Mises Daily

Cuba's Post-Soviet Socialism

On January 1, 2002, the Cuban government celebrated the 43rd anniversary of the revolution that put Fidel Castro in full control of the state. With the dictatorship still in place and the economy under tight central planning, not only has Castro's rule survived the breakdown of the Soviet Union but the government has been able to establish new trade relations and foreign direct investment agreements with several European countries, Canada, and the transition countries in Eastern Europe and in Asia.

Venezuela's Hugo Chavez is a declared friend of Fidel Castro, and Lula of Brazil, who is currently heading the polls in that country's upcoming presidential election, has frequently expressed his sympathies for the Cuban model. Measured by the goal to remove Castro and to establish democracy and a market economy, the U.S. policy toward Cuba must be regarded as a total failure.

The U.S. embargo is ineffective and counterproductive. By pointing to the "blockade," the Cuban people, whose affection for the American way of life is still very much alive, can be taught by their government that the embargo is proof that the United States must be regarded as their enemy. In the 1960s, the endeavors of the U.S. government to isolate the country threw Cuba right into the arms of the Soviets. Since the breakdown of the Soviet Union, and with the maintenance of the embargo, it is now the Cuban people who suffer most from the sanctions.

Misjudging Castro and the Cuban revolution has its roots in misunderstanding the ideological foundation of revolutionary Cuba. Although Fidel declared himself a communist early on, the ultimate character of the Cuban revolution has always been as much nationalistic-paternalistic as socialistic. Castro is a master at playing the tune of anti-Americanism and anticapitalism together with the promise of a better alternative beyond capitalism and Yankee dominance.

Understanding Castro’s political survival requires understanding that he was able to arouse strong feelings of national pride by standing up against the perceived suppression and hegemony of the United States. By rhetorical talent and charisma, and with massive help from the Soviet Union, Castro created a unique system with a specific ideology. This political ideology equalizes socialism with welfare and a socialist welfare state with social justice. Anti-imperialism and anti-Americanism is seen as equivalent to national independence, and national independence is the foundation for national pride that puts the Cuban people apart from the rest.

Putting these two equations of Castro’s ideological algebra together, the alternative appears as the threat that, should socialism disappear, the Cuban people would lose their welfare state and, with it, social justice. The widely held belief is that the end of socialism would mean the loss of national independence, and that with the new dependence, national pride and personal dignity would disappear as well. In Castro’s rhetoric, "socialism or death" is logically equivalent to "patria o muerte."

For more than 40 years, Fidel Castro has almost exclusively dominated politics and the economy of the island. But Fidel Castro is neither the exploitative nor the militaristic caudillo-type Latin American dictator. In his own intention, 1  ​he probably follows more the paternalistic traditions of his country. His view of socialism also has ingredients of the pre-Columbian tribal "Taino-Socialism," and he also follows the tradition of taking full advantage of Cuba’s geostrategic position, which dates back to the colonial period, when Havana became the place where Mexican gold was spent before the rest was shipped to Spain. In a historical perspective, living on foreign money under a paternalistic leader who "justly" distributes the funds among his followers may be a better shorthand description of Cuba’s system than the connotations that come with the concept of  "socialism."

As the country’s prime leader, Castro is also its top economic manager. He acts as the final authority even in scientific affairs, and he is an active adviser for his countrymen in all matters of life; his word extends to judicial courts, the press and education. It is not the Communist Party or any other group but Castro himself who is the glue that holds the parts of the Cuban system together. He is the incarnation of Max Weber's ideal type of a charismatic leader: able to negate all aspects of reality outside of his own vision and capable of imposing his view upon his followers.

Despite the global changes since the breakdown of the Soviet Union, Cuba’s leadership continues to bank on a centrally planned economy as a viable way into the future and to maintain that it is not the inefficiency of the socialist system but primarily the U.S.-American blockade that is the prime culprit behind Cuba's economic problems.

Although admiration for Castro is in decline among the Cuban people, particularly among the younger generation, there is the tendency to accept the present rule out of fear about alternatives that could be worse. The sympathies that associate a general level of welfare equality, which the regime accomplished in the past, are still vivid, and additional loyalty is brought about by the refined system of privileges that typifies dictatorial and authoritarian regimes.

While Cuba has established new foreign-policy ties, the internal economic reforms it has initiated since the breakdown of the Communist trading bloc (Comecon) are based on the premise of keeping the government in total control of the economy. Following the Lenin-Guevara economic model, the government regards the economy as one large factory, with the government as the prime management authority at its heart. All profits are accrued by the central government, which acts as the redistributive agency and delivers the goods to the population. Castro follows this economic policy strategy of maintaining socialist planning as the way to preserve his power. Flexibility is introduced into the system in a pragmatic form and is allowed only as long as its consequences remain under central control. The government also does all it can to prevent that tourism or the presence of foreign companies would have larger spillover effects to the rest of the economy.

Cuba’s economic system represents as a three-dimensional structure, with the centrally planned economy at the center, surrounded by a small foreign sector and a semi-legal private economy. The system is controlled from above, with the government as the unrestricted prime decision maker and Fidel Castro as the final authority in all matters. While the center of the economy, concentrated in sugar production, is a permanent loss maker, the foreign sector’s tourism industry and foreign direct investment compensate somewhat for the internal inefficiencies. The limited private sector works as an auxiliary stabilizer for the provision of the most basic private needs. But as soon as it became apparent that permission of free farmers' markets and small family-owned businesses would revive the entrepreneurial spirit in the country, the government began to impose severe sanctions and suffocating taxes on these entities, practically wiping them out.

Castro wants to maintain these structural characteristics of the Cuban economy despite the profound transformation of the international environment and the obvious failures of socialist economic planning. Maintaining a centrally planned economy is seen as the key to preserving Cuban socialism, while tourism and foreign direct investment serve to generate additional convertible currency, and the private economy is allowed to alleviate somewhat the deficiencies of the centrally planned economy.

The Cuban economy suffers from profound distortions, and inefficiencies are paramount. Poverty is everywhere, extending to food, health, and education. The withdrawal of Soviet subsidies has exposed the "Cuban model" as a mere window dressing. Now the deception is crumbling like the buildings in old Havana. Nevertheless, Cuba’s leadership hangs on to its vision, expecting some turn of fate.

"Socialism or Death": not accepting defeat has become the prime motto of political propaganda in the past years. Like the population--which throughout the country spends most of its time repairing all kinds of obsolete things ranging from American cars (1950s models) to old Russian trucks--the government is desperately trying to repair its obsolete regime. At an increasing speed, the series of ad hoc interventionism is making the internal contradictions more severe. While some of the younger bureaucrats and party followers cling to the hope that Cuba is "imitating the Chinese way," reality does not bear out this perspective; in contrast to China, Cuba’s policy of change is focused, not on transition, but on preserving Castro’s specific view of socialism and his power.

After the end of Soviet subsidies, the government initiated a series of reform measures, such as opening the economy to foreign investment, establishing free-trade zones, fostering tourism, reorganizing companies, and legalizing the possession of the U.S. dollar. These efforts have helped to halt the downfall of the economy. But growth has been anemic, and the two upsurges in the growth rates, which occurred in 1996 and, more recently, in 1999 and 2000 (see table below), do not reflect balanced growth; instead, they are the result of sharp variations in sugar production, of short-lived economic liberalization measures, and, for 1999, of highly concentrated investment, predominantly in the tourism sector.

In recent years, Cuba's economy profited somewhat from a rapid increase in tourism, with 1.7 million visitors coming to the island, mainly from Canada and Western Europe. In the second half of the 1990s, foreign direct investment grew markedly, particularly in tourism, telecommunications, and nickel and oil exploration. Additional sources of foreign exchange come from private transfers from abroad, predominantly from Cubans in the United States.

But these revenues could in no way compensate for the massive Soviet aid that had subsidized the system. With the decline of tourism and foreign direct investment already being felt, the Cuban economy is set for a new downturn in the coming years.

Entering the 21st century, Cuba represents a highly imbalanced economy, with the tourist sector as the most modern and most of the rest of the economy in contraction and decline. Almost a decade into the período especial, the standard of living for large parts of the population is deteriorating rapidly, the productive system remains weak, and the distribution of essential goods is highly defective and very uneven. Shortages in the medical and school system have become more common. Given that living standards may have fallen by about half compared to the 1980s, a further deterioration of the economic situation could mean a complete breakdown of the economy with an increased radicalization of the political system.

Up to now, Cuba's system has been totally dependent on the person of Fidel Castro. In contrast to the former Soviet Union, the Cuban regime is a "one-man show" and represents neither "dictatorship of the proletariat" nor the "rule of party." Fidel Castro Ruz is Comandante en Jefe and Primer Secretario del Comité Central del Partido Comunista de Cuba; he is Presidente de los Consejos de Estado y de Ministros; and he is, since January 1, 1959, the líder máximo of currently more than 11 million Cubans. No one has come close in terms of his charismatic leadership. It seems fairly safe to presume that Cuba’s current system will come to an end once Fidel Castro disappears. The most likely successor would be Fidel’s brother, Raúl Castro, who heads the military and the internal security apparatus. If he should inherit the role as leader, he could maintain his rule only by more suppression.

Given the deteriorating state of the economy and the tendency to increase political suppression, Cuba’s future looks quite grim. This outlook should alarm the United States in particular, because a bloody internal conflict on the island would have ramifications beyond Cuba’s borders. Given the instability of the countries at the northern fringe of the South American continent, turmoil in Cuba could serve as a trigger for conflict in the whole region. The United States may be well advised to initiate détente and more intensive trade relations with Cuba and to get rid of the embargo now.


  • 1 See Fidel y la religión: Conversaciones con Frei Betto . By Fidel Castro and Frei Betto (La Habana, Cuba, 1997); and La Historia Me Absolvera . By Fidel Castro (La Habana, Cuba, 1993).
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