Economic Change Is Coming to Cuba--But How Radical?

Beside the pools of Havana’s new hotels, the ice cubes tinkle in exotic cocktails; beggars follow foreign tourists in the streets outside.

Thirty-five years after Fidel Cas tro came to power, Cuba is coming out of the deep freeze. For now, the changes are small, but like the first faint breezes of an approaching hurricane, they are the harbingers of a storm that will reshape Cuba’s political and social realities and create a major foreign-policy crisis for the United States.

The big news isn’t that the Cuban government has announced some economic changes--reopening the free farmers’ markets and moving toward free markets in certain other goods. These are baby steps on the road to reform.

The real news is who is behind these changes--and why. Well-informed Cubans with personal ties to the highest levels of the island’s leadership agree: Fidel’s powerful brother, Raul, is behind these latest reforms and, behind him, stand the Cuban armed forces.

Badly shaken by the unrest last summer--the raft exodus and the riots in downtown Havana--and hurt by the economic crisis that has forced a 50% cut in military salaries, Raul and the top army brass want to solve the crisis and save the system peacefully. Cuba’s armed forces are increasingly impatient with the blundering political bureaucracy of the civilian government and they dread one thing above all: a situation in which the army will be used to suppress civil unrest.

The fears are not unrealistic. Cuba’s gross domestic product has plunged 45% since 1989, and basic foods are in short supply. “Why is Castro like an onion?” runs a popular joke in Havana. Answer: “They both make you cry in the kitchen.”

The army’s idea is to steer Cuba toward the China model of reform-- perestroika without glasnost. A combination of market reforms and enhanced political discipline will, the Army hopes, allow the Cuban economy to recover its dynamism without threatening the Communist Party and the Castro brothers.

It’s a forlorn hope beyond a few officers and technocrats. Few informed Cubans think this can succeed. The U.S. embargo is only part of the reason. As most Cuban economists know, the Cuban market isn’t big enough, and Cuban producers nowhere near competitive enough, for Cuba to take the Chinese road to development.

Even as the armed forces move to implement limited reforms, another group of Cubans is pushing more radical changes. This group--based in think tanks, certain ministries and in Cuba’s small but important group of independent non-party, non-governmental organizations--is still loyal to what they call “social goals of the revolutionary process” but their vision of a reformed Cuba looks like a West European social democracy.

This group of reformers--most too young to remember Castro’s revolution--recognizes that Cuba must adjust to the international capitalist economy. But in a series of conversations with a half-dozen leading members of this new breed of reformers, one message came through: These Cubans don’t worry so much about whether Cuba has a capitalist future as they do about what kind of capitalism Cuba will develop.

Will Cuba develop a European style of capitalism--with an extensive social safety net and a strong economic role for the government? Many leading Cubans, including well-known members of the Communist Party, would be happy to settle for this.

Will Cuba develop a Korean-style capitalism with less individual freedom, and fewer social benefits than in the European model, but with rapid economic growth? This possibility is less attractive to the more democratically minded of Cuban intellectuals, but is acceptable.

What virtually nobody in Cuba wants is a return to the Latin American form of capitalism they experienced in the past. Cubans do not want to import the drug problems, violence and crime that plague so much of Latin America; nor do they want to recreate the immense gulf between rich and poor found in societies like Brazil and the Dominican Republic.

As they try to imagine a new future for Cuba, the new generation of economists and intellectuals is dropping old taboos. Some make the case for a “big bang” market reform on the Polish model. Others are working out plans to compensate corporations and individuals whose property was confiscated by the Castro government. Public discussion of these radical ideas remains limited, but the continuing economic crisis forces even conservatives to study alternative ideas.

None of this means that Cuba is about to turn into a Caribbean Sweden. The old revolutionaries, and especially the Castro brothers, still control political life.

Moreover, the democratic reformers in their way are as unrealistic as the authoritarian reformers in the armed forces. Cubans may not want to go back to Latin-style dependent capitalism, but it is hard to see how they can avoid it. Cuba is a tropic sugar island with few national resources or opportunities. The agricultural products and nickel that Cuba makes are cheap commodities in the world economy. The oil and technologies needs are expensive. Though Cuban citizens are educated far beyond levels achieved in the rest of Latin America, they know little about such vital subjects as business and management. Finally, 35 years of socialist planning have saddled Cuba with an Eastern European-style legacy of useless factories and worthless state enterprises.

Neither Cuba’s conservatives nor its reformers seem able to admit how grim the situation is. Both groups clutch at straws. The conservatives hope this or that Band-Aid can preserve the essence of Cuban socialism; reformers look for some miraculous escape from the abysmal Cuban economy.

Every East European economy fell into crisis when it introduced reforms. Income fell, unemployment and inflation rose, and social services decayed faster during the period of reforms than under the last years of socialism.

Cuba may not quite go the way of Ukraine--for one thing, it has already suffered the shock of losing its access to cheap Soviet oil. But radical reform won’t be the end of the Cuban economic crisis. It will merely open a new and more difficult phase in it.

Americans are tempted to be smug about Cuba’s problems. For 35 years, Castro thumbed his nose at the Colossus of the North. He openly subverted his neighbor, attempting to foster anti-Americanism and communism in a hemisphere Washington thinks it owns. It is satisfying to gloat now, and the State Department seems to be doing it. As the Cuban crisis deepens, the United States is tightening the embargo and stepping up its rhetorical war.

This is natural--but unwise. Economic hardship in Cuba will send more boat and raft people to Florida; political turmoil will inevitably spill over into the inflamed politics of the Cuban exile community. With more than 1 million Cubans now living in the United States, America’s interest in the peace and stability of Cuba is greater than ever.

U.S. policy toward Cuba must change. Instead of working to dismantle the existing regime, we need to build links to the post-communist Cuba starting to emerge. Full diplomatic relations would allow U.S. diplomats to develop ties to Cuban reformers. An end to the travel ban will allow more face-to-face contact between U.S. citizens and their Cuban counterparts. A gradual end to the embargo will help put a floor under the Cuban economy.

These measures won’t cure Cuba’s economic woes or stabilize its politics. Nothing can. But they don’t cost any money and they will help prevent a descent into chaos in an island of 11 million people 90 miles from our shores. Both Cuba and the United States need changes in policy, and the longer each country waits, the worse things will get.*