The Cuban Economy After Castro

On February 19, 2007, in the pages of the newspaper of the Cuban Communist Party, Fidel Castro Ruz announced that he would “neither aspire to nor accept” the Cuban Presidency.

The post-Fidel era has begun, and it may mean dramatic changes for the Cuban economy and system of government. Look to the actions of the Cuban National Assembly on February 24, when it will appoint the head of the Council of State—constitutionally the President of Cuba. The National Assembly is widely expected to name Raúl Castro, Fidel’s younger brother and the acting president, as the new Cuban president. But it is also possible that the assembly may bypass Raúl (who will turn 77 this year) in favor of Carlos Lage, 56, the current Vice President.

Regardless of the outcome, the new Cuban leader will have to deal with a variety of economic problems. Despite a growing economy, there are signs that the public that has grown increasingly restless over issues such as stagnant wages, food scarcity, and a declining standard of living. In a poll of Cuban citizens conducted by the International Republican Institute (IRI) in late 2007, more than three-quarters of the respondents had no faith in the ability of the current government to resolve Cuba’s most pressing economic problems.

Dynastic succession in Communist systems is tricky—only North Korea seems to have managed it. In China and Vietnam, gradual economic liberalization occurred alongside state-ownership and a monopoly on political power. In Eastern Europe, despite the initial efforts of some countries (Poland, Hungary, Bulgaria, Slovakia, Romania, Ukraine), incremental economic reform was unsustainable: the state-owned enterprises were simply too big and too inefficient to be ignored, as they were in China. In economic structure, Cuba resembles these smaller Eastern European countries at the outset of their transitions more than it does China in the early 1980s.

As for democratic reforms, the political opposition in Cuba is too fragmented, and has not coalesced around a single dissident voice. But the IRI poll also showed overwhelming support not only for free-market reforms but for multiparty elections. Although there may be no immediate crowds in the Plaza de Revolución demanding democratic rule, continuing economic hardships may push events in that direction.

Castro concluded his remarks by reminding the public of the conflict with the United States: “The path will always be difficult and require everyone’s intelligent effort. . . The adversary to be defeated is extremely strong, but we have been able to keep it at bay for half a century.” The poisonous relationship between the United States and Cuba precludes the United States from providing any guidance or assistance in matters of Cuban economic reform. Of course, any hope for dramatic changes in the U.S.-Cuba relationship hinges on how Cuba and the United States choose to resolve the problem of expropriation claims—which total approximately 25% of Cuba’s GDP. Washington’s options in Cuba are also severely limited by the current political-economic mood in Latin America, which is decidedly anti-reform.