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Is Cuba marching towards capitalism?

Raúl Castro's economic policy appears to be a modern attempt to use capitalist mechanisms to save 'the system.'


Among the measures implemented by Raúl Castro to improve Cuba's economy and public finances are two that have generated exaggerated expectations of change and confusion, both amongst the population and many outside observers. I am referring to the legalization of self-employment and small private companies, and the enactment of the Foreign Investments Law. The first set of measures has certainly introduced  changes that seem spectacular in some areas of the country after decades of chronic stagnation. Such changes, unthinkable under the leadership of Fidel Castro, have also been interpreted as a first wave of reform measures that could be followed up by more profound economic changes.

This expectation has been fueled by the government's opening up to certain foreign investments, bolstered by the "normalization" of diplomatic relations with the US. Without any doubt the development of micro and small businesses in Cuba features elements that the public interprets as capitalistic, as their administration is in the hands of private citizens rather than governmental agencies. Indeed, the island's new entrepreneurs do have a certain degree of autonomy to hire employees, determine the prices of the goods or services they sell, and allocate certain volumes of resources to savings and investment, among other new freedoms. Thus far we can say that Raúl Castro has permitted some capitalist forms of free-market economic activity, but only in a few sectors.

However, the scope of development of capitalist forms of production and trade is clearly delimited by the terms under which the government has thus far sought to attract foreign investment. This law excludes the participation of Cuban investors in these companies. This means that Havana is opposed to the development of a class of Cuban capital holders, who would eventually compete with the State, both politically and economically.

These conditions evoke the experience of Lenin's New Economic Policy, well known by their acronym: NEP. This policy was implemented in 1921 to prevent a popular revolt and the collapse of the Soviet economy, which would have quashed the Communist revolution. The NEP consisted of a great liberalization of the country's markets and means of production, which were in critical condition after World War I and the Bolshevik Revolution, with the ruinous economic policies that came in its wake. It was clear to Lenin that it was necessary to take some capitalist-like measures to save Socialism and, in fact, to build Communism on a more solid foundation.

The initiative had many opponents in the Soviet Communist Party, but Lenin prevailed. The NEP was a great success, facilitating the recovery of the Soviet economy and political stabilization. It was abandoned in 1928 with the regime's return to extreme centralization and state monopolies, headed up by Stalin. Today many authors agree that without Lenin there would have been no NEP, and without the NEP there have been no Soviet Union.

Save for some differences, Raúl Castro's economic policy appears to be a modern attempt to use capitalist mechanisms to save Cuban socialism. The official explanations of the "revision" of the model and the government's insistence that it will not "cede one iota" in its negotiations with the US tend to confirm this assessment. Keep in mind that the development of micro and small enterprises in Cuba was motivated by the government's need to drop from the State payroll a million workers deemed unproductive. This made it possible for many of them to create their own jobs and income, thereby freeing the government from a stifling fiscal and economic burden. This is why it is a big mistake to interpret these changes as capitalism superseding socialism.

The sluggishness with which the changes announced  years ago have been implemented do not lead one to believe that Cuba is truly opening up its doors to capitalism. This is also confirmed by the continuing reports of entrepreneurs and foreign investors who visit the island and underscore that conditions are still wanting to justify investment there. Even so, if the country manages to attract significant amounts of foreign investment, the purported "march towards capitalism" as a new mode of economic life is not guaranteed.

There is good reason to expect that in the short and medium terms an essentially state-controlled economy will prevail, albeit with some forms of small-scale capitalism for Cubans, and to a greater but still insufficient degree, for foreign capitalists who venture to invest on the island, under the Cuban government's scrutiny and very precarious conditions.

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