- May 8, 2020
Cuba`s Political Economy
Running head CUBA’S POLITICAL ECONOMY 1
Cuba’seconomy is mostly managed by the state. Fidel Castro in 2010 saidthat the Cuba’s communist economic system model does not work forthe Cubans anymore. Raul Castro, the current president has beenleading a gradual change in the relationship between an individual,the state, and the society without departing from the socialistsystem (Bye, Hoffman, & Whitehead, 2016). Over the past fewyears, the Cuban government has initiated an important process ofreforms. They include significant changes to the economy, social, andpolitical areas (Washington Office on Latin America [WOLA], 2016).Witha shift in the Cuban political economy, policies are changing for thebetter, and the citizens have a prospective economic future.
Thecurrent political economy has no precise definition the CommunistParty calls it the “Actualization of the Cuban social and economicmodel.” It is characterized by a public-private fusion wheredifferent forms of property rights, production, and investment willcoexist with state-run companies (Bye, Hoffman, & Whitehead,2016).
Thereis a new economic policy of promoting the national private sector,and this has been done by expanding self-employment. This economy isfocused on simple services and light manufacturing (Bye, Hoffman, &Whitehead, 2016). The government has reduced government payroll byalmost 600,000 since 2009 this has resulted in an increase inself-employment, small scale, non-agricultural cooperatives andcooperative farming. As of December 2015, Cuba had roughly half amillion self-employed citizens (WOLA, 2016).
Theindependent are allowed to hire workers, and this has made someshops, workshops, and restaurants to be small businesses with ownersand employees. Most of the farmland is now owned by agriculturalcooperatives and private farmers instead of the state, creating useof land that was previously idle by providing rent-free leases.Cubans are also involved in manufacturing, food services,construction, and the commercial sector (WOLA, 2016).
Foreigninvestment has also been welcomed, and Cuba approved a foreigninvestment law in 2014. The country offered high tax deductions andpromised a safe environment for global investments looking for midand long term investments in the country. The exceptions are thesectors of defense, public health, and education (WOLA, 2016).
Theimplemented development policy has a new factor, the middle-incomesector. In the case of Cuba, their role is complex because of theirparticular socio-economic and political aspects that is differentfrom other countries regarding the roles it plays in the process ofeconomic modernization. For over forty years the middle class haddisappeared from the national reality, and updating the socialdifferentiation has created new opportunities compatible with theaims of growth and development (Cordovi & Perez, 2014).
Aninterpretation of recent events suggests that state management of keyareas and leading enterprises along with the expansion of theprivate, cooperative and foreign sector has created a mixed controlof the economy. With direct and decisive state support of health andeducation which constitute the central role of Cuba’s futuresocialism which is preserving independence (Cordovi & Perez,2014).
Inthe 1990s, there was an economic crisis in Cuba due to restrictiveinternational trade due to the reinforcement of the U.S. blockade.The economic policy was marked by its focus on “crisis management,”this changed upon the discussion of the Economic and SocialGuidelines. The transformation was carried out in a balance ofpayment restrictions, technology, macroeconomic distortions, highpropensity to import, and wages in 2011 when the Guidelines wereapproved to create a more encompassing framework for economicdevelopment (Cordovi & Perez, 2014).
Theeconomy of Cuba is bright and is bound to grow, and changes willcontinue, thanks to the economic model that is still unfolding. Itsframework focuses on the factors that development is necessary forthe sustainability of the Cuban socialist system, growth is essentialfor achieving development. High investment is critical to growth, anddirect investment is necessary and plays a central role in order toachieve future growth.
Productionpolicies should supplement the effort to grow this is donespecifically on import matrices, export orientation, production ofhigher value goods, and energy. Infrastructure is to be modernizedspecifically in the information technology sectors, research,development, and innovation is to be upgraded and adapted to thestrategies for growth (Cordovi & Perez, 2014).
Withthe relaxation of economic sanctions by America, Cuba is charting itscourse with market reforms and political liberalization. The countryhas strength in social services citizens enjoy free access tohealth, social protection, and education. These gains are underthreat from economic stagnation, demographic transition, unpaidnational debt, and low productivity. Maintaining a progressive schoolsystem and life expectancy while simultaneously providing incentivesfor entrepreneurial activities, improvements in productivity, and agrowing education demands a delicate political balancing act,especially since the president, decreed that Cuba will not beabandoning the socialist system (Sagasti, 2015).
WithCuba’s transformation both politically and economically towardsproduction, expenditure, transport and import has brought aboutdiversification of trade. When this continues, the reforms could leadto a well-functioning mixed economy. With precise functions and lawsgoverning domestic private firms, state corporations, joint ventures,cooperatives, non-profit enterprises and public-private partnershipstowards a better future (Sagasti, 2015).
Bye, V.,Hoffman, B., & Whitehead, L. (2016). Cuba: heading fora new development and political model – an introduction. ThirdWorld Quarterly, 37(9), 1661-1665.doi:10.1080/01436597.2016.1189301
Cordovi, J. T.,& Perez, R. T. (2014). Cuba`s economic change incomparative perspective- policies for economic growth Cuba`s newera. Retrieved from Brookings Institution website:https://www.brookings.edu/series/cuban-economic-change-in-comparative-perspective-paper-series/
Sagasti, F.(2015, June 1). What does the future hold for Cuba? | World EconomicForum. Retrieved fromhttps://www.weforum.org/agenda/2015/06/what-does-the-future-hold-for-cuba/
WashingtonOffice on Latin America. (2016, March 14). Factsheet: Reforms in 21stCentury Cuba – WOLA. Retrieved fromhttps://www.wola.org/analysis/factsheet-reforms-in-21st-century-cuba/