The Pandemic Depression
The Global Economy Will Never Be the Same
The prevailing expectation in the United States, and certainly among American political leaders, seems to be that the end is near for Cuban President Fidel Castro and his revolution. Indeed, that has been the expectation for some years. In December 1992, shortly after passage of his Cuban Democracy Act, which tightened the embargo against the island, Congressman Robert G. Torricelli (D-N.J.) assured Americans that Castro would fall within weeks. Senator Jesse Helms (R-N.C.), in putting forward legislation last year with Congressman Dan Burton (R-Ind.) to further tighten the embargo, said Castro was on the ropes and needed only a final shove. The Helms-Burton bill would prohibit the normalization of relations with any future government that included Castro.
The only real debate has been over how the end might come. Would it be as in Romania, with the demise of a communist leader at the hands of his enraged people? Or as in Poland and the former Czechoslovakia, where dissident leaders took over the government?
Neither comparison is likely to prove apt. Communist governments were imposed on Eastern Europe at the points of Soviet bayonets. Once the bayonets were withdrawn, the collapse of those regimes was inevitable, however the endgame might play out. In Cuba, foreign bayonets were never needed; communism arrived on the crest of a popular nationalist movement. True, communism was not what Castro had promised. But if it was the path along which he, the most popular leader in Cuban history, wished to lead the country, the great majority of Cubans were prepared to follow at the time. Castro continues to enjoy considerable popular support (whether or not a majority), and the army and security forces are behind him. So it is a mistake to think he will resign. To resign would be to admit defeat, and Castro is far from defeated.
Castro is not in the type of predicament faced by Romanian dictator Nicolae Ceausescu and Soviet leader Mikhail Gorbachev. His situation more closely resembles that of Francisco Franco in Spain after World War II, and not simply because of their common Galician heritage. Both bet on the wrong side of history. In Franco's case, the bet was on World War II. One may argue about the degree of his cooperation with the Axis powers, but his sympathies were clear. He saw conservative authoritarianism as the wave of the future, to be assured by Axis victory.
Franco was wrong. The victory of the Allied powers left Spain politically and economically isolated. Spain was not even allowed to join the United Nations or participate in the Marshall Plan. To gain acceptance, to stay afloat in the new NATO-controlled, democratic sea that Western Europe had become, Spain had to adjust. Pragmatically, Franco began to do so, not because he wished to but because he had little choice. The pace was deliberate, with Franco maintaining tight control throughout. Spain did not attain full democracy until Franco passed from the scene in 1975, but he had laid the groundwork for both democracy and a modern economy.
LESSONS FROM FRANCO
Castro also made the wrong bet. He thought Marxism-Leninism was the wave of the future. He now has no alternative but to reintegrate Cuba into an international community he never anticipated. Like Franco, he is beginning pragmatically. One of Castro's first steps in refashioning the Cuban economy was similar to Franco's: a vast expansion of the tourism industry to take advantage of Cuba's beautiful beaches and low prices. Cuba attracted some 800,000 tourists last year, up from a only a few thousand in 1985. Tourism replaced sugar as the island's principal hard currency earner and could easily double over the next five years.
In 1993, Castro did what he had said he would never do: permit Cubans to own and spend dollars and hold dollar-denominated bank accounts. He also authorized self-employment in some 100 occupations, mostly in the service sector. This meant that individual Cubans could open private television repair shops, laundries, restaurants, and many other small enterprises. Officially they were forbidden by the Cuban government to employ others, but many did and still do.
The next step, in September 1994, was the reestablishment of farmers' markets. After meeting their contracts with state enterprises, farmers now may sell their surplus production for whatever the market will bear. The makeup of the agricultural sector has also begun to change. Before the reforms, some 100,000 small private farms operated on the island. Semiprivate farms have now been added to that stock. State farms have given way to cooperatives in which farmers often have the right to use land (but not own it outright), and they can produce and sell as they see fit.
Since December 1994 citizens have been allowed to sell handicrafts and a variety of light manufactures in artisan markets. Thus, rather than the empty public spaces one used to encounter on weekends, Cathedral Square in Havana and squares and parks all over Cuba are now crowded with people not only selling handicrafts to tourists, but selling shoes, clothing, beer, and sandwiches to one another, providing musical entertainment, singing, dancing, and having a good time. One senses in these scenes the depth of the psychological shift that has occurred. Some optimism and the old Cuban joie de vivre have replaced the despair of 1993.
As in Franco's Spain, foreign investment has been key to Cuba's economic turnaround. This influx of capital has been given a new impetus by a foreign investment law enacted in mid-1995 that makes it possible for foreign investors to own Cuban enterprises outright, not just in tourism but in virtually every area of the economy. Some 60 companies have opened offices in Cuba so far, and many more have invested in Cuban enterprises. Figures are difficult to come by, but a carefully calculated estimate by the U.S.-Cuba Trade and Economic Council places foreign investment to date at over $5 billion and growing. This is a respectable amount, but not nearly enough to provide the economic transformation Cuba requires.
Sherritt International of Canada alone has already committed half a billion dollars to oil exploration and the development of cobalt and nickel mining. It is also investing in transportation, agriculture (including sugar), real estate, tourism, communications, and finance. This is in the face of the Helms-Burton proposal to punish third-country businesses that invest in Cuba. Like Sherritt's executives, many other foreign businessmen in Cuba are unimpressed by the threat. They are more angered than intimidated by Helms-Burton and predict that if it becomes law few foreign investors will pull out. They acknowledge that some investments are now on hold because of it, but note that so long as profits can be had, other companies will replace those who hesitate or withdraw. For example, the Guitart group pulled out but was immediately replaced by Tryp, another Spanish hotel chain. The effect of making Helms-Burton law, then, is likely to be minor. In addition to its other problems, legal experts say it will not stand up in U.S. courts.
Finally, through a strategy that combines increased use of bagasse as fuel, more domestic production of petroleum (which over the past three years has almost doubled to 1.5 million tons), and more imports from Russia, Cuba's energy crisis appears to be on the way to a solution. The crisis began in 1990-92, when Cuba's normal petroleum import of 13 million tons from the Soviet Union plunged to less than 7 million tons.
BACK FROM THE ABYSS
And the result of these reforms? After a decline in economic output of some 40 percent between 1989 and 1994, the free fall has ended. The growth rate for 1995 was over 2.5 percent and is estimated to double in 1996. The price of the dollar has dropped from 125 pesos in mid-1994 to 25-35 pesos. For a short period in August, it went down to 12. Basic foodstuffs that were in critically short supply in mid-1994 have become far more plentiful. The price of beans has dropped from over 60 pesos a pound to 13 pesos and that of rice from 50 pesos to 5.
Intentional energy blackouts, which in mid-1994 sometimes lasted 18 hours a day, 7 days a week, in most areas are now a few hours a week and in some areas have ended entirely. As a Cuban office worker said, "That is the greatest relief of all. I can put up with everything else, but when there are no fans or air conditioning at work and it is so hot at night that one can't sleep, one's temper begins to fray."
The new investment law opens the way for Cuban exiles to return, invest, and open businesses. This is a welcome step, but it has sparked resentment among some Cuban residents, who question why exiles are permitted to open businesses while they are not. They may soon get their wish. Cuban officials have acknowledged that to rationalize the state sector they may over time have to lay off as many as a million state employees. Unprofitable factories must be closed and many government agencies drastically cut back. How are these masses of newly unemployed to be absorbed? There is only one way: expand the private sector. Hence, a new small business law is under discussion. When it is enacted, probably this year, the law will allow groups of citizens, rather than only individuals, to pool their resources and open small private enterprises that will employ others, although it may limit the number of employees they may hire.
One step has led to another in this transition. Legalization of the dollar in the Cuban economy raised the need for a realistic official exchange rate, which Cuban economists are still trying to determine. The self-employment and foreign investment laws increased the calls for a small business law, and that, in turn, will lead to foreign investment in new Cuban private enterprises. The government, pressured by the military and others to continue reform, will doubtless resist at first. But eventually it will have to accommodate them, perhaps by setting up state clearing-houses for foreign investments. Small businesses must have capital to prosper, and it is in the government's interest to ensure they get it. How else will they be able to absorb the growing numbers of unemployed?
As one economic reform leads to another, pressure for political change will increase. Soon, for example, as many as one million former state employees will be earning a living in private endeavors of one kind or another. They will have new interests and want those interests represented. They will turn to the National Assembly, pushing it to become a truly representative body. Economic reforms, in short, set up an equation: the more Cuban citizens enter the private sector, the greater the imperative for a more representative government.
Political changes will come more slowly than economic reforms and mostly in their wake. Cubans have watched with horror the socioeconomic breakdown in the Soviet Union and a number of Eastern European states, resulting, they believe, from going too far too fast and losing control of the reform process. They are determined not to let that happen in Cuba. Also, Cuban officials argue that the midst of an economic crisis is not the time for political experimentation. Only after the crisis, they insist, can one contemplate more significant political reforms. Some go even further and see Cuba following a Chinese model of reform, which allows significant economic liberalization but minimal political change.
Such a model may be appropriate for Cuba's situation today, but it is not likely to remain so over the long run. China is a huge country with oil, coal, and other natural resources and a domestic market so large it is almost irresistible to international business. China can be self-sufficient to a degree that Cuba cannot and is therefore less vulnerable to external pressures. To reinsert itself into the international economic community, Cuba must make more concessions and adjustments than China.
China has had little pressure for political liberalization from its Asian neighbors, the United States, or Europe. This is not the case with Cuba. Leaving U.S. demands aside, Cuba faces growing insistence from Canada, European trading partners, and Latin American states that it move further toward representative democracy. Unlike the United States, these countries believe engagement and trade will do more to encourage Cuban reform than efforts to isolate it politically and strangle it economically. The pressures nonetheless are real, and Cuba must deal with them, especially if it hopes to fully participate in the Organization of American States and hemispheric bodies such as the Inter-American Development Bank.
Spain's transition under Franco once again offers a better parallel than China's transition under Deng Xiaoping. Franco's first steps toward a more open political system and improving Spain's image came immediately after World War II, when he extended conditional liberty to thousands of political prisoners, halted censorship of foreign newsmen (but not of the Spanish press), abolished the Falange militia, and announced that Spain over time would become a traditional Christian monarchy. The question of restoring the monarchy, he said, would be settled "when the nation's interest demands it."
After that, his style of governance changed gradually. His critical moves toward democracy--the liberalization process that began in 1965 and his designation in 1969 of Prince Juan Carlos (in effect, the king-in-waiting) as his successor--came much later. By then, the transformation of Spain's poor, agrarian, centralized economy into one more closely resembling the rest of Europe was well advanced.
If anything, Cuba is changing more rapidly than Franco's Spain, if only because it began before the socialist world collapsed around it. The expansion of religious liberty began more than a decade ago, for example, and Cuban citizens, by and large, are free to practice their faiths without fear of persecution. Believers can even become members of the Communist Party (if they can reconcile their faith with the party's history of atheism). Earlier tensions between church and state have largely been overcome, and negotiations for a papal visit are ongoing.
Since the mid-1970s, Cubans have been able to vote in fair and democratic municipal elections. Voting is by secret ballot, and the process of nominating candidates is remarkably open. One does not have to be a member of the Communist Party to run for office. In fact, the party plays no role in city elections. As one member of the Cuban National Assembly put it, "Rather than a multiparty system, we have a no-party electoral system."
But the municipal councils do not deal with national, let alone international, issues. Those are debated or, some would say, rubber-stamped by the National Assembly. Until 1993 its members were appointed, not elected by popular ballot. In February of that year, the electoral law was reformed so that citizens of each municipality could elect their National Assembly representatives. Unfortunately, the nominating process was tightly controlled and, worse, only one candidate could vie for each seat. The subsequent vote may have been meaningful as a general referendum on the Castro regime because the high voter turnout indicated a willingness to legitimize the government's attempts at reform. But as an election, it was a farce.
Still, it was a step forward. Cuban officials say that there is no reason the electoral law cannot be changed further. Perhaps by the next elections, in 1998, the nominating process will be more open and there will be more than one candidate for each slot. Meanwhile, the Assembly has gained in importance, and the elections of 1993 brought in new, younger faces more open to reform.
A multiparty system is probably a decade or more away, and when it comes it is not likely to follow a conventional pattern. Some Cuban officials have suggested that the Communist Party be abolished in favor of a Cuban Revolutionary Party, the single party called for by the father of Cuban independence, José Martí. Eventually other groups would be allowed to register as opposition or at least independent parties. These officials insist, however, that for the next few decades Cuba should stick to a system in which no party plays a role in elections. "We simply do not want to get into the kind of debilitating party politics we see in surrounding countries," a Cuban political observer said. "There must be a better way of giving the people a voice in government."
Whatever system emerges and however reluctant Castro may be to admit it, most thoughtful Cubans understand that they are moving toward something new--an economy that mixes private enterprise with a continued role for the state and a far more open political system. It will probably look like social democracy to Americans, although Cubans will almost certainly continue to describe it as socialist. Clearly they believe that it is important to preserve the gains of the revolution, such as free education and health care and a high degree of equality.
STICK WITH CASTRO
The dominant view among American political leaders seems to be that Castro must go before meaningful change can take place. The Clinton administration does not demand his ouster as a precondition for normalization, but it has described him as a "lost cause" or "irrelevant" and expressed disbelief that sufficient change could occur under his tutelage. Clearly it would prefer a peaceful transition without him. Helms-Burton goes further, ruling out engagement with any government that includes him. But Castro's departure or ouster is unlikely to occur soon, and it is probably undesirable.
Immediately after World War II, the consensus in Spain and the rest of the world was that Franco's days in office were numbered. Was he not without allies, his soul mates having gone down in defeat? Within a decade, however, it was acknowledged not only that Franco, with or without allies, was likely to remain in power, but that he was the best guarantee that Spain's transition from dictatorship to democracy would be peaceful and relatively smooth. He is well remembered in Spain today for just that.
Most Cubans on the island, including many who disagree with Castro, see him playing a similar role. He is the only political figure with the authority to order reforms and make them stick, and he is the only one who can prevent the various political factions from plunging the country into a bloodbath. They know that his instincts are not democratic and the evolutionary pace he favors will mean an elongated process. Some are impatient with that, but most seem to prefer that scenario to a more dramatic and possibly dangerous denouement. A crucial point is that they see no alternative. It is all well and good to speak of Castro's immediate ouster, but who would replace him? Elections are well and good, but who would run against him? The Cuban people see no one in the wings, and thus their understandable reaction is to stick with Castro.ffi
Castro has been so demonized in the United States that most Americans find it difficult to believe the Cuban people do not want him immediately overthrown--or dead. How can they support a man who is said to be a bloody tyrant and murderer with the worst human rights record in the world? The revolution unarguably has a dark side. Castro is not a democrat and not inclined to tolerate dissent. People are indeed locked up for expressing opposition and are sometimes handled roughly. Human rights activists calculate that as many as 900 men and women remain behind bars for crimes of a political nature (down from tens of thousands in the 1960s). These ills cannot be condoned and must be overcome if Cuba is to gain full acceptance in the international community.
But most Cubans see another side of the revolution, the side that has provided free education, excellent free health care, a high degree of equality, and, most important, a sense of national pride. Until the economic crisis resulting from the collapse of the Soviet Union, most Cubans seemed to feel they had benefited from the revolution. Because of these economic difficulties, many would now like to abandon the revolution, as evidenced by the refugee crisis of 1994. One should not lose sight of the fact, however, that far more Cubans are prepared to stay and see it through, even as they grumble over their plight. The majority of Cubans are black, and they have benefited most from the revolution. That majority wants to see change, but not a return to the pre-1959 situation, which the rhetoric of the white anti-Castro exiles often seems to threaten. Instruments such as the Helms-Burton legislation, which is so clearly driven by those same exiles, simply strengthens the resolve of the black majority and most other Cubans to stick with Castro.
Franco, of course, had one luxury that Castro does not: a king-in-waiting to whom power could be given, who symbolized the nation and could hold it together after Franco departed. While Cuba does not have a Juan Carlos, Castro is preparing a new generation of leaders. Men such as Carlos Lage Dávila, the Vice President of the Council of State, who directs the economy, Foreign Minister Roberto Robaina González, National Assembly President Ricardo Alarcón, and Army Chief of Staff Ulises Rosales are already directing the country's day-to-day business. By the time Castro passes from the scene 10 or 12 years from now, whether through death or resignation, these and other new leaders will be ready to step in and carry on. Given such an extended period, a successor who could peacefully assume power will likely have been chosen.
THE EXILE COMMUNITY
Only in the United States has a Cuban exile community had a strong impact on policy toward Cuba, and even here that impact results more from miscalculations by American politicians than from the strength of the anti-Castro exiles.
The Cuban-American community is by no means monolithic; it is now about evenly divided between those who favor some degree of dialogue with the Castro government and those who are bitterly opposed. This is true even though the vast majority of Cuban-Americans regard themselves as strongly anti-Castro and most remain skeptical that democracy can be achieved under him. Moreover, the Cuban-American vote does not and probably never will determine the electoral outcome in Florida or even in Dade County, where most of the state's Cuban-Americans live. Clinton, for example, won the county even though only 18 percent of Cuban-Americans voted for him. He lost in the northern counties, where few Cuban-Americans live, over issues that had nothing to do with Cuba. Thus his effort in 1992 to win Florida by supporting the Cuban Democracy Act and taking a hard line on Cuba came to exactly zero. He got 39 percent of the vote in Florida, precisely what Dukakis had received four years earlier.
If either a Democratic or Republican administration wished to change U.S. policy toward Cuba, it could easily do so. The protests of ultraconservative Cuban exiles would cause little political damage. The reaction is likely to be even less consequential in years to come as a new, less revanchist generation of Cuban-Americans comes to the fore and more moderate leaders gain strength. After World War II, strong Spanish Republican exile communities in France, Mexico, and Argentina helped persuade the international community not to accept Spain or allow it U.N. membership. But as the years passed and it became increasingly clear that the exiles had no prescription for bringing about change at home and certainly not for replacing the Franco government, their voices were heeded less and less. Such is likely to be the case with the virulently anti-Castro exiles.
AN EMBARGO ON AMERICA'S EMBARGO
U.S. policy toward Cuba still seems to be in a Cold War time warp. Although Cuba has removed its troops from Africa, stopped promoting revolution in Central America, and lost the Soviet military ties of old, the United States persists in tightening the screws. The United States still seeks a more open Cuban political system, greater respect for human rights, and compensation for properties expropriated under Castro's revolution. In fashioning a policy to further those aims, however, the Clinton administration might note that Spain's major advances toward democracy came after the United States had normalized relations with it, signed an economic-military agreement with Spain in 1953, and allowed its admission to the United Nations in 1955. Engagement, in other words, produced better results than ostracism.
The rest of the world favors engagement (as does the United States with most other authoritarian countries) and rejects U.S. policy toward Cuba. The vote in the U.N. General Assembly against the U.S. embargo last November was 117 to 3; in 1994 it was 101 to 2. The only countries voting with the United States were Israel and Uzbekistan, and both trade with Cuba. In other words, not a single government cooperates with the U.S. embargo. Nevertheless, the Helms-Burton legislation would have the president insist to the Security Council that other U.N. members join the embargo. The legislation's extraterritorial punitive measures risk major quarrels with Canada, Mexico, Russia, and the European Union.
Nor is commerce the only arena in which present policy is counterproductive. America's overriding interest in Cuba and most other Caribbean states is that their populations remain in place. The United States does not want tens of thousands of refugees and illegal aliens landing on its shores. That became abundantly clear during the refugee crisis of 1994, when legions of Cubans set out on rafts for Florida. The Clinton administration temporarily resolved the crisis by entering into an agreement with Castro on September 9, 1994, to stem the flow. It concluded another agreement on May 2, 1995, which requires the Coast Guard to return those picked up on the high seas directly to Cuba. Otherwise, the administration left the old policy intact. So although the overwhelming majority attempting to flee were economic refugees, the embargo, which adds to the island's economic difficulties, was left in place. The Cuban embargo is the only embargo of the United States that effectively prohibits the sale of food and medicine, in violation of the Fourth Geneva Convention of 1949.
A MORE SENSIBLE APPROACH
Current policy does not serve U.S. interests or further its objectives in Cuba. It neither advances the cause of human rights and a more open system nor reduces the possibility of another refugee outflow. It complicates relations with America's most important trading partners while denying U.S. companies any share of the Cuban market. The latter is not large, but a recent trade study estimated that the United States and Cuba could quickly be doing some $7 billion a year in business.ffl
Against these losses, U.S. policy achieves nothing. It does not even serve the domestic political interests of the Clinton administration. Still, a total lifting of the embargo might be politically risky. The president would doubtless be accused of giving away something for nothing. However, there is a sensible way to begin to change policy. The United States should halt all efforts to interfere with the trade and investment of other countries in Cuba, lift the embargo on the sale of food and medicine because it is inconsistent with international practice, and lift all travel restrictions, which are of dubious constitutionality and infringe on the rights of American citizens. Having thus shown good faith, the United States should say that it is ready to have a new relationship with Cuba, quickly remove other parts of the embargo, and enter into negotiations on bilateral matters such as compensation for nationalized U.S. properties, which Cuban officials have indicated they are willing to discuss. The United States should emphasize, however, that the pace of normalization would depend in part on how meaningfully Cuba moves ahead with internal reforms. America would lose nothing substantial through such an approach, vastly increase the possibility of playing a constructive role in Cuba's transition, and avoid damaging its relations with other countries.
Unfortunately, all indications are that the United States will stick to the same old Cold War approach of the past 35 years. The much-ballyhooed opening to Cuba announced in President Clinton's foreign policy speech of October 6, 1995, has turned out to be mostly smoke. Although he spoke of vastly increased academic exchanges, the restrictions on them remain largely unchanged. Cuban-Americans can now ostensibly make one trip to Cuba per year without a license but only in cases of extreme humanitarian need. As the "need" is not monitored, however, increasing numbers have travelled to the island, albeit with a dubious justification. Clinton's offer to allow news bureaus of the U.S. media to open in Cuba was not new. A similar offer was made in 1977 and reiterated over the years. The Cubans have always rejected the offer, saying it would not be an even trade because Cuba has only one news agency. In most cases, they will probably say no again.
Despite growing pressure from U.S. businesses, which resent their own government handing the Cuban market to foreign competitors, signals from both the White House and Congress suggest that Cuba policy will not change significantly for at least another two years. If the Helms-Burton legislation becomes law, change could be delayed for much longer.
It may be just as well. Cuba will survive without the United States, and the United States will certainly survive without Cuba. Cuba will move ahead with its reforms, continue to expand its commercial ties with other countries, and eventually end up, like Spain, with a very different society. But it will be a society based on Cuban realities, not those of Washington or Miami. Meanwhile, if so obviously flawed an instrument as the Helms-Burton bill becomes the basis of U.S. policy, it might be better that the two countries remain at arm's length for some years to come.
ffi These appraisals are based on hundreds of interviews and conversations the author has had with Cubans over the past few years.
ffl Donna Rich Kaplowitz and Michael Kaplowitz, New Opportunities for U.S.-Cuban Trade, Washington: The Johns Hopkins University Press, 1992.