The Trouble with Cuban Socialism

Last July 26, on the day that marked the eleventh anniversary of the Cuban revolution, addressing hundreds of thousands of citizens on the same rostrum from which he was accustomed to hail his victories, Fidel analyzed in detail the failure of the great ten-million-ton harvest. ¹ To critical observers who followed from within or looked on from the outside the struggles and stresses that marked the attempt to lay the economic foundations of a new socialist society, this failure had not come as a surprise when it was first announced on May 11. What must have been surprising to those accustomed to the ways of politicians, on the right as well as on the left, was the resounding candor of the speech.

Under conditions normally prevailing in a free-enterprise economy like our own, the failure of one of the major industries to reach an anticipated output level, even by as much as 15 percent, would hardly be considered a national tragedy. In a centrally guided (socialist) economy, the failure to reach a production target which has been officially proclaimed the national goal must, indeed, be interpreted as a sign of a major breakdown.

Whatever its weaknesses may be—and as we shall see presently there are many—a strong socialist regime should be capable of concentrating ruthlessly all the economic and spiritual resources it commands on that single goal. The fact that, despite such capability and the obvious determination to make the greatest possible sacrifices, Cuba nevertheless harvested fewer than ten million tons of sugar leads one to conclude that these sacrifices must have been pushed to the extreme. If a driver is known to be determined to reach a speed of one hundred mph, but is seen to be going only ninety mph, one can be pretty certain that he has pushed the accelerator to the floor; had he actually reached the one hundred mph speed one could not be so sure.

Indeed, the list of subsidiary failures—subsidiary, that is, to the ten-million-ton sugar harvest—itemized in Castro’s speech is distressingly impressive. Milk production fell 25 percent in one year, delivery of steel 38 percent, the output of cement 23 percent, and so on, and so on. The proportion of normal working time spent by thousands of highly trained technicians away from their real jobs, and the portion of the normal school year which both students and teachers devoted to swinging the machete and loading the cut cane, must have, in many instances, approached 100 percent.

The poor performance by industry, agriculture, transportation, and distribution predicted by all of Fidel’s hostile as well as many of his friendly critics is now confirmed by the official figures. If before July 26 two different interpretations of the state of the Cuban economy were possible, a distressing unanimity now prevails: the high hopes for rapid growth have been disappointed; the situation is desperate, although, one must hasten to add, still far from hopeless. It is not surprising, however, that in the explanation of how all this came about, no such unanimity exists.

Though one is tempted to ask what “the cause” of the debacle was, to yield to this temptation would be to oversimplify the issue. A national economy, even the national economy of a small country like Cuba, is a complicated system. Fidel is, of course, the big wheel in it. He would be, however, the first to admit that his effectiveness depends to a great extent on a large number of other wheels and gears.

Whenever many different experts set out to explain a development as complex as the economic difficulties in Cuba, the dispute about its true cause can safely be assumed to reflect a disagreement about appropriate remedies. It is as though one observer might say that someone’s headache had been caused by his failure to take aspirin, while another might insist that it was rather the reluctance to take anacin, and a third that the headache was due to lack of sleep. Any one of these observers may be right, but in what sense can the three experts be said to have offered three different explanations of the headache?

The economic difficulties confronting Cuba are fundamentally the same as those that plagued the Soviet Union and other socialist countries after the overthrow of their capitalist semifeudal regimes. In the Cuban case there was, of course, no physical devastation from a prolonged civil war such as accompanied the Russian revolution, although the blockade imposed by the United States, in cutting off the flow of indispensable replacement parts for American machinery unobtainable from any other source, caused great and lasting damage to the economy. On the other hand, Cuba received extensive economic aid from the Soviet Union as well as modest, but not negligible, trade credits from other parts of eastern and western Europe and from China.

In the same July 26 speech, Fidel blames the plight in which his country finds itself on bad planning. All available evidence seems to indicate that the low and apparently steadily falling efficiency of labor is another, probably more important, factor responsible for this trouble. It is my contention that the second problem—the characteristically low productivity of labor, rooted in the basic difference between a socialistic and an individualistic society—will moreover prove to be particularly difficult, perhaps even impossible, to overcome.

The first two years after the overthrow of the old regime were a glorious revolutionary honeymoon. The immediate political and social objectives of the victorious popular movement were attained. The standard of living of large masses of the population shot up. This increased rate of consumption was, however, maintained only through the depletion of existing stocks. The sharp rise in the per capita meat consumption, for example, was sustained by the abnormally high rate of animal slaughter, which always in all countries accompanies the nationalization of private herds. After all, the social upheaval at the outset could only have had a negative effect on the organization of production and, consequently, on the flow of current output.

By 1962 reserves were used up, shortages began to be felt, and rationing of food and clothing was inaugurated. In 1959 the National Agrarian Reform Institute had been organized to carry out agrarian reforms; and in 1960 the Central Planning Office—the Juceplan—was established to guide the over-all economic growth. Edward Boorstein, who was not only a close observer but a participant in the first serious attempts at central planning of the operations and the growth of the socialist economy, gives a very full and graphic account of it in his book, The Economic Transformation of Cuba.²

The original idea of transforming the predominantly agricultural economy into an industrial one was given up after two frustrating years. The decision to base plans for further economic growth on a diversified agriculture with particular emphasis on sugar production and cattle raising appears to have been quite sound, since next to rich deposits of nickel and a few other minerals the main natural resources of the island are its agricultural land and propitious climate. Another aspect of Cuban economic strategy—the exceptionally high rate of saving and investment—is characteristic of all modern socialist countries. In this, Marxist practice is in keeping with the precepts of orthodox economic thought that are preached, but not practiced to the same extent, by capitalist societies.

Long-run projections of economic growth exist now in all countries, even in the United States. In France, for example, these projections take the form of prospective plans that are intended to serve as over-all guidelines for the economic policies of the government as well as for the major investment decisions made by large private firms. The efficacy of this and other similar attempts at over-all planning within the social and economic framework of the private enterprise system is, however, highly problematic. Except in the very special case of Japan, where the government, working hand in hand with representatives of well-organized industries, wields considerable economic power, it seems to do little good, though it does not do great harm.

In a socialist country where the government takes over the responsibility for all the large and small decisions involved in the operations of the national economy, the function of a plan or rather the responsibilities of the central planning organs are very great and very grave indeed.

Since Lenin inaugurated the first socialist five-year plan nearly half a century ago, problems of central planning have become a favorite subject of theoretical analysis both in the East and in the West; originally, in fact, more in the West than in the East. In the Soviet Union by now several scientific institutes with literally thousands of economists, mathematicians, and statisticians on their staffs are working on these problems. The organizations responsible for the actual management of the economy do try to make practical use of the results of this research; however, they do so very cautiously and very slowly. A careful inquiry would likely show that managers of large American corporations make, at the present time, greater and more effective use of modern programming and planning techniques than the planning organs of socialist countries.

With one or two exceptions the revolutionary leaders who found themselves responsible for managing all the nationalist branches of the Cuban economy were even less well prepared for their task than the men who came to power in Russia in 1917. The economy which Fidel took over in 1959 was, of course, as I observed earlier, in a much better state than the Russian economy of 1917, which was exhausted by four years of war. While apprehensive of possible foreign intervention, Cuba was spared the trials of a prolonged civil strife. This, in addition to the fact that a Caribbean island does not have to withstand the assault of harsh northern winters, explains, at least in part, why the Cuban revolution was and still is a relatively happy one, in contrast with the grim Russian revolution.

In reading the detailed account of successive reorganizations of the economic administrative organs in Havana, one cannot help but see a repetition of the early history of Soviet planning. So far as purely economic matters are concerned, because of their inexorable internal logic the problems facing the two socialist societies have more similarities than one would expect in view of the differences in time and place.

The so-called market, or free-enterprise, economy, as it exists in most Western countries and as it existed before the revolution in Cuba, operates like a gigantic automatic computing machine. In the absence of any central guidance, the production and consumption of thousands of various goods and services, the introduction of new technologies, the contraction or even liquidation of old industries, and the creation of new ones—all are regulated by the proverbial invisible hand that operates, as Karl Marx would have said, “behind the consciousness of men.” This machine is responsible for the unprecedented prosperity of the Western world, but it functions anything but smoothly: it often, for example, brings about unemployment and generates pollution. Most damaging of all, it tolerates an unequal distribution of income and, as a result of this, an even more unequal distribution of political power. Under the impact of a radical social upheaval, such as the Cuban revolution, the functioning of this crude but nevertheless delicate regulating mechanism simply comes to a stop.

In his book Guerrillas in Power, the Cuban Revolution,³ which is devoted primarily to the political and ideological aspects of the Cuban revolution, the European journalist K. S. Karol describes very well the high expectations raised in Cuba by the arrival of experts from the older socialist countries, particularly from Poland and Czechoslovakia, who came to instruct the victorious guerrilleros in the principles of socialist economic planning. Che Guevara was skeptical and he turned out to be right. The time has not yet come when the giant computing machines of the Central Planning Board, supplied with all the necessary information by the Central Statistical Office, can take over from where the mechanism of the market system has left off.

Large-scale economic planning, so long as it has not yet become an applied science, remains, to a large extent, an art that cannot be taught but rather must be learned through painful practical experience. In the Cuban case the difficulties are aggravated by the loss, through officially permitted emigration to the United States, of many thousands of skilled workers, foremen, managers, and engineers.

A typical pitfall of beginning socialist planners is a fascination with technological innovation combined with supreme disdain for cost-accounting and all other kinds of economic calculations. This fault has often been described as a bias in favor of technological as against economic considerations. From the point of view of modern economic theory such a distinction is fundamentally misleading.

The price of any particular product reflects in a concentrated manner—as the round curved mirror hanging over the mantlepiece in an old-fashioned parlor reflects in miniature the entire room—the structural, i.e., technological, characteristics of the entire economy of which that product is but a small component part. The market price of a ton of steel or of a kilowatt-hour of electric energy communicates to the buyer of these products how the available supply of various primary resources and the production methods used in all the different branches of the particular economy affect the physical availability of one ton of steel or, respectively, of one kilowatt-hour of electric energy. In order to make possible the computation of the “correct” accounting prices of steel and electric energy in an ideal centrally planned economy, the central technological data bank would have to provide the central planning office with tapes carrying a detailed quantitative description of the technical “cooking recipe” of each and every sector of the national economy that contributes directly or indirectly to the production of these goods.

In choosing between two or more possible methods of production, one, for example, requiring more steel and the other more electric power, the planner must take into account the prices of these as well as those of all the other inputs. In insisting on this we really are saying that the acceptance or rejection of a technological innovation in one particular industry cannot be rationally decided upon without knowledge of the technologies, that is of the methods of production, that are or could be used in all the other industries.

The manager of the dairy farm that I visited near Havana, who decided to air-condition the cowbarns because he found that cool cows yield more milk, might have made an economically and, consequently, also a technically unjustifiable decision: the large amount of electric power absorbed by the air-conditioning equipment might have been better used to produce fertilizer if it were known that a still greater increase in milk production could have been attained by providing the cows with more or better feed instead of air-conditioned living quarters. Had the manager of the farm, or the central planning board—if it were responsible for this decision—known the correctly computed costs of air-conditioning and the true price of feed, a correct choice between the two methods of increasing the milk supply would have been clear. I should add that this particular dairy farm did not keep cost accounts of any kind.

Whether true prices are determined by the operation of the so-called free market forces or computed on electronic machines makes no difference from this point of view, provided they reflect with reasonable accuracy the actual technological capabilities of the system as a whole. Prices that do not change when the structure of the economy changes are bound to give a distorted picture of that economy’s technological possibilities. This is the reason why Soviet Russia, Hungary, and other socialist countries undertake from time to time drastic revisions of their otherwise rather rigid price list—revisions usually referred to as price reforms.

In promulgating many of the spectacular technological changes and economic shifts introduced in recent years, the Cuban planners have based their decisions on distorted prices or, to judge by reports of such experienced observers as René Dumont, they have more probably arrived at them without the benefit of price or cost computations of any kind.

There could be hardly any doubt that the Cuban economists are fully aware of these problems and that they do all they can to replace what might be called impulsive planning by rational economic calculations. The choice of correct prices is facilitated in the Cuban case by the fact that, as a small, primarily agricultural economy depending largely on a single crop (sugar), it exports a very large proportion of its total output, and imports most of the domestically used tools, raw materials, machinery, and even food. The correct accounting prices for these goods are, of course, those quoted on the world market or agreed upon in the special purchase and delivery contracts with foreign buyers or suppliers.

After some years of additional experience Cuban planners can be expected to learn to use conventional planning routines with effectiveness comparable to that of their colleagues in older socialist countries. It will take much longer to put into practice the sophisticated mathematical techniques proposed by both socialist and capitalist theorists. As things stand now, many economic decisions involving the expenditure of hundreds of thousands of dollars are still being made without any systematic justification.

As I said before, bad planning is only one of the factors contributing to the economic difficulties in which this socialist island finds itself; the other—possibly the more important—is the low productivity of labor. This seems to be lower now than it was before the revolution. With the same equipment and under otherwise identical physical conditions the same worker, or the same group of workers, seems to produce in all branches of industry and agriculture smaller amounts of goods. or goods of lower quality, or both, than would have been produced before the revolution.

The so-called moral incentives on which so much emphasis is placed now seem ineffective as a means of inducing laborers, white-collar workers, managerial and supervisory personnel to perform their respective jobs as well as they did before the revolution. The material threat of joblessness and hunger, combined with the often inequitable but nevertheless tangible and potent material rewards of higher wages, salaries, and profits, unfortunately works incomparably better. Direct statistical evidence on this subject is, for obvious reasons, difficult to come by. It can be found mainly in the writings of such authors as Carmelo Mesa-Lega⁴ who are critical of the new regime.

Neither, however, do the regime’s proponents present any convincing direct quantitative evidence to the contrary; as a matter of fact, none of them really attempts to do so. Eyewitness accounts by experts such as René Dumont⁵ or Edward Boorstein, or traveling observers like Jose Yglesias⁶ and Elizabeth Sutherland,⁷ to mention only a few of very many, present a picture of sugar cane plantations and factories, orchards and building sites, filled with the sound and fury of enthusiastic exertion, heroic self-sacrifice, and honest exhaustion, a description which does not evoke the image of a well-organized and effective labor process. And then, of course, there are the over-all figures showing a low and falling yield of agricultural products and the shrinking output in many industries.

Persistent, albeit unsuccessful, experimentation with mechanical cane cutters seems to have been prompted by the belief that the low efficiency of labor could be compensated for by large-scale use of sophisticated automatic equipment. For reasons that I have presented above, such hope is hardly justified. Careless handling and poor maintenance of machinery, buildings, and all other kinds of fixed capital goods is one of the surest signs of an insufficiently motivated labor force. So long as moral incentives continue to work as badly as they apparently have up to now, large-scale introduction of costly new equipment might aggravate the economic difficulties of Cuba instead of alleviating them.

The struggle between the advocates of material incentives and the proponents of so-called moral ones has marked the ideological development of the Cuban revolution throughout its course, as we can learn from the books of Dumont and Karol, among others. In the early years this struggle went on in the open, then it became less visible, but still continued. As late as 1965 the wage of the lowest agricultural worker was 63.80 pesos per month, while the salary of a top-level executive or technician was 938.05 pesos per month. As shortages led to more and more stringent rationing of most consumer goods the differences in monetary earnings became less and less meaningful.

With increasing emphasis on the creation of a truly socialist society and with the progress of a powerful educational effort aimed at transforming the old narrow individualistic attitude into a community-oriented equalitarian one, the doctrine of moral incentives, as contrasted with material incentives, gained the upper hand. The trial and condemnation of Anibal Escalante and his “micro-faction of rightist deviationists” in 1968 marked the decision to accept the elimination of material incentives and replace them by incentives of a purely moral kind—the immediate objective of social and economic policies.

René Dumont, a French agronomist who became an influential adviser of the Cuban government in the early stages of the revolution—and is now its severe and occasionally acrimonious critic—describes the transition from conventional agrarian reform to collectivized agriculture in his volume Cuba: Socialism and Development. K. S. Karol, in the more detached manner of a friendly journalist, reports vividly and in great detail on the external and internal political developments that accompanied the transition from the original “socialist” to the present “communist” phase of the revolution. Che Guevara’s role in this transition and his efforts to define the “New Man” in Cuba are treated with sympathy and great personal understanding.

The New Man is now defined by the Cubans as a member of an equalitarian society who is expected to exert himself for the benefit of the entire community to the utmost limits of his physical and mental capabilities. While ultimately he is supposed to do this out of deep inner conviction, unmindful of any personal advantages or rewards, at the present time much emphasis is laid on public encouragement and recognition of creditable efforts. There is also public celebration of the outstanding individual or group performance. A negligent attitude, absenteeism, and poor work elicit public exposure and criticism from officials and fellow workers. Moral incentives, then, depend to a great extent on the reactions of the group one belongs to.

All available evidence, of which I spoke before, indicates that in Cuba as in other socialist countries such moral incentives failed in their effectiveness to measure up to more conventional individualistic self-interest. Moreover, material self-interest continues to persist, and, in cases of conflict, to weaken and distort the hoped-for effect of moral motivation.

Below the surface of the new morality and the idealistic attitude, pursuit of private gain goes on. The outward show of great and even supreme efforts in the interest of the public good is combined with apathy and downright sloppy performance in those areas and in the type of work that, by its very nature, cannot be easily assessed from the outside. In his remarkable speech of last July 26 Fidel declares, again and again, that while much attention is being paid to the quantity of the product, its quality tends to deteriorate to such an extent that it becomes practically useless.

The explanation of this phenomenon, again common to all socialist countries, is of course that a worker’s peers (on whose acclaim or approbation a man or woman moved by moral incentives primarily depends) can more easily observe the quantity of the output than judge its quality. Poor maintenance of equipment and the shortage of “small work tools and measuring instruments,” which Fidel laments, must also be explained in the same way. Most readers of these lines will remember occasions when the taxicab they rode in seemed about to fall apart: the driver, when queried, explained that neither he nor any of the other cabbies who drive the car for the company is interested in its proper care and upkeep. How different the attitude, and consequently the appearance of the vehicle, when the cab he drives happens to be his own.

In a system in which the motive of profit or material gain has been effectively excluded, the only workable alternative for maintenance of efficient performance is internal dedication that functions independently even of the popular approval on which the moral incentives, as introduced now in Cuba, so heavily depend. There can be no doubt that on the highest level of Cuban political leadership and economic management, as well as on other levels, including the lower ones of educational, scientific, medical, and artistic activities, true inner dedication to the interests of the community does, in fact, prevail. In most instances, moreover, it is combined with a deeply ingrained “instinct of workmanship.” The Cuban programs of health, education, and social welfare seem major accomplishments, especially in view of the limited resources available for investment in them.

However, at every other level of productive activity, on which the overall performance of any modern economy so critically depends, the abolition of the old profit system has not eliminated the driving forces of individualistic interest. The new institutional apparatus of education, propaganda, public honors, and popular disgrace has only directed these forces in different, often invisible, channels. The effect of such displacement is a marked lowering of the total productivity of labor.

All this, combined with poor over-all planning, leads to the rapid deterioration of the economic performance so dramatically described by Fidel himself. Other socialist countries, while maintaining centralized planning and continuing to stress social and moral aims, have at the same time developed elaborate systems of economic incentives. Although much less effective than ours, particularly on the lower and middle management levels, they nevertheless work reasonably well. It clearly helps to maintain labor discipline and production on a higher level than the one to which they would have sunk under the system of moral incentives practiced in Cuba now and in Russia immediately after the revolution.

Does all this mean that the attempt to build a new society in which equality will be given precedence over prosperity and public over private interest must fail? Not at all. Socialist and particularly Marxist thought was traditionally based on the assumption that moral incentives—as compared to material incentives—can better serve not only the higher aspirations but also the material, economic needs of the society. All available evidence—and Cuba is the most recent of many tests—demonstrates that this is not the case. In prompting an average laborer, sales clerk, manager, or technician to exert himself day in and day out in steady purposeful, i.e., productive, work nothing seems as effective as a steady flow of material benefits closely commensurate with the results of his individual efforts.

This is not to imply however that human nature cannot change in the long run, especially if the economy reaches a point where it can comfortably supply material needs and work itself becomes less arduous. But in the short run Cuba is facing a dilemma, and in questions related to human nature the short run means not one, or two, but several generations. (The socialist regime in Russia celebrated its fiftieth anniversary two years ago.)

Ninety miles from Havana, but worlds away politically, the affluent American society is facing the other end of the same dilemma. There is increasing concern with the social and economic inequalities and environmental depredation that the single-minded pursuit of profits tends to generate; in addition to a more and more insistent demand for greater satisfaction of the cultural needs that free private enterprise tends to denigrate. The classical response consists in the erection of an elaborate structure of rules, subsidies, and special taxes, that, like an intricate system of dams and canals, is designed to harness the crude power of the private profit motive to serve an ever greater variety of public needs.

As the conservative defenders of the free-enterprise society correctly observe, each additional dam and each auxiliary canal cause a net loss of energy. Sometime, and that time might be not very far away, the driving power of material incentives will be incapable of sustaining the fast-increasing work-load. What are conventionally called public, as contrasted to individual, needs are essentially individual needs that cannot be served by private enterprise operating through competitive markets. Their satisfaction depends on the government or on voluntary action by individuals or groups. Moral incentives with all their disabilities will have to be relied upon more and more. Economic efficiency will suffer, productivity will fall; but having traded in—to use the fashionable jargon—some of its material satisfaction for greater equality and a better quality of life the society in the balance will be better off.

Could it be that the south wind blowing across the Florida Straits toward his Key West retreat is responsible for the unexpected conversion of the titular defender of private enterprise in the US to the belief in the principle of moral incentives? The President’s recent appeal for voluntary restraint—addressed, of all things, to the General Motors Corporation—is truly touching, and it is likely to prove an even less effective means of fighting stubborn inflation than Castro’s reliance on socialist conscience as the immediate substitute for material incentives.

Castro is facing a difficult choice, one somewhat analogous to the one Lenin was confronting on the eve of the inauguration of the so-called New Economic Policies. To continue on the present course means risking further economic deterioration, or at least stagnation, and with it rising discontent, which is bound to change the mood of the revolution. Reintroduction of material incentives would also change that mood and it would require a great deal of public explanation. One hopes that whatever road is chosen will bring the country out of its present impasse. A collapse of the aspirations of the revolution would be a great calamity, not only for the Cuban people, but also for the rest of the world.