Cuba’s Next Chapter

Rachel Price

In April 2016, Cuba’s Communist Party (PCC) convened its Seventh Party Congress. Sprinkled throughout the published proceedings were a few attempts at levity by the otherwise laconic Raúl Castro. One joke went as follows: when US politicians critize Cuba for having a single-party system, Raúl responds, “Yes, just like you.” The gullible Americans correct him, naming their two political parties. Raúl then reflects that if the US considers its two parties to be anything more than a single one—presumably advancing global capitalism—then Cuba, too, could be seen as having two parties, one led by Fidel and the other by himself. The punchline: “Surely Fidel will say ‘I want to direct the communist one,’ and I’ll say: ‘Fine, I’ll head the other one, the name doesn’t matter’ (Laughter).”

Raúl probably meant that his party, too, is communist, and maybe also that he’s too pragmatic to care about terminology. But the joke also points to the unnamed—or unnameable—nature of the reforms he’s undertaken over the past decade. In 2008 Raúl formally became president of Cuba, after taking over provisionally from an ailing Fidel Castro two years prior. During Raúl’s term, which is set to end in 2018, Cuba has undertaken its most serious economic restructuring since the 1959 revolution. The November 2016 election of Donald Trump and the death of Fidel Castro, however, alter the geopolitical backdrop for these changes.

Is Cuba headed toward market socialism, authoritarian capitalism, stasis, or something else altogether? Defying definition, the changes have nonetheless attracted much attention. This was particularly true in the United States after the December 17, 2014, announcement of the restoration of diplomatic relations between the US and Cuba. It’s rich: a moment in which much of the world, left and right, rejects neoliberal globalism has also witnessed a nearly libidinal fascination with Cuba’s increasing insertion into a global market. Is it symptomatic of an anxious desire to affirm a bankrupt model? A transfigured hope for an alternative to reigning political economies? A pragmatic response to a stalled economy?

Whatever the motivations, with the recent election of Trump to the presidency of the United States, all bets are off. It already seems unlikely that he will advance protectionist trade, as he peddled to the Rust Belt during his campaign, and instead will push through economic policies that hurt working people and favor the business elite. We may assume that a good portion of Obama’s national and international agenda will be revised or revoked. What will happen to the incipient “normalization” of bilateral relations?

The quick answer is that Trump may not reverse engagement. He has given mixed signals, though, saying both that he won’t; then, more recently, that he will. Since Fidel Castro’s death Trump has stated (or tweeted) that Cuba would have to change in order to maintain a relationship with the United States—but immediately his team qualified those statements. Similarly, though Trump named the executive director of a pro-embargo group to his transition team, long before running for president, Trump-the-hotel-and-casino tycoon sought to invest in Cuba, and in the past year Florida Cubans—roughly half of whom appear to have voted for him—overwhelmingly supported diplomatic relations and increased trade with the island.

Still, it’s safe to say that legislative pathways to further ease US policies toward Cuba are now unlikely, and Trump may place new conditions on engagement. Meanwhile, Cuba is refusing any pressure to speed negotiations before the new US president takes office, and, after congratulating the president-elect, ordered five days of military exercises to prepare for “different actions by the enemy.” The specter of US military aggression is a strategy the Cuban state employs to control its own population. But neither has it ever been without justification.

<i>Havana, 2010</i>. Photograph by Amaury Henderick / Flickr

Let’s set aside for a moment, though, speculations about imminent US policy. Cuba’s own economic changes have generated much interest. Because of the two nations’ mutual obsession with one another, it’s easy to conflate Raúl’s economic reforms over the past decade with last year’s political normalization and the burgeoning presence of US tourists and businesses (still largely restricted by the US embargo). But Cuba in fact already welcomed foreign direct investment, inaugurated free-trade zones, allowed for joint ventures, rebuilt its tourist industry, and opened a non-state sector, all in the early 1990s, during the post-Soviet economic crisis known as the “Special Period in Peacetime,” when GDP fell 35 percent. In those dire years Cuba haltingly reengaged with a global market. The US responded by passing some of its most punitive legislation against Cuba, strengthening the embargo, and restricting visits and remittances from Cuban Americans, with the idea (once more) of forcing the collapse of the Cuban state.

Still, something is different about Cuba’s recent economic changes, and the United States has been very much a part of the calculus. If Cuba’s command economy began to include market elements in the 1990s, the more recent reforms, officially termed an “updating” (actualización), are wider and more dramatic, drawing inspiration from Vietnamese and Chinese versions of market socialism. Some of these development policies clearly presumed an imminent end to the economic embargo by the US. The recent restoration of diplomatic relations with the US has thus been understood as both a calculated component of Cuba’s independent economic reforms and facilitated by piquing US interest in an economic “transition.”

Reforms have ranged from modest to radical. Cell phones were legalized, as were new professions for a growing non-state sector (known as cuentapropismo, or “on your own account”). A half-million people were cut from state payrolls, with further dismissals projected; at least 2 million Cubans (out of a population of less than 12 million) now work in the non-state sector, to which should be added a majority who augment their $20 monthly salaries with work in the informal economy. The sale of automobiles and homes was permitted for the first time in a half century.

Formal permission to leave the island, required for five decades, was eliminated. This had the effect of depoliticizing travel for Cubans who previously might have overstayed tourist visas in Europe, Latin America, or the US, unsure whether they could secure permission to travel again. Now professionals earn money abroad and bring it home, while Cuban tourists cycle through Miami, Panama, and Ecuador as “mules” procuring goods and materials for resale.

Food included on the monthly ration cards was reduced still further than its already meager proportions since the 1990s. New forms of agricultural and nonagricultural cooperatives were established, and land was given in usufruct to private farmers to work. In 2014 massive renovations to the port of Mariel were far enough along for it to open for some operations. The port features a special economic zone for which the government has announced portfolios seeking billions of dollars of foreign investment.

Several recent books and dossiers focus on the implications of both Cuba’s economic reforms and the prospects for normalization of US-Cuban relations. All draw on work by Cuban economists at institutions such as the University of Havana’s Center for the Study of the Cuban Economy (one of whom was recently fired from his post, allegedly for sharing too much information with the US). Eric Hershberg and William LeoGrande’s A New Chapter in US-Cuba Relations: Social, Political, and Economic Implications brings together essays on a range of topics by social scientists from Cuba, the US, Latin America, and Europe, probing various implications of the “normalizing” relations between two nations that have in fact never enjoyed such a thing. Richard Feinberg’s sunny Open for Business: Building the New Cuban Economy is an assessment of current economic changes, a series of recommendations for further efforts to strengthen market socialism, and a set of predictions. The book ends on an optimistic note, though Feinberg likely did not count on the recent US election results.

Both books are closely engaged with Washington debates. Hershberg and LeoGrande are professors of government at American University, where Hershberg directs its Latin American and Latino Studies Center (as a program director at the Social Science Research Council in the early 2000s he worked to link Cuban economists with their Vietnamese and Chinese colleagues). LeoGrande has served on various committees in government. Feinberg is a fellow at the Brookings Institution, was a policy advisor for Latin American affairs at the National Security Council under Bill Clinton, and helped Obama craft remarks on recent Cuba policy.

The books outline two principle paths that Cuba has carved out for its economic development. The first gambles on megaprojects such as the Mariel port, aimed at capturing foreign capital and state-to-state partnerships. The second depends on a newly opened non-state sector that includes agricultural and nonagricultural cooperatives, and a number of (largely nonprofessional) fields such as food service and construction. It’s bottom-up, but not equally possible for all: restaurants, home sales (all done in cash), and other small businesses can require from tens to hundreds of thousands of dollars of seed money, often provided by family members abroad.

Both books underscore the state’s awkward balance between the two strategies. While small-business, bottom-up growth appeals to notions of anticorporate, local, and creative forms of association, it favors privileged actors—those with access to capital abroad or prime real estate—and it has been actively encouraged by a US interested in weakening the Cuban state. Most economists agree, however, that it is urgently needed and should be expanded further still. Large-scale, state-run development projects, which appeal to notions of investing in the public good or in more equitable growth, currently discriminate against Cubans in favor of foreign capital—often from large, multinational corporations—and set workers’ take-home salaries too low. The darkest analyses see this as the Cuban government selling off the island’s natural resources and opportunities to foreign investors, who are offered special treatment denied to Cubans.

<i>Santiago de Cuba, 2012</i>. Photograph by Yu Pong / Flickr

In addition to delving into these two plans for growth, the recent books also propose remedies for Cuba’s economy. The list is long. Cuba needs greater capital accumulation, new infrastructure, and foreign investment. (One leading Cuban economist dissents, pointing out that there is no evidence that foreign investment necessarily helps local economies—especially when it is granted tax exemptions.) New tax codes are in order, so as to ameliorate the growing inequality produced by market reforms. Cuba will imminently consolidate its dual-currency system, in which workers are paid by the state in Cuban pesos (at the rate of 24 to the dollar) while foreign trade and many goods sold in the island use the Cuban Convertible Peso, or CUC, pegged to the dollar. The island ought to diversify its service-sector-heavy profile: could it rebuild its sugar industry? (Unlikely.) Strengthen its biomedical and biotech sector? Develop a tech sector focused on applications and software development? In general, revived industry would do well to capitalize on the nation’s highly skilled labor force. A larger internal market is needed, as are wholesale markets for the country’s burgeoning private sector. Woefully low public-sector wages need to rise substantially. The US embargo must go, and with it, barriers to multilateral financial institutions and capital markets (though there is much debate about the perils of the IMF). As sociologist Marifeli Pérez-Stable points out in Hershberg and LeoGrande’s book, true normalization in fact “extends well beyond relations with the US.”

Normalization with the United States hasn’t actually yielded much economically yet for Cuba, since the embargo hampers the island’s ability to access its largest and closest potential market. How about Cuba’s own reforms? One can hear the frustration in young Cuban economist Ricardo Torres’s analysis: though the state explicitly draws on policies spearheaded by China and Vietnam, it refuses to admit that it’s moving toward market socialism, or any other master plan. Explicit priorities include energy, agriculture, and the renovated port of Mariel, managed by the Singaporean company PSA. A billion-dollar loan from Brazil helped dredge Mariel into “post-Panamax” size, to accommodate cargo ships built for the newly enlarged Panama Canal. A 2014 law on foreign investment sanctions wholly owned foreign companies oriented toward export and import substitution sectors, the creation of infrastructure and technological change, and joint ventures with state-owned enterprises, private farmers, and nonfarm cooperatives—but not with private entrepreneurs. Foreign firms cannot at present do their own hiring, carried out by the state, and the Cubans who work at Mariel are paid low salaries in Cuban pesos, while international firms pay the Cuban state higher salaries in CUCs.

The problem with this arrangement, Torres points out, is that despite its rhetoric of national sovereignty the Cuban state is in practice offering huge tax exemptions to foreign investors while creating a large tax burden on local Cubans. Such a policy favoring foreign capital from the biggest multinational companies implies a development that Torres calls “not only discriminatory but also short-sighted and dangerous.” It may emerge from concern about growing inequality among Cubans. But accumulation is taking place anyway, in ways that disadvantage many educated, professional, and skilled workers from the middle classes—precisely the opposite of the kind of development that should take advantage of Cuba’s highly educated workforce.

WITH ALL THE FEAR THAT AMERICAN TOURISTS WILL RUIN CUBA, IT’S WORTH NOTING THAT CHINA IS ALREADY PLANNING FOR ITS OWN CRUISE SHIP PASSENGERS. 

The economic essays are among the most compelling in Hershberg and LeoGrande’s edited volume. But there are insightful reflections too on culture, as well as on relations with the diaspora and with other nations. And sometimes culture is an economic question. For instance, Cuba’s booming art scene boasts both abundant talent and the privilege of being one of the more lucrative non-state fields; Feinberg thinks creative industries may be one of the island’s future strengths. As art becomes more of a business, however, potential traps may await, such as: 1) the production of an art that “self-censors” not for political content but in response to market tastes (critics already perceive this behind a boom in easily consumable, two-dimensional works); and 2) the relegation to the art world of some of the social work the state once did, which art historian Claire Bishop has already documented in post-welfare-state Europe and the US: contemporary art performs harmless versions of democracy and social services (neighborhood work, food production, etc). For now, anyway, much recent Cuban art remains compelling, often a laboratory for new thought. (One contemporary piece is performance artist Tania Bruguera’s recent announcement of her candidacy for president of Cuba in 2018. Her plea to Cubans in the post-normalization era has been to be “neither slaves nor consumers: citizens.”)

Art market aside, normalization might not change much culturally. For one, restoration of diplomatic relations lags by years or decades behind the intimate processes of reconciliation between the diaspora and the island. Caricatures of Miami Cubans as recalcitrant exiles have long been belied by the fluid reality of post-1990s emigrants, who return to the island regularly and who helped push Obama toward the recent rapprochement. Moreover, Cubans have long consumed American popular culture; Americans now enjoy slightly increased access to Cuba and Cuban culture.

Whereas cultural exchange didn’t need to wait for official cold war thawing, it’s altogether too early to believe in political “normalization.” Weeks before the 2016 US elections President Obama issued a Presidential Policy Directive clarifying that his administration was not pursuing regime change or covert democracy promotion. Yet one can only be skeptical, as some of A New Chapter’s authors are, that the United States’ long-standing covert (if not overt) offensives on the Cuban state—including the ongoing “democracy promotion” programs wielded by a power with overwhelming military might and a naval base in Cuban territory—are truly behind us.

The challenges facing Cuba’s new economic reality are many. Inequality is on the rise. Scholars have found that remittances from a racially stratified diaspora reproduce racial inequality in Cuba through differential access to foreign capital. As Feinberg notes, increasing stratification is also being created by local elites connected to the military or the Communist Party, who similarly take advantage of global networks of former schoolmates, colleagues, and family members for seed funds for new businesses. The reforms have enabled the emergence of new sectors of Cuban society with more disposable income to invest locally, but they have not yet helped employees in the public sector.

The risk of a kind of post-Soviet, corrupt privatization also remains real. And, Feinberg points out, while Vietnam and China are the models for Cuba’s economic reforms, Asian economic and demographic might allowed for an interdependent, not d with the US, and hence a more even playing field; Cuba will never be on equal footing with its neighbor to the north. What’s more, Asian market socialisms are in many respects closer to authoritarian state capitalism than to bottom-up, socialist democracies. One political scientist predicted in A New Chapter that when the embargo finally goes, Cuba’s political victory may be pyrrhic, as the island could end up co-opted into a US-run liberal world order. Since the recent US elections that order itself seems effectively gone. Authoritarian capitalism is on the rise.

Finally, early concerns about Mariel seem to have fallen by the wayside, such as whether Caribbean free-trade zones actually generate good and sustainable jobs, or what environmental oversight will be enforced as littorals are developed along with golf courses, marinas, and hotel complexes. Under a Trump presidency, and given some of Cuba’s extractivist priorities, will the heretofore-significant collaborations between US and Cuban environmentalists continue apace?

 <i>President Obama and President of Cuba Raúl Castro at their joint press conference in Havana, Cuba, on March 21, 2016</i>. Photograph courtesy of Chuck Kennedy / Wikimedia Commons

Still, there are reasons to be optimistic about Cuba’s future. Feinberg’s Open for Business covers Cuba’s economic changes since the 1990s but focuses on the recent reforms, and it’s cheery about Cuba’s ability to combine a strong state presence with increased market structures to move toward market socialism. In eight chapters, the book ably addresses Cuba’s partnerships with emerging markets, successful and unsuccessful joint ventures, and new millennial entrepreneurs and leaders.

In Feinberg’s assessment, Cuba has many advantages as it seeks to strengthen its economy. It already heavily restructured during the worst of the 1990s. It is poised to capitalize on a substantially middle-class society, educated professionals, and rich natural resources. Feinberg dwells little on the state’s single-party nature, and rightly surmises that “over time the entrepreneurial middle classes will perceive government not just as an irritation but also as the necessary guarantor of a stable and productive business climate”: this is probably already the case for entrepreneurs doing well in the current arrangement, less interested in politics than in making money. He believes that the island’s middle classes retain egalitarian values and a desire to preserve accomplishments in education and health, and won’t “lurch from socialist planning to unfettered market capitalism.” Today economists on and off the island argue that market reforms and increased tax revenue are at this point not opposed to but in fact necessary to preserve Cuba’s achievements in social services.

Feinberg’s final chapter offers three potential scenarios for where Cuba may be in 15 years. The first, “Inertia and Exit,” imagines the outcome of only halting and minor reforms (it’s worth noting that Bert Hoffman, a German political scientist and author of a chapter in Hershberg and LeoGrande’s book, penned a November 2016 editorial wondering whether Raúl was already backtracking.) The second scenario, “Botched Transition and Decay,” is the worst: Cuba squanders the unique advantages of low inequality, a highly educated work force, strong institutions, and natural resources. The island falls prey to a reprise of post-communist kleptocracy in which managers of state-owned enterprises enrich themselves. Cuba ends up a poor, possibly violent, and militarized nation with little to differentiate it from the worst among its peers in the region.

But Feinberg’s optimistic study places its money on scenario three, “Soft Landing and a Sunny 2030.” A Cuban form of market socialism prevails, the island attracts immigrants (already artists, writers, and some small-business people have been buying homes and returning from more expensive cities abroad); a tax-based revenue system helps level growing inequalities; strong state-run businesses ally with both foreign capital and homegrown private firms. For this scenario, Feinberg asserts, “rules must be established, institutions rebuilt, experts trained, and public attitudes reset.” He believes longstanding emphasis on social justice and the merits of equality—and a distaste for unbridled capitalism—will facilitate this outcome.

It’s refreshing to read Feinberg’s optimistic prognoses. Cuba’s landscapes now feature restaurants, bars, services, wi-fi zones, houses under repair, and Cubans with more money to spend, a far cry from the dark nights and empty streets of the Special Period. New online journals offer independent journalism. People leave the country and return, often with means to further their careers. Others are moving back from Madrid and New York. And Raúl’s pragmatism has been welcomed by Cubans eager to see changes at home, rather than afar, a priority of Fidel’s internationalism.

If Feinberg’s most optimistic outlook materializes, however, it may be despite the wishes of many in the US and China. With all the recent concern about the imminent invasion of US cruise ships, tourists, and consumer culture—the fear that Americans will ruin Cuba—it’s worth noting, as Feinberg does, that China is already planning for its own cruise ship passengers, and has begun joint ventures including a tourist complex with a golf course. For the Chinese, he observes, the island offers a strategic presence near the United States. US multinationals’ obsession with the Cuban market, however, is better explained with recourse to psychoanalysis or ideology critique than to bottom-line reasoning: Cuba, with fewer than 12 million inhabitants, doesn’t compare to markets like Brazil’s. Yet it remains of interest to “multinationals compulsively seeking a presence in every market worldwide.” This compulsion to establish a presence on the island is the inversion of Cuba’s revolutionary desire to delink from global capitalism. That a nation defined by its geographical position as a node in early globalization should opt out (or into a Soviet sphere of influence) infuriated some and inspired others. It made the fate of Cuba resonate beyond, and sometimes despite, the desires of Cubans themselves. Now it seems the Cuban state is embracing again its geographic centrality to transatlantic trade.

Something else is worth observing about recent US business interest in Cuba. US journalists have tripped over themselves to celebrate Cuba’s entrepreneurs, many aided by US-based family members contributing small seed money. Yet the most prominent US businesses establishing a presence in Cuba are far from scrappy, ingenious entrepreneurs: Airbnb (which now has 100,000 listings on the island), Sony, Verizon, Sprint, Starwood Hotels and Resorts, and the like. Even before the prospect of a real estate billionaire as US president loomed, voted into power in part by a working class with few real chances for good jobs, the giddiness about Cuban entrepreneurs suggested something more than mere business strategy. It translates a yearning for the kind of small business possible in carefully regulated, strong states, but difficult in deregulated neoliberal economies: another example in a long and global history of dreaming that Cuba might save us from ourselves. As left and right alike reject agendas prescribing relentless insertion into global markets, utopian hope clings to the idea that an alternative, just, and prosperous political economy is yet possible.