The chairs of a government commission, after meeting in secret, release an economic reform document that some say cuts to the heart of the relationship of citizens and the state. The head of the largest labor federation says its message to workers is “drop dead.” Retirement, medical, even defense programs are targeted for cuts. Government workers are to be laid off; government salaries cut. Benefits are to be better targeted at the most vulnerable. Should the program be adopted, even home ownership will be affected.
Such are the changes envisioned for the United States by a deficit reduction commission chaired by Erskine Bowles and Alan Simpson. They have aroused great controversy here in the U.S., even emotional condemnations (“drop dead”?). No one, so far, has called the plan a blueprint for abandoning capitalism. The path for turning the secret plan into public policy is at best unclear.
Societies great and small are confronting the need to make significant adjustments in their approaches and obligations toward their citizens in order to regain fiscal balance and preserve and extend the essence of their systems. The United States, with its 14 trillion dollar Gross Domestic Product (GDP), is starting a debate to address these challenges. Cuba, and its 40-50 billion dollar GDP, has dramatically embarked on its own course to save its economy and system.
In recent years, the short-comings of Cuba’s system have been magnified by the roiling global economy, destructive seasonal storms, and the continuing burden of the U.S. embargo. The Associated Press reports that Cuba lost $10 billion of its income due to fluctuations in sugar, tobacco, and nickel prices, hikes in the costs of imported oil and food. Additionally, over the last four decades, 16 hurricanes have caused an additional $10 billion in damage, a figure which represents twenty percent of Cuba’s GDP.
For a generation, Cubans had the latitude to operate outside the system in order to make ends meet. But economic conditions simply outran them. In a process that many of our Cuban friends found agonizingly slow, Cuba’s government initiated a period of discussion and modest reforms aimed at easing the difficulties of everyday life.
Earlier this year, Cuba’s government announced that half a million workers would be dropped from state payrolls and that economic reform would occur with the goal of equipping the private economy to absorb them. Some adjustments have already taken place, but there was no formal mechanism for transforming promises into policies.
Now, something bigger and much bolder is taking place. For the price of a peso, about 3 cents, we’re told that Cubans can purchase on the street corner a thirty-two page economic modernization plan – Project for Guidance on the Economic and Social Policy – that encompasses a sharp critique of the system and significant reforms. The plan will drive a national debate starting now through the beginning of next year, and culminate in the first Cuban Communist Party Congress in fourteen years.
The plan restates the call for layoffs of state workers. It aims to pay off Cuba’s foreign debt. It proposes ending the ration card that subsidizes the ability of households to buy food. The plan eases restrictions on private enterprise and self-employment. State-owned businesses will have more autonomy over decisions on who to hire, when to invest, and whether to import. Retail and agriculture will remain on the path of private sector reforms. The document even proposes opening up the real estate market for Cubans’ privately owned homes.
Foreign direct investment will be further encouraged and targeted at special economic zones to promote development. Cuba will remain a planned economy – it is not abandoning socialism – but one that relies less on micromanaging the system and more on regulating and taxing businesses.
President Raúl Castro, in an address earlier this week, announced that the plan would be debated from November 15-30 by Communist Party members, and by the population more broadly in meetings convened from December 1, 2010 to February 28, 2011. He said revisions could take place before the Communist Party meets in April 2011. Once that meeting occurs, Cuba’s new course will be set.
These are dramatic changes undertaken by Cuba at its pace, at its own discretion, following the beat of its own drum, not a wish list conjured by Washington or U.S. policy.
For those who’ve made the overthrow of the Cuban system a matter of theology, neither the sweep of the reforms nor their homegrown nature will be sufficient. You can hear it already – “they haven’t abandoned socialism!” True. Or “they haven’t finished freeing all of their political prisoners.” Also true.
But there is another truth. No matter how much Cubans decide to change their system, for these critics, it won’t be enough, and the new changes will probably excite calls in the U.S. Congress to twist the screws of the embargo harder, or at least hold them fast, and the new conservative majority has the leverage to try and make it so.
President Obama – who has begun to engage in the debate over fixing the U.S. economic system – must decide for himself what to make of these sweeping reforms in Cuba. Whether he acknowledges them or not, they are going to take place. His own policy declarations committed our country to encouraging such changes by loosening the restrictions of our policy toward Cuba. Whether reality or politics prevails, time will tell. Meanwhile, adjustments in both countries are going to be made.