Economic Liberalization in Cuba

As a great deal of political rhetoric in the United States revolves around measures to alter socio-economic inequalities, its neighbor to the south, Cuba, presents a rare case study on economic liberalization and its effect on equality.  With economic equality comes not only a fairer society, but also a more stable one, and it is time that the United States focuses on bettering itself for everyone and not just a few.


Economic equality in Cuba stems from the communist system, surely, but there seems to be more to it than that.  Contrary to the beliefs of many, Cubans are able to buy and own more than the limits placed on them by rations and government handouts. A Cuban, while only recently able to buy or sell his or her home, has always been able to purchase other luxury items to distinguish himself or herself – even American-made products find their way there.


Cuba, despite its economic woes, has seen significant gains in social indicators.  There remain signs of a widening gap between the rich and the poor–yet, it is not uncommon for the “chauffer” to sit down with the “doctor” at his home for a meal.  Gender equality in the country is on par with that of developed countries and getting better each year.  There are no private schools.  As argued in an article by The Atlantic, educational equality equals economic equality, and Cuba’s schools are not only equal: they receive high priority in the national budget, with over 10% spent on education.

 

The prevalence of remittances threatens economic equality and does create some disparity, but often these remittances have been distributed among so many family members, they rarely make anyone rich.  That, however, is changing rapidly as Obama has lifted restrictions on remittances. The cash-strapped island will be reluctant to stop the currency inflow.  These remittances are also disproportionately concentrated in Havana and a few other cities, as these places have historically had higher migration opportunities.  Already, there are neighborhoods in Havana where the houses are better maintained and the feeling is more affluent.


Illegal economic activity also undermines economic equality and will play a bigger role as the state further opens itself to tourists.  Illegal sales of goods and services are very pervasive.  Nearly every Cuban household engages in some sort of illegal economic activity in order to supplement their government wages and rations.  As in a capitalist society, some entrepreneurs are more successful than others.  However, the clandestine nature of this income generation has generally limited its potential to create any obvious economic disparity between neighbors.  This, too, will change as the tourism sector flourishes and the U.S. eases its restrictions on travel to the country.
The political and economic reforms that have taken place since the 1990s (Over 300 modifications have been made in the last decade alone) have seemingly put Cuba on a slow path toward modernization.  Now, Cubans are free to buy and sell homes and used cars, a practice banned since the Revolution.  While still swearing allegiance to socialism, Raúl Castro has called for an end to monthly ration books and for the expansion of private enterprise.  He has assured Cubans that they would continue to receive free access to health care and education, but has maintained that Cuba’s economy could not support the ration books and other government handouts.  He had called to lay-off over 500 public employees, encouraging them to find work in the limited private sector, but later postponed those plans.

 

These changes have led to an increase in foreign direct investment and tourism.  Cubans working in these sectors stand to see an increase in their economic prospects, whether they be gained legally or illegally.  Already, there is increasing disparity between the rural Eastern part of the island.  Legal hurdles remain prohibiting the free relocation of Cuban citizens to other areas of the country. While a citizen may be free to buy and sell his house, he is still unable to relocate to Havana without permission from the state.

 

The U.S. has already started easing restrictions imposed through its embargo against Cuba and has flirted with the idea of ending it altogether.  The embargo has been criticized by the international community.  While Cuba has asked twenty times for the end of the embargo at the United Nations General Assembly, the U.S. has continually refused.  If the embargo is lifted, the island nation will undoubtedly see an increase in tourism profits as well as an increase in foreign direct investment and trade.  While this could be achieved through government run and controlled operations, it is unlikely that the U.S. will lift the embargo without some sort of provision that limits this scenario.

 

The timid steps taken by Raúl Castro have shown that the government understands change must take place, as its current economic situation is stagnant and unsustainable.  However, Castro is unsure how to move forward while still hanging onto the rapidly fading ideals of the Revolution.  Nevertheless, even while Raúl Castro has spoken of liberalization and freedoms (even proposing political reforms that may signal an end to dictatorial rule), he has kept Cuba’s repressive legal and institutional structures in place.  Cubans cannot leave the country legally without a Carta Blanca (an exit visa, which is not guaranteed) or freely relocate within the country. There are still repressive limits to free speech and expression.  Even after the hunger strike of Orlando Zapata Tamayo in 2010 provoked the release of over 40 political prisoners, many remain in Cuban prisons.  It is clear that these tactics serve only to keep the Castros in power, and they keep relations with the U.S. tepid at best.  Many critics argue that any reforms will be constrained by the memory of the Revolution and the goals of its founders, rather than sweeping, generational changes.  The remains of the Revolution may put a chokehold on further political reforms.

 

As Cuba seeks ways to grow its economy, it will undoubtedly see the creation of some economic inequality.  It has no choice but to liberalize the economy in order to maintain its social spending, but in doing so it will create new social problems.  The central government will need to move away from universal social policy to more diversified programs.  Centralized planning has not, historically, had much success in broadening programs to meet the needs of different sectors of its population, but this will be essential for the political structure to maintain its legitimacy.  In order to address these different needs, the government will need to admit that there is inequality, which it may be reluctant to do.  It will need to decide how much inequality is acceptable and what the requirements for attaining it are.

 

The pace and scope of these changes will not only alter the future for the country–it could possibly be the trailblazer for a liberalized market economy with a high level of economic equality.  Clearly, Cuba is a long way from a liberalized market economy, but unlike other economies moving in this direction (China, for example), Cuba is the only one starting from relative equality.  How it proceeds in the coming years as it is gradually integrated into the global economy could show the world another way of doing things.

 

Brittany Borg is a senior at Fordham College at Rose Hill and can be contacted at bborg1@fordham.edu.

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