A Conversation on the Economics of Transition in Cuba

A Conversation on the Economics of Transition in Cuba, the second event of the Knight Foundation-funded project “Preparing Miami for Democratic Transition in Cuba,” took place Wednesday, May 14 at the Biltmore Hotel. The evening drew an audience of 50 who responded to presentations by Dr. Jan Švejnar, the James T. Shotwell Professor of Global Political Economy Director, Center on Global Economic Governance at Columbia University, and Dr. Rolando H. Castañeda of the Association for the Study of the Cuban Economy. The presentations concluded with a lively discussion.

The example of the Central and Eastern European countries that went through the process of successful economic transition following the collapse of European communism 25 years ago, very clearly demonstrates that political and economic transitions need to go hand in hand, if we want real change. Similarly, the belief of many Cuba observers that economic reforms, alone, can trigger substantive political transformations is unrealistic and ideologically biased, because political and economic processes are interconnected and highly interdependent in the moment of transition.

Some general observations:

The current efforts by the Cuban government to open the economic system to private entrepreneurship and attract foreign investors, while maintaining the island’s political status quo, – “the leading role in the society of the Communist Party combined with the military establishment - will inevitably lead Cuban reformers down a blind alley and anemic results. These changes will certainly not benefit the well-being and quality of life of the general Cuban population. Whether Raul Castro and his cronies like it or not, if the performance of its economy is to improve, Cuba must undergo systemic change of its political institutions. First and foremost must come a respect for the rule of law, and unalienable human rights, as defined by the international covenants. Without such protections, Cuba’s half-hearted reforms and attempts to “update” its current socio-economic system will only benefit special interest groups and feed large-scale corruption.

The international context within which the process of the Central and East European transitions played out 25 years ago will also play a key role in any transition within Cuba.

The relative success of the countries in my region, including the Czech Republic was facilitated by the fact that they had a defined starting point – a state-controlled socialist economy – as well as quite detailed parameters for the desired state to be achieved – the integrated economy planned for the European Union.

The liberation of Central and East Europe from its long decades of Babylonian captivity within the Soviet Empire, coincided with the move toward European integration. Participation in that process required the formulation of healthy macroeconomic and microeconomic policies, creation of new legal and financial systems, and liberalization of prices. In the case of the newly freed central and eastern European states, the transformation also required the opening of economies long closed to the world markets, the embracing of sweeping privatization, and the complete repudiation of a system of economic governance marked by monopolistic, highly inefficient enterprises run or controlled by the totalitarian state – a situation closely resembling that of today’s Cuba.

There are two major factors which, in my view, differentiate the Cuban situation from the East Central European case: First, the geopolitical location of Cuba. Cuba’s relative isolation as an island in the Caribbean insulates it from direct exposure to the kind of East-West rapprochement (the thaw in the relationship between ideological opponents of the Cold War - so called Helsinki Process), which led to the fall of the Berlin Wall and encouraged transition.

Second, the major Cuban diaspora. The large community of Cubans living in exile holds great potential to play a positive role in the economic transition of Cuba. It is the cooperation between the folks on the island and those in exile that can help decisively to open Cuban society after more than fifty years of the failed revolutionary experiment and to set it on a long desired journey to freedom and prosperity. But clearly before this cooperation can happen, there must be some real changes at the political level—starting with the ratification of the International Human Rights Covenants and the recognition of the Cuban democratic opposition and its legitimate role in the process of transition.

What say you?