.7 million people—mostly because of the loss of
employer-provided health insurance during the recession. Congress
passed a health overhaul this year to address the rising numbers of
uninsured people, but its main provisions will not take effect until
2014.”

Of course, the “poverty rate” statistics are something of a fraud
since a family of four living on $22,000 per year in Washington, D.C.,
would not be counted as being “in poverty” because their income is too
high.

How Marx’s view on socialism relates to Cuba

Cuba’s decision to lay off 500,000 workers and reduce subsidies is
neither an inherent failure of socialism, nor remotely connected to
the unemployment phenomenon in the United States or the other advanced
capitalist countries.

Scarcity is not a principal feature of the socialist stage of society,
which presumes the reorganization of society’s economic resources
based on the highest developments and technological achievements of
capitalism. But it is precisely the problem of scarcity that faces
Cuba and other socialist revolutions in lesser developed economies.

The Cuban government is expanding a private market, especially in
agriculture but elsewhere too, because it currently lacks the material
wherewithal to use purely socialist methods to overcome the problems
caused by scarce products and services. The state sector lacks
sufficient resources.

When Marx and Engels were outlining the prospects for socialist
revolution and socialist public ownership as the remedy for the crisis
of overproduction, they were considering that the revolution(s) were
likely to take place in several advanced capitalist countries. It was
precisely because capitalist property relations had become a fetter on
the development of the means of production that they believed society
would inevitably reorganize production on a socialist basis (public
ownership) and using socialist methods (economic planning free from
the constraint of private profit) as a way to allow the forward march
of productive capacity.

The Cuban Revolution did not take place in an advanced capitalist
country. Neither did the socialist revolutions in Russia, China,
Vietnam or North Korea. As Lenin noted in 1917, the revolution took
place not where capitalism was strongest, but where the bourgeoisie
was the weakest.

Marx’s prognosis about where the socialist revolution would begin was
amended by real life and historical processes. Revolution, it turned
out, was more possible initially in poor countries, but their poverty
combined with the enmity of imperialism made the construction of real
socialism more difficult.

The economic tasks that presented themselves to the Cuban
revolutionaries in 1959, and the earlier revolutionary formations in
Russia and elsewhere, were not focused on rationalizing imbalances
based on surplus product, but rather overcoming the heavy weight of
scarcity and extreme underdevelopment.

The USSR, China and Cuba used socialist methods—such as public
ownership of the means of production, central economic planning and
the monopoly of foreign trade—to speedily accomplish basic social and
economic tasks: literacy, health care, primary and advanced education,
electrification, modern farming and industrialization.

To the extent that a socialist bloc of nations worked in cooperation
with each other—and enjoyed their own international division of
labor—the process of basic economic and social progress in these still
undeveloped countries was greatly facilitated. But labor productivity
indices were always lower than those evident at the center of the
world capitalist market. This was a consequence of underdevelopment
and colonialism, not of socialist methods per se. In fact, socialist
methods led to staggering increases in production, science, education
and the arts, while also providing for full employment, free health
care and affordable housing.

Imperialism’s strategy

Economic development was the requisite priority of Cuba in 1959 and
still is today. The policy and strategy of the U.S. Empire is to use
scarcity and underdevelopment as a weapon to strangle the revolution.
That is the essence of the U.S. blockade.

Economic recession and stagnation need to be urgently overcome. That
is the primary task. The government is under siege from the United
States, which seeks to utilize all of its economic and military power,
and its “intelligence” capacities to destroy the Cuban government by
fomenting splits inside of the Communist Party and through the agency
of domestic counterrevolution.

Economic stagnation and protracted scarcity of goods and services is
understood by imperialism to be fertile soil breeding dissatisfaction
and making part of the population open to counterrevolutionary
appeals. The goal of the U.S. blockade and the EU economic sanctions
on Cuba is just that: to promote widespread demoralization and
disaffection with the hope of generating a counterrevolutionary
upheaval.

The United States and Britain used this tactic to overthrow the
government of Mohammad Mossadegh in Iran in 1953. Tight economic
sanctions caused disaffection among the middle classes who became the
human material for the CIA-organized coup that overthrew the
government and led to the return of the Shah’s regime. Once back in
power, the Shah promptly denationalized Iran’s oil and gave it back to
U.S. and British oil companies.

This strategy is more understood by the Communist Party of Cuba than
anyone. It has been confronted by economic blockade/sanctions and CIA
subversion for over 50 years.

The significance of the USSR and the socialist bloc

The Cuban economy’s integration into the socialist bloc is what
allowed the country to survive in the early 1960s. The existence of
the socialist bloc gave Cuba the ability to engage in trade on terms
that were favorable to its social and economic development.

For instance, Cuba’s main trading partner was the Soviet Union. The
USSR was the largest producer of oil in the world. Cuba produced
sugar. The two countries traded oil for sugar. On the world market oil
is traded in U.S. dollars. Cuba cannot access dollars easily. The
integrated trade arrangements between Cuba and the USSR, East Germany,
Czechoslovakia and the other socialist bloc nations allowed Cuba to
develop rapidly, even with the severe imbalances caused by the
blockade and endless U.S. military threats, as well as Cuba’s enforced
economic isolation from most of Latin America.

When the socialist bloc governments of Eastern Europe and the USSR
were overthrown in the reactionary wave of 1989-1991, Cuba lost not
only its energy supplies, but also a vast and inter-tangled network of
trade, aid and financing arrangements that had allowed it to survive
and even grow despite the imperialist blockade.

In the last few years, Cuba’s economic isolation was mitigated by the
left turn in Latin America and in particular by its relations with
Venezuela under the leadership of Hugo Chavez, but also with Bolivia,
Ecuador, Brazil and other countries. Economic growth picked up
markedly, but the global capitalist economic crisis that swept the
world in 2007 has had a grave impact on Cuba and most developing
countries.

The Special Period and market reforms

The problem of generalized scarcity—which is the normative legacy not
only for Cuba, but for all countries that are emerging either from
colonialism or pre-capitalist economic systems, or both—soared and
presented itself as an existential threat to the socialist project in
Cuba during the years known as the Special Period (1991-1997).

Factories shuttered, farms stopped producing and electrical blackouts
were constant as the Gross Domestic Product plunged. From 1990 to
1996, daily life in Cuba was marked by a drastic drop in caloric
intake, from 2,500 to 1,500 calories per person, due to the cutoff of
85 percent of its trade and 80 percent of its imports. When many of us
who are now leaders of the PSL took $2 million of donated insulin to
Cuba in 1994, the country was a month away from a complete depletion
of its reserves for the 46,000 insulin-dependent diabetics who live
there.

Unable to provide the necessary inputs to maintain state farms and
factories, the government introduced private farmers’ markets and a
whole menu of market-oriented reforms. Cuba also permitted joint
ventures with imperialist corporations from Europe, especially to
revive the tourist industry. It also permitted the use of U.S. dollars
sent to Cubans from family members living in the United States.

These measures helped reinvigorate the economy during the 1990s, which
allowed for gains in health indices, recovery of caloric intake, and
the maintenance of free healthcare and free universal education. But
there were also definite social costs and negative setbacks for
socialism, including the growth of economic inequality based on
people’s access to dollars, association with tourists or the presence
of family members in the United States.

A new Special Period today

The PSL’s leadership bodies have been discussing the internal
situation in Cuba for many months. Gloria La Riva, a leader of the PSL
and the coordinator of the National Committee to Free the Cuban Five,
prepared a special internal report in May 2010 for the PSL’s Central
Committee meeting that took place in Washington, D.C.

La Riva wrote: “Many of the same factors that led to Cuba’s 1990s
Special Period have resurfaced or intensified, making it necessary for
the government and the Communist Party of Cuba to reintroduce or
increase some of the economic measures originally employed in the
1990s for its survival, and to pull back on others.

“Basically, the problems are a combination of the intensified blockade
and the world economic crisis. There is lately a drop in production
for lack of spare parts and raw materials, and a serious decline in
the country’s purchasing power for essentials of food, medicine and
fuel. The latter is due to the great increase in the world’s commodity
prices, like that of rice, milk and meat; the precipitous fall in
nickel prices (Cuba’s number two source of foreign income); as well as
a decline in tourist income.

“For example, 50 percent of Cuba’s foreign earnings come from nickel.
Until the financial and commodities crisis hit in 2008, nickel
commanded a price of about $52,000 a ton (May 2007). Cuba in 2008
produced 70,000 tons thanks to foreign investment in its mines, mainly
Sherritt Corp. in Canada.

“Then, at the end of 2008, nickel fell sharply, and Cuba announced
that with the market price falling to between $9,000 and $10,000 per
ton, Cuba was producing nickel at a loss.

“It has recovered some, to about $18,000 per ton in late 2009. (As of
Sept. 14, 2010, nickel prices jumped to over $21,000 per ton.) Still,
it is nowhere near the price of 2007.

“The loss in income from nickel has hit the Cuban economy the hardest
of losses in any sector.

“At the same time, Cuba has maintained its decades-long policy of
providing basic food subsidies for all the population, even as world
commodity prices are sky-high. It has done this while an estimated
189,000 able adults are not working or studying, but still enjoying
the full rights of free healthcare, housing (almost everyone owns
their home or pays pennies for rent) and schooling—with no economic
support for it by being engaged in production. This is becoming an
untenable burden for the economy.

“A longtime top economist and currently Minister of Economy and
Planning, Jose Luis Rodriguez, said that on the island there existed
‘189,000 people of working-age who neither study nor work; however,
they parasitically enjoy all of the country’s social benefits. It will
be necessary to face this situation using the appropriate methods to
resolutely eliminate that form of exploitation of those who work or
are studying by those who contribute nothing to society.’”

‘Long live the Cuban Revolution!’

The Party for Socialism and Liberation has been inspired by the Cuban
Revolution. PSL members work tirelessly against the blockade, in
pursuit of freedom for the Cuban Five, to expose the crimes of Luis
Posada Carriles and the other CIA-funded terrorists, and in defense of
socialism.

Our support for the Cuban Revolution is not based on an idealistic set
of assumptions. Cuba is a workers’ state, not because it is a workers’
paradise, but because it has a superior social system compared to the
capitalist system that preceded it.

Classes do not disappear overnight just because a revolution
triumphed. Scarcity, furthermore, leads to competition for limited
resources. Scarcity and underdevelopment create numerous economic
imbalances, bureaucratic deformations, and other problems and
contradictions that are not the consequence of “bad leaders” or
because socialism is unworkable.

The single biggest and most enduring problem for Cuba, however, is the
unceasing war waged against the heroic island nation by the most
powerful Empire in history.

So, what can we do here? It is by intensifying the revolutionary
struggle of the working and poor people in the United States against
the Empire that we can render the greatest service to our inspiring
and steadfast counterparts in the land of Marti.

As we do that, the PSL will also promote an independent assessment of
the political and economic situation in Cuba.