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Cuba before the Revolution had been one of the most affluent Latin American countries, albeit with great social inequities. Castro and the Revolution succeeded in narrowing the inequities in Cuban society, but tragically for the Cuban people, he did it by impoverishing the entire country. Castro announced that he was a Communist and proceeded to recreate a Soviet planned economy in the Caribbean. Private enterprises were nationalized without compensation. It is widely believed that Castro's conversion to Communism was a largely tactical decision to obtain Soviet backing. At the time, many in the third world were impressed with the Soviet Union and saw Socialism and economic planning as the way of rapidly developing their countries. Castro had no knowledge of economics, but appears to have blithely assumed Communism was the path to the future. It also had the advantage as perceived by other dictators of giving him the mechanism of completely controlling Cuban life and avoiding pesky elections. The Revolution in fairness did address social inequities, but in the process made Cuba one of the poorest countries in the region. Revolutionary Cuba developed close relations with the Soviet Union and in exchange the Soviets provided billions of dollars in military and economic assistance. (Much of this assistance was in the form of loans that Russia has made futile efforts to collect.) Communist economics and mismanagement combined with Castro's erratic management style has meant that the Soviet assistance meant to help Cuba develop has left it poorer and less developed than it had been before the Revolution. Private businesses nationalized by the state were put in the hands of political supporters who had no idea of how to run businesses. No attention was paid to production costs and accounting. To Castro's surprise, productivity plummeted. And rather than allowing gradual improvement, Cuba remains one of the poorest countries in the region and in recent years getting poorer. Cuba's socialist economy is unable to fully provide even basic necessities like food and soap. No one starves in modern Cuba, but because of an inefficient economic system, adequate food and basic consumer goods are unavailable to the average Cuban.
Cuba before the Revolution had been one of the most affluent Latin American countries, albeit with great social inequities. Cuba had a very substantial middle class. And per-capita income was high in relative terms. The gap between the middle class and poor in Cuba may have been relatively high in Cuba because the middle-class was more substantial than in many other Latin American countries. Like other Latin American countries, the rural labor force was poor, but not especially poor in regional terms. Tourism in the 20th century became an important industry, creating a degree of diversification. Cuba has a largely agricultural economy based on sugar and to a lesser extent tobacco. these were the major export products. There was also a strong sector supplying the domestic market. Until the Revolution there were no shortages of milk, meat, and other products. There also was some mining, especially nickle. The Revolution in fairness has addressed social inequities, but in the process made Cuba one of the poorest countries in the region. The Communists have put a floor under just how poor people can be, but at the cost of making the entire population poor. Ordinary workers make about $25 per month and professional like dentists may make as much as $50 a month. There is no doubt that the Revolution's investment in education has trained quite a number of qualified professionals. What has not done is established an economy that has created jobs and opportunity for the Cuban people or even the most basic foods and consumer goods needed let alone desired by the Cuban people.
Castro and the Revolution succeed in narrowing the inequities in Cuban society, but tragically for the Cuban people, he did it by impoverishing the entire country. Castro announced that he was a Communist and proceeded to recreate a Soviet planned economy in the Caribbean. Private enterprises were nationalized without compensation. It is widely believed that Castro's conversion to Communism was a largely tactical decision to obtain Soviet backing. At the time, many in the third world were impressed with the Soviet Union and saw Socialism and economic planning as the way of rapidly developing their countries. Castro had no knowledge of economics, but appears to have blithely assumed this was the path to the future.
It also had the advantage as perceived by other dictators of giving him the mechanism of completely controlling Cuban life. A dictator can not totally control a control a country without controlling the economy. Even if the economy declines, con rolling the taxonomy gives a dictator enormous power. It is the difference between an authoritarian and totalitarian government.
Revolutionary Cuba developed close relations with the Soviet Union anxious to prove the superiority of their economic system over market capitalism as part of the Cold War Struggle with th United States. The Soviets did not engineer Castro's successful revolution nor were Communists the main support. But Castro's turn to the Communists promoted by his brother Raúl and Ernesto 'Che' Guevara was a propaganda bonanza. At the time many around the world still believed that Socialism and Communism were a superior economic and political system and Cuba provided the Soviet Union a perfect show case to demonstrator the superiority of their system. And to make sure that that their show case succeeded, they not only provided massive military aid, but even more extensive economic assistance. This effort began under Premier Khrushchev who makes it very clear in his memoirs that he saw it his duty as a devoted Communist. As a result, the Soviets provided billions of dollars in military and economic assistance. (Much of this assistance was in the form of loans that Russia has made futile efforts to collect.)
Cuba was not one of the sugar islands that played such an important role in the world economy (17th-18th centuries). The Spanish with American investment built an important sugar industry (19th century). Sugar in the 20th century was the major Cuban cash crop and export. Thus the attention of the Castro Government turned to sugar and the Zafra. Cuban economic planning turned to sugar and achieving a 10 million ton Zafra. A primary part of Soviet aid was paying Cuba for sugar well above above the world market price. This had a range of consequences. First of all it was a rare enefit to Soviet consumers. Although the Soviet Union produced very little sugar. Sugar became a commodity that was readily available in shortage-plagued Soviet food stores. Just the opposite was true in Cuba where sugar was rationed because the Government wanted to export as much of the Zafra as possible. Because of the focus on sugar, and the confiscation of privately owned farms, food production declined and shortages forced the Government to ration food despite the massive Soviet aid. And mismanagement resulted in little investment in the existing infrastructure would mean that refineries had trouble maintaining production levels.
Castro in the 1960s decided to also follow the Soviet example in fisheries. It is unclear why he was excited about fisheries. We suspect that he decided that increased fisheries production could compensate for the failure of his agricultural programs and the declining production, especially of meat. He authorized major investments in highsea fisheries ordering expensive distant-water trawlers in Spain. Vessels of this type and size were not designed to be in Cuban waters or anywhere else in the Caribbean. Warm Caribbean waters only support relative small fish populations and this small boats are appropriate. This meant that the Cubans had to find distant-water grounds in northern waters like the Soviets. The only thing is that this was at the same time that coastal countries began claiming extended jurisdictions leading to the Law of the Seas Treaty and 200-mile Exclusive Economic Zones. So the Cubans had increasing problems finding grounds where they could deploy their expensive trawlers. The end result was that Castro decided to use very substantial amounts of foreign exchange to buy expensive distant-water trawlers for which they were unable to find grounds where they could be adequately deployed. And if this was not enough, the ships bought by the Cubans used large quantities of diesel fuel. Cuba produces no oil and had no foreign currency to purchase it. And unlike the seafood produced in Cuba waters (snapper, shrimp, and lobster), the distant-water catch had virtually no export value. The Soviets provided Cuba's oil. But Cuba's distant-water fisheries actually cost the country more money to conduct, a net loss to the economy. As is often the case in Communist countries, the value of the inputs (capital, material, and labor) exceeded the value of the product produced. The distant-water fishery destroyed rather than created value. The Soviet-provided fuel consumed by the distant-water fishery could have been sold in export markets. One more economic failure for Castro and the Revolution.
Cuba since the Revolution has faced shortages--shortages of everything. But the most significant shortages were of food. Shortages of other products are people can adjust. Foos shortages are more difficult for people to adjust, especially shortages of the basics. The economic dynamic could not be more clear. The shortages are due to the government's decision ton seize private farms and have Government collectives do the farming. Even at the time of the Revolution this dynamic was clear. In the 50 or so countries that had tried Communism, when the Government seized the land--food production declined. Still Fidel proceeded with his ideological bent. And food shortages not only declined but got worse and worse as the Revolution continued. This was made worse because the inputs needed to maintain farm production such as equipment, fertilizer, and fuel became increasingly unavailable because of failures elsewhere in the economy.
Communist economics and mismanagement combined with Castro's erratic management style that the Soviet assistance meant to help Cuba develop has left it poorer than it had been before the Revolution. Private businesses nationalized by the state were put in the hands of political supporters who had no idea of how to run businesses. No attention was paid to production costs and accounting. To Castro's surprise, productivity plummeted. And rather than allowing gradual improvement, Cuba remains one of the poorest countries in the region. Cuba's socialist economy is unable to fully provide even basic necessities like food and soap. No one goes hungry in modern Cuba, but because of an inefficient economic system, basic consumer goods are unavailable to the average Cuban.
The Soviet Unuin because of its stagmating economy and other economic problems had aleady behga to reduce aid to Cuba (late-1980s). It was not lost on Soviet oiffuicials that despite massive economic aid for three decades, Cuba had not economic progress and the level of living was well below taht before the Revolution. Fidel's Communist Cuba contibued to be an economic basket case, a very expesive basket case. It had strategic value in the Cold War, but now Generak Secretary Gorbechev wanred to end the Ciold War and reach an accomodation with America. And this was not what Markxist economic theory predicted should be happeninjg. Khruschev had insisted in the 1960s, "We will bury you." And by the 1980s both the Soviet Union and Communism sould br prosperring and the capitalist West should be detertiorating. General Secretary Gorbechev rose to power because he believed that some basic reforms would fix the Soviet system (1980s). The iron laws of economics, howevrr, finally came home to roost. There were many reasons for the collapse of the Soviet Union, but the fundamental reason was that the Socialism was a flawed economic system. Soviet factories in real terms were achieving massive losses. The raw materiel that went into Soviets factories were worth more than the manufactured goods that came out of them. No country can survive forever with such an economic system, especially a country involved in a costly high-tech military competition with an efficient capitalist country. The Soviets found it more and more difficult to meet their costly economic commitmenhts to Cuba which were having no real imoact. The Soviets in 1985 were paying Cuba more than eleven times the world market price for sugar. By 1989 that had been reduced, butbwas three times the world price. 【Bain, p. 777.】 At the same time they were providing oil to Cuba at a fraction of the world market price. And then the Sovirts shocked the Cubans with a propsal for a new one-year trade agreement (comopared to the previous five-year agreements). This was reluctantly agreed to (late- 1990). The agreement commited to sugar purchasesa at world market prices. TYhe Soviets were clearly mocing to reduce Cuban dependence. Than the Soviets took the further shocking step of disbanding Comecon (June 1991). A primary feature of Comecon was access to Soviet raw materials including oil at below nmarket pruves. All of this as diasterous news for the Cuban economy. There was more gthan economics involced. Perestroika and Glasnost was not what Fidel wanted to hear from Moscow. Openess and transparency and scrutiny of leaders by the mass media were not what a one-man totalitarian dictarorship values highly. Castro publicly began criticized Gorbechev's reforms, but he hoped Soviet Communism and the Soviet aid would continue.
The collapse of the Soviet Union had dire consequences for Cuba (1991). The new Russian Government ended the massive Soviet subsidies that were keeping the Cuban economy afloat. This was essentially a depression, immediately felt in Cuba living standards, most severely in food and fuel. And of course the same dynamic that brought the Soviet Union down affected Communist Cuba. The raw materials and other inputs into Cuban enterprises were worth more than the manufactured goods and food products that came out of them. Cuba experienced a shattering social and fiscal crisis, known as the Período especial en tiempos de paz (Special Period in the Time of Peace), essentially a deoression. 【Binns, p. 53.】 While the primary cause was the dissolution of Comecon and the implosion of the Soviet Union. The fall of Communism throughout the Soviet Eastern European Empire also was significant as those countries were also supporting the Cuban Economy. This was all a huge shock to the Cuban economy. Too much emphasis can be placed on the fall of the Soviet Union. Fundamentally the inefficiencies of socialism were the problem. The Soviet aid simply masked this basic problem. Other Latin American countries make out reasonably without massive Soviet payments. The situation was most difficult in the early to mid-1990s before Cubans could make any adjustment. Cubans were suddenly faced with severe privations. Food shortages became much more severe. Ration levels of state-subsidized prices were reduced and were not always available. There were severe energy shortages most visibly seen in the sharp reduction in the avaieability of transport for both goods and people. Also electricity became intermittent with frequent blackouts. There was a huge shrinking in an economy dependent on Soviet and Eastern Bloc imports. 【Garth】 One huge adjustment was the loss of Soviet fertilizer. Tropical agriculture is less productive than farming in temperate areas and high yields requires application of fertilizer. Cuba had to revert to organic agriculture. Massive reduction in transport requiring gasoline impacted every aspect of Cuban life, including industry, agriculture, health, and diet. People had to make do without many goods and services once considered as necessities and widely available before the Revolution. It was only when Hugo Chávez was elected president in Venezuela. Chavez was an admirer of Fidel and began shipping low priced oil to Cuba. It was only when Chavez began to replace Soviet aid that the Depression or Special Period ended (1998). The domestic market reforms helped, but it was Venezuelan oil that provided Cuban Communism a meaningful lifeline. Vladamir Putin's election in Russia provided some additional support with renewed Russian aid 2000)--although far below Soviet levels.
The economic disaster resulting from the loss of Soviet subsidies forced the Government's hands. They finally did the unthinkable, they initiated some limited market reforms. It was nothing like the capitalist embrace of the Asian Tigers, but the Government cane out of with a list of occupations that individuals could pursue. The economic boost did not approach that of the Asian tigers. And it did not solve Cuba's economic problems, because the Government maintained control of most of the economy. But the market reforms did help and provided living income for some Cubans.
Unlike Fidel, Venezuelan Army officer Hugo Chavez actually won an election. After lading a failed coup. Chavez was elected president of oil rich Venezuela (1998). And he was a bug Fan of Fidel and the Cuban Revolution. It boggles the mind how someone could envy the Cuban economy, but Chavez did. Apparently he was attracted by the reduction of inequities in the system, rather ignoring the fact that this was done by making everyone poor. Of course Chavez did not have to worry about poverty backed by Venezuela's oil income. And he was able to throw Fidel a life line. Genius that he was, Chavez does not seem to have wondered why after nearly four decades of Communism, the country needed a life line. He not only began providing oil to Cuba , but he followed Fidel's policies of nationalizing private property, both industry and agriculture. Thus worked fine until the nationalized factories and farms proved inefficient and production declined and more and more of the oil income went to paying for imports bcause of collapsing national production. And then oil prices declined. The situation was worsened by Chavez's mismanagement of the oil industry. Venezuela has the world's largest crude reserves. But it needs considerable technology to get at, meaning foreign technology was essential. Chavez ignored this and replaced competent Venezuelan technicians with political hacks and did everything he could to drive foreign companies with needed technology out of the country. Not only did oil prices fall, but Venezuelan crude production collapsed. The Venezuelan economy began to collapse. Chavez died (2013). By that time, Venezuela was already on its way to falling from the richest country in Latin America to an economic basket case and unable to continue massive subsidies to Cuba. Nicolas Maduro who replaced Chavez with a faked election, has overseen a continued fall in the Venezuelan economy. People are losing wight because of the food shortages. Given Venezuela's huge petroleum reserves, it took an extraordinary level of incompetence even beyond that of Fidel's Cuba to turn the country into a poor, hungry nation, but Chavez accomplished the unimaginable.
With the end of the Venezuelan life line, Cuba had continued its descent into abject poverty. Living standards have fallen bellow the post-Soviet lows of the 1990s. The government can no longer guarantee the already limited basket of essentials. Electricity is intermittent with juice being cut off for lengthy periods daily. President Putin has provided emergency Russian shipments of oil and wheat, but no where near the level of Soviet subsidies needed by the Cubans. The Cuban Government has been forced to the humiliating admission of failure by asking for United nations food aid. In particular Cuba has been unable to provide even minimal quantities of milk for young children.
Bain, Mervyn J. "Cuba-Soviet relations in the Gorbachev Era," Journal of Latin American Studies Vol. 37, No. 4 (November 2005.)
Binns, Leroy A.. "The demise of the Soviet Empire and its effects on Cuba," Caribbean Quarterly. Vol. 42, No. 1, (March 1996).
Garth, Hanna. "'There is no food': Coping with food scarcity in Cuba today," Society for Cultural Anthropology (March 23, 2017).
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