Cuban market reforms signal the death of communism

As the global economy slowly emerges from the rubble of the devastating 2008 financial crisis, developed and developing economies are beginning to review their macro-economic policies in a collective attempt to spur sustainable global economic growth and avert a similar crisis. The US has been largely to blame for initiating a crisis that caused global economies to collapse. It was a failure of unbridled capitalism and the malcontents of globalisation, which resulted in increased risk of correlation convergence (meaning the interconnectedness of global trade posed more systemic risk to the global economic system).

Diversification for those tasked with managing a portfolio of investments became less useful, as failure of one major economy had a domino effect on the rest. The lessons learned from the 2008 global economic collapse meant the G20 needed to cooperate more than before in order to ensure sustainable economic growth. The need to revisit individual macro-economic policies and economic models, in some instances, signals the seismic shifts in the collective mindset of world leaders and their approach to growth and prosperity.

The crisis may perhaps be blamed by some on the expansion of unbridled capitalism. It was largely a failure of strong regulatory oversight and the implementation of prudent macro-economic policies. Capitalism continues to be a system under which nations will continue to prosper. The fall of the Soviet Union and the Berlin Wall, as well the collapse of communism in Eastern Europe in 1989, meant that communism and socialism in their purity had no place in the world firmly embracing individualist pursuits of wealth and prosperity.

Cuba under Fidel Castro remained the last prominent “outpost” of communism. Countries such as China continue to define themselves as “communist nations” when in fact they fully embrace capitalism within an authoritarian political framework. China’s successes may be wrongly credited as successes of communism when it is the triumph of capitalism.

Raul Castro has made a startling admission that their economic model in Cuba has failed. Cuba has attempted to remain loyal to the communist ideals of the Cuban Revolution since the 1960s and it is now pursuing market reforms, which if successful, may afford ordinary Cubans their economic liberty. Castro has announced that the government will fire half a million public servants who are redundant, and promote opportunities for self-employment. Some say these market reforms may not yield significant positive results because it is not a wholesale transition to a free-market system. Nevertheless it is a step in the right direction after the collectivisation of the Cuban economy when Fidel Castro declared himself a Marxist-Leninist. Fidel had gone on a revolutionary offensive and confiscated small businesses, effectively subjecting the Cuban economy to protracted strangulation.

The US embargo imposed on Cuba in 1960, when Castro began to nationalise the properties of US citizens and corporations, also did not do the communist island much favour economically. The primary objective of this embargo was to isolate Cuba economically with the hope that it would lead to its total collapse and the democratisation of the island nation. The fall of the Soviet Union also exacerbated Cuba’s economic problems, as it lost its major trading partner. As early as 1996, the US Congress passed the Helms-Burton Act, which further restricted US citizens from doing business in or with Cuba. The US has been unrepentant in its quest to throttle Cuba’s economy. And it continues to enforce the embargo despite the UN passing another resolution early in 2010 condemning these economic sanctions.

The lesson that the US and its allies at the UN can learn from Cuba is that sanctions rarely work. They have failed for more than 50 years to transition Cuba towards democratic capitalism, and have failed to change the behaviour of other countries like Myanmar, Iran and North Korea. What sanctions did do was deepen the deprivation and misery of ordinary citizens. What has also become apparent is that sanctions are not generally imposed in the pursuit of equality, justice and freedom, but largely in the pursuit of economic self-interest.

George W Bush had previously opposed attempts by US Congress to impose trade sanctions against China because of their human-rights violations. China has jailed Nobel Peace Prize laureate Liu Xiaobo for campaigning for the democratisation of his native land. Despite the suppression of the civil liberties of the Chinese people, China remains the US’s key economic partner.

Cuba has been relying on handouts from Hugo Chavez of Venezuela. Whether Raul Castro’s market reforms will strain relations with Caracas is yet to be seen. Though Venezuela may have the resources to influence lesser fortunate Latin American countries, it should draw some instructive lessons from Cuba on the limits of blind totalitarianism within a global framework of economic progress. The ideological pursuit of nationalising private enterprise and denying citizens their economic and property rights is the best ingredient of a stillborn economy. Venezuela, which has pursued nationalisation under Chavez’s Bolivarian Revolution, does not have a sustainable economic model.

Cuba is now almost fiscally bankrupt and can no longer afford to carry millions of inefficient public servants. That the world economy is still emerging from the financial crisis leaves Cuba with limited options for its economy to stay afloat. Raul Castro was forced into a corner largely by economic circumstances and perhaps secondary by the realisation that Cuba’s economic model is not sustainable going into the future.

The impeding global economic realignment dictates on Cuba to revisit its economic model and make difficult choices between staying loyal to the communist ideals of the Cuban Revolution, which are disastrous, and the full adoption of the free-market system. It remains to be seen how Cuba will balance the transition to “managed” free-market system with its political regime in its quest to become a player in the transforming global economy. The conscious move towards strengthening economic relations between Cuba and China provides hope for the resuscitation of economic life on the communist island.

The political ideas of Karl Marx and Vladimir Lenin have effectively been relegated to the dustbin of history. Only pseudo-communists like Blade Nzimande would still imagine the transition of a particular state from democratic capitalism to an authoritarian and socialist system. Capitalism in whatever shape or form, managed, unbridled or otherwise, is what will define the course towards human prosperity and survival.