The Economy After A Half Century

— Frank Thompson

THE OBJECT HERE is to evaluate the current state of the Cuban economy, but for this no insightful perspective is possible without considering its performance historically, especially over the last sixty years and most especially over the half century since the triumph of the Revolution.

A fundamental determination for such an evaluation is what metrics of economic performance to use. The usual primary focus for such studies is the path of real per capita Gross Domestic Product (GDP), a statistic with profound flaws as a general measure of economic welfare. But more adequate measures are available, most importantly (since 1990) the Human Development Index (HDI) regularly compiled by the United Nations Development Program.

Both Cuban per capita GDP and HDI measures will be considered here (as well as Cuban performance by these standards in comparison with some other Caribbean countries and Latin America as a whole) as well as even broader criteria of social-political-economic achievement.

For per capita GDP figures I rely primarily on the most recent, most comprehensive, and arguably most plausible compilations, those of Angus Maddison for the OECD. (Maddison, A., The world economy: Historical statistics, Paris: Organization for Economic Cooperation and Development (OECD), 2003, and, 2009.)

Tracking Gross Domestic Product

On the basis of the best available estimates of per capita GDP, the Cuban economy has not performed particularly well during the past half century, either in real terms or in comparison with most other economies, most saliently other Latin American economies.

This generalization must be disaggregated. The path of Cuban per capita GDP has not been smooth. But the overall performance is unmistakably unprepossessing.

One way to make this generalization vivid is to consider the following. In 1950, Cuba ranked seventh in per capita GDP in (the 47 countries of) Latin America (and Caribbean). The order was Venezuela, Argentina, Uruguay, Chile, Trinidad and Tobago, Guatemala, and (nearly tied for sixth place) Cuba. If a nation is represented by its per capita GDP ranking, Cuba was thus highly ranked in Latin America (although, even then, as we will momentarily consider, Cuban per capita GDP ranked lower than the Latin American per capita GDP — there were many more Argentines than Cubans).

A half century later, in 2001, Cuba was the third poorest country in Latin America as measured by per capita GDP. Only Nicaragua and poorest-of-the-poor Haiti ranked lower. In two generations, Cuba fell from ranking as one of the more prosperous countries in Latin America to being one of the poorest. More recently (the latest figures are for 2006) the Cuban economy has grown respectably, but it is too soon to pronounce a trend.

Of course, the here-striking relative (and in the early 1990s catastrophically absolute) decline in Cuban GDP per capita did not occur uniformly. It is necessary to consider separate periods.

Table 1. Average Growth Rates of Cuban Per Capita GDP (%)

   1950-2006:    0.80

   1950-1958:    1.61

   1959-2006:    0.92

   1959-1970:   -0.62
   1971-1989:    2.04

   1990-2006:    0.49

   1990-1993: -11.09

   1994-2006:    4.22

Source: Annualized rates calculated by the author from Maddison (2009).

Cuba's annualized average growth rate of GDP per capita during the whole 1950-2006 period is a meager 0.80%. During the same period, Latin America's average per capita GDP grew at a rate of 1.67%. That is, during this period, Latin American average per capita GDP more than doubled (to be more precise, increased 161%), whereas Cuban per capita GDP grew only 58%.

“Institutionalization” and Recovery

The first decade after the fall of Batista was tumultuous, not least economically. After a slow decline in which most of the unproductive and productive upper and middle class was taking flight from their homeland, there was a brief spectacular recovery followed by an even more spectacular bust, culminating in the catastrophic attempt to produce 10 million tons of sugar in 1970.

The growth rate of Cuban per capita GDP during this period averaged -.62%, whereas the regional average slowed to 2.35%. Cuba fell further behind.

By 1971, the revolutionary regime solidified into “institutionalization” — the first congress of the Partido Comunista de Cuba (PCC) took place only in 1975, with the “gray decade” of the 1970s followed by the “good 1980s.” Cuban per capita GDP growth was slow but steady at an annualized 2.04% rate.

During the same 1971-1989 period, Latin American per capita GDP growth averaged only 1.15%, but this process was by no means steady. Throughout the entire period, Cuba gained some relative ground. This is unsurprising, because Cuba throughout this period was receiving something like a $5 billion annual subsidy from the Soviet Union — about $500 per capita annually — in the form of a relative price for Cuban sugar bartered for Soviet oil that far exceeded prevailing relative world market prices.

Then, in 1990, Cuba was plunged into by far its worst economic crisis since 1959. With the collapse of the Soviet system, Cuba went from being the per capita most highly externally subsidized national economy in the world to near autarchy.

The “special period in time of peace” began. By 1993, per capita GDP had fallen by more than one-third, and in the slow recovery since then only regained the ground lost since the 1985 peak in 2006.

The declared “special period” is now past, though no official announcement of an end has been issued. The Cuban economy has registered entirely respectable growth rates since the 1993 bottom.

Although some attempt to do so, to make predictions about the future path of the Cuban economy is to confront radical uncertainty. Of course much depends on how economic relations between Cuba and the United States transform.

The current general uncertainty about the path of the global economy makes prediction even more problematic. I will not venture such predictions here.

Even without appealing to a comprehensive statistically elaborated growth-theoretical account, some things about the Cuban case are clear. It is often suggested that the poor economic performance of the Cuban economy has one cause far more momentous in its potency than all others: the U.S. economic embargo.

Looking at Human Development

First, however, on any plausible account of the negative economic effects of the embargo, the 15 years of massive Soviet subsidies should have had a more than compensating positive effect during that period.

Second, Cuba and the United States have been economically isolated from each other but, despite the strenuous efforts of the U.S. government, Cuba has not been isolated from most of the rest of the globe. The main causes of Cuba’s poverty must surely be domestic.

It is now generally understood that per capita income is a very imperfect measure of human development. And with respect to the two other aspects of development that are combined with real income to construct the Human Development Index (HDI), Cuba has performed far better than any other poor country.

Most recently Cuba is listed as 51st in the international HDI ranking despite being ranked 94th in per capita income. One can say that Cuba somehow uses its meager GDP per capita far more effectively than any other country in meeting the health and educational needs of its population.

But taking the HDI as a more adequate measure of development than mere per capita GDP at best allows one to argue that Cuba’s position has not slipped relative to the rest of Latin America. In the first HDI ranking in 1990, Cuba ranked seventh among the nations of Latin America and the Caribbean. It remains in the seventh position in the most recent report.

The HDI is itself a pathetically incomplete conception of human development. First, the components of each national index are national averages of health, education and income outcomes, whereas real-life human development involves aspects of distribution beyond sheer averages.

Detailed, reliable statistical information about the distribution of health, education and income in Cuba is simply not available. But there is ample evidence, not merely anecdotal, that the distribution of all three has become significantly more unequal in the past 20 years. Most disturbingly, an important determinant of this increasing inequality is unmistakably racial.

Rights and Justice

Beyond the HDI, there are broader conceptions of development that not only consider distributions of health, education and income, but also incorporate the extent and distribution of civil rights and liberties and of opportunities to occupy and benefit from differential positions of authority and remuneration.

Essential inspiration for these inquiries comes from the incomparably important work of John Rawls. (See Rawls, Justice as Fairness: A Restatement, Cambridge, MA: Harvard, 2001.) His work conclusively argues that, at least under conditions of merely moderate material scarcity — conditions that Cuba if not Haiti arguably meets — justice requires above all else extensive and equal civil liberties.

Cuba egregiously and tragically fails to honor this first principle of justice. The one permitted political party in Cuba tolerates no formally organized factions. All public media, broadcast and print, are explicitly or indirectly controlled by the PCC, as are all educational and public health services, the security forces, and the judiciary.

Freedom of speech, association and public assembly are tightly restricted. Any Cuban who attempted to publicize Rosa Luxemburg’s dictum, “Freedom always means freedom for the dissenters,” would risk severe sanctions.

This topic would not be so interesting if Cuba were not so astonishing. Columbus had a point when he described Cuba as “the most beautiful land human eyes have ever seen.” Today the Cuban Revolution has offered unique inspiration to millions of visionaries fighting oppression. But Cuba has also become a symbol of how visions can be delusions. There is a duty — sometimes difficult and honored in the breach — to tell the truth, and this duty applies as well to those on the left.

ATC 141, July/August 2009

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