Cuba: The Challenges of Being Global and Socialist... at the Same Time

Contemporary dilemmas in Cuba: an introduction
Although usually presented in stilted academic discourse or strident ideological rhetoric, most debates about contemporary Cuba are in fact born from basic tensions of life. The demise of “really existing socialism” in Europe, the vast market-oriented reforms in China and Vietnam, and—above all—the rapid transformation of Cuban society itself during the 1990s have provoked at least two debates among ordinary citizens of that country: first, about how to survive in this “brave new world,” and second, about what kind of future is in the making.

From 1989 to 1993 almost 35% of Cuba´s gross domestic product (GDP) simply evaporated (see Table 1). The last decade of the twentieth century began with the worst peacetime economic crisis in the history of Cuba.  Table 1 also shows the collapse of imports and exports between 1989 and 1993 (and the partial recovery since then).

Daily existence for most people during the early 1990s, the first years of the post-Soviet era, was unusually tough.  As Table 1 shows, nutritional levels declined drastically (though by 1998 they were again approaching 1989 levels).  Under these conditions, learning to survive meant reviving some old attributes such as individualism and market-oriented shrewdness, for which at least two generations of contemporary Cubans do not have adequate preparation.

Table 1: The Crisis of the Nineties (Selected Statistics)

(a) Figures for 1990;  (b) Figures for 1997. Source: Oficina Nacional de Estadísticas, La Habana, Cuba.            Government policies to deal with the crisis were markedly different from the usual pattern of economic adjustment that other countries have adopted.  Essential social services, such as education and health, were provided universally and at no cost even in the worst moments of the crisis. Subsidized food -- although in relatively reduced amounts -- guaranteed a minimum level of nutrition, while other important social programs were designed to support specific social groups (older people, children, disabled people, and pregnant women).  Adherence to norms of fairness and social justice was definitely the hallmark of Cuban adjustment policies during the 1990s.

Nonetheless, the fact is that many people were barely able to get by.  It would be preposterous to assert that “survival” was the object of calm scholarly debate during the first years of the decade. Survival was fundamentally a short-term practical matter more than an academic issue.             However, by 1995 the worst of the crisis was over and the economy began a steady -- although puzzling -- process of recovery. Consequently, the possible shape of the future began to receive more attention in public debates. The belief that better times will inevitably come has been shattered during the process of crisis and adjustment, at least for segments of the population: uncertainty has never been fertile soil for strong convictions about the future. Nevertheless most people are still interested in what the future might look like. In that sense, the search for a better future has not only been a practical problem for Cubans; at the same time it has been a critical issue in contemporary controversies (political as well as academic) on the island.

A sector of the Cuban population has not abandoned the dream of building a better world, inspired by socialist ideals, knowing that they will have to find the resources, the incentives, and the legitimacy for that dream without losing sight of reality or sacrificing common sense. Thus, contemporary debates about Cuba are full of disturbing questions, crude representations of reality, and unconventional exploration of alternative paths.

As an open economy, Cuba´s future is closely linked to its international environment.  Current debates about the prospects of the nation and its people must therefore take into account the study of the global economy.  Since the early 1990s Cubans have been entangled in arguments regarding the viability of socialism in a small island amidst a vast sea of globalization, a process made particularly difficult by the open hostility of the most powerful nation on earth towards the island.

One of the most pressing problems for Cubans is precisely to address -- convincingly and clearly -- the cloudy visions of the future arising from current rationalizations that social phenomena are irreversible and that because of some nebulous global trend, there is no alternative to austerity.

The Cuban economy in the 1990s: the impasse and the promise
Despite its recent economic reactivation, Cuba is still in deep trouble when considered from the longer-term perspective of development.  But a way out can be found. It will depend on how problems are understood and solutions are defined.

Capitalism, as we know it, is clearly not the answer. The advantages of its allegedly superior efficiency will only benefit a fraction of the population. That has been its effect everywhere else, and there is no reason to think that it would work differently in Cuba. To claim that capitalism offers a solution for the problems of the majority of Cubans is either self-serving, naive, or both. “Actually existing socialism,” as it really was, is also a non-starter.  In the end, that kind of socialism was trying to emulate capitalism in a frenetic race to maximize production, but with inferior institutions and incentives. Why that type of socialism failed so spectacularly is still a matter of passionate debate, but very few people still find it attractive as a model.

It is even harder to find a suitable model in the few countries that still call themselves socialist.  With the exception of Cuba, they are concentrated in Asia, and North Korea and Laos stand in disturbing contrast to the claimed successes of China and Vietnam.¹  Beyond any doubt, transformations in China and Vietnam are relevant for Cuba, although their real stories are much more complex than the usual official versions and occasional World Bank assessments. Interesting experiences and lessons can be found there, but the claim that there is a “Chinese-Vietnamese socialist model” waiting to be copied elsewhere is simply not grounded on evidence.

Many people would like to think that Cuba is also a special case, and as a matter of fact it is, but that does not mean that it is a free-floating actor capable of choosing among many options. Alternatives are rather limited, and the ones most often mentioned are basically limited to three: a) full-fledged capitalism; b) welfare-state capitalism; and c) socialism. Contrary to widespread belief, none of these -- neither capitalism nor socialism -- will be imposed by some ineluctable “march of history.”  History is not a matter of fate but of social action, where choices do exist.

Nor is progress by any means to be taken for granted, if by progress we mean increased well-being based on the development of productive forces.  One only has to look elsewhere to recognize that. What is more, progress could also be understood from a different perspective, one which rejects the productivist approach that -- under both capitalism and socialism -- has been destroying the environmental framework of human activity and leading people to think that happiness is only possible through symbolic consumerism. Therefore, it is not enough to identify development options as “capitalist” or “socialist,” for there are crucial problems of the real world that do not correspond to those labels.

Capitalism, however it is defined, would not be very attractive for the vast majority of the Cuban population, unless by some magic trick they could be sold on the notion that a tropical version of the Nordic system is feasible on the island. However, people would more likely realize that the Dominican Republic, and not Denmark, is the place to look for clues about a capitalist future for Cuba.

Socialism by itself cannot provide answers to many problems. Cuba is a socialist country but it is not the socialist country that it used to be. What is then the current Cuban condition?  Cuba is a country where socialism is trying to hold its ground amidst a vast social restructuring of worldwide proportions which increasingly has been impacting Cuban society. It is socialism on the defensive, trying to resist the erosion of past achievements while at the same time getting involved in the globalization of the national economy. In that sense, this is socialism in a passive-defensive mode.

State ownership of the main means of production plus redistributive mechanisms oriented towards a more equitable society are not necessarily conducive to a full and efficient insertion of Cuban society into the world system to bring its presumed benefits to the population.  No feasible blueprint for modernization of Cuba has been convincingly elaborated during the 1990s. It is still a matter of controversy. “Modernization” is probably the concept that has been subject to the most verbal abuse in Cuba, but nobody has yet dared to define exactly what it means in the current context.

Some segments of the Cuban population -- those employed in the tourism industry and the recently dollarized areas of the economy -- have already become modernized in the sense that they are engaged in activities integrated into global production networks and enjoy high incomes.  But the country as a whole is not “modern” and probably never will be under its current economic structure: there are virtually no small and medium-sized private firms which might attract foreign investment for intermediate stages of global productive processes, and there are controls on the use of non-state assets to generate income.

More important, any “modernization” which entailed adopting international standards of efficiency would impose hardships on the majority of people. One of the most important aspects of the process of contemporary global restructuring is its multidimensional exclusion, whether societies are structured on a capitalist or a socialist matrix.  At one level, globalization could mean the exclusion of industries, sectors and even complete economies from world markets, which would entail a loss of income. In theoretical terms, global restructuring does not have to be a zero-sum game, but in the real world it often is.  At a different level, global restructuring could be conducive to another type of exclusion:  the suppression of now unprofitable economic activities, leaving many people unemployable.  For them, this would mean social and economic downgrading and the increase of both absolute and relative poverty.

Multidimensional exclusion is the key factor to begin to understand Cuba’s current predicaments and options. The real story behind Cuba’s economic and social impasse during the 1990s is the exclusion of a substantial share of Cuba’s productive capacity from international markets.  Until about 1990 the island was inserted into the world socialist market, that is, it was heavily dependent on advantageous access to markets, capital, technology and know-how which it enjoyed for political reasons.

This isolation from the world capitalist market meant that the low productivity of its industry did not hamper material and social progress on the island. When the world socialist market collapsed in the late 1980s and early 1990s, Cuba's outdated and inefficient supply structure left it exposed -- for the first time ever -- to the full impact of an increasingly globalized world market. Most of Cuba's workforce remained at a low level of technical skill, which in turn kept productivity down.

During the 1990s Cuba became a dual economy. A dynamic zone, generally based on the intensive utilization of natural resources (tourism, nickel, cigars, and a very much contracted sugar industry) is more or less competitive in world markets, while a large and noncompetitive area (most agriculture and most manufacturing) is excluded from world markets, with very little chance of becoming competitive under its current scale and structure.  Key sectors of this area are heavily concentrated in the large-scale production of homogeneous items which could not be exported profitably because of low productivity, substandard quality, noncompetitive delivery timetables, and poor after-sales service. In some cases competitiveness -- international inclusion -- would only be possible at the high cost of substantial downsizing, which would mean increased exclusion at the domestic level, that is, the displacement of a substantial share of the labor force for which there are no clear alternatives of equal or better employment. In the case of Cuba the process of labor displacement is very complex because of the distortions introduced by the dual currency system (i.e. the US dollar and the Cuban peso).²  Some workers displaced from jobs in technologically sophisticated production could find new jobs that might be less demanding in terms of knowledge and technical skills but nonetheless offer a higher level of income. For example, a person formerly employed as a machinist or software designer (a state employee receiving a salary in Cuban pesos) might get a new job as a waitress in a hotel (earning US dollars).  It could be argued that this is not a case of economic exclusion, since the worker's income has risen. True, but in the longer term that process is self-destructive for the development of the country because it creates incentives for the downgrading of skills and thereby destroys the opportunity to get and absorb new knowledge and technology.  In sum, it contributes to further exclusion from world markets.

The “social contract” has been eroded in the 1990s with the emergence of inequality and the decline in the effectiveness of welfare state institutions which heretofore guaranteed a minimum standard of living below which no one was allowed to fall.  The sectors that are competitive on the world market produce a surplus which provides for redistribution to the low-income population (which today includes the vast majority of people, including vast segments of the more skilled workers).  At current levels, however, that redistribution cannot compensate for the impoverishment caused by low levels of productivity and by the emergence of private enterprise in the domestic economy (social stratification due to the expansion of some private activities, a parallel dollar sector, distorted markets, and sources of income not related to work). The welfare system has still been able to provide some basic free services such as health care and education at relatively high levels during the 1990s, but other broad social services such as pensions for retired workers, welfare services for targeted groups (e.g. disabled workers), public transportation,  and nutritional subsidies have been provided at less than satisfactory levels. The recovery of the economy during the second half of the nineties has contributed to the amelioration of that deficit, but it does so by offering welfare benefits rather than by improving the level of production.

The shortcomings of the welfare system force the population to develop survival techniques, leading to a kind of multi-tiered income system, because in addition to income from the formal sector, some people have privileged access to foreign remittances and many others are engaged in self-employment activities, legal or illegal.  The growth of the informal sector has become a fact of life in Cuba due to the crisis of the state socialist sector.  A large share of the population is involved in informal activities outside the formal state, capitalist (foreign), and cooperative sectors, although in many cases there is an overlap between formal and informal activities. The desire to emigrate is another evident consequence of the choice to “modernize” using private means.

It is rather openly recognized that the economy falls short of full “modernization,” although some government officials argue that, at some undefined point in the future, an internationally competitive sector will emerge which is strong enough to provide full protection for an extended welfare sector in Cuba, which would mean internal socialism sustained by capitalist success in global markets.

However, while such a system might be sustained for some time, its long-term viability is less certain.  First, it presumes that Cuba will successfully achieve a level of partial insertion into the global economy, sufficient to provide enough resources to sustain an adequate level of income for a labor force fundamentally employed in noncompetitive sectors.  This is unlikely.  So far, Cuba´s insertion into world markets has been driven by activities based on natural resources.  For a country like Cuba, there are clear limits to the possibilities of development on that basis.  Thus, the competitive sector could grow but it would not include the majority of the economy and society, which within this model would remain in the welfare sector.

Second, even if some equilibrium could be found, so that the resources provided by the competitive sector would be large enough to sustain a minimum standard of living, the model would then be plagued by the problems confronted by any kind of “welfarism”: welfare recipients, who might be the majority of the population, would play only a passive role and would lack incentives within the system.  This would especially affect the poorest young people and well-educated people earning professional salaries in Cuban pesos which are inadequate to support a decent standard of living.  They could be expected to show latent and overt signs of social decomposition; and above all, they would see that the system works well for only a few people. This could pass for socialism but it is not socialism. In the global era, paternalism could be more a time bomb than a solution.

Third, that “welfarist” model is extremely unstable and also vulnerable to the very social exclusion for which it is trying to compensate.  It is unstable because global inclusion, which is the key factor in the dynamics of the competitive sector, is determined by factors subject to wild and unpredictable variations. If selective modernization is highly dependent on globalized activities such as tourism, then it could be vulnerable to unpredictable circumstances. Tour operators and airlines could make or break the most elaborate plan for the development of tourism in a country like Cuba.  Abrupt changes could wipe out the income of entire key economic sectors in just a few weeks. The model is vulnerable because once the decision to play the game of competitiveness has been adopted, its rules must be observed. Competitiveness means strengthening corporate capital, and its negative impact on people in the name of “global realities” is totally predictable. A socialist state accountable to the majority of people could moderate the most abusive forms of that impact, but if it is engaged in the competitive game, it cannot avoid them entirely. Increasing competitiveness could mean putting more people on welfare, which would be preferable to letting them go down the drain, but that is no solution. 

Clearly, alternatives are needed.  Let us be clear from the beginning that the goal of this article is not to suggest the feasibility of a “third way” for Cuba. We believe in the possibilities of socialist alternatives on the island, but it must be “socialism with an edge.”

At one level, socialism will have to abandon any illusion of prospering within a system which is its social nemesis, but it is evident that socialism does not appear as a systemic alternative to capitalism on the world scene for the foreseeable future. Therefore, socialism -- particularly in a small, underdeveloped country in conflict with the US -- is confronted with the twin problems of securing economic growth by participating in the global economy -- a legitimate means of improving the life of people and strengthening national security -- while at the same time rejecting the productivist approach and the forces inherent in the global system which would mean that a large share of the population would get little benefit from international insertion.  The challenge is then to clearly identify collectively determined goals and to establish mechanisms to offset the negative impacts.  This is easier said than done.

The fact is that “insertion” and “modernization” should be considered  not as goals but only as problematic means. Under current circumstances it makes little sense to pursue the complete modification of the world system, but it is possible to move in the right direction. This is better than either assuming that unmitigated insertion is desirable or deciding to postpone socialist aspirations.

A more controversial proposal is for what might be called “socialism with an edge”: identifying the positive aspects of exclusion from global markets and taking advantage of them to mobilize excluded people to work for their own well-being. As already mentioned, the removal of some sectors from participation in international markets is generally associated with the loss of employment and income for those sectors, thus leading to internal social exclusion unless compensatory measures are taken.  Socialism will have to deal with exclusion but there is no point in regarding all forms of exclusion as totally negative. Internationally driven exclusion is a complex process. It means losing national income and employing part of the population at technological levels below those found elsewhere in the world economy.  It could also be a blessing in disguise, however: it could eradicate some productivist practices.  Closing plants that produce high levels of pollution, downsizing or eliminating activities that require high energy consumption; and abandoning some agricultural practices that rely on mechanization and chemical fertilizers could be considered positive results of exclusion.³

Even more important than avoiding the negative side effects of advanced technology is the obligation not to treat excluded people as “leftovers of modernization” or as welfare recipients.  To accept mechanisms of domestically driven exclusion, barely compensated for by welfare practices, would be incompatible with socialism.  The solution for the excluded part of the population (which may be the majority) is not welfare or the illusion of reinsertion at some point in the future. Multidimensional exclusion creates both the opportunity and the need to mobilize the capacity of people in creative ways to collectively produce for themselves. One of the possible alternatives that could be explored is the so-called “associative and self-managed project” (proyecto asociativo y autogestionario), consisting of measures to allow workers to share in the management of existing firms and the establishment of new worker-managed private firms and cooperatives.  It would also include cooperative community projects for goals other than economic production and income generation.  The conditions for the creation of what some authors have called a “popular economy” are already there. They only have to be fostered and expanded.⁴ 

In search of a new pattern of development for Cuba: Export Substitution Industrialization
Globalization poses very particular challenges to a country like Cuba which is simultaneously socialist and underdeveloped.  Nevertheless, it should be clear that if we rule out the possibility of autarky, the country's development can only occur in the context of participation in the global economy.  We have already mentioned that phase of the debate over Cuba's future regarding the economic and social dimensions of possible models.  We will now briefly examine another dimension of the debate about the future of the country: the development pattern.

Cuba in the year 2000 is very different from the Cuba of only ten years ago.  There are at least four basic differences between the Cuban economy at the beginning of the 1990s and in the year 2000: the embrace of tourism as the key economic sector; the growing dollarization of economic activity; the eclipse of the traditional centrally planned economic model; and a reduction in the country's capacity to upgrade its industry, because the process of transition to more complex economic forms has been stalled. 

The changes in Cuba's economic path since the beginning of the 1990s have been widely discussed and analyzed.  The process has been complex, embracing multiple dimensions whose impacts have been felt in almost every sphere of social life in the country.⁵

Nevertheless, to judge by available publications, one dimension of those changes does not appear to have been examined as closely as its importance would require: the dilemmas entailed by the different possible economic directions for the country's development. 

In other words, it is not just that developments of the 1990s represented a new economic direction with regard to rate of growth, sectoral composition, international insertion, institutional structure, and modus operandi of the economic agents.  Those developments have meant, above all, the adoption of a pattern of development which is not necessarily the only one possible.

That is to say, in theory there are different patterns of development.  The main question in terms of the future, therefore, is whether the development of Cuba is compatible with the present pattern of development or whether, on the contrary, a different pattern should be adopted. 

Before going on, a brief theoretical digression is necessary.  In conceptual terms there is an important difference between strategy of development and pattern of development: "strategy" always refers to an ideal representation by the formulators of policy, while the "pattern" of development consists of the actual sequence of events and economic and social outcomes, which can be measured, evaluated, and compared.⁶

We believe that it is necessary to include in any analysis of the contemporary Cuban economy two aspects which at present are unavoidable components of the comparative studies of development and which unfortunately have been omitted from the analyses produced and published in Cuba about the development of the country.  These two aspects are a) the role of the global production networks in the process of development and b) the use of the concept of industrial upgrading to evaluate the path to more complex economic forms which development requires.             With regard to these aspects, the following points appear to us to be crucial:

1. The majority of the most dynamic sectors of the contemporary world economy are organized as global production networks.  To be exact, the contemporary international insertion of a country consists in being able to attract the activities of these networks to its own territory.

2. The incorporation into global networks is essential for development today.  This is not the only mechanism of development, but it offers companies and countries access to the technological and organizational knowledge which are the bases of the process of development.

3. In present conditions, “self-centered” schemes of development -- that is, those based on the assumption that nation-states enjoy a relatively broad and independent margin of maneuver to decide their strategies of development -- do not appear very promising.  Nation-states have a range of freedom, but it is not as great as it might have been in another historical epoch.  What appears most important is that development today depends more on the capacities that countries can acquire as part of global production networks than on the relatively autonomous decisions of their governments.  The most dynamic activities of the international economy are organized as global commodity chains.  Participation in these networks, rather than autonomous activities, offers the greatest opportunities for a country's development.  For these reasons, in the present world the nation-state is not the most appropriate unit of analysis for thinking about strategies of development.

4. All this in no way implies compromising national interests or abandoning the active role of the nation-state in the process of development. What it does mean is that the most efficient way to promote those interests in the current period is for the nation-state to recognize that there are limits to its freedom to decide on its patterns of development or to disregard the dynamics of the global economy.  That is, while self-centered notions of development might have been justified in another historical epoch, they are no longer viable.  The state can still act to promote development, but under very different premises.

5. Countries which aspire to development cannot be incorporated into these global networks haphazardly; they can only join by adopting economic patterns that permit industrial upgrading or, in other words, by acquiring economic and organizational knowledge that will foster increasingly complex economic activities in the country.  In general, this means expanding the activities which use the country's human and social capital intensively.

6. Seeking incorporation into these production networks under other premises (e.g. appealing fundamentally to natural resources and cheap labor power) can attract global activities to a country, but at the cost of trapping that country in a development process which emphasizes activities that do not favor industrial upgrading.

7. Through its participation in global production networks, a country can upgrade its industry by attracting foreign investment for complex activities that create and distribute value under more favorable terms of exchange.

8. The process of industrial upgrading is indissolubly linked to the efficient use of the country's human and social capital, and in particular requires a dynamic process of innovation.  Without establishing an adequate environment for economic innovation, development today is inconceivable.  This is much more important than simply attracting global activities. 

9.  The most important thing is not competitiveness in itself, but the process of learning which makes it possible.  In the current context of globalization, what is a high growth sector today may become a low growth trap tomorrow. In that context, knowledge becomes key.  Firms and countries must therefore be organized to learn constantly and to apply what they have learned in order to transfer a knowledge base developed for a given activity to another more complex one.

There is a striking continuity between the pattern of development observed in Cuba in the 1990s and the one that existed before the crisis: both are based on import substitution industrialization and on the exports associated with the intensive use of natural resources.

In the 1990s very important changes occurred within the previously existing pattern of development, but there was no change in the pattern of development itself.  During the period 1975-90, what occurred was "industrialization by means of import substitution in conditions of high external compensation" (in short, compensated import substitution), while in the 1990s the predominant process can be called "reindustrialization by means of import substitution with superimposed export orientation" (in short, combined reindustrialization).  In both periods, the most important component of the model -- which upheld the hard core of the pattern -- was import substitution industrialization, that is, the expansion and preservation of a domestic manufacturing base oriented towards the internal market. In both periods, development has been fundamentally associated with the creation of the material foundations of socialism, requiring a rather well developed and diversified manufacturing capability with a high proportion of value added domestically. Exports based on the intensive use of natural resources have been a very important component of the pattern of development in both periods but those exports were subordinated to the process of import substitution industrialization. They were supposed to generate the funds (hard currency) to sustain the industrialization drive and also to facilitate the expansion of “forward linkages” in the economy, for instance, sugar exports as the foundation of a large scale sugar cane processing sector in which high value-added sugar cane byproducts -- such as high density alcohol and inputs for the pharmaceutical industry -- would be economically viable.

What changed over time was the actual mix of natural resource based exports. Before the 1990s, the main exports were from agroindustry and mining, while in the 1990s tourism—essentially an activity based on the use of natural resources -- joined them.⁷             It appears that in the 1990s import substitution industrialization continued to be the main component of the development strategy.   What has changed recently is the perception that the new international conditions make several things unavoidable: 1) a reconfiguration of the industrial structure taking advantage of new internal markets in foreign currency⁸; (2) the development of a few specific new exports capable of rapidly becoming sources of accumulation and axes of articulation of productive links to permit a partial reindustrialization; and 3) the incorporation of foreign investment as a means of access to financing, technology, and markets.  In summary, present policy places a relatively greater emphasis on the need to create new exports in the short term.              Beyond that, however, and acknowledging the general endorsement of the need for a "will to export," the paradigm of industrialization based on import substitution has not changed in the new phase of the Cuban development strategy.  The predominant pattern of development in Cuba today does not use the country's principal assets efficiently.  Those assets are a relatively highly skilled labor force and a high capacity for learning.

From the perspective of the study of global production networks and of their potential contribution to industrial upgrading, what has happened in Cuba can be summarized as follows:

a. Activities associated with the functioning of global production networks have only been attracted to the country in a small number of sectors like tourism, mining, and tobacco.

b. With few exceptions, no productive specialization of the country has emerged which might fundamentally displace the composition of economic supply toward activities involving more complex products or processes, greater technological capacity, or an increased scale of knowledge-based exports.

c. Cuba's skilled labor force is an essential aspect of the process of technological and organizational learning which can lead to development; but Cuba has been incorporated into the international economy without taking complete advantage of it.

d. Cuban economic actors have rarely taken advantage of their contact with leading firms of global production networks to learn from them.

In summary, the global production networks have not in general acted as a factor to facilitate the country's industrial upgrading.             What Cuba needs is a reindustrialization with export substitution, in other words, the adoption of a pattern of development in which technologically advanced and knowledge-intensive products and services become the country's leading exports, rather than products and services based on the intensive use of natural resources.⁹

Conclusions

The economic transformations which have occurred in Cuba during the 1990s have in no way met the formidable challenge of changing substantially the current structure of production to gain access to development without abandoning the socialist character of the country.  Despite the changes which occurred in the 1990s, the reconstruction of the Cuban economy is an incipient process and highly undetermined.  In short, it is a challenge which has yet to be resolved.

It must not be forgotten that for an open economy like Cuba's, development occurs within a framework of restrictions, particularly the inherited structure and the existence of the US economic blockade. Nevertheless, even with those restrictions, development is possible.

The central argument which we have presented in this essay is simple: the most appropriate development strategy for Cuba in present conditions consists in undertaking a process of reindustrialization with export substitution which will foster continuous upgrading of the country's technological and organizational capacity by taking advantage of  the skill level of its labor force.

Translated by the author and Jack Hammond

Notes

1. Smith, Richard, “The Chinese Road to Capitalism,” New Left Review, No. 199, May- June 1993; Greenfield, Gerard, “The Development of Capitalism in Vietnam,” The Socialist Register 1994, The Merlin Press, London, 1994; and Andreff, Wladimir, “The Double Transition From Underdevelopment and from Socialism in Vietnam,” Journal of Contemporary Asia, Vol. 23, No. 4, 1993.

2. Since 1993 the double circulation of the domestic currency (Cuban peso) and some foreign currencies (particularly the US dollar) has been officially authorized. Given the combination of a strong US dollar (20 pesos equal 1 dollar) and the relatively low average salaries paid in pesos (around 200 pesos), there is a great disparity in the real income of people with and without access to dollars.  People engaged in activities in the hard currency area (tourism, some private activities, and foreign enterprises), and others who receive family remittances, have incomes well above those of the majority of the population dependent on peso salaries.

3. Rist, Gilbert, The History of Development: From Western Origins to Global Faith, Zed Books, London, 1997.

4. Núñez, Orlando, La economía popular asociativa y autogestionari, CIPRES, Managua, Nicaragua, 1995.

5. CEPAL, La Economía Cubana. Reformas estructurales y desempeño en los noventa, Fondo de Cultura Económica, Ciudad México, 1997; and Rodríguez, José Luis, “Cuba 1990-1995: reflexiones sobre una política acertada,” Cuba Socialista, No. 1, 1996.

6. Gereffi, Gary, "Paths of Industrialization: An Overview,” Chapter 1; in Gereffi, Gary, and Donald L. Wyman, Manufacturing Miracles. Paths of Industrialization in Latin America and East Asia, Princeton University Press, New Jersey, 1990.

7. The Programatic Platform approved in the First Congress of the Communist Party of Cuba, which occurred in December, 1975, stated that "the central tasks of the plans for development of the national economy in the next five-year period (1976-80) will be the industrialization of the country."  Plataforma Programática del Partido Comunista de Cuba. Tesis y Resolución, Departamento de Orientación Revolucionaria del Comité Central del Partido Comunista de Cuba, La Habana, 1976.

8. Internal markets in foreign currency developed very rapidly during the 1990s.

9. We have adopted the concept of export substitution from the studies of development by René Villarreal. Cf. Villarreal, René, “The Latin American Strategy of Import Substitution: Failure or Paradigm for the Region,” in Gary Gereffi and Donald L. Wyman (editors), Manufacturing Miracles. Paths of Industrialization in Latin America and East Asia, Princeton University Press, New Jersey, 1990, p. 310.