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Is Change Finally Coming to Cuba?

With the economy in desperate shape, the government may finally be loosening its grip

By Patricia Smith

For almost 20 years, it's been obvious that Cuba's economy is in terrible trouble. But the Cuban government has continued to defend its socialist system, in which the government controls the economy.

So it came as quite a surprise when longtime Cuban leader Fidel Castro casually told an American journalist last month that Cuba's economic model "doesn't even work for us anymore."

Castro's comment, which he later said had been misinterpreted, came just a few days before the Cuban government announced plans to lay off more than half a million government workers. The hope is that those workers, once off the state payroll, will move into private businesses and jump-start the economy.

"They are in the process of massively reducing the size and participation of the state in Cuban life," says Julia E. Sweig, a Cuba expert at the Council on Foreign Relations.

President Raúl Castro—who officially took over from his ailing brother, Fidel, in 2008—says the layoffs are part of a much-needed radical overhaul of the country's economy.

In his first weeks as President, Raúl Castro allowed Cubans to buy cellphones, computers, and DVD players for the first time, which many hoped was a sign of more substantial changes to come. But bigger reforms did not follow—at least, not until now.

The proposed changes raise fundamental questions about how a Communist state goes about encouraging even limited free enterprise, which is the hallmark of capitalist economies. Where will Cubans get money to start new businesses? How much profit will they be allowed to keep? And will more economic freedom be accompanied by any political freedom, which is in equally short supply?

Cuban sociologist Haroldo Dilla predicts that the government will resist the development of a real free-market economy, and that the reforms announced won't make that much of a difference in the lives of most Cubans.

The Revolution

Fidel Castro took control of Cuba in 1959, when he and his band of guerrillas overthrew the U.S.-backed dictatorship of Fulgencio Batista. At the height of the Cold War between the U.S. and the Communist powers, Castro aligned Cuba with the Soviet Union, embracing its repressive political system, state-run economic model, and hostility toward the U.S. He also nationalized, without compensation, American businesses in Cuba. In response to Castro's actions, Washington imposed a trade embargo that remains in effect today.

Soviet aid kept Cuba's economy afloat until the early 1990s, when the Soviet Union collapsed and Cuba went into economic free fall.

The Castro brothers have long blamed the U.S. embargo for the woes of Cuba's state-run economy. And while the Communist regime has been credited with progress in education and health care, Cuba remains a totalitarian state that stifles dissent, holds political prisoners, and violates basic human rights. The press is controlled by the state, and most Cubans have little or no access to the Internet.

Even with rationing, there are often shortages of even the most basic foods. (There's an old joke in Cuba that if education, health care, and sports are the Revolution's three greatest achievements, its three greatest failures are breakfast, lunch, and dinner.) Government salaries average about $20 a month—even for doctors and teachers.

Those who work in tourism and earn tips in dollars and those with relatives abroad fare better: There are 1.5 million Cubans in the U.S., mostly in Florida and New Jersey, and they send $600 million a year to their families in Cuba.

In 2009, President Obama relaxed restrictions on travel to Cuba, making it easier for Cuban-Americans to visit relatives and to send them money. But Cuba remains off-limits for American tourists.

Some say the U.S. travel ban must be lifted for any private-sector reforms to really take hold. "That is when there will be enough money circulating to support these small stores," says Serafin Blanco, a Cuban-American in Miami.

Like China and Vietnam?

One model the government may be eyeing is that of China or Vietnam, Communist countries that have opened up their economies with great success while remaining authoritarian one-party states. That could bring economic, if not political, freedom to the people of Cuba.

But Ted Henken, a Cuba expert at Baruch College in New York, is unsure how transformative the changes will turn out to be.

"This is the beginning of what we've all been waiting for," Henken says. "It's a major change in the way the Cuban economic system will work. It will be felt by every Cuban." But, he adds, "they still want to maintain state control. We'll see how this plays out."

(The New York Times Upfront, Vol. 143, October 25, 2010)