Economics Analysis
There have been several structural and quantitative economic changes in the Cuban economy over the years, especially within the realm of institutional and quantitative information of the last thirty eight years that indicates incomplete and fragmentary statistical data. The very important and relevant macro economic factors or indicators’ evolution must be put into standardized study to arrive at a scientific, formal economic analysis.
This should include the changes and causes of such changes in consumption, GDP-the Gross Domestic Product per sector, aggregate investment levels, imports and exports as well as internal and external savings.
However there are several impediments to a valid analysis. One of them is the unreliable statistical information resulting from the fact that the public and some officials of Cuba are kept in darkness by the government on matters regarding real economic situation of the country.
Secondly, the distorted and arbitrary pricing system severely affects almost all economic information. Thirdly, the economic activities of private and self employment that have fundamental contribution to the GDP are not properly accounted for by the government.
Fourthly, there has been an extreme exchange rates overvaluing that introduce additional distortions to the already distorted pricing distortions (Sanders, 2007, p. 14).
Lastly, the government has always deliberately hidden former president Castro’s personal expenditure and covert foreign operations funds’ sources. Furthermore, Cuban states that are not in any partnership whatsoever with foreign activities and investors are accredited with accounting procedures and systems that are evidently very faulty. To arrive at a conscious conclusion regarding the positive and negative economic factors and changes, it is imperative to study the evolution of the Cuban economy from a structural, institutional and qualitative view point.
This can be done by analyzing reports gathered from public Cuban administration members and unrevealed individuals’ accounts as well as the scattered and fragmentary semi official and official sources of Cuban reports. Between 1960 to1961 there were radical financial and international trade changes resulting from massive technical and entrepreneurial talent exodus. There was heavy dependence on soviet union’s subsidies before and until the Soviet Union’ demise. This made the Cuban economy appear as a member of the socialist economic bloc.
Structural economic disturbances and disequilibrium arose from these subsidies cut, and the economy remained somehow stagnant in per capita growth (Luis, 2001, p. 67). There have been some unintended and intended outcomes from the government’s implementation of emergency control measures aimed at recovery and stabilization of the economic policies and activities. Gradual decay of the government’s control over populations in some regions and the economy are some unintended results whereas protection of top government members appears as the major achievement of these emergency measures (Liss, 1997, pp.
34). Sectoral analysis provides the best information for Cuban economic revolution understanding. The major source of foreign exchange and income in Cuba, the sugar industry, seem to be in continuous deterioration especially from the fact that for example the government could not give official and accountable figures for total sugar output in 1997 and furthermore there are no official costs of production records available (Erickson, 2002, p. 21).
Lack of efficiency in management of this sector seems to be its crisis’ major cause but the government perennially insists that unavailability of short-term loan or credit is the main cause. Moreover, lack of field and mills’ workers’ incentives is another possible reason for this sector’s crisis. The denial of short-term credit to Cuba by international markets results from Cuba’s efficient production inability. The little credit accessed is usually at interest rates which are debilitating.
Availability and sources of dollars in the countryside regions makes these regions more precarious as compared to the urban regions. Remittances of US dollars are thus a paramount source of Cuban foreign exchange. They are usually generated mainly by relatives who are in exile in other countries especially the US, with a gross estimate of US$ 500-800 million dollars per annum (Baloyra, & Morris, 1993, p26). Prostitution, being Cuba’s major tourist attraction, justifies the fact that the main source of foreign exchange in the country is tourism.
These prostitutes are lowly paid predominantly due to decreased economic opportunities available to the people. Tourism therefore seems to be of relative and absolute economic value although it is constrained by the bloated dependence on foreign food imports as a result of chronic food and agricultural production crisis in Cuba. Before his retirement, President Fidel Castro had appeared as a last result leader to his subjects mainly because of mismanagement of government affairs which he personalized and operated as a private property.
There has been unknown strategic and reserves origin which Castro managed privately as deposits in International Financial Bank (Banco Financiero International) and other foreign financial institutions. There are profound management and structural economic changes that have and are taking place in Cuba alongside the quantitative changes involved. These changes have made Cuba evolve into four main sectors or subsystems in the economy. Fidel’s personally administered subsection of enterprises holds the most political and economic power.
These included; the Banco Financiero International, Castro’s physical and monetary reserves, yogurt and cheese production industries installations among others. He operated this subsystem as a personal consortium/ manor outside the public traditional sector. Its major revenues are accrued from the nationals’ purchases of imported items using the dollar remittances received from exiles in the US, commercial sex payments, informal and private markets operations/ transactions, tips given by tourists as well as the tourism industry itself (John, 2000, p. 19).
His personal mistrust of an economic system that he created himself and which didn’t follow strict guidelines of a central plan system seems to have led to formation of Castro’s economy. His executive promotions in the government as well as public enterprises depended on loyalty rather than the conventional competence criterion. This resulted to the chronic fall in efficiency in production processes. His major aim in creating this economic subsystem was to guarantee and sustain his government’s military and police personnel’s security after the Soviet’s subsidies were cut.
His second economic subsystem comprised mainly of foreign entrepreneurs and investors operating, in partnership with him, in the tourist industry for concomitant mutual benefits (Byrne, 2003, p. 15). These foreigners brought managerial and marketing skills and some limited capital. The two subsystems, foreign and Castro’s or a combination of both, appear to be the most productive or prosperous in the whole economy. Castro on his part provided contracting security and rights to property to the foreigners who provided large amounts of foreign exchange in return.
There is a form of privatization very clandestine in nature in the two subsystems by making selective privileges to some nationals of this country. This pinata involves management by the military of some economic endeavors especially in food production. It also includes massive wealth volumes to express support to the national security. The third subsystem is comprised of the sugar industry as the major sector including its manufacturing and agricultural sub sections. Other remaining enterprises that are not under the full control of the government are also included in this subsystem.
This subsystem seems to be neglected in the sense that much of investment is prioritized in the foreign exchange-earning tourism industry (Camphell, 1997, p. 13). It is deteriorating at a very fast rate than the other subsystems possibly because of the inability of the government to manage the subsystem, which is scattered over the whole island. There is underutilization of installed Cuban capacity possibly as a result of unavailability of supplies and parts. Self employment in Cuba was instituted in efforts to achieve a certain level of equilibrium between aggregate consumption and total salaries volume.
It was also allowed as a measure to curb the Cuban peso future debasement. The fourth economic subsystem is the private sub sector which is under high constraints though very dedicated to legal economic activities. The same law however explicitly constrain this sector by prohibiting workers hiring. Furthermore, the sector is comprised of retired army and police personnel with the objection of making extra profits. Workers in the third subsystem/ or sector who require additional supplement of the rationed food quotas also comprise this sector.
A close examination of these economic subsystems indicates widespread uncertainty and corruption. The country’s food crisis risk could be reduced by marked economic growth in the first two sub sectors and probably the fourth as well as the reluctant small enterprises emergence due to the extreme imposed restrictions by Fidel Castro. The third subsystem is the largest of all four being made up of approximately 80-90% of the working population and as thus the entire economy is considered possibly stagnant, shrinking and in definite disarray (Sanders, 2007, p. 190.
The socialist nature of this “Cuban revolution” has been criticized by several people including Ernesto Guevara (“Che”), who questioned Castro’s socialist rhetoric and his sincerity concerning his public oratory. The major areas of concern include chronic government inability to install reliable national accounting systems and long term planning abandonment since 1962 (Luis, 2001, p. 89). The other issue is the long term and continued dependence of the country on the Soviet Union’s subsidies without parallel interest or commitment to develop internal and international economy.
The surreptitiously created private enterprises controlled by Castro and his intimate allies are another factor that resulted to the stalement of Cuban economy including undisciplined production in both public and private enterprises. Furthermore, the central planning, currently broke down in management of the economy is another draw back to development progress of this nation. It is ironic that Castro created a socialist revolution agenda which he didn’t actualize in Cuba but one that he constantly tried to export to other nations instead.
With the constraining embargo of the US in consideration, it was possible for Cuba to have a better economic superiority and mediocrity than is the situation today. In this respect, a market economy wouldn’t be inferior to a socialist market but the socialist one would prosper Cuba especially if the embargo of the Cuban potential entrepreneurs and workers was lifted. Even within a socialist realm, there has been inexcusable reluctance on the Castro’s side in liberalization processes and advocates of unconditional and unilateral US embargo lifting must acknowledge this fact (Gonzalez, MacCarthy, 2004, p.
47). His powers that are very monopolistic in nature impede the benefits enjoyed from foreign and domestic trade by the Cubans and such embargo lifting would only be beneficial to him alone. There are many challenges ahead in the post- Castro era requiring, among others, very dramatic overhaul of the government system to revive Cuban economy. A variety of economic disorders and disparities must be addressed especially prioritizing the strengthening of the currency as well as addressing the wage stagnation, declined standards of living and the food crisis.
In communist governance systems, dynastic succession is usually tricky especially where liberalization of the economy is gradually expected to go alongside political and state ownership monopolistic power. At the onset, there is much fragmented political opposition in this country and there is evidence that most of the citizens are for multiparty voting and elections system as well as free market system. Cuba has for many decades not received any assistance or guidance from the United States due to the venomous relationship between the two countries.
Expropriation claims therefore should be put into consideration by these two parties in order to resolve the problem in the most appropriate way possible for there to be dramatic improvement hope for Cubans (Bungelsdorf, 1994, p. 20). Another factor requiring concerted efforts to improve the countries ailing economy is the dual monetary system and low production as a result of marginalized salaries and wages the fail to provide incentives to workers and entrepreneurs. Foreign exchange should be taken as an integral component of all developmental activities aimed at achieving rapid growth and development.
Real wages boost, resolution of the conflict with the US and national currency strengthening therefore should be the government’s priority. Reference Baloyra Enrique & Morris James (1993) Conflict and Change in Cuba. Mexico, University of Mexico Press, pp. 26 Bungelsdorf Carollee (1994) The Problem of Democracy in Cuba: Between Vision and Reality. Oxford, Oxford University Press, pp. 20 Byrne Janice (2003) Hemingway in Cuba. The Hemingway Review, Vol. 23, pp. 15 Campbell Al (1997) Cuba Today and the Future Socialism. Monthly Review, Vol. 48, pp. 13 Erikson Daniel (2002) The New Cuba Divide.
The National Interest, Spring, pp. 21 Gonzalez Edward & McCarthy Kevin (2004) Cuba after Castro: Legacies, Challenges, and Impediments. London, Rand Publishers, pp. 47 John Danielson (2000) Canada-Cuba Relations: The Other Good Neighbor Policy. American Review of Canadian Studies, Vol. 30, pp. 19 Liss Sheldon (1997) Roots of Revolution: Radical Thought in Cuba. University of Nebraska Press, pp. 34 Luis William (2001) Culture and Customs of Cuba. London, Greenwood Press, pp. 67, 89 Sanders James (2007) Degrees of Freedom: Louisiana and Cuba after Slavery. Journal of Social History, Vol. 40, pp. 14, 19
