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International Critical Thought

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Economic change in Cuba: The

(re-)making of a socialist development
strategy
Ant onio Carmona Bez

Depart ment of Polit ical Science, Universit y of Amst erdam,

Amst erdam, t he Net herlands

To cite this article: Ant onio Carmona Bez (2012): Economic change in Cuba: The (re-)making of a
socialist development st rat egy, Int ernat ional Crit ical Thought , 2:3, 297-313
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International Critical Thought

Vol. 2, No. 3, September 2012, 297313

Economic change in Cuba: The (re-)making of a socialist

development strategy
Antonio Carmona Baez
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Department of Political Science, University of Amsterdam, Amsterdam, the Netherlands

With recent structural changes and economic reforms in Cuba, a conceptual framework for
understanding what socialist development was and is today, is in order. This article
integrates development analysis with interpretation of change while documenting the
economic reforms now underway in this country. A clear distinction between the concepts
of patterns of development versus development strategy contributes to explaining how the
proposed reforms relate to the official state discourse of socialism, as well as to the policy
options that will shape future economic development. Cuban and non-Cuban narratives are
taken into consideration in order to provide a balanced assessment of the process. Important
features are the states shift from producer to regulator, the aperture of new market spaces
and the redefinition of the term social property.
Keywords: Cuba; development; markets; patterns; strategies

Since late 2010, much attention has been paid to the proposed structural and economic changes
that were disseminated at large by the Cuban Communist Party (PCC) in preparation for its sixth
Congress, which was celebrated in April 2011 (Miroff 2010; Juventud Rebelde 2010). Some have
related the upcoming changes to the transfer of power from Fidel to Raul Castro, hypothesized on
the younger brothers affinity to Chinese market socialism, interpreted as a transition towards free
market economics (Plummer 2001; Mesa-Lago 2008). But this is not the first time that observers
have speculated on such a beginning of the end to the ideals and fundamentals of the Caribbean
socialist alternative. During the 1990s, in the aftermath of the fall of the Soviet bloc, some cubanologos, especially in the United States, contemplated the disintegration of the one-party Marxist
state, similar to the real collapse of the nominally akin countries of Eastern Europe and Africa
(Rivera 1992a, 1992b).
While some during the 1990s saw structural reforms as a prelude to later implosion, now
observers remark upon the possible continuity of Cuban socialism through market reforms. In
any case, the proposed structural changes and the norms that were finally adopted by the sixth
PCC Congress may be perceived as evidence that some form of capitalist features will always
be needed for continued development and economic growth. This view, however, is contrasted
sharply with political discourse and academic analysis found within Cuba, where economists
use the term transition to depict the construction of socialist society (Figueroa Albelo 2008).
The aim of the article is twofold. First and foremost, to provide a conceptual framework for
understanding recent economic reforms and structural changes in Cuba; and second to contribute

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to the making of a comprehensive narrative of socialist development bringing to the fore the
debates found among Cuban intellectuals in understanding their own process.
I will argue that for the first time in the five decades of its existence, the Cuban party/state
apparatus has the space to re-conceptualize development and create its own development strategy,
shaped by both the domestic will to continue a project of socialist construction and the global
structures that impinge upon the economy. This will be done by, first, revisiting the distinction
between the two concepts of development strategy versus patterns of (national) development
as suggested by Gereffi and Wyman (1990). Second, I will provide a brief history of Cubas economic experience since the 1959 revolution, through the crisis of the 1990s up until the sixth PCC
Congress; after which I provide analytical commentary regarding how the 50 years of development has been perceived by some Cuba experts. Third, I will attempt to highlight the most important features of the PCC Guidelines that have already and will continue to impact Cubas sense of
development for some time. Conceptualizing a Cuban sense of development, and understanding
its transformation cannot be done without taking into consideration how official state discourse of
socialism will be shaped by new development strategies; this will be the fourth component of the
article. Parallel to this it would be most appropriate to depict some of the most serious recommendations offered by Cuban social scientists, and underscore the internal debates that have come into
fruition. I will conclude by expounding some of the essential characteristics of socialist development strategy in twenty-first-century Cuba.

Models, patterns and strategies

Previously, the socialist development model was defined as a structure of institutional practices
derived from ideology, treating the state as the essential motor of direct economic planning
and management, allocating resources according to priorities established by the state itself.
This was identified with central planning, nationalizations, restrictions on private property and
accumulation, investment prioritized by central planning and monopoly controlled prices
(Clapham 1992; White 1984). Additionally, soft budget constraints where government provides
additional funding for losses incurred by state-owned enterprises, was a typical feature of socialist
industrialization (Kornai 1986; Lin and Tan 1999). Looking at the experience of actually existing
societies which claimed to be socialist, Clapham (1992, 13) refers to the socialist model,
especially in the Third World, as an alternative strategy of development.1
In order to avoid confusion, gross generalizations and fixed categories that typify Cuba, I
would prefer to move away from the term development model and utilize the concepts of patterns of development and strategies of development. The first, patterns of development, refers
to the complex processes and historical experiences that generate distinctive national structures
of organisation and conditions of human and material resource allocation (Fajnzylber 1990, 236).
They are historically and structurally situated. The second, development strategies, has been
defined by Gereffi as sets of government policies that shape a countrys relationship to the
global economy and that affect the domestic allocation of resources among industries and
major social groups (Gereffi and Wyman 1990, 23). The key concept here is the relationship
to the global economy. Strategies should be thought of as conscious, purposeful and intentional.
1

It may be interesting to note here that in his 1992 article, The collapse of socialist development in the Third
World, Clapham argued that reports of the death of a state socialist development model might be exaggerated. At the same time, he says: If there is light at the end of the tunnel, I would look for it in the possibility
that revolution might be seen as the precursor, not to socialism, but to an effective process of capitalist development (Clapham 1992, 24).

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According to the Cuban political economist Pedro Monreal (2004, 107): The distinction is relevant to the extent that most of the controversy concerning strategies revolves around what governments can actually do, so that the study of the past (patterns of development) reveal their
capabilities or lack thereof. That knowledge, consequently, can be utilised as an initial condition
for the design of new strategies. Walking away from a nebulous term socialist development
model, which may or may not have ever existed, allows us to look specifically at how patterns
of development evolved and may inform a conscious national development strategy.
In Cuba, as will be argued later, what have been identified as development strategies,
especially during the 1990s, in fact often are fragmented decisions that attempt to mediate
crisis. Two narratives on Cubas patterns of development, which reflect analysis of the economic-historical process, will be presented for consideration. The first concentrates on the relationship between the market and the state, while the second elaborates on macroeconomic tendencies.
Synthesized, the two views can be identified as an aid in conceptualizing current changes. I will
maintain that although a new strategy of development is in the making, indicating a certain, conscious will to change in normative and organizational structures and economic reform which
defines a new relationship with the global market, patterns will not necessarily be broken
down. In other words, although national development strategies change, patterns might not.
Fifty years of economic development
The years 2009 through 2011 saw both academic and non-academic literature making reference to
the commemoration of the half century-old process of social transformation in Cuba (Brundenius
2009, 31 48). Among the most influential of these are those that speak to the progress and patterns of the countrys policies regarding social, economic and political development. Although the
social and political aspects are noted as the most fascinating, my interest here is geared towards
the economic and Cubas relationship to the global political economy. The five phases identified
below cover the years: 1959 60, 1961 63, 1964 75, 1976 89 and 1990 to 2008. In each of
these phases, especially the last three, I will emphasize the change of course that was taken up
by state leaders (Perez Villanueva 2010).
1959 60 saw land expropriation of the latifundios and the establishment of the National Institute for Agrarian Reform (INRA). This initial stage represented the most revolutionary period,
whereby the leaders of the new state dedicated the bulk of their time studying various options
to reverse or pass beyond the social ills inflicted upon the populace, explained as a result of
400 years of Spanish colonization and more than 60 years of neo-colonial dependency and domination under US-based corporations exploiting raw materials and cheap labour in agriculture.
Due to social upheaval and the competition of political forces and ideological tendencies, no
economic model could be articulated. The platform for revolution, however, was already laid
out in Fidels famous speech History will absolve me in 1956, when he delineated the eradication of social ills by identifying the search for economic models to improve social conditions
among the islands mostly impoverished population. Among the guidelines implied in this
speech is the nationalization of major economic sectors and natural resources (Castro Ruz 1961).
1961 63 with the creation of a national System of Budgetary Finance and the Central Board
of Planning, guided by Ernesto Che Guevara, which in turn was absorbed into a Ministry of
Industries in 1962. It was understood that in order to relieve the country from social and economic
underdevelopment, it would be necessary to enter into a process of industrialization by import
substitution. This policy intention was not particular to Cuba at the time but was a policy that
was promoted by the United Nation (UN) Economic Commission on Latin America (ECLA).
The difference being that in 1961, the Cuban government sought a way to enter into heavy industrial production simultaneously with import substitution and agricultural diversification for

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exports, while ECLA recommended that heavy industry could be accomplished as the last link in
the chain of development (Triana Cordov 1999). In 1962, the government proposed defining the
economy as an agro-industrial producer. Generally, this objective ran into difficulties due to US
postures and eventual economic embargo, the devastation of infrastructure caused by internal
conflict between political forces and technical brain drain that coincided with the mass exodus
of Cubas intellectual and scientific elite.
The hostile US response to nationalizations and the flight of Cuban capital pushed the countrys leadership to officially adopt socialism as the national discourse for development and economic policy. Socialist development was conceived then, primarily, as a centrally-planned
economy of state organized industrial and agricultural production, whose raison detre is the collective improvement of the standard of living for the vast majority of people, conducing to collective and individual emancipation (Campbell 2009; Clapham 1992, 13 25; Cole 2002, 40 56;
Guevara 1987, 154 178). By 1963, a rationing system to guarantee each citizen a minimum daily
caloric intake was consolidated, thus leading to the elimination of hunger. Much of the popular
mobilization to meet basic needs was done voluntarily, while monetary compensation played a
minor role in the exchange of products and bulk production. By 1963 the Cuban government
oriented over 70% of the countrys trade toward the socialist bloc, 40% of which was based on
trade relations with the Soviet Union (Triana Cordov 1999, 18).
1964 75 was the period of a definite positioning of Cubas economic development within the
Soviet blocs parallel international market, starting with preferential (or highly subsidized) prices
for sugar exports in 1964 until the full integration of the Cuban economy into the Council for
Mutual Economic Assistance (COMECON).2 State leaders and economists today recognize
this period as one starting with preference for highly centralized state planning, to a period of
experimentation with new forms of management and then back to decentralized production. In
response to proposals coming from debates at the national labour union (CTC) congress, the
Central Board of Economic Planning (JUCEPLAN) was reorganized in 1973, to oversee staterun projects of investment and production and to coordinate management, which became more
and more independent from government control. What was clear was the maintenance of the
sugar industry as the main source for international trade. Although planned sugar quotas were
rarely met, the state continued to invest heavily in this sector, as exports paid for investments
in education and health, raising the populations standard of living way beyond any country in
Latin America and the Caribbean, while bringing life expectancy and infant mortality up to par
with Western Europe (Stubbs 1989; Zimbalist 1987). Productivity also increased specifically in
the sectors of steel, pesticides and electric energy; in a word: industrial expansion was based
on sugar derivatives. The PCC held their first Congress in 1975.
1976 89 was essentially characterized by experimentation with enhanced decentralized production, more management autonomy and the search for more access to Western markets. Politically, in 1976, it was when the Cuban government codified the principles and laws of the land in
the Soviet-inspired constitution which outlined the framework for the construction of a socialist
society. This document defined such concepts as property, which was flexible enough to allow for
the first attempts at joint ventures with Western-based corporations in the 1980s (Carmona Baez
2004, 92 3). The new constitution de-bureaucratized central planning by creating the Organs of
Popular Power, made up of provincial administrative committees.
At the first PCC Congress, the System of Economic Management and Planning (SDPE) was
outlined and later implemented in 1976 with a five-year plan. This system closely followed the

2
Cuba was one of three non-European countries to participate as a full member; the other two were Vietnam
and Mongolia (Jeffries 1993).

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economic framework of the Soviet reform era beginning in 1965 (Kontorovich 1988, 308 16).
Local authorities of this innovative system allowed for the use of small plots of land for
private agricultural development; it also encouraged collective subsistence farming and initiated
managements right to hire and fire labour, and use bonuses and salary increases to stimulate work
place production. During the second PCC Congress in 1980, Fidel Castro proclaimed that the following decade would culminate with the establishment of the technical-material bases for socialism in Cuba, allowing for higher investment in industry, a fairer scheme of redistribution and
the growing satisfaction of the peoples material and spiritual needs (Castro Ruz 1980). Decree
Law # 50 of 1982 provided the basis for joint venture investment in pharmaceutical production
and exports for life-saving vaccines. During the PCCs third Congress in 1985, the leadership
passed the socio-economic guidelines for the five-year period 1986 91, which mostly concentrated on the balance of payments and trade, savings, promotion of import substitution and the
identification of biotechnology as a possible space for new markets in which the country could
participate at a global level. The country, still dependent on the export of sugar at subsidized
prices, was transformed into the most egalitarian society in Latin America with socio-economic
indicators resembling those of the most advanced industrial societies of the world. Up until after
this period, unemployment was not recognized by the state and salaries continued to follow egalitarian norms. Average annual gross domestic product (GDP) growth rate was 5.6%, which is
considered relatively high in relation to the neighbouring Latin American countries that were
experiencing zero growth due to the debt crisis of the 1980s. Growth in industrial output and
infrastructure grew by 6.9% for this period (Perez Villanueva 2010, 7 16). State discourse and
social policies concentrated on correcting the social effects of decentralized planning and autonomous management.
Lastly, 1990 2008 brought new, and perhaps unforeseen, challenges to the Cuban economy
that might be analogous to the experience of the early years of the Revolution, where productive
forces had to be re-arranged and the state leadership was forced to look for new strategies. With
the disintegration of the Soviet bloc and its parallel trading system the COMECON Cuba lost
over 80% of its trading capacity and industrial production practically collapsed. A series of normative and organizational restructuring procedures prepared by the fourth PCC Congress in 1991,
allowing for aperture of limited market spaces, held the country together throughout four years of
excruciating zero-growth (Carranza, Gutierrez, and Monreal 1996).3 Since then, no five-year plan
has been established.
Together with the legalization of the use of hard currency, bank decentralization, the creation
of new market spaces, the possibility of new business models like self-employment (cuentapropismo) in services and state-sponsored cooperatives that promote decentralized agricultural production, and a turn to tourism, the 1995 New Law on Foreign Direct Investment allowed for the
re-insertion of the Cuban economy into the global market. One of the most important steps here
was the conversion of the JUCEPLAN into the Ministry of Economy and Planning in 1994. The
liberalization of markets was accompanied by a rudimentary tax-regime that eventually evolved
into an important determinant of fiscal policy.4 The opening up of commodity stores operating in
hard currency allowed for the sales of domestic products in international prices. All these
measures (emergency measures, according to state discourse) were considered to be temporary.
3

This period coincided with the 1992 Constitutional Reform. It is worth mentioning here that social investment, especially in health and education, did not drop; on the contrary, more investment was geared towards
these sectors.
4
In Cuba, the term aperture (apertura) or opening of market space is used in place of the term liberalization. This is important in understanding not only state discourse but also development analysis as produced
by Cuban social scientists.

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By the fifth PCC Congress in 1997, however, the System of Entrepreneurial Perfection (SPE) was
set up to mainstream state-owned enterprises into the global market, with the intention of making
them profitable and more efficient. It is here that an attempt was made to link wages to productivity, making labour more flexible. The SPE was inspired by industrial sectors that were controlled by the military (Revolutionary Armed Forces) under the guidance of Raul Castro
(Carmona Baez 2004, 164 84). Production was mainly centred on nickel extraction, elaboration
of sugar derivatives and, more importantly, services sold to the global market, especially tourism,
and medical and technical assistance abroad. The average economic growth rate (GDP) for the
later part of this period was 6.5% annually, whereas between 2001 and 2003 GDP growth averaged 2.5% and between 2004 and 2008 the average was 8%. Between 1997 and 2000, the newly
recognized unemployment rate dropped considerably. Whereas in 1998, the official unemployment rate was at 7%, it dropped during the course of 2000 to 5.5% and has maintained itself at
an average of 2.8% through 2009 (Perez Villanueva 2009, 30 2). Again, this reserve army of
labour was inserted into non-productive sectors of the ministries.
Another important factor explaining economic growth for this period was the close relationship that the country fostered with Venezuela since the rise to power of Hugo Chavez with his
Bolivarian project of building stronger economic ties within the region; most notable was the
sale of medical services provided by Cuban doctors in exchange for Venezuelan crude oil. The
number of trade agreements between Cuba and China also reportedly increased during the
same period (Associated Press 2008).
In 2004, the government took measures that would ensure a re-centralization of productive
forces, limiting the autonomy of management in enterprises, the free market pricing system that
occurred during SPE mainstreaming and a re-distribution of wages and services among the population. Accompanying these measures was what Fidel Castro called the universalization of education, ensuring that every municipality in the country would build its own university, for the
purpose of fostering a knowledge-based economy (Horruitiner Silva 2005). But the re-distribution
of resources aimed at controlling inequalities by applying market mechanisms to some sectors had
no impact on the serious consequences of speedy economic growth. Instead, hyperinflation of basic
commodity products like food and clothing led a portion of the population and foreign businesses
operating in Cuba to prefer imported products (Lopez Segrera 2011, 8). Stagnation in productivity
despite five years of economic growth (2002 7) can also be explained by the reactivation of a significant portion of the unemployed into the social service sectors of the economy (Perez Villanueva
et al. 2009). In 2009, and in response to inflationary tendencies in food products, some effort was
made to stimulate local farming organized and managed by municipal councils (Nova Gonzalez
2010, 176 273).
Monetary policy for this grand period went from the single use of the Cuban peso, to the use
of the peso, a convertible version and a variety of foreign hard currencies, to the 2003 Central
Bank Resolution 65 creating the convertible peso (CUC), now recognized as the only valid
hard currency to be used on the island along with the Cuban peso (Monetary Policy Committee
of Banco Central de Cuba 2005). The convertible peso was based mainly on US dollar reserves
until 2004, but from then on it recognized the euro informally as the main basis for foreign currency reserves backing up the CUC. A large amount of commodity products and even basic needs
such as food products, moved from the subsidized pricing system of the peso to the convertible
CUC.
What is depicted in this summary is a sectoral shift from industrial production financed by
exports of natural resources to services in the period 2000 8. While the country experienced
high rates of economic growth during this last period, the global economic crisis resulted in
the downturn of tourism, less family remittances and a price hike for imported foods. The downturn of production which eventually brought the GDP to its knees from 2007 onwards brought the

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PCC to reconsider their development strategy and the fundamentals of the Cuban economy,
looking at past experiments not as mistakes but as lessons on which to draw (Vidal et al.
2010; Mesa-Lago and Vidal-Alejandro 2010).5

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Narrative one: Zigzags, apertures and closings

In their separate but parallel works, Eckstein (2003) and Carmona Baez (2004) compressed the
economic phases up until the mid-1990s into periods roughly corresponding to decennia in
order to elaborate on the interaction among domestic and international political and social pressures that shaped economic policy, social priority and state capacity for development. More than
decennia, they in fact identify moments around the party congresses or political campaigns. To
use Ecksteins terms, these are: the utopian jump to Radical communism/social re-configuration
and mass mobilization (1959 68), the Retreat to socialism/institutionalization (1970s and the
first PCC Congress), the Campaign to Rectify Errors and Negative Tendencies (1986 90) and
the Special Period in the Time of Peace (the 1990s). Carmona Baez (2004) extends beyond
this to the fifth PCC Congress when the New Cuban Economy was proclaimed through the
SPE, and identifies quasi-permanent structures that would allow for further re-insertion of
Cuba into the global economy while impacting internal socio-economic indicators.
Eckstein (2003) and Carmona Baez (2004) look to both international as well as domestic/
popular causes and responses to the economic policies put forth by the party/state apparatus leadership. Some might consider the documents produced for the party congresses as national strategies of social and economic development. A closer look, however, at how global and local
pressures impinged upon policy reveals that within the framework of party/state dynamics,
many policies adopted throughout the course of 40 years reflected either ad hoc decisions
based on opportunities presented by Cold War logic or state responses to appease the popular
masses (popular democratic governance), i.e. politically stimulated. For instance, based on
studies corroborated by Domnguez (1978) and Zimbalist and Brunenius (1989), all recognize
that the changes made during the first half of the 1970s, including the SPDE and especially the
de-centralization of enterprises, were state responses to popular concerns of food shortages,
tight rationing and inefficiency in public services. Absenteeism and foot-dragging were considered as legitimate forms of protest, while black market activity, especially in agriculture (punished harshly) signalled the possibility of more efficient production under loose-control of the
government.
Eckstein tended to highlight the importance of values and ideas used in the broad campaigns,
and the figure of Che Guevara falling in and out of political discourse according to moments of
state encroachment upon (the negative tendencies of) the market. The material economic needs to
boost productivity together with egalitarian deemed socialist values proved to be the balancing act which governed Cubas social and economic development. But the miraculous success of
the regimes survival during the 1990s brought on inequalities such as income disparity that were
seen as side-effects of aperture. The large-scale impact of structural reforms, particularly inequalities budding among the population, featured prominently in scholarly discourse forcing their
appearance into local debates about socialist strategies of national development (Espina Prieto
2004; Garrido Rodrguez and Garca 2008).
5
The question of public debt and its remedy is yet another important factor contributing to the national
debates. I have chosen to leave this out of this discussion as the figures for national debt have yet to be
corroborated and lenders yet to be identified. For the impact of the global economic crisis on Cuba, see
Mesa-Lago and Vidal-Alejandro (2010).

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All in all, the two above-mentioned authors found common ground with the zigzag pattern of
openings and closing of market spaces, and zigzags between centralization and decentralization
controlled by the party/state apparatus and influenced by popular responses to changes. This
zigzag tendency is a general pattern within the party/state apparatus relationship with
markets, allowing for the controlled inflow of hard currency, technology and the availability of
foreign trade. The moving back and forth from centralization to decentralization was depicted
by Gonzalez Nunez (1995). This pattern has also been documented as a feature of Chinas
state response to the market since liberalization took off during the 1970s up until today
(Andreas 2010; Huang 2008; Daz Vazquez 2010).
Cubas insertion into the post-Cold War, global economic order represented no less of a zigzag
at the start of the twenty-first century. From 2000 4, numerous national projects for ensuring a
balancing act were instated. In 2000, Fidel Castro launched the so-called Battle of Ideas, a series
of corrective measures to control the social contradictions emanating from the economic expansion (Cuban Ministry of Foreign Affairs n.d.). The government allowed fewer productive spaces
for foreign direct investment (FDI), suspended and reduced new and existing self-employment
licenses, and targeted direct aid toward the most vulnerable segments of the populations
(Lopez Segrera 2011, 8). Although pensions and other social security benefits increased, the government halted many of the structural reforms made during the Special Period up until 2000.
There was another battle of ideas parallel to these measures. Already in 2003, the Cuban
government welcomed the presence of a Chinese delegation of economists that left an outstanding
impact on the debates occurring in the country. Xu Shincheng of the Chinese Academy of Social
Sciences was quoted saying that the country should establish mechanisms of socialist marketbased economy, and do away with egalitarianism (cited in Mesa-Lago 2008). Here egalitarianism
refers to the practice of maintaining generally equal salaries independent of the productive or
service sector, which is what currently differentiates Cuba from similar economies worldwide.
An end to egalitarianism would mean strictly linking wages to productivity. This was experimented with briefly in the SPE at the end of the 1990s, after the fifth PCC Congress in 1997 but later
suspended. It was not until five years later, in 2008, that Raul Castro and the top echelons of the
PCC adopted this bold posture as an important part of the proposed reforms (Castro Ruz 2008).
Since his entry into office in 2007, Raul Castros speeches have been peppered with insinuations about the changes that needed to be made: enhancing popular participation, the formulation
of proposals for change and democratic debate; increase in overall productivity, but especially in
agriculture; making sure that peoples standard of living is directly related to their legal income;
reduction of redundant state employees and excessive benefits such as meals provided for at the
workplace; the closing down of non-economic projects that were launched during the Battle of
Ideas; and ensuring transparency, making top management accountable. Parallel to this, Cuba
saw greater popular and scientific debate on development strategies and the re-conceptualization
of the terms social property and socialist development (Mesa-Lago 2008; Alzugaray Treto
2009, 37).6
As of 2007, the government began passing legislation lifting prohibitions on Cuban citizens
participation in the market. These are liberalization of the sale and purchase of such commodity
goods as computers and laptops and entertainment appliances. Access to broader services of
mobile telephones which had been reserved for diplomats, business managers and foreign visitors was also expanded. The same period saw the lifting of restrictions preventing Cuban citizens from enjoying some hotel services traditionally limited to tourists. Flexibilization in the

6
Some analysts have speculated that the Battle of Ideas was in fact an economic-ideological manifestation of
the political transfer of power from Fidel to Raul Castro (Mesa-Lago 2008; Alzugaray Treto 2009, 37).

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calculation of salaries was another feature, while Law-Decree No. 259 on the distribution of idle
lands for the purpose of private agricultural development and Decree-Law No. 268 modified
labour laws to allow for multiple employment and flex work. In a sense, we can speak of the
re-introduction of the economic practices which emerged out of the Special Period.
Here we see an opening up of new market spaces, a tendency towards apertures and the
getting rid of features closely identified with the socialist development of the 1980s, when the
relationship between the market and the state was re-evaluated. It is possibly a return to the initiatives taken up during the Special Period and interrupted shortly before the transfer of power from
Fidel to Raul. There is still a question with which to contend: did the structural (organizational and
normative changes) changes adopted during the Special Period and extended throughout the last
decade reflect the making of a new strategy?
Narrative two: Import Substitute Industrialisation (ISI) and combined re-industrialization
After analysing specific macroeconomic tendencies and studying the normative and organizational transformations during the 1990s, Cuban economist Pedro Monreal (2004, 91 118) compressed the above mentioned stages even further to identify continuity in Cubas economic
development since the 1970s and the need for a break in the near future. He starts off by recognizing that, the central axis of Cubas development strategy as of 1975 was the industrialisation
of the country as delineated in the Programmatic Platform approved by the first PCC Congress
in 1975 (Monreal 2004, 99). Although Cuba never fully industrialized, it succeeded in gaining
higher industrial output, diversification of production, expanded infrastructure and embryonic
business networks, especially since the 1980s. Industrial expansion was found in metal processing, industrial machinery, naval construction, pharmaceutical production and medical equipment, electronics and textile plants. As a result, exportable primary and refined resources
increased, but industrialization by import substitution continued to be the main objective. The
problem by 1990 was that these new spaces of economic development were never internationally
competitive. Inefficient industries were reactivated and modernized because their sales took place
domestically, where the levels of efficiency were less than would be required by global markets
(Monreal 2004, 104). In addition, the allocation of capital and resources among industrys administrative bodies continued to be controlled by the whim of state bureaucrats in their understanding
of productive priorities. This led to imbalances and distortions of market mechanisms.
The 1990s indeed saw a transformation and restructuring attempts in order to allow for the
expansion of an industrial base and would guarantee a certain success in overcoming complete
economic collapse. As Monreal (2004, 104) notes, exports increased during the 1990s due to
enhanced exploitation of natural resources through services, especially in tourism. Simultaneously, this attempted to reproduce domestic market mechanisms, the acquisition of technology and advances in order to expand an industrial base for local consumption, referred to as
exports within borders. Revealing the importance of hard currency, exports within borders
have made it possible to create some industries originally designed to place imports on parity
with export-oriented industries for direct access to foreign exchange. From here, domestic
markets in foreign exchange could act as a spring board for the generation of real exports but
this has not yet been materialized.
Monreal (2004, 108) concludes that from the pattern of the 1990s we do not see a different
strategy, rather what is seen is a different phase of the same strategy, imitating the pattern: If
the phase that extended during the period 1975 1990 could be characterised as industrialisation
by means of import substitution under conditions of high external subsidies (form the Soviet
bloc) the 1990s opened a new stage of what in essence was the same strategy, which can be
called reindustrialisation by means of import substitution with superimposed export orientation

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(in short, combined re-industrialization). Monreal suggests industrialization by means of export

substitution, i.e. replacing the products sold abroad with the purpose of buying up capital to industrialize the domestic market by reconfiguring the industrial structure to take advantage of emerging domestic markets, hereby producing sources of accumulation and articulating links with
productive chains internationally, which would make Cuba a new site for manufacturing in
global products. This, according to Monreal (2004), would be the nucleus of a new strategy.
In a sense, the industrial expansion that was more evident during the early 1980s was only
possible due to Cubas participation in the Soviet bloc parallel market system of preferential
and subsidized prices. From the 1990s onwards, a strategy of resistance sought to maintain
the continuous flow of investment into social welfare and safeguard socio-political stability.
The changes made during the Special Period were not a discontinuation. Rather, they sought to
preserve the structures of state-dominated production and industrialization by means of import
substitution. This development strategy of resistance can only be thought of as a strategy in hindsight, never purposeful or intentional, but developed over time. Therefore they were re-conceptualizations of patterns of development and do not represent that strategy of development that
can carry Cuba for decades to come. While recognizing the importance of changes made in the
patterns of development in sectoral studies, we can continue to recognize the significance of
global structures that determine a Cuban path to development without a Soviet bloc.
The argument can be taken further to suggest that Cuba never had a strategy for economic
development in the global system. Rather, the patterns of industrial and economic development
were framed by Cold War logic, sovietized if you will, especially since 1973 when it entered
into the COMECON, until the demise of the Soviet bloc. The structural changes that were
expounded during the 1990s, thought of as temporary measures for recuperation, can only be
thought of as impulsive responses to the naked global market, and may have given clues for a
future, conscious development strategy. To quote a renowned Cuban economist:
We thought that through the construction of socialism (we are not a socialist country yet but a country
in transition to the same) we could resolve the question of development. Now we have a standard of
living that is first world with a consumption level that is third world and a level of productivity that
reflects advanced development of the 1950s. (Triana Cordov 2010; originally in Spanish)

Monreal (2004, 110 11) suggests that under new international economic conditions, the creation of the internal foundations necessary for the systematic development of the countrys productive forces should be the result of a reindustrialisation process whereby a share of the industrial
base is oriented towards contemporary global production. This does not mean, however, that
import substitution should be completely eliminated. Gereffi et al. recognized that a combined
strategy of both import substitution and outward oriented industrialization should be the norm,
albeit with import substitution taking on a subordinate role (Gereffi and Wyman 1990, 20). In
order to accomplish this task, it would be necessary to take into account the recommendations
that Cuban economists have been outlining since the Special Period, not as temporary measures
but as permanent features for a new Cuban economy. These include the elimination of the dual
monetary system, financial autonomy of state enterprises, redefining the material bases of
accumulation and the introduction of new forms of property, the redistribution of idle lands for
the use of private agricultural production, identifying spaces where the Cuban economy can
insert itself into the international market and its distribution chains (manufacturing) and, last
but not least, securing the confidence of foreign investors (Carranza, Gutierrez, and Monreal
1996; Brundeius 2009; Mesa-Lago and Vidal-Alejandro 2010; Nova Gonzalez 2010; Vidal 2009).
It seems as if the suggestions made by Cuban analysts have recently been inserted into party/
state discourse through the recently formulated guidelines and have laid the groundwork for a

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sound development strategy. The culmination can be found by studying the guidelines prepared
by the PCC Commission on Economic Policy and approved by the PCC this year in their sixth
Congress. More than structural and normative transformations that enhance productivity, what
is taking place in Cuba today is the implementation of economic reforms that will permanently
change the concept of production itself; this time from the perspective of integrating Cuba into
the global economy.

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New guidelines, new strategies

Before entertaining the most concerned element of the Guidelines document, it is worth mentioning that prior to public discussion the Council of State, Cubas supreme executive body,
after consultation with the countrys economists, decided to reduce the public payroll. It
intended to mobilize millions of underemployed workers into newly-privatized sectors
through self-employment, private companies with a limited number of employees, cooperatives
or through the possibility of acquiring land for the purpose of private agricultural exploitation
(Perez Villanueva 2009, 22). Indeed, between January and March 2011, more than 500,000
people were offered work in agriculture or licences for self-employment (Reuters 2011).
This effort to make government smaller alongside the 2009 decision to raise the retirement
age to 65 for men and 60 for women resembled many other nations policy shifts (Bongaarts
2004; Pelaez 2011). These issues were dealt with outside of the reforms framework suggested
in the Guidelines discussed below, as if to separate the norms dealing with labour and productivity from the structural economic reforms that address property, investment and
efficiency.
It is important to understand that the Guidelines for Economic and Social Policy (Partido
Comunista de Cuba 2011) do not represent reforms or legislation, rather, they are just that: guidelines that will be elaborated into legislation throughout the next five years. State officials have
commented on the need to implement the changes slowly, although some of the changes have
in fact already taken place.
It is beyond the scope of this article to place any value judgement on the level of democratic
procedure that was used in the preparation, discussion and modification of the guidelines. It is
worthwhile, nonetheless, to mention that: the original document (first draft) prepared by the
PCC Commission on Economy Policy was delivered publicly in November 2010 and that
national meetings for public scrutiny were held between the following December and February;
whereby 8.9 million people participated at workplaces, schools and neighbourhood centres. Out
of the original 291 guidelines, 94 remained the same, 197 were modified or integrated into others
(68% of the total) and 36 were added to make a total of 311 guidelines that were approved by the
sixth PCC Congress in April 2011. If these figures are to be taken seriously one might argue that
the process has been characterized by a high level of popular participation. The first draft caused
uproar and sparked a number of debates that were documented and found online. Among the
themes that were debated were: the absence of any reference to workers in new productive entities, the role of the central trade union and the form of democratic governance that would follow
(Arreola 2011; Leiva Jimenez 2011; Pineiro Harnecker 2010a, 2010b; Espacio Laical 2011).
The 311 guidelines are divided into 12 chapters.7 The most important features for our discussion here are the following: new forms of non-state (social) property; the possibility of private
7

These are entitled: I Model for Economic Management; II Macroeconomic policy; III External
Economic policy; IV Investment policy; V Science, Technology and Innovation policy; VI Social
policy; VII Agro-industrial policy; VIII Industrial and Energy Policy; IX Policy on Tourism; X

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production and the elaboration of non-state systems of public services; new industrial relations
with a new inter-managerial framework; tax regimes and agriculture; the reorientation of social
benefits traditionally associated with egalitarian policies towards the concentration of social services to the most vulnerable sectors of Cuban society; greater space for private property and the
commodification of real estate and other objects such as automobiles.
The first guideline, falling into traditional party/state discourse reads: The system of socialist
planning will continue to be the main path for leading the national economy and should be transformed in its aspects of methodology, organisation and control. Planning will consider the market,
influencing the same and considering its characteristics. Here we see the will of at least the state/
party leadership and arguably a major portion of the population, in maintaining socialism as the
main structure for development, while the state shifts from producer to regulator. That is, separating state functions from business functions through a gradual process, to allow room for defining the normative transformation. Entities remaining under state control will receive more
management autonomy in employment, budgeting, operations, and material and fiscal resources
use, to increase both efficiency and accountability. The forming of self-managed, collective entities, i.e. cooperatives, in industry and services will be the main form of non-state social property,
with obligations similar to private entities in terms of profit-making, revenues, employment, management and eventual (re-)investment.8 The government should develop a business state legal
order that will facilitate contracts, controls and penalties. A tax regime for business should be elaborated at both the municipal and provincial levels, in order to ensure an adequate redistribution
of wealth and investment in infrastructure. Internal finances shall not be tampered with by government agencies, only monitored, and the guidelines advocate gradually eliminating subsidies
covering losses. The new non-state business entities shall have the possibility to create their
own investment funds, invest freely in other spheres of production and services and cooperate
with other non-state entities. State budgeting will fall from the sphere of production of goods
and will be reduced to such basic services as education and health. Here, soft budget constraints
will be eliminated in industries.
In the area of macro-economy, the guidelines are geared towards: (1) achieving the best
coordination possible between the planned objectives of the national economy with the design
and reach of monetary and fiscal policy; (2) reaching trade balance; (3) reducing the number
of imported foodstuffs; (4) guaranteeing a clear relationship between the growth of worker productivity and the median income of workers, while not lessening internal monetary efficiency; (5)
the unification of the double monetary system into one convertible hard currency; and (6) the provision of credits to stimulate a domestic entrepreneurial culture. A separate chapter (III) was dedicated to external trade and investment, with the attempt to attract foreign capital targeting
economic areas of interest for society, especially in services and manufacturing. As far as
exports are concerned, guideline 73 prioritizes professional and technical services abroad,
while guideline 74 allows for the elaboration of a strategy to identify new global market
spaces in the pharmaceutical and medical industries. Guidelines 80 and 81 refer to import substitution of mechanical parts and machinery but with the intention of working within a framework
where Cuban companies are participating in an international (foreign) chain of production.

Transportation policy; XI Policy on Construction, Housing and Hydraulic resources; and XII Business
(domestic) policy.
8
In guidelines 2529, two forms of cooperatives are identified: first and second grade; wherein the second
may emanate from a mother cooperative, specialising in a particular service for the company. Guideline 26
clearly discourages the sale of the cooperative to individual proprietors and private companies (natural
persons) or even to the state.

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The creation of new market spaces internally to facilitate a business culture is clear with the
commodification of real estate and automobiles; whereas before exchange of housing was strictly
mediated by the state, now there is the possibility to sell and rent homes and personal transport
vehicles, as well as the liberalization of renovation and construction services on an individual
basis, in order to alleviate housing shortages. Guidelines 166 through 196 in chapter VII treat
the agro-industry by extending more titles of land for agricultural exploitation under private enterprise and cooperatives with the purpose of diversifying products for both domestic consumption
and exports. Public municipal and provincial legislative bodies will handle subordinate status of
agriculture. Guideline 287 suggests new non-state forms of business and trade, especially in gastronomic services and domestic maintenance shall be introduced. Guidelines 249 through 267 in
chapter X allow for state investment in setting up modernized, profit-making transportation networks of passengers and goods, while facilitating new non-state forms (private or cooperative) of
management. Finally, such egalitarian services, as the libreta (or food rationing card) and formerly guaranteed meals at the workplace will be gradually eliminated and in its place a new
welfare system targeting the elderly, the sick and handicapped, and those families with no or
very little income.
Socialist strategies of development
A serious, thorough re-evaluation of what socialism means and how it is defined within this new
context is called for; but not here. It suffices, for the sake of the present study, to review what
socialist development has meant throughout the last 50 years in Cuba and what the term
entails under the new development strategy and economic reforms currently under way. I
already mentioned earlier that shortly after the revolution, in the second phase covering 1961
63, socialism was conceived as a centrally planned economy of state-organized industrial and
agricultural production, whose purpose was development or the collective improvement of standard of living for the vast majority of people, conducing to collective and individual emancipation. Note that the key word is development. Revolutionary ideologists, like Ernesto Che
Guevara thought that industrialization would bring Cuban society towards this goal of development in a rapid time frame. The mobilization of the workforce was initially conducted by moral
appeal as opposed to material incentives and the market was seen as diametrically opposed to the
state, which was the sole embodiment of social property. The results of the venture radically
changed Cuban society and the elevation of the general standard of living certainly ensued. Somewhere between the late 1960s and the mid-1970s, a zigzag pattern depicting the states relationship to the market began to appear and became more evident from the 1980s throughout the entire
Special Period of the 1990s and at the start of the twenty-first century. Some Marxist theoreticians
both in and outside Cuba concluded that socialism does not equal the elimination of the market,
rather the control of it through social planning, be it with more or less centralism. One returning
feature in this pattern is what has been identified by some Cuban social scientists specializing in
development studies as hyper-statism (hiperestatalizacion), which has led to alienation of
workers from understanding production processes, authoritarianism and distributive homogeneity
with insufficient sensibility towards the diversity of societal needs and heterogeneous interests
(Alzugaray Treto 2009; Espina Prieto 2008). To add to this, lack of managerial discipline and
the transfer of funds from one sector to another were kept unchecked, no one was held responsible
for losses.
With some comparative analysis looking at various socialist experiments from Russia to
Yugoslavia, China and Vietnam, mathematician and philosopher David Schweickart reinterprets
socialist development and brings to fore the concept of economic democracy, otherwise known
as market socialism where the state continues to play a central role in planning and coordination,

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and where the state is the primary actor in deciding what is to be invested and how much.
Schweickart, whose works have also been published in Cuba, emphasizes democracy and
worker participation and control in planning (Schweickart 2009; Schweickart et al. 1998). This
renewed vision of socialist development, found on the platform of a new development strategy
in Cuba, implies the emergence of a mixed market economy where various forms of social property (state and worker owned, i.e. cooperatives) coexist with private enterprise. The debates in
Cuba concentrate on where the emphasis should lie and which new forms of property should
be given priority: cooperatives and worker-controlled structures vs. private capital (Pineiro
Harnecker 2010a, 2010b).
Never before has the socialist strategy of development been more debated publicly in Cuba
than it is now. Nevertheless, if new market spaces are to be created in order to stimulate a
process of industrialization, that is to be increasingly linked to global chains of production and
distribution, as Monreal would have it, the Cuban government can emphasize cooperatives all
it wants while private investment (foreign and local) will most likely take the lead. This is
perhaps what was seen in China and Vietnam (Huang 2010). If mobilization of the workforce
is to be geared towards reducing Cubas dependency on agricultural and foodstuff imports, this
in order to reduce underemployment, then we should see the battle between the various forms
of property here. Thereafter, the market that will be created by the privatization of real estate
and the possibilities of its commodification will also have a significant impact. The outcome of
co-existence between new forms of social property and private enterprise working domestically
as well as internationally, will define Socialism with Cuban characteristics.

Conclusions
Anyone observing from the outside would recognize many parallels between the economic reforms
taking place in Cuba and economic measures that have been closely identified with neoliberal policies internationally. For some, smaller government and reduced public payrolls, decentralized state
production and outright privatization, the opening up of new market spaces, enhanced labour flexibility (albeit with the same social guarantees), may signal the ceding of the socialist project to global
capitalism. In Cuba, however, every step taken towards change has been done in the name of safeguarding socialist development, whereby the party/state apparatus even as a regulator/(re-)distributor and less of a producer continues to provide the material bases allowing for an orderly and
progressive fulfilment of the populations collective needs. By this account, spaces of production
are ceded to the market for insertion into the global chain of production, which happens to be decentralized and operates with flexible labour. In the minds of Cuban analysts affiliated with the countrys new national development strategy, this does not equate to capitalism. Beyond this basic
differentiation of perspectives, the debate can be followed up in a future theoretical discussion
of political philosophy. The parallels with neoliberal reform are logical due to the fact that production and distribution is dominated worldwide by corporate structures; there is little that a
small economy like Cuba can do about this.9
Throughout this work I have attempted to look at recent economic changes by combining two
separate narratives on Cuban patterns of development from 1959 up until the sixth PCC Congress
held in April 2011. As the forces of production are unleashed in harmony with official discourse
on the construction of socialist society, the state will continue to have an uncertain relationship
9

Those of the Regulatory Capitalism School, like David Levi-Faur (2005), argue that what we see is not
neoliberalism; rather, it is privatization with the creation of new regulatory bodies and the diffusion of regulatory capitalist trends. Following this logic, we can perhaps speak of a regulatory state capitalism in Cuba.

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with the market. A country such as Cuba, that continues to be excluded from governing international bodies of trade by virtue of the US economic embargo, will continue finding ways of
sustaining import substitution as an important feature of the development strategy, while
making the insertion of key economic sectors into the global chain of industrial production and
the development of independent local market spaces capable of interacting with forces outside
of the country as the central nucleus of its development strategy. On the one hand, moving
away from strategies of (re-)industrialization that does nothing more than providing for domestic
consumption, towards the opening of market spaces for the purpose of insertion into international
production chains of distribution if done skilfully, can circumvent the problems of external
shocks related to the exportation (within and without borders) of natural resources; something
that has plagued Cuba since pre-revolutionary times. On the other hand, external shocks can
and most certainly will happen, as they do occasionally, in industrial production and distribution
chains. The Cuban economy will displace its vulnerability from one sector to the other in a time
where financial markets and flows of investment are no less unstable. For this reason, although we
can identify a definite change in the strategy of development, the patterns of development which
highlight the States relationship to the market might never change. The central characteristic of
socialist economics and socialist strategies of development planning and coordination of
resources, remains paramount. If there is a clear answer as to why the economic reforms are
not accompanied by a radical change in discourse, abandonment of the project of socialist construction and the disintegration of the party/state apparatus, it is to be found in the pattern of
state supremacy over the allocation of resources, production and redistribution in both the
public and private sectors. This is the essence of Cuban socialism operating in twenty-firstcentury global capitalism.
Notes on contributor
Antonio Carmona Baez teaches International Relations and Political Economy of Development at the University of Amsterdam, The Netherlands. He specializes in Latin American and socialist economies. He is
author of State resistance to globalisation in Cuba (2004) and has written articles on neoliberalism, economic change in the Caribbean and socialist alternatives. His current research interests lie in renationalization
schemes of Latin America, market socialist reforms and social movements.

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