Cuba: Before and After Socialism The purpose of this paper is to compare the Cuban economy before and

after the institution of Socialism. The nature of the Cuban economy while under Spanish rule is not considered in this paper, despite its lending some insight into the economic conditions of independent Cuba. Therefore, this paper will focus on the years between 1902 and the present. This will be an intriguing comparison because Cubas Capitalism was heavily influenced and supported by the United States, and its Socialism was heavily influenced and supported by the Soviet Union. This makes it one of few, if not the only, countries to have operated under both economic systems for an extended period of time, and is one of the three remaining countries in the world that still practice centrally planned Socialism. First I will briefly relate the history of Cuba between 1902 and the present, as this will provide some context for rest of the paper. Second I will describe the economic successes and failures of capitalist Cuba (1902-1953) using GDP, wages, and several other indicators of standard of living. Third I will do the same for socialist Cuba (1953-present). Fourth I will draw a conclusion in comparing the economic success of each economic system. Then finally I will explore the possibility of Cuba being the nation best prepared by capitalism to enter into socialism according to Marxs directions.

A Brief History Cuba was the first part of North America discovered by Europe, and one of the first to be settled (1511). As such, it has a long economic history, which can be generalized into three distinct periods. From 1511 until 1898 Cuba remained a Spanish Colony and operated under

various forms of feudalism and slavery. Due to its favorable climate for the cultivation of cane sugar, the Spanish used Cuba almost exclusively for the production and export of that crop. After the Spanish-American War (1898) Cuba was briefly owned by the United States before obtaining independence. However for its contributions the U.S. retained the right to intervene in Cuban affairs by supervising the finances and foreign relations of the new Cuban government. From 1902 until 1959 Cuba operated under a U.S. influenced capitalist system. During this period Cuba suffered from unstable politics and widely fluctuating cycles of business. During this period Cuba is often compared to the southern states in the U.S. in terms of living standards and productivity. Despite Cubas relatively stable economy and finances, the political system was in frequent turmoil. The large amounts of capital available from investors led to a culture of corruption in politics that never was cured. In 1952, after losing the election, former Cuban President Batista led a nonviolent coup to take back the office. This later led to a violent revolution lead by Fidel Castro in 1959 to remove Batista. This revolution was at first welcomed by the U.S. as a sign of Democracy at work, but it soon became apparent that Castro intended to reorganize Cuba into a full blown socialist state. To this day Cuba still maintains a socialist economy with strict central planning; although after the passing of Fidel, his brother Raul Castro has instituted modest reforms away from fully controlled markets.

Capitalist Cuba Exports - Capitalism in Cuba came about quickly and almost entirely as a result of U.S. investment on the island. In exchange for allowing the U.S. to retain the right to intervene in Cuban affairs, the U.S. gave preference to the Cuban sugar industry. As a result, in the early

1900s 22% of the sugar imported into the US was Cuban; 82% of Cuba's sugar exports were to the U.S. This trend did not change much even as laws evolved in both countries and by 1958 the U.S. was still consuming about 60% of Cuba's sugar. (Baklanoff, 2008) Also contributing to the massive influx of investors was the collapse of the Spanish feudal system, which left massive amounts of land, cultivated and virgin, available for sale at sharply discounted prices. Although it might seem that heavy influxes of U.S. capital would have excluded Cuban nationals from ownership in the lucrative sugar industry, some were able to begin buying back the sugar industry as early as 1930, and by 1958 Cuban capital controlled three-fourths of the sugar mills; and these, in turn, accounted for 62 percent of the islands sugar The cost of such a focus on sugar production was a heavy reliance on external food sources. In 1906, the United States supplied a little less than half of all Cubas foodstuffs. While this was largely due to the U.S. having a comparative advantage in the production of food, it does highlight how dependent Cuba was on foreign trade. It would however be inaccurate to characterize Cuba as a one export nation. Tobacco was also a major export staple, along with a modest percentage of pineapple and hardwoods. While sugar accounted for 94.6% of Cubas exports in 1899, independent Cuba immediately started diversifying its exports and by 1902 sugar accounted for less than 90% of total exports. Sugar never dropped much lower than 70% total export throughout the capitalist period. Transportation - Transportation infrastructure was rapidly developed and only three years after establishing its independence, Cuba had a railroad system that ran the entire length of the island. It is further noted that by the end of World War 2 Cuba had An extensive, wellintegrated system of highways (Baklanoff, 2008). As Cuba had no native automobile manufacturer the strong majority of its automobiles were imported from the United States. In

1929, the ratio of car ownership in Cuba was one car per 78.7 persons. In fact, in Havana the rate was one car per 23 persons, while at the same time the rate in New York City was one per 25 persons. Wages - Throughout the first half of the 20th century Cuba enjoyed a wage rate that was only surpassed in the Americas by the U.S. and Canada. Using a table compiled by Harvard University, which used 1913 as the base year (Wage=100), we can see that real wages trended upwards to varying degrees. Real wages reached a maximum however just before the Great Depression in 1931, when the average real wage was 180.9% of the base year. During the depression real wages in Cuba fell to about 114.6% of the base year but they steadily climbed from that point, reaching 146.6% in 1939. This continued and by 1957 real wages in Cuba were higher than any country in the Western Hemisphere, excepting the United States and Canada. (Baklanoff, 2008) Life Expectancy - Life expectancy rose at an increasing rate during the capitalist period. Beginning in 1900, the average life expectancy was only 33.2 years. For the next two decades it rose by about 2.1% per decade, rising to 35.3 in 1910 and 37.4 in 1920. From that point until 1960 the rate of increase was much more rapid. In 1930 life expectancy jumped 4.1% to 41.5, then 6.0% to 47.5 in 1940, and 8.3% to 55.8 in 1950. Finally in 1960, the rate of increase reached 8.2 percent to a life expectancy of 64 years old. This will become significant later as it appears that the rate of increase rapidly dropped back to around 2.1 percent and stayed there following 1970. While life expectancy did continue to increase, it has not made any substantial strides similar to those increases found in the capitalist. Admittedly this may be partially due to the fact that life expectancy is somewhat self-limiting; even the country with the best life expectancy (Monaco) is not older than 90 years. Therefore we should expect a countries rate of increase in

life expectancy to drop over time. I believe it is telling however is that the fastest increasing years in Cuba occurred shortly before the fall of capitalism, and the rate dropped rather quickly after beginning socialism. Literacy However, literacy in Cuba is another story. In 1910, the Cuban population was approximately 45% literate; Cuba trailed behind many of its contemporary Latin countries, partially due to an extensive population of former slaves. This rate increased nicely over the following years, and in 1931 the literacy rate was approximately71.7%. The Great Depression again played a role in the Cuban economy, and education dropped in priority. In 1943, the literacy rate had dropped to 71.3%. This drop sparked a new effort in mass education, and by 1953 76.4% of all Cubans were considered literate. While these figures show that literacy rates improved dramatically under capitalism, it seems this increase may have been more a consequence of the abolition of slavery and not the direct influence of capitalism. Gross Domestic Product Finally, we must examine GDP per capita. There appearsto be very little actual data available on Cubas GDP before 1960. However, there have been several detailed attempts by economists and universities to extrapolate what the GDP might have been, based on other raw data available. The study I will refer to for this data is benchmarked on a 1953 estimate of Cuban GDP by economist Harry T. Oshima. As such the data is indexed around the 1953 estimate of about $4,854,400,000 (adjusted to 2014 dollar value) such that 1953 = 100. This being said, Cubas GDP in 1902 stood at about $3,543,712,000. From that point, it rapidly increased until 1920 when it reached a peak of about $5,339,840,000. This is approximately a 4% increase per year, which is especially remarkable during that time period. As is to be expected the Great Depression had a dramatic effect on GDP as it fell to pre-capitalism levels in the early 30s. Recovery from the Depression was slower than Cubas earlier expansion,

but it was steady and by the time of the Cuban Revolution, the GDP had reached its preDepression levels. While it is impossible to determine what might have been if Cuba had managed to avoid the Great Depression, it is clear that the growth rate of GDP tended to be healthy.

Socialist Cuba In the time since the Cuban Revolution, relations between Cuba and the U.S. have tended to be cold, if not hostile. As such I am not certain how accurate and unbiased Cubas economic data is, except for the data published by the World Bank starting in 1970. Another issue for some years is the use of custom economic measures such as Gross Social Product (GSP) or Gross Material Product (GMP) which are not directly comparable to western concepts of measuring GDP. Communism as a formal political party has existed in Cuba since 1925, but in 1959 the communist party established control following the Revolution lead by Fidel Castro. In 1961, Cuba signed a trade agreement with the USSR, and by 1963, it was clear that Castro intended to install a Soviet style government and economy. During these few years all of thesupporters of the former government were rooted out, and approximately 3,200 (some estimates reach as high as 33,000) political dissidents were executed. Due to the radical actions of the Castro regime, Cuba was quickly alienated from international trade outside the Soviet Bloc. Exports - Despite an idealistic emphasis on diversification in the early years of Cuban socialism, sugar was and still is king. While the U.S. closed as a market for sugar, the USSR happily accepted this trade, and between the years 1959 and 1976 sugar remained 74-90% of Cubas total exports. This is similar to the export levels seen before 1959. Aside from sugar,

Cuba aggressively developed its nickel production based on predictions that it could become the fourth largest producer of a nickel in the world. Nickel production fell short of this lofty goal, and today sits as the worlds eighth largest producer. (MetalMiner: Stuart Burns, 2010) While it is proven that Cuba sits on 34% of the worlds total nickel reserve, Cubas largest nearby market the U.S. is still closed due to embargos. Instead, most of Cubas nickel goes to China. It is noteworthy, that the most successful nickel foundry is a joint venture between state-run Cubaniquel and a Canadian free market firm. Nickel is one of Cubas few successful exports. Almost all other exports are in decline. In fact, while sugar has accounted for 90% of total export, as of 2010 it was only 5%. Similarly, coffee has dropped from 60,000 tons per year in 1960, to 6,000 tons in 2009. Even Cubas namesake cigars are in decline, dropping from $243 million in 2008 to $218 million in 2009. These declines are collectively attributed to changing world health standards. Cuban planning does not seem to have responded well to the change in demand however, as it is noted that stockpiles of these three exports have increased dramatically. (MetalMiner: Stuart Burns, 2010) Transportation - Cuban transportation systems continued to grow rapidly with the support of the Soviet Union. Over 7,742km of railway now covers the island, mostly in order to transport the nations sugar product. Despite this only a few of the inter-city rail lines are in use; with the collapse of the sugar industry vast expanses of track are idle. Roadways are a similar story; most secondary roads are in shambles. (InterNations, 2014) It is somewhat interesting to mention the status of the nations automobile fleet. It is estimated 60,000 pre-1960 vehicles still in operation in Cuba. This means that classic cars are commonplace considering that there are only 173,000 vehicles estimated to be in operation. After 1960, the U.S. placed an embargo shutting off the Cuban market. Soviet vehicles were substituted for many years, but due to poor

quality it seems that older American models were much preferred. Recently the Cuban government has allowed the purchase of foreign vehicles, but still regulates the prices. A Peugeot (which is listed internationally at 29,000 U.S. dollars) is priced by the government at $262,000; it is clear that while it may now be legal, it certainly wont be affordable to the vast majority of Cubans. The government justifies its high prices by saying that revenues will go towards public transportation systems. Car ownership is now about one per 31.25 persons. (BBC: Sarah Rainsford, 2014) Wages - Wages in Cuba remained relatively steady during the years of Soviet support, although on average they were lower at the end than in the beginning. Wages for nonagricultural workers in 1965 averaged 170 pesos per month. This average had fallen to 150 pesos per month by 1979, but had recovered to 160 pesos per month by 1981. (Cuba Studies v19, 1989) Other wage sectors in Cuba followed a similar trend. While this is not remarkable as wages were strictly planned by the central government, it does set up a powerful observation into Cubas reliance on the USSR. When Soviet support vanished in 1989, wages dropped dramatically. The average real wage in Cuba in 1989 was 190 pesos per month; by 1993 the average wage had dropped to 20 pesos. This period of time is known as the special period in Cuba. From that point on wages increase very slowly and by 2008 they had only reached 40-50 pesos per month. Life Expectancy - Life expectancy continues to be one measure in Cuba that never decreases. For the first 20 years the average life expectancy of all Cubans increased by about 1/3 of a year per year. That is to say that in 1960 the expected life was 65 years and by 1980 it was about 74 years. The average increased slowly for the next 20 years and by 2000 it had only risen to 75 years old. After the year 2000 life expectancy growth seems to have returned to normal at 79 years old.

Literacy - Literacy also is a success story for Cuba, although it may have been victim to some level of propaganda throughout the years. What can be said is that literacy was one of the first, and most strongly emphasized agendas of the Castro regime. By 1970, literacy had risen to about 88% (over the previously noted rate of 76% for 1953), and by 1986 it had risen to nearly 100%. Literacy has stayed at this level since then and the CIA estimate for 2011 still lists it at 99.6% for both males and females. (CIA, 2011) This is about 0.6% better than the United States. Gross Domestic Product - The World Bank only holds data for Cuban GDP back to the year 1970. I did not find any other credible sources for the GDP for the years between 1959 and 1970, but it seems safe to assume that GDP did not decrease or increase dramatically in these years. Some sources infer that these were relatively good years as the economy rode out the final influences of capitalism, while others suggest sluggish growth as political chaos followed the Revolution. I choose to ignore those years and focus on the data I have. In 1970, the World Bank lists the GDP at $5,693,005,244 (Current U.S. Dollars). From this point GDP grew at rates varying cyclically between nine and one percent until the year 1980 when it dropped by 5%. The next year shows a rapid recovery of 20% growth, followed by another five years of growth between 1-9%. From here growth slowed considerably ranging between -2% and 4% (likely due to the slowdown of the Soviet economy), and in 1990 the economy crashed hard. The years 1991, 92, and 93 showed GDP decreases of -11%, -12%, and 15% respectively. From this point on the World Banks data seems to have some inconsistencies. In 1995, GDP is listed as $ 30,428,638,304 and the growth rate for 1996 is 8%. However the GDP listed for 1996 is only $ 25,017,300,000. These numbers continue to be inconsistent through 2013. Growth rates never exceed 12% (and average around 5%), yet GDP for 2011 is listed at

$68,233,900,000. Furthermore, while one might reasonably expect the financial crises of 2008 to show up on Cuban GDP in some manner, the listed GDP barely slows for the years 2008-2010. I am not certain as to how the World Bank obtains its data; the numbers only make sense if the data is supplied by the Cuban government itself. After further research I found that following the collapse of the USSR Cuba restructured its method of measuring GDP to account for social good; that is they somehow value GDP based on value to society. This would explain why the GDP seems to have recovered nicely, while other indicators such as wages and exports have not.

Success of Cuba Comparatively in each system The clearest conclusion I can draw about Cubas economy is that it has always relied heavily on foreign support. The nature of that support differs between the two economic systems; Capitalism brought investment from a host nation, while Socialism brought subsidies from a host nation. In turn, Cuba has been severely impacted by the ripple effects of crises occurring in the host nation. Cuba was not able to escape the effects of the Great Depression in the United States, and likewise suffered severely from the collapse of the Soviet Union. Upon review of multiple and varied sources on the subject, it appears that Cuba did exceptionally well during the capitalist period. With the exception of the period during the Great Depression, wages, gross domestic product, literacy, life expectancy, and transportation infrastructure all improved during the roughly 50 year period. Not only did they improve, but at rates that far exceeded the improvements seen in other Latin American nations. Because of the international nature of capitalist trade and the continued success of the United States, it would seem reasonable to conclude that Cuba would have continued to do well if capitalism had continued.

On the other hand Cuba did not do poorly under socialism, until the Soviet rug was pulled out from underneath them. Wages, GDP, and transportation all improved steadily with the help of the USSR, but in the 24 years since the collapse Cuba has struggled to improve all of these measures. One huge bright spot in this comparison is the success of literacy rates and life expectancy growth. Cuba is one of the most literate nations in the world, and one of the longest lived. The success of socialism in Cuba is an unfinished story at this point in history, but it would seem reasonable to assume that it will eventually fade in favor of a more market driven economy. (My prediction would be a move towards the Chinese model of market socialism). The success of life expectancy and literacy does not fully constitute an argument in favor of socialism, however as Cuba would surely have been realized these benefits through capitalism. While it might have taken longer for literacy to become prioritized to that level, it surely would have happened, and the benefits of a rich economy cannot help but include longer life expectancies. One classic example of this correlation between life expectancy and economic success is found in Cubas medical system. Cuba has one of the best doctors to patient ratios in the entire world with about 58 doctors per 10,000 people. This seems good until you understand to other facts. First, Cuban doctors are so poorly equipped that most hospitals are little better than the nurses office at school. Second, Cuba has to export asignificant portion of its doctors to other countries in the region in exchange for crucial commodities; for example Venezuela supplies Cuba with refined petroleum products in exchange for Cuban doctors. So it begs the question, what good is having lots of doctors if they are not able to operate at their maximum ability? Capitalism naturally leads to the efficient usage of capital, and also allows for international sharing of capital. That is to say that if a business in one company wants to buy

and develop resources in another country they can do it and the host country will be benefitted by the investment. In the case of Cuba, heavy foreign investment boosted the sugar industry and made it even more profitable. While a strong Castro supporter might say that corporations were exploiting Cuban workers, an honest examination of the situation will show that the greatest benefit was to Cuba, not the corporations. The U.S. investment in Cuba did only helped the Cuban economy. In summary, my research leads me to conclude that capitalism was more beneficial to the nation of Cuba than was socialism. In terms of the five performance criteria used for evaluating economic systems, capitalism outperformed socialism in all measures except Income Distribution Equality. Even viability seems to lean in favor of capitalism as the replacement of capitalism was not due to any failure of capitalism, but rather due to political idealism. I believe that if Cuba had remained with capitalism it would have as good of an economy as any state in the United States.

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