“In no way do these changes represent a change in our goal of building socialism”

We first heard about Cuba’s economic changes in September 2010. Headlines declared that 1 million state jobs would be cut and David Cameron exulted that “even communist Cuba has got with the programme that we need to cut the budget deficit and get spending under control”. Meanwhile the media revelled in accusations that the economic changes represented an abandonment of socialism. Continuing the theme of half a century, neo-liberal vultures circled Cuba waiting for the inevitable collapse of socialism. 

The Cuban economy has suffered as a result of global financial crisis and a number of devastating hurricanes, but media analysis has instead portrayed the changes as a response to structural flaws in the Cuban model. I met Carlos Camps, Political Counsellor at the Cuban Embassy, to examine some of the most prominent new policies and find out the truth behind the media headlines.

Although areas of the Cuban economy remain unproductive – and the socialist principle of distribution has been challenged by unearned remittances – Carlos points out that the Cuban economy grew 2.7% last year whilst capitalist countries struggled to recover from recession. As Carlos observes: 

We see the American model everywhere, but this is not the model for us because it is in a very profound and very deep crisis … The international press is always looking to discredit Cuba and the socialist character of our revolution, but in no way do these changes represent a change in our goal of building socialism.

Housing

For a number of years, Cuba has struggled with housing shortages and one of the new policies seeks to resolve the problem by changing the way Cubans buy and sell houses. Although Cubans have always owned their homes – with residencies passing through the family – houses could only change hands through a bureaucratic system of exchange. The new system aims to solve the housing problem by establishing a legal and open process of monetary transaction.

As Carlos notes, “it’s no secret that sometimes the old process was open to abuse. If you lived alone in a very big house, I could give you $5000 and you could move into my small place”.  The new system limits the potential for corruption because it legitimises financial transactions – allowing the state to generate money through taxation – and transfers the responsibility of drafting legal documentation from the individual to the state.

“The old process took place through the housing office where individuals would present all ownership documentation,” explains Carlos. “Now everything takes place through notaries who draw up legal documentation. Any financial transaction takes place through the bank. For example, we would agree the price and you deposit the money in my account. I would then take a statement to the notary who checks it, changes the property registration and deducts a transaction tax.”

The situation is similar for the buying and selling of cars. Previously, only American cars from before the revolution could be bought and sold. Any modern cars – mostly of Soviet origin – could only be passed to your children or spouse. The new law allows transactions involving any car. As of November 2011, over 6000 had changed hands. Whereas “people will only be able to own one home and one holiday home,” Carlos explains that people will be able to own more than one car. As with the exchange of houses, all transactions go through the notary and are taxed. 

The core aim of the new housing legislation is to prevent housing shortages and overcrowding.  As Carlos illustrates, “if a couple have money available but don’t have a house to exchange – for example they could be living with their family – they can now buy their own house. If a family have a large house, but also another empty house registered in the name of a son, they can sell it to someone who needs it”.

A new series of grants, loans and subsidise have been introduced to support those who cannot afford to buy their own home. According to Granma, citizens are now eligible for grants of up to 80 000 Cuban pesos to help build a family home. Furthermore, loans starting at 1000 pesos are available for those interested in purchasing materials for home improvement and construction.

The new benefits are specifically targeted at those who need support most. “Up until now, the price of construction materials were determined by high earners – such as those who work in tourism or receive money from abroad,” explains Carlos. “If you had a low income, or had been affected by a hurricane, it was harder to get construction equipment. The new system ensures everyone has equal access and receives full support”.

The government has guaranteed the production of building materials to satisfy demand and has introduced various safeguards to ensure loans are used for their intended purpose and that construction is stimulated. As Carlos says, “you can only spend a credit or subsidy in the same area that you applied for. Everything is done via credit or bank note with no cash involved”.

Agriculture 

Agricultural changes – including increasing the amount of land farmers can rent, extending the length of leases and allowing farmers to sell produce directly to hotels rather than through state intermediaries – dovetail with developments in housing. As Carlos explains: 

Due to the success of social programmes after the revolution, many farmers’ children went to the city to study and to work. One aim is to encourage people back to the countryside and a house could attract them.

Although agricultural output increased by 2% last year, it is estimated that Cuba will import food worth $1.7bn in 2012. Building houses in rural areas – alongside increases in land to cultivate – acts as an incentive to increase agricultural production. “Why import tomatoes and potatoes when we can grow them at home?” asks Carlos. “We need to make farming attractive so people are interested in production.” 

Allowing farmers to sell directly to hotels makes the process quicker and increases quality. “Tourism is a very sensitive area,” concedes Carlos “and it means the product must be of a very high standard”. The increase in quality and efficiency – although aimed at the 2.5m visitors each year – will help benefit all Cubans.

Self-employment

The rise of self-employment has been portrayed by the Western press as Cuba embracing free-market liberalism – but this conclusion does not stand up to scrutiny. 

In December 2011, Cuba’s Deputy Minister of Labour and Social Security announced that the number of self-employed workers had increased by over 50% over the previous year and now exceeded 357 000. Over 100 separate occupations are now eligible for self-employment, from gardeners and barbers to pet-walkers and plumbers.

Carlos sees the expansion of self-employment as part of the “necessity to organise the whole system” and, as self-employment removes unnecessary prohibitions, it allows individuals to fill gaps where the state does not have the capacity to provide.

There will still be a close and inextricable link between the state and self-employed enterprises as many businesses will be renting government buildings and most will be buying state supplies. Both of which will help the state raise funds. As Carlos explains: 

If you want to start a business you have to attend a government office and apply for a license. They tell you how much you have to pay per month. If at any point you can’t afford to pay, you can apply to defer payment. 

Official Cuban figures show that 66% of self-employed workers were previously registered as unemployed. One possible explanation for this is that many of these people – now officially registered and paying tax – were previously active on the black market. Hence, new regulations serve to legitimise previously prohibited activity and, at the same time, allow the state to reinvest new money raised through taxation into the social infrastructure. Therefore, rather than representing developments as an eschewing of socialism – by involving them in civil society – it can be viewed as an extension of socialist planning.

Conclusion

As Raul Castro declared in a recent speech at the National Assembly, “corruption is currently one of the principal enemies of the revolution”. In this context, economic changes can be seen as an attempt to eliminate corruption by moving previously unofficial activity into the state-regulated – if not state-owned – economy. This allows the state to generate wealth – which can be reinvested into socially productive projects – stimulate growth and create jobs. They also address ongoing challenges including housing shortages, low agricultural production and excessive bureaucracy.

New benefits are targeted at the most vulnerable to raise living standards and reduce the gap between those with and without access to hard currency. As Carlos predicts, the probable aim is a return to a single currency “but this requires not just an increase in salaries, it also needs a decrease in prices”.  

Moreover, the economic changes – rather than representing a sudden divergence from socialist principles – are consistent with Cuba’s long history of reflection, renewal and rectification. As Carlos explains:

The Cuban revolution has always been very dialectic. We have always worked on our mistakes to ensure we don’t commit them again. The process of revolution is not a fixed phenomenon, especially in a changing world. Fidel has said that the revolution is about changing everything that must be changed, but never the principles on which socialism is based.

The purpose of the changes are “to guarantee the socialist gains of our revolution and make our economy stronger. We will never renounce the principles of independence, self-determination and working-class rule,” concludes Carlos. “If you can produce more, you can live better – and that’s the final goal of socialism”.

This article recently appeared in CubaSi magazine