Lessons in Socialism: How Cuba Can Become Relevant Again

An entrepreneurial wave is emerging in Havana that, along with immigration reform in the U.S., is giving Cuba renewed relevance while giving Americans a close look at the dangers of extreme wealth redistribution.

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Havana, Cuba — In this once spectacular tropical city, three buildings collapse from neglect every single day. There has been little infrastructure investment in 50 years and the average worker earns $20 a month. By almost any economic measure, socialism under Fidel Castro has been an abject failure.

Yet things are beginning to change. Presumed to be ailing, Castro has handed power to his brother Raul, who is permitting modest levels of private enterprise and home ownership. Meanwhile, President Obama has eased U.S. travel restrictions to Cuba. Legal passage from the States has soared more than 10-fold in a decade. Most of the 600,000 U.S. residents expected to visit Cuba this year have family there, but conventional tourism is on the rise as well. I was there in January on a people-to-people visa.

Critics worry that tourist dollars will prop up the failed socialist system and prolong its grip. But based on my trip, there’s reason to believe the opposite may prove to be the case: Spirited young entrepreneurs are rising from Havana’s rubble to take advantage of these small but important signs of economic liberalization. Interestingly, Cuba’s glacial but perceptible shift to the right comes as the U.S. has turned sharply to the left, raising income taxes on the rich and searching for other means to redistribute wealth.

I was introduced to this burgeoning new economic order through a young entrepreneur I’ll call Javier.  Javier did not ask that I not use his real name, but after speaking frankly with me about emerging Cuban business opportunities, Javier worried that he had made dangerous political statements. If he were judged to be subversive, his budding business empire could be shut down in minutes.

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Javier is 31 years old. He’s college educated, speaks fluent English, and calls himself “ambitious and restless.” He has taken advantage of the fledgling residential real estate market in Havana, brokering home sales from struggling Cubans to fellow countrymen with money sent from family in the U.S. and abroad. (Foreigners are not allowed to purchase homes directly, so they do it through family.)

Javier has invested his real estate commissions in a “paladar,” which is a private, family-run restaurant permitted since the early 1990s. Paladares typically are converted residences; they serve authentic Cuban cuisine to tourists seeking a higher quality dining experience than is available at government-run restaurants.

It took Javier three years to convert his residence to a paladar, where the meal was among the best I had while in Cuba. Now he wants to use his restaurant business to meet more wealthy foreigners who want to buy a home through their Cuban families. In other words, he’s looking for business synergies. He’s also bolstering his finances through creative accounting that helps him avoid taxes of 50% on earnings over $50,000 a year.

What could be more entrepreneurial than synergies and, well, tax planning? Javier strikes me as the kind of Cuban who could become a millionaire if true reform ever comes.

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Socialism here has managed to raise the living standards of the destitute, the bottom 20%. But virtually all others have fled or been dragged lower. Whatever leadership succeeds Fidel and Raul, it will have to confront the basic question of whether raising the living standards of the very poorest is worth the toll it has taken on the rest, as well as the toll it’s taken on the country’s infrastructure and even its fertile landscape—much of which is now grown over with weeds.

Even dictators want some level of popular support. Castro earned his by lifting the poorest and stirring nationalist emotions in a historically colonized land. But the physical decay is so extreme that it is difficult to imagine any new leader succeeding without reinvigorating an economy that has been bled dry. Perhaps the post-Castro government will consider whether a more open economic policy might lift all boats. Even the poor benefit from greater growth, as empowered capitalists have started to show in China.

Traveling in and around Havana offers stark lessons in the futility of socialism. Billboards are non-existent; there is nothing to advertise except “La Revolución” and “Más Socialismo,” largely self-explanatory terms you find painted on fences and printed on banners on many city blocks, promoting the government.

Castro elevated health care, education, and the arts. But he did so in part by diverting pesos from sorely needed infrastructure rebuilding. All of Havana is literally crumbling. Stunning facades have fallen in heaps. Throughout this city, brilliant but severely worn architecture lies masked behind the drying laundry of impoverished families crowded into space that at one time bustled with trade and the activities of the well-to-do.

There are jobs for everyone; unemployment stands at less than 2%. But wages are so low that little gets done. Cuba’s productivity per person ranks among the lowest 3% in the world. A popular refrain heard throughout this city: “Fidel pretends to pay us and we pretend to work.” The only jobs that matter are those where you can pilfer goods from the workplace or which give you access to tourist money. Tour guides and artists who sell to visitors command enviable incomes. Butchers earn more than doctors.

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The country’s GDP is $60 billion, about the same as the state of New Hampshire. California alone produces $2 trillion annually. Roughly 5% of Cuba’s “output” is gifts to its residents from exiles sending “remittances” to family in Cuba.

While America’s recent political shift to the left under Obama is in no way comparable to the Más Socialismo of the past five decades in Cuba, the pendulum swing nonetheless reflects our own internal debate as we have raised taxes on the wealthy. Our tax-the-rich movement has spurred talk in some wealthy segments of fleeing high-tax states like California and New York, and of retiring to non-productivity rather than forfeit so much income.

That might sound like rich-folk blather, and certainly there are ample good reasons that U.S. tax policy has moved this direction. Even a hard-core capitalist like Warren Buffett has endorsed the extra toll on the wealthy. We’re not and never will be Cuba. But a tour of  Havana reminds you just how wrong wealth redistribution can go.

17 comments
Socialist_Worker
Socialist_Worker

First to those who say the embargo is irrelevant. Well why not end it than? Second Cuba is a small country. It can not be self sufficient because todays world relies international trade. Even the US military can no longer rely on all us made components for its war machinery. Any company doing business with Cuba even a Non US company faces sanctions if caught trading with Cuba. The embargo also affects the shipping industry in that ships docking at a Cuban harbor can not call at a US port for six months later even though Key West is a only 90 miles away. That embargo includes medical devices that are humanitarian in nature only.     

liznola
liznola

The alternative to the Havana of today shouldn't be a Havana run by global corporate moguls, but I fear that's what is coming.  The city will become, once again, the playground of the wealthy; its native inhabitants will be displaced by soaring real estate prices and services.  There's nothing to celebrate in that.  The article doesn't address the important historical role the US has played in pushing Castro further and further toward totalitarianism:  constant assassination threats, military provocation, embargoes, CIA dirty tricks.  The US will never allow a country in this hemisphere to exist  and thrive under an economic system not manipulated to serve our interests.  The people of Cuba can read, think, and speak articulately.  They're untouched by mass advertising; their minds haven't been corrupted by an addiction to consumption.  Those clear minds are reflected in their self-expression via the arts which are difficult to separate from everyday living.  While they no doubt deserve and will hopefully get a functional government and rising standard of living, they stand to lose their souls under Western capitalism.

Isabel
Isabel

Dear Dan Kadlec,


I just read your article Lessons in Socialism: "How Cuba Can Become Relevant Again" and want to express my disappointment.  Both as an expert on Cuba and as someone who grew up there I have to tell you that your article approaches the complexities of the topic in a very superficial fashion. Not even once you mentioned the word "geopolitics" to explain the difficult situation that Cuba is going through, as a result of the dysfunctional relations between Cuba and the US for half a century. Not even a mention of the embargo. No reference to the ways that the US has intentionally undermined populists and democratic processes (Nicaragua, Guatemala, Chile), a reference that could shed light on similar patterns of US foreign policy pertaining to Cuba.

This is very concerning to me, since I am part of the executive committee of the educational grass root organization CAFE (Cuban Americans for Engagement) whose members strive to educate the American people about the unfairness of the embargo, the unjust inclusion of Cuba on the list of terrorists countries and many other instances that show how the US has had a negative impact on the development of Cuba. Beyond the fact that Cuba is ruled by a dictator, the embargo is a flagrant violation the human rights of the Cuban people.

On a positive note, it was good to read that the injection of capital is promoting a slow economic development and liberalization in Cuba.

I hope your misleading perceptions come from an honest but misinformed place.

One last thing: Cuba was never really "relevant". Maybe Havana was. And just a very selected group of people. The country never developed its own internal market and industry and it had a very parasitic relation with the US. The Revolution thus, didn't come out of the blue.

Thanks for your time,

María Isabel Alfonso, PhD
Associate Professor
Modern Languages Department
St. Joseph's College
malfonso@sjcny.edu

Manolo
Manolo

mglnese is full of sh*t


hcapiro
hcapiro

Republic of Cuba: Power Sector Infrastructure Assessment - Dr. Manuel Cereijo, P.E.
University of Miami - December, 2010   Executive Summary
After almost 52 years, the Castro’s socialist experiment has exposed Cuba to the economic turmoil and decay that are the hallmarks of a command economy: stagnation, heavy debt burdens, and inefficient industries, deterioration of the infrastructure, declining standards of living, and shortages of basic goods. In order to better prepare the conditions for a successful transition it is absolutely basic to have comprehensive and detailed information about the state of the Cuban economy and infrastructure. That is, the new government and private investors will need a feasibility study, an assessment, of the country, including such areas as: present state of the main industries, availability of skilled labor, communication systems, conditions of roads, airports, seaports, railroads, water and sanitation, and, of course, the electrical energy infrastructure. We believe this study will be one of the greatest contributions, prior to the transition, to assist in the economic recuperation of Cuba.
The study has been divided into three parts or periods of time, that define clearly the
stages that the electrical system in Cuba has gone through:
(a) 1959-1989
(b) 1990-1997
(c) 1998-2010
The emphasis on the report is on the last period, since it is the period of interest for the purpose of the study. The last decade has been one of mixed results. From 1998 to approximately 2004, there was some progress in the electrical energy system. However, the continuous use of domestic oil, the age of several units, which has produced breakdowns in some of the major plants, have created a crisis in the system, and the government has tried to solve it by purchasing small diesel and fuel oil plants, as well as the use of gas for fuel, in what they call Energas.
There are only seven main plants, out of the 17 plants that are mentioned as part of Union Electrica, with a capacity above 50MW. They are:
1. Antonio Maceo, formerly Rente
2. Antonio Guiteras, Matanzas
3. Lidio Ramon Perez, Felton
4. Maximo Gomez, Mariel
5. 10 de Octubre, Nuevitas
6. Carlos Manuel de Cespedes, Cienfuegos
7. Este de La Habana, Santa Cruz del Norte

 http://ctp.iccas.miami.edu/Appendices/Appendix_D_Power/Cereijo_2010a.pdf

yvonwest007
yvonwest007

Socialism failed in Cuba for many reasons. We have the usual suspects : Extreme system of wealth redistribution through socialism ; repressive dictatorship ; no property rights until recently ; etc. But what about culture? Scandinavians have developed a form of sustainable socialism without going into excesses. They don’t fall into insane veneration and personality cults, or show such vulnerability to populism. They wouldn’t tolerate dictatorship. Isn’t the problem more cultural? The ability to enjoy life in a capitalist society requires discipline – not envying your neighbor – and to be more aspirational than jealous. It also requires the rich to re-invest their wealth into the people around them, instead of parking their money into safe havens. Perhaps Latin America is not ready for more capitalism…

sminister
sminister

I mostly agree with mglesne.  Compared to most other major Latin American cities, Havana is in pretty good shape.  I would choose to live their over Mexico City or Guatemala City anyday!  When you compare Guatemala and Cuba today, both of which were controlled by a small political and economic elite in the 1950's, it is very telling.  Guatemala has a bunch of shiny new building and high-end fashion stores to go along with the 5th highest rate of child malnutrition in the world, terrible rural poverty, drug cartels, and rampant violence.  What Cuba lacks in shiny new buildings it more than makes up for in low crime rate and high standards of education and health (including a lower child mortality rate than the U.S.). 

sminister
sminister

I spent three weeks in Cuba in January doing research.  While this article has some good information, there are also parts that are ideologically-driven spin and not reflective of the reality on the ground or the many and varied views of the Cuban people.  Like anywhere, Cubans are internally diverse.  A small minority of them want a change to capitalism, but the large majority want socialism with small & medium scale private enterprise.  This, of course, is the direction they're moving.  Whether they will move fast enough and with enough dexterity is a big question, but the majority of Cubans still believe that economic growth should benefit everyone, rather than just making a small elite very wealthy (which is what Cuba had prior to the Revolution).  The idea in this article that "open economic policy lifts all boats--even the poor" is not universally true.  It all depends on how the economic liberalization is managed by the government.  The contrast between China and Russia is relevant here.  Every Cuban I met readily admitted that Cuba has lots of problems and needs change, but they tend to see this within the context of an evolving socialism, rather than a change to capitalism.  So contrary to the suggestions of this piece, most Cubans want "mas socialismo," albeit it with significant reforms.

mglesne
mglesne

How ridiculous! You would not even dare to walk through the back streets of any other Carribean/Latin American capital, given the crime and poverty that infests the capitalist cities of the South. Havana, on the other hand, not only remains the most beautiful city of our southern hemishpere, but is also free from the violence and despair that grips 3/4 of most Latin cities. What "infrastructure" is missing exactly? Maybe if you had gotten outside of the capital you would see that the infrastructure spending deliberately went towards the countryside and provincial cities that are usually completely ignored by capitalist countries of the South. But Havana is far from the crumbling mess you want to convey to your readers. Streets are well paved, public transit is everywhere and City parks are beautiful and well-used.

hcapiro
hcapiro

OR ESPLAIN THIS María Isabel Alfonso, PhD!! EMBARGO? WHAT EMBARGO! IT HAS SUCH HUGE HOLES THAT EVEN FIDEL CASTRO'S EGO COULD EASILY PASS THRU IT! DATA FROM CUBA'S OWN WEB SITE!  

SECTOR EXTERNO / EXTERNAL SECTOR  - 8.4 - Intercambio  comercial de mercancías por países seleccionados  y áreas geográficas (Conclusión) Trade in goods in selected countries and geographical areas (Conclusion) Estados Unidos de América (USA) 2004 = $443,900,000  2005 = $476,311,000 2006 = $483,591,000 2007 = $581,657,000 2008 = $962,767,000 2009 = $675,420,000 http://www.one.cu/aec2009/esp/08_tabla_cuadro.htm     REUTERS: Cuba says U.S. climbs to 5th leading trade partner-HAVANA | Thu Aug 14, 2008
(Reuters) - The United States ranked among communist Cuba’s top five trading partners for the first time in 2007 despite the decades-old U.S. trade embargo, as U.S. agriculture sales increased by $100 million. Trade data for 2007 posted on the Web site of Cuba’s National Statistics Office (
www.one.cu) placed the United States fifth at $582 million, compared with $484 million in 2006, including shipping costs.
The United States, which began selling food to Cuba in 2002 under an amendment to the embargo, placed seventh in 2006 and 2005. 
http://www.reuters.com/article/2008/08/14/us-cuba-usa-trade-idUSN1447847620080814  

hcapiro
hcapiro

@sministerITS AL GOOD WHEN YOU HAVE MONEY DEAR! NOW TRY LIVING LIKE AN ORDINARY CUBAN FOR LESS THAN $20/MONTH! SO LETS HEAR FROM THE ORDINARY CUBAN CITIZEN NOT SOME OUTSIDER!

YOUTUBE: DOCUMENTARY: "Cuba and the Elephants" - Full version w / English Sub-titles: A Look at Cuba, in reality beyond its tourist attractions. A documentary that takes us to reflect on the achievements of the socialist system and how truly the common Cuban people live. A production of the Political Institute of Peru for Liberty. 

http://www.youtube.com/watch?v=jCIk66EPIV4&feature=results_main&playnext=1&list=PL9241B0E7F766DBA0&fb_source=message

hcapiro
hcapiro

@sministerDONT YOU THINK THAT WE SHOULD LISTEN TO THE ORDINARY CUBANS AND NOT THE "CUBAN EXPERT" OUTSIDERS WITH LOTS OF DOLLARS TO SPEND??

YOUTUBE ENTIRE DOCUMENTARY: "Grandchildren of the Cuban Revolution"  - The Grandchildren of the Revolution gives the youth a voice to share their feelings of hope and despair. Some speak with humor, many do it in defiance. The film tries to capture the vibe of Cubas youth today. Featuring artists like: Los Aldeanos, Porno para Ricardo, Silvito El Libre and bloggers Claudia Cadelo, Yoani Sanchez and Laritza Diversent, the film was directed by Carlos Montaner with the help of young camera men and women who visited the island throughout a span of several months. SPANISH WITH ENGLISH SUB-TITLES

http://www.youtube.com/watch?v=-KVqUrOBiQQ


hcapiro
hcapiro

@mglesneHAVANA IS FALLING APART DUE TO THE PURPOSE NEGLECT OF THE CASTRO OLIGARCHY!

YOUTUBE DOCUMENTARY: Habana - Arte Nuevo de Hacer Ruinas, Parte 1 de 6 - HAVANA: The New Art of Making Ruins In recent years, Havana has become famous all over the world for the morbid charm of its flaking façades – a curious blend of magic and decay – and romanticized in countless Hollywood films and documentaries, most notably perhaps in Buena Vista Social Club.  Its beauty resides in the poetry of its ruins. But these ruins are far less poetic for the people who inhabit them. Houses frequently collapse causing fatalities. The decay of this city and its living quarters is a continual source of both danger and shame for its inhabitants. This unique documentary tells the stories of the people who reside in these modern ruins, from a homeless man who lives in an abandoned theater (in which Caruso once sang for Cuba’s high society), to an expropriated landowner who struggles against the decay of his parental home, to a writer who conceives a philosophy of the ruins to explain and bear the gradual collapse of the city and its political system.

http://www.youtube.com/watch?v=jkA3lw5plks

Isabel
Isabel

@hcapiro the fact that under certain exemptions the US can sell food to Cuba does not denies the reality of the embargo, which has been denounced by Ammnesty International, an organization that has criticized the violation of human rights in Cuba . And please, no need to use capital letters. Calm down. Just for a change, angry Cuban-Americans from Miami like you should learn to dialogue using the language of democracy and respect.