Cuba: New Corporate Utopia?

Cuban touristsOn the list of America’s most-hated leaders, Fidel Castro gets the award for longevity. Outlasting ten U.S. presidents, from Eisenhower through George W. Bush, Castro has managed to maintain his high ranking for over five decades. Though the 84-year-old ex-president of Cuba is unlikely to drop off the list during his lifetime, the persistent image of Cuba as communist dystopia may be on the verge of changing–that is, if the dreams of American big business come true.

The emerging vision of Cuba as a corporate utopia has become especially prominent since September 15, the day Fidel’s brother and current president, Raul Castro, announced that Cuba will cut 500,000 state jobs over the next year as part of a larger program of economic reform. Currently, the state employs 95 percent of Cuba’s 5.1 million workers. The new policy is designed to privatize Cuba’s workforce and encourage the growth of small business. Approximately half the laid-off workers, or 250,000 people, will be issued licenses for self-employment in a wide range of sectors, from transportation and construction to agriculture and retail. Until now, the private sector has been restricted to a narrow range of activities, including barbershops, beauty salons, and restaurants, all of which the state keeps under strict surveillance. In the wake of the global economic downturn and the disastrous hurricanes of 2008, underground businesses and remittances from relatives in the United States have kept many Cubans afloat.

This move toward privatization is not altogether new. Since 1959, Cuba has gone through periodic cycles of economic reform and consolidation. After the dissolution of the Soviet Union, which drastically reduced Cuba’s subsidy-dependent budget, the government declared the Periodo Especial and relaxed restrictions on private businesses only to tighten them again within a decade. Since he assumed office in 2006, Raul Castro has promised to reform Cuba’s centralized economy. “At times, he has sounded more like Margaret Thatcher than Karl Marx, stressing the need for Cubans to improve their work ethic, efficiency, and productivity,” notes Cuba expert Julia Sweig. Some economic reforms, especially in the agricultural sector, have already been implemented, allowing small farmers to sell directly to the public and keep their profits. Critics have argued that past reforms have been insufficient and ultimately insignificant. The latest reform has not met the same skepticism. Whether or not they support the plan, most analysts agree that it represents the biggest overhaul of Cuba’s economy since the revolution.

Tea Partiers Tout Fidel

The news of this “seismic shift” in Cuba’s economy has made a particular splash in the United States, with experts and pundits on all sides weighing in on the issue. Of course, U.S.-Cuba relations have long been an important element in American domestic politics. Since Castro assumed power in 1959, Cuban exiles, anti-communists, and conservatives of all stripes have made opposition to the regime a hot-button election issue. In recent years, however, fierce opponents of the Castro regime have lost ground. In 2008, Obama won the state of Florida, despite his promise to loosen travel and trade restrictions between the United States and its neighbor 90 miles south of Key West. Nationally, 10 percent more Cuban-Americans voted Democratic in 2008 than they did in 2004.

The newest economic reform plan has put Cuba back on the table during this election season. But the old script has changed, and with Cuba’s economy, the political alliances appear to be shifting. Politics creates strange bedfellows, but this adage doesn’t quite capture the irony of conservatives playing footsie under the sheets with none other than Fidel, el comandante himself.

The recent torrent of media coverage began with the scoop, made by Jeffrey Goldberg in The Atlantic, that Fidel himself had lost faith in communism. On September 7, Goldberg, the first U.S. journalist to interview Castro since the onset of his illness, blogged about his long leisurely lunch with Fidel, during which el comandante reportedly let slip that, “The Cuban model doesn’t even work for us anymore.” Castro refuted the story, claiming that Goldberg had misinterpreted him, and that his statement meant just the opposite–that it is American-style capitalism, and not Cuban-style socialism, that has failed. But the media pundits were certainly not going to accept this less juicy interpretation of Castro’s remarks. Collectively, the media has made a point of underscoring the historic nature of the possibility that Fidel is distancing himself from communism.

Conservative talking heads and media hosts have been especially keen to use this story as part of their larger effort to discredit the Democrats’ “big-government” policies and influence the November mid-term elections. On September 15, the late-night Fox News show “Red Eye,” hosted by former Maxim editor Greg Gutfeld, did a segment on Cuba in which he and his panelists made no secret of their contempt for Fidel. In the late-night bar, jackass spirit of the show, they presented the former dictator not as a dangerous demagogue, but instead as an “old coot,” a characterization meant to underscore just how pathetic Fidel and his communist ideology have become. “The Cuban plot,” declared Gutfeld, “was a Cuban flop.”

Of course, this was no surprise to panelist and talk radio host, Monica Crowley, who said, “Anyone with half a brain knows that socialism doesn’t work.” But while Cuba is finally coming to terms with that truth, the Democrats, suggested Crowley, are still not getting it. “But I’m hoping that Fidel picks up that red phone and calls Obama and tells him that,” she said. In the oddest of twists, Crowley transformed Fidel from a pathetic old Marxist to a potential spokesman for the Republican/Tea Party position. By the end of the segment, comedian Tom Van Horn was portraying Cuba as a beacon of hope for the free market while, in full Glenn Beck effect, painting the United States as a country on an existentially dangerous path toward the dreaded “s” word: “They’re gonna go to capitalism and we’re slowly gonna go to socialism.”

Cuba as America’s Playground

Using Cuba as a counter-example of the Democrats’ dangerous socialism is just the most partisan and disingenuous manifestation of a broader and more genuine excitement about what Cuba might look like if and when the country privatizes its economy. This almost childlike anticipation inevitably harkens back to the days before the revolution when Cuba was a proverbial playground for American businessmen. A capitalist Mecca free of most regulations and taxes, Havana was a haven for profit-makers of all sorts. In addition to the famed casinos and nightclubs owned by Meyer Lansky and his U.S. mob affiliates, U.S. business interests had a stake in virtually ever sector of the Cuban economy. In 1956, according to a Department of Commerce survey, U.S. businesses owned 90 percent of Cuba’s telephone and electronic services, 50 percent of the country’s railroads, and 40 percent of the sugar industry. On the eve of the revolution in 1959, private U.S. investment in Cuba totaled $956 million, more than any other Latin American country except for Venezuela.

Ever since Castro nationalized the Cuban economy in the early 1960s, Americans of all political stripes have waxed nostalgic about this era and have fantasized about its return. Havana’s famous nightclub, the Tropicana, was first resurrected on the television screen in I Love Lucy. In 2004, the Atlantic City Tropicana opened “The Quarter,” modeled on the architecture, atmosphere, and food of Old Havana in the 1940s. Jamestown, New York even has a full-scale replica of the Tropicana.

The desire for a return to unfettered capitalism in Cuba extends far beyond the world of casino kitsch, and, politically speaking, it includes more than conservatives. “Free trade” proponents from across the political spectrum are excited about the prospect of Cuba’s economic reforms. A Western diplomat proclaimed in The Economist, “One day we might well look back on this as the perestroika moment,” alluding to the Gorbachev-era restructuring of the Soviet economy that made it possible for foreign investors to do business in the Soviet Union.

For close to five decades, the U.S.-imposed embargo has prevented American companies from doing business in Cuba. Some conservative groups, like the Heritage Foundation, have maintained a hard line on this policy. However, opposition to the embargo has been on the rise for over a decade. Polls show that a majority of Americans support the loosening of diplomatic tensions with Cuba. The case for ending the embargo has been strengthened and given new urgency by the latest developments in Cuba. Washington Post columnist George Will urged Obama to reconsider the embargo in light of Castro’s own doubts about communism. A recent editorial in the L.A. Times put it more directly, arguing that Congress should end the longstanding trade embargo and “get out of the way of U.S. investment in Cuba before American firms lose out to those in Europe, Brazil and elsewhere.” Or, as one panelist put it on “Red Eye,” “Let’s end this silly, silly embargo and start shoving our American crap down their throats.”

Although Cuban exiles have historically supported the embargo, many are similarly looking forward to the possibility of trade and investment prospects in Cuba. Along these lines, Tomás Estrada Palma, the grandson of the first president of Cuba by the same name, envisions Cuba in the 21st century as the English philosopher John Locke envisioned America in the 17th–a land of rich, untapped resources just waiting to be made productive. “Much of Cuba is unused,” Estrada-Palma wrote recently on his blog. Like other Cuban exiles, his family had to cede land given to them by Queen Isabella to the state. Estrada-Palma is nothing short of exuberant about Cuba’s economic future. He anticipates that Cuba will be “the hottest tourist Mecca and investment location on the planet!”

According to this vision, returning exiles will be an important part of Cuba’s revved-up economic engine. If returning entrepreneurs like him get tax relief, argues Estrada-Palma, “Investment will roar into Cuba lifting everyone’s existence.” Estrada-Palma would have Cuba eliminate all taxes on income and capital investments. Elite conservatives have been touting this kind of trickle-down economics for decades, and the Tea Party has been campaigning on a similar theme in the name of populism. Now, Cuba, of all places, is becoming a key site for the conservatives’ embattled vision of America.

Ignoring Labor and Other Human Rights

Economic analysts have been comparing Cuba’s proposed reforms to those of China and Vietnam. Cuba, this comparison suggests, will be the next Asian tiger. And as with China and Vietnam, the most informed observers do not expect economic reform in Cuba to coincide with political reform, at least not in the near future. Sweig, a strong supporter of opening ties with Cuba, has nonetheless warned Obama against expectations of democracy in a country that had little of it even before the revolution: “To think that an end to the embargo will speedily usher in an era of multiparty elections and market capitalism would be to set your administration up for failure,” wrote Sweig in an open letter to Obama in 2008. “Cuba is today and will remain for some time a one-party state with a controlled press and significant impediments to public freedoms.”

What about the economic security of the average Cuban worker? Currently, Cubans who work for the state earn an average monthly income of only $20, a paltry sum that has sufficed for so long only because the state provides free healthcare, education, and food subsidies. Over the long run, economic reform is expected to increase these wages. At the same time, however, the state will likely cut health, education, and food benefits, creating a significant gap between the rich and the poor. In fact, this is already happening. In recent years, as Cuba has experimented with market reform, studies have found a widening income gap between the country’s most wealthy and the poor. Since Castro reduced the food subsidy in 2009, Cuba’s poorest have faced serious hunger and malnutrition for the first time since the revolution.

Economic reform will not likely empower workers to advocate for their own economic rights and security. Currently, Cuban workers belong to the state labor union and are not allowed to form independent unions. International labor groups have long argued that this, and related policies limiting worker autonomy, constitute a transgression of international labor laws. Globalization advocates typically argue that liberal economic policies stand to benefit workers. However, as leaders in the movement for an independent labor movement in Cuba argue, unless labor has a real voice in the new Cuban economy, the economic reforms will probably not increase the economic wellbeing of ordinary workers.

The latest announcement of economic reform comes more than a decade after Cuba opened its doors to foreign direct investment from capitalist countries. Since the mid-1990s, Cuba has succeeded in attracting international investors and has become a hotspot for European and Latin American business in particular. A 2004 study of foreign direct investment in Cuba showed Spain, Canada, Chile, France, and the United Kingdom at the top of the list, with tourism, real estate, mining, and processed foods as the key sectors of investment. Little known to the American public is the fact that the U.S. agricultural industry is also already doing business with Cuba, thanks to amendments to the U.S. embargo in 2000. According to the U.S.-Cuba Trade and Economic Council, between 2001 and 2009, U.S. agricultural exports to Cuba totaled more than $2.8 million and are expected to rise in the near future.

Instead of reducing labor abuses, foreign direct investment actually exacerbates them. Under the current laws, the state union, not the foreign company, hires and fires all workers. In practice, these laws give preferential treatment to individuals that are loyal to the state and, especially in the tourist industry, to light-skinned individuals. Once hired, anyone who works for a foreign-owned company is paid through the state, which garnishes wages and takes a cut from every dollar or euro converted into pesos. Cuban workers see only four cents for every dollar invested by foreign companies. If a worker has a grievance against a foreign company, her only recourse is the very state union that suppresses her right to organize.

The current reform plan has no provisions to alter this system. According to a recent Human Rights Watch report, the current restrictions on labor rights constitute “Cuba’s virtual guarantee that no investor will face any independent union organizing in the workplace.” Far from deterring foreign companies, these measures “were created to attract foreign investors.”

What Cubans Actually Want

Opponents of the Castro regime in the United States have long spoken on behalf of the Cuban people. Typically, their arguments tell us much more about what they want than what Cubans actually want. Many Cubans, especially those who have been running under-the-table businesses, are happy about the latest reforms and are looking forward to life in the private sector. A recently laid-off computer scientist named Silvia has decided to take a chance at her own business renting clothes for birthday parties and is moderately optimistic: “I have never thought about working for myself and really I don’t expect to become a millionaire, just to live better,” she said.

At the same time, many others are skeptical. “What do I gain by asking for a business license if the state then won’t sell me lumber?” asks Ricardo Aldana. Polls confirm broad dissatisfaction with the reforms that have already been implemented and marked ambivalence about the likely impact of the new economic policies. In a recent survey conducted by Freedom House, 40 percent of respondents claimed their economic condition has gotten worse in the last two years, citing low salaries and the high cost of living as the largest problems. The same survey found that many Cubans fear the crime, violence, and insecurity that they associate with capitalist societies. Freedom House analysts concluded that, “While Cubans have a negative view of life in their country, they tend to fear that change may make matters worse. Given the option of continuing to live in their current circumstances or returning to the Periodo Especial (or worse), many Cubans seem inclined to accept the status quo.” These and other polls suggest that Cubans are at best lukewarm about their country’s turn to a capitalist system.

Cuba as Mirror

Jokes about Fox News aside, Cuba’s capitalist turn has special importance in the context of current political and economic trends here in the United States. Ever since Obama took office and the Democrats assumed control of Congress, conservatives have been painting apocalyptic pictures of the United States as a socialist state. If anything, the evidence suggests the opposite.

In the same week that Raul Castro made his announcement, Governor Chris Christie of New Jersey announced his plan to slash benefits and pensions for state workers, just the latest initiative in his larger effort to roll back the size of the state budget. In the current climate of fiscal austerity, governors across the country are similarly cutting back spending while refusing, in many cases, to raise taxes.

On the national level, the corporate agenda has dominated the move to extend the Bush tax cuts to the country’s wealthiest. As usual, supporters of the extension say this is in the interest of small business. But the same people have spoken out against President Obama’s incentive plan for small business—which would give a 100 percent tax credit for spending on equipment and physical improvements and renew an expired tax credit on research and development.

Cuba’s hasty privatization may well offer lessons to American policymakers, but not the ones that Tea Partiers would like to draw. Along these lines, Cuba expert Phil Peters writes, “Republicans should go to Cuba to find out what downsizing actually looks like.” It is too early to say whether Cuba’s latest economic reform is just another temporary experiment or will really stick this time. But for the first time in over five decades, Cuba is looking less like a relic of the Cold War past and more like the hyper-capitalized future of corporate fantasy.

Hannah Gurman is an assistant professor at New York University’s Gallatin School of Individualized Study and a contributor to Foreign Policy In Focus.