Cuba's economic system of the 1970s and early 80s:

Cuban "socialism" adopts the

Soviet state-capitalist model

by Mark, Detroit
(from Communist Voice #12, March 1, 1997)


List of subheads:

The 1970s: state-capitalism solidifies under the banner of a "retreat to socialism"
Market methods within the state sector: "self-financed" enterprises
Creating greater wage disparities and unemployment
Treating state property as private property
Private interests in the state economy undermine planning
Expanding the private sector
Government "parallel markets" mimic private markets
Expansion of small private manufacture and services
Division of cooperative farms between rich and poor
Further integration into the Soviet bloc
Influence of the market capitalist countries on Cuba
Revolutionary communism or Cuban revisionism?

Text of the article:

. The revolution of 1959 brought much progressive change to Cuba. A major land reform was carried out and the conditions of the poor were improved through extensive social reform. Within a few years after toppling the tyrannical, U. S. -backed Batista regime, the Castro government nationalized the U. S. and other foreign capitalist holdings as well as the large businesses and farms of the Cuban bourgeoisie.

. In the midst of this transformation, in the early 60s Castro declared that Cuba was building socialism, created a new allegedly "communist" party and tied the country closely to the supposedly communist Soviet Union. The view that socialism was being built in Cuba spread widely among the left in the U. S. and elsewhere. But, as the old saying goes, appearances can be deceptive. The Soviet Union had long ago degenerated into a state-capitalist order. The Castro regime, despite going off on a few of its own (non-Marxist) tangents, largely fell under the sway of the phony revisionist "communism" of the Soviet leaders. Thus, a state-capitalist order began to be set up in Cuba.

. These days, the capitalist nature of Cuba is becoming ever more clear. With the collapse of the Soviet Union and the other revisionist (phony communist) regimes of Eastern Europe, Cuba has been in a severe crisis. True, Castro holds on to power and still talks about socialism. But the regime's way out of the crisis is to offer up the state sector for privatization, legalize the extensive capitalist black market, and bank on foreign capitalist investment to save the day. State-capitalism is evolving into private capitalism.

. Crises bring to the fore things that are hidden beneath surface appearances in ordinary times. They can strip away hypocritical veils. But though the recent methods taken up by the Cuban leaders has helped expose the true nature of the state-capitalist course they have taken, it is fashionable in the left today to shut one's eyes to what has been going on. For some, if Cuba still has something left of its social safety net, that is reason enough to fawn over the Cuban social system. For the pseudo-Marxist trends that come out of the Soviet revisionist or trotskyite tradition, if state property still exists, that is all the proof needed that Cuba is socialist or at least some kind of workers' state. Yes, some among these just-mentioned trends have all sorts of criticisms of Castro's reign. Nonetheless, by obscuring the class nature of the Cuban social system they confound proletarian socialism with state-capitalist oppression.

. Our trend, anti-revisionist communism, opposes these approaches. Mere recognition that the remnants of certain social programs still exist cannot justify defense of the Cuban system when the last revolutionary measures ended decades ago and a new system of exploitation weighs down on the masses. Nor does clinging to the myth of Cuban socialism do any good for those who seek to attain the real thing. What is useful to those who aspire to the liberation of the workers is not comforting fairy tales, but a genuinely Marxist perspective of the socialist and communist future. The revolutionary activists need to understand that standing with the Cuban workers today is not simply a matter of condemning U. S. bullying of Cuba, but of supporting the development of revolutionary working class politics in Cuba in opposition to the Castro regime and the state-capitalist order.

. To this end, Communist Voice has been carrying a series of articles examining the evolution of the state-capitalist economic system in Cuba and its more recent partial evolution towards private capitalism. The policy followed by the Cuban leaders goes through certain phases. In the first couple of years after the revolution, the Castro regime carried out some radical social reforms and, whatever its original intentions, the government wound up with the former property of U.S.and other foreign imperialists and the larger Cuban capitalists in its hands. In the remainder of the 1960s, the Cuban leadership experimented with various types of economic models. By the end of the 60s, the dominant model was one which gave a section of the bureaucratic elite more centralized power over the economy so that they could better carry out some arbitrary and ill-fated development schemes. When the dust of the 60s settled, the Cuban hierarchy settled down into the state-capitalist model based on the type of policies then prevalent in the Soviet Union and Eastern Europe. From the 70s on, the state-capitalist order has gone through periods where the mix of market reforms and bureaucratic controls changes, with the bureaucratic controls portrayed as defending socialism or as communist measures. But in fact the government controls did not stop the general development of private interests, and gradually adopted themselves to it. Although certain left trends promote that the Castro regime was following a wonderful new path, this basic pattern is similar to what went on in the Soviet Union.

. The late 80s is a period when the Cuban leadership, under phony "communist" rhetoric, cracks down on some private market openings but doesn't bring about any basic change. Then there is the period following the collapse of the Soviet Union and the Eastern European revisionist states, which devastates the Cuban economy. To cope with this, Castro turns to the market and foreign capitalist investment. Once again, just as the growth of private interests under state-capitalism paved the way for private capitalism in the former Soviet Union, so Cuba is embarking on a similar course.

. A previous article in Communist Voice chronicled the capitalist-type measures taken by the Castro government since the economic ruination in the wake of the collapse of the Soviet bloc. Two other articles focused on puncturing the hoax that in the mid-80s, the Cuban rulers began to carry out a "rectification" that fundamentally challenged the system of state-capitalist economic organization that held sway from the early 70s. (1) These articles show that even in countries where the means of production are predominantly state-owned, the state sector and economy as a whole does not necessarily operate on socialist principles. This article will further illustrate this point with a brief look at some of the main features of the system established in the early 70s. It will attempt to illustrate how this system allowed capitalist methods to be consolidated in the state sector while giving wide play to the private sector of the Cuban economy.

The 1970s: state-capitalism solidifies under the banner of a "retreat to socialism"

. The policies adopted in the 1970s were portrayed by the Cuban rulers as a retreat back to socialism, a period that creates the conditions for communism, from an attempt to leap directly to the higher stage of communism. If that was what was going on, this period would have been a reasonable retreat necessary to continue on a revolutionary course. But under the mantle of "retreating to socialism" something quite different was happening.

. Let's review what socialism is, so as to judge whether the policies of the 70s were bringing it closer. Socialism entails the abolition of the private ownership of all the means of production and the direction of the economic system as a whole by the working masses. Such control over the economy goes beyond each group of workers running their own particular factories, or peasants their individual or collective farms. It means that each factory and farm is subject to the direction of the working masses as a whole. The new revolutionary state power established by the working class following the overthrow of the bourgeoisie is the means by which the masses can have such overall control. But the building of this new society can't happen overnight because, at its birth, the new society will still have a number of features and habits left over from capitalism. The achievement of socialism requires a whole process whereby the masses organize themselves, learn how to run the affairs of state and administer the economy.

. Nationalizing the means of production can be done with relative ease, but the achievement of real workers' administration and control is a protracted task. In the process of doing this, money and using various types of financial accounting and incentives will be necessary for a time. As well, the state can take over large enterprises rather quickly, but the voluntary socialization of small farming and other petty production is a protracted process and initially it can only be regulated. But progress toward socialism can only be measured by the ability to overcome these leftovers from the old social order. Building socialism requires working toward the elimination of a separate management stratum. Society can only advance toward socialism if the motivations necessary for disciplined production can move beyond relying on direct financial reward for oneself or one's workplace. Only in this way can the new society work toward eliminating all class distinctions and inequalities.

. In Cuba, despite periodic rhetorical bows toward achieving these goals, quite something else happened. In the 70s, a separate bureaucratic stratum, detached from and lording over the masses, had its rule formalized. Each and every problem was supposed to be solved by finding just the right financial incentive while the workers simply waited for the next scheme to be pronounced from on high. The policy shifts revolved around how to best to build an economy based on competing private interests, and basing the economy on overall societal interests and planning became impossible. Likewise, the idea of working to overcome wage inequalities faded away. And when it turned out that all the material incentives promised the workers wouldn't provide much for them, the ruling elite offered the alternative of extending the private sector where some more goods are available but are largely unaffordable. No matter how much opening the private capitalist forces were given, the substantial black market stood as a constant sign of the inability to establish real overall planning, much less socialism.

. The model applied universally in the 70s had already been tried for several years in the 60s in the agriculture and foreign trade sectors. But in the later 60s, all sectors of the economy were incorporated into a plan that was supposedly going to bring Cuba quickly to the higher stage of communism. For instance, there was supposed to be communist principles of distribution of society's production. A type of distribution characteristic of the higher stage of communism would have meant that everyone was free to take from the social product what they needed regardless of what they contributed through their labor.

. But none of the conditions existed for this type of distribution in Cuba. Among other things, a society would have to have an abundance of goods and services available while, in reality, scarcity was prevalent in the weak Cuban economy. Nor could one seriously talk about communist distribution when the society was based on class divisions with a bureaucratic elite on top.

. Not surprisingly, a distribution system characteristic of the higher communist stage did not really come into existence. Actually, the distribution system of this time was the rationing of this general scarcity among the masses while high party and state officials lived in relative splendor.The workers were expected to do more work without further direct compensation. But the distribution to them along communist lines did not occur. Instead the workers faced scarcer rations while they were expected to work longer and harder by the bureaucrat-capitalist rulers. Given this reality, expecting the mass of workers to labor indefinitely along the lines of this decidedly un-communist distribution system proved impossible. As the workers' conditions grew harsher in the late 60s, their work effort declined and absenteeism became a major problem. Along with this, the black market flourished as a source for goods the government failed to supply.

. The workers' dissent was a manifestation of the severe economic crisis that engulfed the Cuban economy as the 1970s approached. This crisis burst the pipedream that Cuba was entering "communism. " As far back as 1970, Castro announced that the previous economic policy could not continue, and he spent the next several years touting the new system. The new system was largely based on the market reform model adopted by the state-capitalist Soviet Union in the mid-60s. In the mid-70s, the system of market reforms of the state sector was formalized as the System of Economic Management and Planning (SDPE). The adoption of this system and the consolidation of the state-capitalist order that took place under it, was what the Cuban revisionist leaders fraudulently called the "retreat to socialism. "

. The Cuban leadership was avowedly not Marxist-Leninist when it took power in 1959, and when it suddenly declared itself "communist" in the early 60s, its alleged communist principles were really a hodgepodge of Soviet revisionism and various types of petty-bourgeois radicalism. It was the Soviet revisionist tradition of pawning off state-capitalist methods as the heart of socialism that took hold. Even though there was to be considerable state ownership, the economy remained divided between competing enterprises driven by the profit motive. Even though eventually certain central planning took place, it could never overcome the anarchy inherent in the economic system and was often tossed aside by both the enterprise managers and the top party and state bureaucrats. Despite the fact that the gross inequities of the old capitalist order were abolished and the old exploiters expropriated, a new type of capitalist class structure developed with the ruling bureaucrats on top controlling the economy and living in a style that the masses could only dream about. Socialism would never arrive, much less the higher stage of communism.

Market methods within the state sector: "self-financed" enterprises

. A more detailed look at the measures that encompassed the economy in the 70s reveals they encompassed many of the well-known features of capitalism. These market reforms were based on the plans formulated by the Soviet revisionist economist E. G. Liberman, which had influence in the Soviet Union in the early 60s. A central feature of Liberman's proposals consisted of a new version of an old Soviet policy of self-financing of state enterprises. Self-financing was taken up in Cuba, where the state enterprises were the dominant sector of the economy. Under the self-financing methods, the government would provide the original funding, but thereafter, enterprises were to survive on their own resources. Initially profitability was officially declared the number one criterion on which enterprises were to be judged successful while other times it was only considered one indicator of success. In any case, the underlying profit-making orientation remained. As originally conceived, unprofitable enterprises would be shut down, although in practice, certain measures were apparently taken to help bail out enterprises running deficits. (2) On the other hand, failure to run a profitable enterprise could end the career of an enterprise manager.

. In such a system the private interests of each enterprise are bound to grow. Thus, even though the state owns the enterprise, in effect it is run as if it were private property. Even though the top managers of the enterprise do not own the enterprise, their fate is tied to the enterprise. To succeed they must behave like the managers who run capitalist enterprises anywhere. Cuban enterprise managers are a privileged class over the workers: they, not the workers, have control over how the enterprise operates. And if they are good enough at squeezing profits out of the workers, they can keep themselves in posts which entitle them to a better lifestyle. Of course, the managers of individual enterprises are not the only ones who run the economy. The high party and state officials oversee the system of private interests they created and they live in comparatively grand style off the labor of the workers. The official basic wage scale has provided high government officials with earnings as much as 10 times higher than some workers.But that is only part of the story. The ruling elite also has such things as access to the best housing, their own vacation resorts, access to luxury goods denied the general population, and are in a position to enrich themselves through corruption. The class stratification between top officials and the masses pre-dates the 70s reforms. But the system of privileges for the elite was reinforced in this period.

Creating greater wage disparities and unemployment

. "Self-financing" also included various measures that encouraged greater wage and benefit disparities among the workers. This is not the aim of socialism, whose goal is to step-wise eliminate such differences. For one thing, piecework was extended. This meant that the worker needed to meet certain production quotas to make the full basic wage. At the same time, various types of bonuses were instituted whose size depended on the amount of profits the particular enterprise made. (In the preceding period, workers who performed the same job were to get equal wages regardless of the profitability of their enterprise. ) Some bonuses were given to the workers as a group, e. g. , the enterprise bonus fund might finance a day care center. Others were individual. This might include cash bonuses or awarding scarce consumer goods like refrigerators or TVs to the most productive workers. Such bonuses could potentially amount to as much as 25% of take home pay. (3)

. Thus, disparities were created between employees of different enterprises and between employees within each enterprise. Indeed, militant workers in the ordinary capitalist countries have long opposed such forms of compensation as piecework and basing wages on bonuses.They have fought for a standard wage for a given amount of time worked so that the needs of all their class brothers and sisters would be better assured. By the same token the substituting of productivity bonuses for regular wages is all the rage among the employers in the market economies.

. It should be noted that while the workers were encouraged to work harder and longer with the lure of bonuses, the rewards were limited by the lack of consumer goods available for enterprises to distribute as bonuses. As well, in the late 80s, work quotas were raised, forcing wages down. All this was done under rhetoric about ending disparities. But this hardly meant the demise of the bonus system. Bonuses were still used as a lure and new forms were introduced. (4)

. In line with the profit-making needs of the state enterprises, managers were given wide latitude in hiring and firing workers. This, along with measures to increase productivity such as piecework, contributed to growing unemployment. Under a socialist economic system, an increasing productivity of labor will also occur: technology will reduce the number of hours needed to produce things. But this need not result in unemployment. It can result in a reduction in the working day or in other production necessary to meet the ever-growing needs of society.The rise of unemployment is a sign of the anarchy of production in Cuba, a characteristic of capitalism, not socialism.

Treating state property as private property

. The "self-financing" system made it incumbent upon each state enterprise to treat their plants, equipment and production as their own private property, despite the fact that it was supposed to be social property. Certain practices reflecting this private nature of "social" property were officially sanctioned. For example, the right of the enterprise to engage in market-style transactions where they could sell and buy with other enterprises at their own discretion was progressively expanded.

. Under the SDPE, enterprises were openly encouraged to produce "above the plan" for the explicit purpose of freely marketing this surplus to other enterprises. In and of itself, an enterprise producing with more efficiency than the state plan envisioned would be a good thing. But under this scheme, it reinforced the profit motive and extended the private market. Another measure allowed enterprises to contract between each other for products not centrally distributed by the government. Over the years, more goods were removed from control of the central allocation apparatus. (5) Beginning in 1979, the government permitted "resource fairs" where enterprises could buy and sell surplus resources they had accumulated free from government regulation. Four years later, the government had identified half a billion pesos worth of products available for trade in these markets. State companies also had the right to use up to 30% of their profits to make purchases from the private sector. Thus, a wide field for legal commodity exchange by the state sector was established.

. Under ordinary capitalist conditions, prices fluctuate according to what the market will bear.We see something similar in the trade conducted by the Cuban state enterprises. Evidence of this is that the Cuban government itself has been forced to admit that exorbitant prices are often charged by state enterprises in violation of official price structures. (6) High Cuban officials revealed that certain "problems" with the SDPE system needed to be "rectified". For instance, the General Secretary of the Cuban trade union center cited the problem of "state companies showing profits because they charged bloated prices to other state companies. "(7) However, the outcries of this official, and the bureaucracy as a whole, against such things are hollow because they have continued to carry out market reforms that are bound to give rise to such maladies as price-gouging.

Private interests in the state economy undermine planning

. As can be seen, the private interests of the enterprises resulted in violation of official planning policies. Indeed, a whole system of enterprise practices helped undermine the centralized plans. The SDPE was supposed to reduce the practice of hoarding of scarce resources by enterprises. Allegedly, the profit motive would drive state companies to no longer incur the expense of accumulating unused resources. But, as self-financing entities, state enterprises still had to compete among each other for resources and the practice continued. Presumably, the decision, a few years after the SDPE system was introduced, to allow the free trade of surplus resources between state enterprises, was at least a recognition of the failure to stop stockpiling, if not an added inducement.

. Planned production targets were also undermined by state enterprises shifting their efforts to the most profitable undertakings. For instance, construction projects might not get finished because "the value of the final stages of building were lower than the initial stages. "(8) Reportedly, unfinished construction projects had reached a crisis stage by the mid-80s. According to a former manager of a chemical enterprise, production was shifted from planned production goals because "sometimes we had production indicators expressed in value terms. .  .  . Sulfuric acid was priced high. When the global value plan was going to be underfulfilled, we intensified the production of sulfuric acid in order to increase the value plan. Workers were reallocated to production of those items with high values. "(9) According to a Deputy Agriculture Minister, a similar development occurred in the agricultural sector in Cuba where production shifted to certain highly profitable export crops. (10)

. Cuban officials have been forced to acknowledge that the enterprises often falsify production figures. As well, various semi-legal or illegal deals are worked out between managers of enterprises who engage in barter of materials between themselves. A system of enterprise managers bribing their higher ups to get production goals lowered or to get better allocations of materials is also reported. (11)

. Given the way the economy actually operated, planning was continually undermined in Cuba. While the Cuban leadership all proclaimed the necessity for a national economic plan, such a thing did not exist in the late 60s. Instead there were some sectoral plans and emergency measures. The introduction of the 70s reforms started to establish at least a semblance of national planning. But this was undermined by the market reforms that accompanied it. By the mid-80s, the Cuban leaders were hypocritically cursing what they admitted were capitalist-type ills that were consuming the country and undermining state planning. An ardent American leftist supporter of the Castro regime was forced to admit that "the plan, [was] until now the conglomerate result of turf wars. "(12) As a "solution" to this, Castro and a group of top bureaucrats usurped the role of the central planning bodies and began to operate the country on the basis of short-term emergency measures. The government also reduced its central plans to mere "guidelines". Thus, in essence the Cuban rulers were conceding that the enterprises were unwilling and/or unable to meet the goals of the state plan.

. The undermining of planning by private interests in Cuba is a sign that socialism has not existed there. A socialist economy can operate according to a plan only because it replaces private ownership of the means of production with social ownership. During the period of transition from capitalism to communism, social ownership is ownership by a workers' state. This type of ownership creates the possibility for the economy to operate as if it were a single enterprise, with each unit being subordinate to the whole. This is how anarchic relations between enterprises can be replaced by full society-wide planning.

. The SDPE system ran contrary to this. According to the "logic" of the Cuban revisionist leaders, the interests of society as a whole were compatible with a system where each enterprise had to fend for itself. Practice destroyed this theory and showed that under such a system true societal planning was out of the question. This was not just a matter of having a national budget or not. Price controls were declared, price controls were violated. The state allocated resources, the enterprises redistributed them. The government declared production goals, the enterprise produced what was most profitable. Of course, this is not surprising if we realize that we are talking about a state of bureaucrats fostering a type of capitalist order, not a workers' state.

. In modern market capitalist countries, a good deal of planning exists. There are state-controlled sectors of the economy; there is an extensive planning carried out over whole branches of the economy by giant monopolies; and sometimes there are government national economic plans.But so long as there is private ownership, anarchy continues to manifest itself amidst all the planning. Under the Cuban system, the state enterprise had to operate on essentially the same principles as in the market economies. Here also, all the planning and controls of the government could not curb the underlying anarchy inherent in enterprises run for private interest.

Expanding the private sector

. As the state sector adopted more market principles in the 70s and 80s, so private entrepreneurs were given freer reign. One of the best know features of this era was the establishment of "free peasant markets" in the cities. Formerly, peasants were permitted to privately market products not sold to the government, but only near their own farms. The new city markets lasted from 1980 to 1986. They were later to reappear in 1994. In these markets, individual farmers and cooperatives could sell goods not covered by sales quotas to the government and goods where there was a surplus after the quota was fulfilled. Also, agricultural workers on state farms could market the output of plots they had originally been given for self-consumption. In the free markets, the seller could charge what the market would bear. Prices were many times higher than state-subsidized goods, but the scarcity of state-supplied goods left much of the population no alternative but to pay the exorbitant prices of the free market. At their peak, the markets supplied a hefty amount of all the perishable foodstuffs consumed.

. The free markets not only netted small fortunes for a number of private farmers. It also brought into the open a strata of parasitic middlemen who would buy up the production of multiple farmers and then market it themselves. In one of these operations, an eight-day profit was made of 212,000 pesos by four people who passed themselves off as small farmers. (Even divided four ways, this is maybe what the wealthiest private farmer could earn in a year. )

. The creation of the free market not only extended the open capitalist sector, it contributed to the anarchy in the economy overall. Private and collective farmers diverted production away from fulfilling government quotas because market prices were more profitable. Production was shifted to crops that could fetch high market prices and the poorest quality production was reserved for the state quota. Employees on the state farms used the state resources to concentrate on their private plots whose output they could market. As well, certain crops that were supposed to be reserved for export, like coffee, were diverted to the domestic markets. Naturally such things wrecked havoc with planned production outputs from both the private, collective and state farms.

. Though the free markets caused the regime enough headaches that they were eventually closed down for several years, the decision to open them was part of an ongoing trend of reliance on market reforms to solve various crises faced by the Cuban rulers. With the scarcity of consumer goods provided by the state sector, a large black market had long flourished in Cuba. But the government had no intention of increasing the subsidized rationed goods which were affordable to the masses. It was busy cutting subsidies in order to solve the budget crisis it was facing. So its answer to the scarcity of consumer goods was essentially to try to legalize the black market in the form of the free peasant markets. The regime figured it would tax the goods thus legalized, thus further helping solve its budget woes. In essence, the government would solve its budget woes by letting the masses face extra-high prices while a handful of private profiteers went to town. Only it turned out that it proved very hard to collect any taxes from the legalized free market and the diversion of state resources to the private market proved something of a drain on the state budget. Meanwhile, the black market not only continued, but there was new room for its "excesses. "

Government "parallel markets" mimic the private markets

. There was a temporary retreat from the free markets, but not from market principles. As far back as 1973, the government established "parallel markets", known among the Cuban masses as "rich people's stores". The "parallel markets" made available extra quantities of rationed goods as well as items considered luxuries and not available through the ration system. Subsidized ration goods generally provided only a bare minimum of the masses needs, official allocation levels were often not available, and watching for when scarce goods arrived at stores and waiting in line for these goods turned into a separate occupation. But the "parallel markets" did not solve the masses' problems because the goods they offered were not subsidized and could cost several times more than rationed goods. (13) Thus, in effect, the "parallel markets" created an official two-tier system -- scarce necessities for the masses, more necessities plus luxuries for those with money.

. The "parallel markets" grew tremendously during the 70s and early 80s as the role of the subsidized ration system declined relatively. When the Cuban rulers grew disenchanted with the free peasant markets of the early 80s, the "parallel market" was extended to fill the void. The government raised the prices it paid to private commercial farmers for extra production for these markets. The government then got its cut by charging "more in line with the farmers' markets' prices. "(14) Thus, some commercial farmers and the government made out well at the expense of the workers. (15) The free market died -- only to have its principles incorporated in the official "parallel market. "

Expansion of small private manufacture and services

. A further opening to private market forces was the legalization of small handicraft and manufacturing enterprises and services in 1978. These small businesses accounted for only a few percent of total production, but, according to Cuban officials, eventually about 20 percent of the population was earning some income through them. Free artisan markets, like the free peasant markets, were legalized and then closed. Small business was allowed to continue on, however, and the artisan markets reopened in the early 90s. As with private agricultural production, the small artisan and service sector often defied government regulation. State property was pilfered for use in the private businesses, with management often implicated. (16) In some cases the restrictions on hiring wage-labor (family labor was allowed) were violated. There are also many indications that the private businesses tended to divert workers' energies from their regular jobs in state enterprises.

. Among other things, the private sector expansion was the government's solution to the perpetual shortage of good housing for the working people. As the 70s went on, urban housing construction projects were scaled back and the housing crisis grew. Shantytowns were springing up in Havana, while the overall housing stock was badly in need of upgrading. The opening for private construction businesses of the early 80s resulted in the majority of housing being built by this sector. More housing was being built than ever before, but unlike housing built under state initiative, those most in need could least afford the new housing. By the end of the 80s, reportedly only the affluent could afford this housing. (17) At the end of the 80s, state-organized "brigades" were revived to build housing, but the resources provided them by the government was insufficient to reverse the overall decay. Castro himself acknowledged the continued growth of slum conditions, which in Havana had reached about 14% of the population with 20% of the housing lacking electricity or running water. (18)

Division of cooperative farms between rich and poor

. Amidst the free-market openings of the time, the government also conducted a campaign to encourage private farmers into production cooperatives where the land and implements would become property of the cooperative. (19) Looked at superficially, this might seem to be some kind of socialist measure, something completely out of character for this period of market reforms. After all, during the transition period of socialism, Marxist theory holds that cooperative farms may serve as a transition between petty production and farms owned by society as a whole. During the transition period, the idea would be to not only provide incentives for the small producer to join the cooperatives, but to step-wise find means to have the cooperative members see the advantage of making society responsible for the well-being of the collective while equalizing conditions between all collectives and the state economy.

. In fact, the cooperatives found themselves more and more subject to market conditions that divided the cooperatives into rich and poor. Thus, while the number of production coops zoomed during this period, only about 40% were doing well while another 40% were on the verge of bankruptcy. (20) As for the state farm sector itself, it ran on the basis of market mechanisms in the 70s and 80s. As well, in recent years the state farms have been dismantled into competing cooperatives while cooperatives have been subdivided into smaller units. This further demonstrates why the Cuban cooperative movement should be compared to cooperative movements undertaken in a variety of capitalist regimes rather than to production cooperatives in a society constructing a socialist economy.

Further integration into the Soviet bloc

. Another major feature of the Cuban economy was its heavy dependence on the imperialist Soviet Union. This relationship developed rapidly since the early 60s. In the 70s, the Castro regime further cemented this state of affairs. The relationship with the Soviet (and other East European revisionist regimes) was not one of a "socialist" Soviet Union assisting the development of the revolutionary process in Cuba. Rather, it exhibited many of the same features of domination that were exhibited by U. S. imperialism before 1959. This didn't mean that all the particular forms characteristic of U. S. domination continued. For instance, Soviet firms did not set up businesses in Cuba while many U. S. and other foreign firms had operated in pre-revolutionary Cuba. (On the other hand, by the end of the 70s Cuba was already once again courting Western capitalist investment, which would start to arrive in force in the late 80s. ) But then again, the aspects of domination that came to the fore in the Western imperialist countries were not uniform either. Nor did Soviet domination imply that the Cuban economy and the Cuban bureaucratic bourgeoisie ceased further development. Certain development took place even though the economy remained weak and dependent and the development took place through the suffering of the masses.

. One feature of the economic relations quite similar to the situation when U. S. imperialism dominated the Cuban economy involved the overwhelming reliance of the entire economy on the export of sugar. In the bad old days before the revolution, the fluctuations of the world sugar market could wreck havoc with the Cuban economy. Such a system was reinforced in Soviet-Cuban relations. The Cuban revisionists relied on Soviet imports for everything from basic energy supplies like oil, to manufactured goods, to foodstuffs. From the Soviet side, this provided a market for their manufactured products and machinery which would not withstand the competition outside the Soviet Union's revisionist trading bloc. As for the Cuban elite, they periodically complained about the inferior Soviet and Eastern bloc goods, but appreciated the fact that by buying from the Soviet Union, they saved scarce hard currency they wanted for trade with the market capitalist world. But Cuba continually ran up large trade deficits, which the Soviet regime was no longer willing to tolerate. Part of the solution was found in a Soviet agreement to step up purchases of Cuban sugar.

. Even though over the years Cuba was able to become somewhat more self-sufficient in certain products, this basic relationship lasted until the collapse of the Soviet Union. Sugar production accounted for 65% of agricultural product in 1962, and rose to 71% in 1976. (21) Such a relationship was consistent with the general so-called "socialist" division of labor established by the Soviet Union over its subordinate economic partners. (Cuba formally joined the Soviet economic bloc, COMECON, in 1972. ) In the early 60s, Castro had made a brief attempt at getting Cuba off its sugar dependency. By 1976, however, he was singing in harmony with the Soviet imperialist "division of labor" schemes even as sugar prices plummeted. (22) True, there are debates about whether the Soviet Union paid advantageous prices for Cuban sugar or not. But since a good amount of sugar was still sold on the open market, world sugar price fluctuations could still devastate Cuba. After rising sharply in the early 70s, they declined a good deal. And when sugar prices declined, austerity measures for the masses followed. Evidently, the world sugar market prices generally remained a thorn in Cuba's side in the 80s. (23)

. Despite the increased Soviet sugar purchases, deficits to the Soviet Union continued to balloon. The Soviet Union extended a lot of loans to Cuba to cover the deficit and keep the purchases of Soviet goods going. Meanwhile, Cuba got into an enormous debt crisis with the USSR, reaching about five billion dollars in the mid-70s. Reportedly, borrowing from the Soviet Union was cheaper than borrowing from Western capitalism. Nevertheless, these debts were huge compared to Cuba's capacity to repay them. As it turned out, the debts had to be rescheduled and largely written off as it became clear that Cuba would not be able to meet them. Not coincidentally, Soviet aid began to dry up in the 80s.

. But although one could argue that the Soviets failed to make a great killing in their economic dealings with Cuba, this hardly proves they were not imperialist bullies of the first order. Far from using their aid to encourage Cuba down a revolutionary road, the Soviets used their economic ties as leverage to get Cuba to accept their counter-revolutionary policies. The arrogant nature of the Soviet economic blackmailing was now and again openly complained about by Cuban leaders. For instance, in a 1971 speech by Raul Castro a Russian embassy official is quoted as saying "We have only to say that repairs are being held up at Baku [a Soviet oil port] for three weeks and that's that. "(24) Indeed, with its reliance on the Soviet Union for virtually all oil supplies, with the vast bulk of its trade with the Soviet-controlled bloc, with enormous debts to the Soviets, and with dependency on Soviet military aid, the Cuban leaders time and again had to knuckle under to the Soviet position. (25)

. In the late 60s, when the Soviets were proclaiming their fear of revolutionary movements upsetting their accommodationist approach to U. S. imperialism, they pressured the Cuban government to promise to desist from certain ties they had developed with various guerrilla movements. When the Soviets wanted Cuban support for their invasion of Czechoslovakia, they used economic threats. Throughout the 70s, whatever private disagreements may have existed, the Cuban regime publicly supported every Soviet disgrace. Thus, for example, Cuban troops fought on behalf of the Soviet-backed Mengistu regime in Ethiopia, a regime well-known for its attempts to drown the Eritrean liberation struggle in blood. By the end of the 70s, Castro was backing the Soviet invasion of Afghanistan. This does not mean that Cuba simply waited for its foreign policy to be drawn up in the Kremlin. Indeed Cuba had its own active foreign policy. But the Cuban rulers always had to fear dire consequences if they contradicted vital Soviet interests.

. The Soviets could also exert a lot of pressure on Cuban domestic policy. Soviet pressure helped force Cuba to abandon their economic policies of the late 60s and accept the Soviet state-capitalist economic model. Indeed, while Soviet economic advisors had been present in Cuba since the 60s, the process became more formalized over time. For instance, in 1979, Soviet advisors were made part of joint bodies in the Cuban planning apparatus.

Influence of the market capitalist countries on Cuba

. Despite overthrowing U. S. domination, the market capitalist countries continued to have a significant influence in the Cuban state-capitalist order. As mentioned above, until the late 80s, there was no longer an issue of foreign multinationals in the Cuban economy. But Cuba also relied a good deal on sugar sales and loans from the market capitalist countries to purchase technology and other items vital to its economic plans. In the 1970s, the debts to the market capitalist countries grew several times over, reaching over two billion dollars in 1977. With heavy debts also owed to the Soviet Union, the Cuban debts to the West reached crisis proportions. In the mid-80s, Cuba found it difficult to get any new Western loans. In more recent years, the Cuban government began to sell off state enterprises to cover the debt.

. Cuba's international relations were an important source of the anarchy in the Cuban economy. For example, if the economic plan was based on certain imported technology, and then sugar prices collapsed, so did the plans. Cuba also needed U. S. dollars to pay off its debt to the West. When the value of the dollar fluctuated, Cuba could suddenly find itself deeper in the debt hole than it had planned.

. Undoubtedly, the strengthening of economic ties with the market capitalist countries contributed to Cuba's conciliatory approach toward the Western capitalists. In the 70s, Cuba toned down its revolutionary rhetoric and often gave support to bourgeois regimes in Latin America and elsewhere. At the end of the 70s its main role in the Nicaraguan revolution was counseling the victorious Sandinistas not to antagonize the U. S. or the local (Nicaraguan) bourgeoisie too much, which Cuban leaders now considered to be a mistake of their revolution. Nor was Cuba encouraging revolutionary change in the big powers of Western Europe or the U.S. The Castro regime would still talk against imperialism, but not from a revolutionary standpoint. The heart of their critique was to defend the weaker bourgeois regimes in their conflicts with the big powers, focusing on such issues as debt relief and unfair trade practices. As for the U. S. , Cuba relied on courting the left-wing of the Democratic Party, using ties with various reformist and pseudo-Marxist groups as a vehicle for this.

Revolutionary communism or Cuban revisionism?

. Clearly, the development of a revolutionary working class trend can only be undermined by the promotion of the Cuban system as socialist. These days, activists who have the liberation of the workers at heart find themselves in a difficult atmosphere. The working class movement is winning few battles and is suffering many major defeats. There is a general lack of revolutionary class organization. The capitalist offensive has hit the workers and poor hard in many countries. There are periodic rumblings of renewed class struggle, and the conditions are gradually being created for its spread, but the days of glorious revolutionary outbursts are not yet at hand. It is fashionable in such times to latch on to anything that seems to represent some alternative prospects for the workers, regardless of how feeble that alternative. It might be comforting to take refuge in the Cuban state-capitalist system since it clings to socialist phrases while the phony communist regimes of the former Soviet Union and Eastern Europe have collapsed altogether. But it is a dead-end path. It will no more advance the cause of the workers than supporting Clinton as the alternative to Gingrich. If the workers are to rise again with their own independent voice, then they must leave behind all illusions in the Castro regime and Cuban "socialism. " The critique of Cuban revisionism is a necessary part of opening a new vista for the workers, the vista of revolutionary communism. <>


1. The articles referred to are "The imperialist Helms-Burton law and the myth of Cuban socialism" found in Communist Voice, vol. 2, #5, October 15, 1996 and the articles "Did Castro steer Cuba towards socialism in the late 1980s?" and "How the SWP whitewashes the Castro regime" found in CV, vol. 2, #6, December 15, 1996. (Text)

2. Mesa-Lago, Carmelo; The economy of socialist Cuba: a two-decade appraisal,p.21; University of New Mexico Press; 1981. (Text)

3. Eckstein, p. 43. Mesa-Lago's The economy of socialist Cuba, p. 151, cites an example where the bonuses went much higher than 25% of take home pay. At the Ariguanabo Textile Factory in Havana in 1979, 16% of the workers received no bonuses while some individuals got as much as 2,000 peso bonuses. That amount is huge if we compare it to the monthly wage scales given on page 147 of the same volume. By these scales, a bonus of 2,000 pesos would be bigger than the yearly basic wages of most workers. (Text)

4. For more information on the bonus system in brigades see the article "Did Castro steer Cuba towards socialism in the late 1980s?" in Communist Voice, vol. 2, #6, December 15, 1996. (Text)

5. Zimbalist, Andrew; "Reforming Cuba's economic system from within," pp. 223 and 230 in the collection Cuba at the crossroads: politics and economics after the Fourth Party Congress; edited by Jorge F. Perez-Lopez; University Press of Florida; 1994. Here the author notes that the Fourth Plenum on the SDPE decided that the State Committee on Technical-Material Supplies "was still allocating too many products and the number should be significantly reduced".Zimbalist also points out that "the number of material balances drawn up" by the State Committee was to be ended for 382 products (31%) from its 1988 levels, while "direct contracting was established between enterprises for 518 different products during 1988. " These later statistics are from a 1988 special commission to study the SDPE which also recommended that "(1) the number of commodities and commodity groups subject to central planning was to be reduced from 2,300 to 800 .  .  . " All the aforementioned figures don't indicate the total weight of all the products removed from centralized control *in terms of value*. But they do show a definite trend away from even the pretense of overall state planning of the economy. (Text)

6. Eckstein, p. 78 cites Cuba's Granma Weekly Review reporting that of 451 enterprises surveyed in a 1986 study, 40% were violating price guidelines. (Text)

7. Frank, Marc; Cuba looks to the year 2000, p. 43; International Publishers; 1993. (Text)

8. Eckstein, p. 75. (Text)

9. See pp. 298-299 of the article "Managing state enterprises in Cuba" by Sergio G. Roca contained in the collection Cuban communism: 1959-1995, 8th edition, edited by Irving Louis Horowitz; Transaction Publishers; 1995. (Text)

10. Frank, p. 101. (Text)

11. Perez-Lopez, Jorge F. ; Cuba's second economy: from behind the scenes to center stage, p.96; Transaction Publishers; 1995. (Text)

12. Frank, p. 33. (Text)

13. For instance, in 1977-8, rationed beans sold for 0. 20 pesos per pound in the rations system, but over six times that in the parallel market. See Perez-Lopez' Cuba's second economy, p.48.(Text)

14. Eckstein, p. 55. (Text)

15. Another bit of evidence that the "parallel market" was, in essence, a mirror of the free market, is that a president of a local private farmers association stated that he wasn't that upset by the closing of the free markets because "there wasn't a big difference really: without the market we make up to 20,000 pesos a year. " (Quoted in Marc Frank's book Cuba looks to the year 2000, p. 112.) (Text)

16. See Cuba's Second Economy, p. 109. It recounts how some 19. 5 million pesos in state machinery and materials was being used by the private artisan sector, with some individual cases involving as much as 1 million pesos. (Text)

17. Eckstein, p. 163. (Text)

18. Eckstein, p. 164-5. (Text)

19. It should be noted that by the time this campaign for production coops was initiated, state farms were already predominant. However, in the 60s they were not run along socialist lines. In the 70s, state agriculture ran along the lines of the Soviet market reforms of Liberman, which it also did for several years in the 60s. (Text)

20. Frank, p. 115. (Text)

21. Mesa-Lago, p. 65. (Text)

22. Mesa-Lago, p. 65. The author cites Castro's speech where he justified "stick[ing] to sugar".(Text)

23. Frank, p. 106. Frank, an ardent defender of Castro, does not challenge the contention that "in the eighties sugar's world market price averaged just half of production costs." (Text)

24. See the article "Cuba and the Soviet Union: what kind of dependency?" by Robert A. Packenham in the collection Cuban communism: 1959-1995, 8th edition, p. 151. (Text)

25. See the article "Cuba's International Economic Relations in the 1980s" by Sergio Roca in the collection The Cuban economy: dependency and development, p. 73; edited by Antonio Jorge and Jaime Suchlicki; University of Miami; 1989. It reports that by the early 80s, the percent of total trade with the Soviet-dominated COMECON had risen to over 80%. (Text)

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