Viva la evolution! - Cuba's economy - Cover Story

Reason, August-Sept, 1994 by Mack Tanner, Larry Grupp

Does a taste of free enterprise mean the end for Fidel's Cuba?

The Special Period

"Bring them to my house." She spoke in Spanish, her voice almost a shout. "Let them see my hungry children. Let them see the real Cuba." The angry, distraught woman appeared suddenly out of the crowd to confront the Cuban government guide shepherding a busload of Canadian tourists through the streets of Havana. In her mid-30s and wearing a worn, dirty cotton print dress, she was thin, but she didn't seem to be starving.

"Get out of here!" the guide told her. "Before you get in trouble!" He was embarrassed but not angry. He spoke in a quiet, sympathetic tone, sounding like he really was worried that a police officer might arrest the poor woman for committing one of the more serious street crimes in Havana today--doing anything that threatens the tourist industry. The woman, fear replacing the anger on her face, turned and walked away through a scattered crowd of Cuban pedestrians at a speed just slower than a trot.

"What was that all about?" a Canadian tourist asked the guide.

"Nothing," he said. "She is just a crazy woman. She should be in a hospital." As the tour guide brushed off the incident, he looked at Mack Tanner, the only foreigner in the group who spoke Spanish. Both men knew that the woman didn't have anything to give her children to eat that day. She wasn't crazy; she had been driven into anger by desperation and frustration--two emotions in great abundance in Cuba these days.

The people of Cuba are hungry, but they are not starving, at least not yet. They are doing without a lot of things--soap, shampoo, toilet paper, toothpaste, pencils, shoes, headache pills, vitamins, and even the single piece of meat per week for which they have ration coupons. The shortages interact and compound each other. Because of the frequent electricity blackouts, food in cold-storage plants and home refrigerators spoils. Even if a factory has raw materials, workers don't show up because the buses aren't running.

The Cuban economy has gone bankrupt, and every citizen in the country knows it. Fidel Castro has admitted it and has even given the bankruptcy a name, Let Estapa Especial--the Special Period. His propaganda machine spins out explanations for why it has happened and promises of how the Cuban government is going to solve the problem. His treasury is so empty of foreign exchange that Fidel can't buy enough fuel and fertilizer to run his sugar industry, medicines for his much-touted health-care services, or shoes or uniforms for the children in his free educational system. Factories sit idle for lack of electric power, fuel for engines, spare parts, and raw materials.

The public transportation system runs at a snail's pace when it runs at all. People crowd bus stops in such numbers that special, unarmed marshals wearing yellow uniforms keep order and direct the loading of waiting passengers into whatever government vehicle comes along with empty space. Workers can spend as long as six hours a day traveling back and forth to their government jobs. Clerks in government stores sit in front of empty shelves. When a grocery store does get a delivery of food--most of the time a single item such as carrots or cabbages--a mob of customers instantly gathers outside. Many still stand there waiting when the shelves are once again empty.

While Castro and his government blame this economic disaster on the withdrawal of Soviet aid, the continuing American trade embargo, and the low world price of sugar, the plain fact is that the Castro government has failed because communism always fails. Rather than trying to prevent Americans from visiting Cuba, we ought to encourage as many as possible to go see what happens when a communist system absorbs a free-enterprise economy. Castro took over one of the most vibrant, developed economies in Latin America in 1959. He destroyed the capital formation mechanism and the market incentives of the economy, and the Cuban people have been eating their seed corn ever since. Soviet charity kept them going for a while but only delayed the inevitable. Now Cuba ranks with Haiti as the poorest of the poor in the Americas.

With the collapse of the Cuban economy and the possibility of real starvation in the near future, Castro and those around him have been forced to turn to the only thing that might save their economy: free enterprise. New laws make it legal for Cubans to hold and spend American dollars; rural families can once again sell the surplus they produce; and city dwellers can legally engage in single-owner private business enterprises. The Cuban political leaders have made a major investment in the tourist industry in an attempt to earn enough foreign exchange to keep the economy going. Cuban diplomats are scouring Europe, Canada, and Latin America, looking for capitalists willing to risk money in joint ventures in Cuban mining, petroleum, and manufacturing interests.

Vision of Failure

Interested in what happens when a communist society lets loose a bit of free enterprise and curious about what role, if any, the U.S. embargo has played in pushing Castro up against the wall, we decided to travel to Cuba. The U.S. embargo against Cuba, which has been in place since 1962, doesn't prohibit U.S. citizens from traveling there, but it does forbid Americans to spend any money on travel to Cuba. The penalties for breaking the law are severe: up to 10 years in prison and fines up to $250,000. The law allows exceptions for Americans traveling to visit their families, legitimate scholarly researchers, U.S. government officials, and news-gathering journalists.