Cuba: a story of socialist failure
13 February 2020
SUGGESTED
Economic Theory
12 February 2020
Society and Culture
Tax and Fiscal Policy
19 November 2024
As Fidel Castro progressed slowly toward Havana in the first days of 1959, he was met by huge crowds of enthusiastic supporters. The ex-president, Fulgencio Batista, had fled in the early hours of New Year’s Day to the Dominican Republic, accompanied by various supporters and an estimated $700 million in cash, art and bullion. With a high degree of corruption, the brazen presence of the U.S. mafia, and the use of violence to ensure control, Cuba’s crony capitalism had little support, even from its previous backers in the United States. Batista had fallen and, for the cheering crowds, the revolution was a chance to replace a system that enriched a small corrupt clique with one that promised to deliver human progress to the Cuban people as a whole.
Castro had expressed little by way of an economic agenda other than his commitment to land reform, greater democracy and better education. It was a program that made it easy for him to ally with others. When he took control, he even appointed a liberal president and prime minister. Six months after the revolution (July 1959), Castro could assert, “I am not a communist and neither is the revolutionary movement.”
But Castro’s land reform was getting bogged down and Cuban government was splintering as varied interests within it diverged on policy questions. Escalating conflict with the United States highlighted the need for powerful friends. As a consummate politician, Castro knew he could not leave a policy vacuum. To create his new economic plan, he turned to an unlikely source – his deputy in the revolutionary army, Che Guevara. Better known as a revolutionary fighter, Guevara would run the land reform programme, be the President of the National Bank of Cuba, Minister of Industry, a member of the National Directorate for the Economy, member of the Council of Ministers, and chief negotiator with the communist bloc.
Guevara had no doubt as to the cause of Cuba’s lack of human progress. It was not a lack of natural resources, for the country had fertile land with leading sugar, cigar and rum industries. It was blessed with the world’s second largest nickel reserves, the fifth largest production of cobalt, and reserves of oil, iron ore, copper, mahogany and cedar. Having studied Marx, Guevara was sure that the problem rested with what he perceived as Cuba’s “laissez-faire capitalism.” It was capitalism, he reasoned, that had impoverished Cuba despite its rich natural resources, thus showing “how deeply a people can enslave itself by economic means without realising it.”
Guevara adopted several goals to direct human progress in Cuba. On prosperity he proposed doubling “the yearly income of each Cuban in ten years… [from] 400 pesos… to more than 900 pesos.” Unemployment was to be eliminated by 1962. Meaningful work, he reasoned, would spur human development rather than “alienating” workers from the product of their labor. Guevara launched initiatives to eliminate illiteracy, and to massively expand free education and health care. A “New Man” would emerge – informed, educated, healthy, gladly working to provide society’s material needs, and committed to socialism for all. It was, for many, an attractive vision.
For Guevara, the means to deliver these goals included an extensive program of state planning and control. He argued that “planning is one of the laws of socialism. Without it there can be no adequate guarantee that all the sectors of a country’s economy will combine harmoniously.” And that “the sine qua non for an economic plan is that the state controls the bulk of the means of production, and better yet, all the means of production.”
Virtually all of agriculture, industry and commerce were nationalised; output objectives and pricing were set centrally, as were wages and employment levels; food and consumer goods were rationed, down to the level of how many eggs each person could buy each month; most savings were seized; investment followed a central industrial policy; foreign exchange and trade was controlled. It was one of the most comprehensive attempts ever implemented to use socialist central planning to deliver human progress. That approach largely continues – six decades later.
As an economic approach, it has failed. It also failed to bring progress to the people of Cuba. GDP per capita has risen at only around 1 percent per year, and that includes (now ending) subsidies from Venezuela and transfers from Cubans living in the United States. Two million people have emigrated to the United States and elsewhere. Despite its fertile land, Cuba imports two-thirds of its food. When the USSR subsidy ended in the early 1990s, GDP fell by a third and there were widespread, severe food shortages. The inefficiencies of planning meant that Cuban productivity languished as other countries overtook even the previously competitive sugar industry. And planning also failed to direct investment to genuine economic opportunities. Instead investment has produced low returns and failed to deliver growth.
There has been some progress in healthcare and education, but not in housing. For example, Cuban life expectancy is reported to have risen from 64 in 1960 to 79 today. But similar improvements have occurred in other parts of the Caribbean. Unfortunately, Cuban “achievements” have come at huge opportunity cost, with education and healthcare each consuming around a tenth of GDP. In many other countries, the two are provided at less cost. Intriguingly, Cuban investment in human capital has not itself produced a better growth rate, indicating how important other factors – such as economic freedom – are in turning human capital into human progress.
Those who crowded the streets of Havana in 1959, hoping that the fall of Batista’s crony capitalism would usher in a period of human progress, have been sadly disappointed. Anyone interested in what prevents economic and human progress can learn many lessons from Cuba’s stagnation. Cuba joined the long list of countries where central planning and state ownership have turned out to be a detour on the route to progress and prosperity.
Neil Monnery is the author of the book “A Tale of Two Economies. Hong Kong, Cuba and the two men who shaped them“.
This article was first published on Human Progress.
Castro had expressed little by way of an economic agenda other than his commitment to land reform, greater democracy and better education. It was a program that made it easy for him to ally with others. When he took control, he even appointed a liberal president and prime minister. Six months after the revolution (July 1959), Castro could assert, “I am not a communist and neither is the revolutionary movement.”
But Castro’s land reform was getting bogged down and Cuban government was splintering as varied interests within it diverged on policy questions. Escalating conflict with the United States highlighted the need for powerful friends. As a consummate politician, Castro knew he could not leave a policy vacuum. To create his new economic plan, he turned to an unlikely source – his deputy in the revolutionary army, Che Guevara. Better known as a revolutionary fighter, Guevara would run the land reform programme, be the President of the National Bank of Cuba, Minister of Industry, a member of the National Directorate for the Economy, member of the Council of Ministers, and chief negotiator with the communist bloc.
Guevara had no doubt as to the cause of Cuba’s lack of human progress. It was not a lack of natural resources, for the country had fertile land with leading sugar, cigar and rum industries. It was blessed with the world’s second largest nickel reserves, the fifth largest production of cobalt, and reserves of oil, iron ore, copper, mahogany and cedar. Having studied Marx, Guevara was sure that the problem rested with what he perceived as Cuba’s “laissez-faire capitalism.” It was capitalism, he reasoned, that had impoverished Cuba despite its rich natural resources, thus showing “how deeply a people can enslave itself by economic means without realising it.”
Guevara adopted several goals to direct human progress in Cuba. On prosperity he proposed doubling “the yearly income of each Cuban in ten years… [from] 400 pesos… to more than 900 pesos.” Unemployment was to be eliminated by 1962. Meaningful work, he reasoned, would spur human development rather than “alienating” workers from the product of their labor. Guevara launched initiatives to eliminate illiteracy, and to massively expand free education and health care. A “New Man” would emerge – informed, educated, healthy, gladly working to provide society’s material needs, and committed to socialism for all. It was, for many, an attractive vision.
For Guevara, the means to deliver these goals included an extensive program of state planning and control. He argued that “planning is one of the laws of socialism. Without it there can be no adequate guarantee that all the sectors of a country’s economy will combine harmoniously.” And that “the sine qua non for an economic plan is that the state controls the bulk of the means of production, and better yet, all the means of production.”
Virtually all of agriculture, industry and commerce were nationalised; output objectives and pricing were set centrally, as were wages and employment levels; food and consumer goods were rationed, down to the level of how many eggs each person could buy each month; most savings were seized; investment followed a central industrial policy; foreign exchange and trade was controlled. It was one of the most comprehensive attempts ever implemented to use socialist central planning to deliver human progress. That approach largely continues – six decades later.
As an economic approach, it has failed. It also failed to bring progress to the people of Cuba. GDP per capita has risen at only around 1 percent per year, and that includes (now ending) subsidies from Venezuela and transfers from Cubans living in the United States. Two million people have emigrated to the United States and elsewhere. Despite its fertile land, Cuba imports two-thirds of its food. When the USSR subsidy ended in the early 1990s, GDP fell by a third and there were widespread, severe food shortages. The inefficiencies of planning meant that Cuban productivity languished as other countries overtook even the previously competitive sugar industry. And planning also failed to direct investment to genuine economic opportunities. Instead investment has produced low returns and failed to deliver growth.
There has been some progress in healthcare and education, but not in housing. For example, Cuban life expectancy is reported to have risen from 64 in 1960 to 79 today. But similar improvements have occurred in other parts of the Caribbean. Unfortunately, Cuban “achievements” have come at huge opportunity cost, with education and healthcare each consuming around a tenth of GDP. In many other countries, the two are provided at less cost. Intriguingly, Cuban investment in human capital has not itself produced a better growth rate, indicating how important other factors – such as economic freedom – are in turning human capital into human progress.
Those who crowded the streets of Havana in 1959, hoping that the fall of Batista’s crony capitalism would usher in a period of human progress, have been sadly disappointed. Anyone interested in what prevents economic and human progress can learn many lessons from Cuba’s stagnation. Cuba joined the long list of countries where central planning and state ownership have turned out to be a detour on the route to progress and prosperity.
Neil Monnery is the author of the book “A Tale of Two Economies. Hong Kong, Cuba and the two men who shaped them“.
This article was first published on Human Progress.
6 thoughts on “Cuba: a story of socialist failure”
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Cuba opened the socialist road in the America’s with the first big military defeat in the America’s of the Greatest Military Empire in the history of the world. Sixty years later the revolution is still moving forward despite all the predictions of Bourgeois Professors at the elite Universities of the Empire.
GDP is fundamentally NOT the way to measure the economic success of socialist nations now…is it.
Manufacturing consent as per usual
This is what Trump wants for America. He wants to govern everyone here he wants to get rid of Democrats he wants to run the banks run out of food he wants to run everything. So someone should make a commercial and show what Trump is like. Do you want to be like Cuba well look at this this is what Trump wants and you people are allowing him to get it. Someone out there make a commercial. Make the commercial show what happen on January 6 this is what Trump asked for this is what he got. I will die soon but my children will have to look at this and go through this. All these Republicans then are lying about what happen on January 6, 2021 they should be voted out. Why do we need them why are we paying them their salaries they trying to stop people from voting so get rid of them we don’t need them. This should go out as of next month you put it on TV just like Trump has been lying for the past four years he’s brainwashing. So someone should do that with the commercial start now so Republicans are out in 2022. And until they don’t go back with true values they should never win another election. Look what they did to Cheney for telling the truth she is a good woman a lot of people are praying for her. She has good values like the old days. Trump it’s only doing what his father taught him to lie and brainwash people and boy has he brainwashed a lot of the country. Make the commercial make the commercial make the commercial start now brainwash people just like trump. Brainwash them with the truth that’s what the problem is the truth lets the lies go on and they’re silent.
Socialism is and always has been an extremely attractive political agenda, appealing to youth, and many who espouse a “sharing” of the advantages of a successful Society so as to benefit all. Unfortunately, Socialism still STILL relies upon OPM, Other Peoples’ Money, to continue the Socialist, sharing for the good of all, programs. Therein lies the problem, what to do when the OPM is no longer there, is insufficient to continue the Utopia-like promises. Cuba relied upon massive help from the USSR to fund its Socialism. When that was stopped, Cuba foundered, having made absolutely no plans re how to survive on its own.
There’s no mention of the crippling US blockade and sanctions on Cuba. Everything has been done by the US to make sure that Socialism cannot succeed. It’s the obsession of the Capitalist empire to smash everything that could prove there is a better system to live under. Do you really think we are that stupid?
Spot on Larry! And yes as this article and many others on this topic over the years proves that journalists are at least either bias or stupid! And why after all these years and the death of the rebels that lead the revolution is the blockade still there? And now thanks to trump labelled this defenceless island a terrorist state! Same reasons; they want it fail and everyone plead to join the capitalist dream that makes a tiny minority and the vast majority poor or wage slaves. Seems to me to deliberate, if you ask any person about Cuba, all they will tell you is it is proof socialism doesn’t work. It is another brainwashing article, full of miss information to fool ignorant minds.