Changes in the Economic Model and Social Policies in Cuba

Mayra Espina Prieto

The “social purpose” of the economy, as it is called, is a pillar of the socialist model of socio-political organization in Cuba. Thus, by examining the evolution of Cuban social policy, we can uncover the direction and options for change in society based on this model. The history of social policy since the 1959 Revolution can be divided into three main phases, two of which have already ended and one that has just begun.

The first phase, beginning in 1959 and ending with the final days of the Cold War in 1989, focused on promoting equality as the value and purpose of social policy. Cuba’s universal, centralized, unitary, and planned social programs aimed to provide total coverage, consolidate the state as coordinator and manager of social policy, and establish the fulfillment of basic needs as a right to which citizens are entitled—especially work, food, health care, shelter, and education. The provision of these goods and services became a public responsibility, and their distribution depended on free or highly subsidized services with very few commercial mechanisms.

Such an approach stems from the idea that equity and justice are not merely a function of distributing income at the family or individual level. Rather, they depend directly on redistributive state action through public spending, with an emphasis on the unconditional provision of services that promote development and social protection. Three statistics concisely illustrate the success of this strategy in terms of establishing economic equality: First, in the 1980s, Cuba’s Gini coefficient—a measure of economic equality, with a value of 0 for total equality and 1 for total inequality—was relatively low, at 0.24. Second, the salaries of the highest-paid state workers were four and a half times the lowest paid workers, and together they made up more than 95% of the workforce. Third, Cuba’s poverty rate was estimated at 6.3% in 1984, a relatively low percentage for a society with limited resources.1

This relatively egalitarian state of affairs was threatened by the collapse of the Soviet Union, which for decades had provided Cuba with significant economic support. Cuba’s acute economic crisis during the first half of the 1990s diminished the state’s redistributive capacity deteriorated the quality of social services. That, together with reforms that established a larger market role in the distribution of basic products (many of which were no longer subsidized or freely distributed) and a decrease in real wages, generated a strip of urban poverty calculated at about 20% of the population; by the year 2000, the Gini coefficent had risen to 0.38.2

Beginning in the early 1990s, the Cuban government introduced economic reforms that focused fundamentally on two issues: employment/income and social assistance. The new measures included handing over state land in usufruct and strengthening small family commercial agriculture; implementing remuneration systems in foreign currency for selected activities and occupations; raising wages for activities that generated foreign currency or that were prioritized as having a social role (health care, education, science, and internal security); legalizing family remittances and the possession of foreign currency; creating a public community network to distribute subsidized food to low-income people; and ranking public services in education and health care according to priority, in an effort to optimize the use of resources.

Perhaps the most significant measure, however, was decreasing the number of state jobs and increasing independent work (cuenta propia). In 1988, before the crisis, 8% of the Cuban workforce was in the non-state sector; by the mid-1990s, this percentage had reached about 21%, according to the National Statistics Office. This may seem like a small proportion compared to other societies and economies, but not in the Cuban context.

While these economic changes were under way, a second phase of post-1959 social policy began in Cuba that was strengthened in the first decade of the 21st century. The new social policy regime was focused in three directions: (1) recovering health services through building repairs and the technological modernization of medical facilities, bringing advanced technology services (like dialysis, ultrasound, and Somatom, among others) to the municipalities; (2) expanding access to higher education, which declined during the crisis, by establishing municipal campuses and expanding distance-learning services that eliminated admissions exams; and (3) focusing attention on the most vulnerable at the community level with the state-run Program for Integrated Community Work; social worker training; attention to special needs, vulnerable sectors, and the poor; and increasing pension and retirement benefits.

Even in the 1990s, in the midst of the crisis and economic reform, the proportion of Cuban social spending remained at more than 20% of GDP, a level matched only by Brazil and Uruguay in Latin America. However, there are several limitations to this otherwise successful formula for social policy. They include, for example, excessive homogeneity in the kinds of goods and services distributed to the population and the absence of affirmative action policies, which has tended to reproduce previous inequalities (racial, gender, generational, and territorial).

The social policy regime of the 1990s also faced the problem of sustainability. Between the second half of the 1970s and the first half of the 1980s, consumption grew annually at an average rate of 12%; during the same period, however, the global social product* increased 9% annually, on average, and wage workers’ incomes grew by only 2.3%. Similarly, between 1998 and 2000, yearly GDP increased by an average 6.4%, while social spending increased 13.1%, considerably exceeding the growth rate of labor productivity.3 In short: Social spending and its growth dynamics in Cuba have historically tended to outflank those of economic indicators.

These problems are now being addressed as part of a new set of reforms that have opened a new phase of social policy in Cuba.

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The platform of changes that the Sixth Congress of the Cuban Communist Party, held in April, has just approved after an extensive process of debate should address a national state of affairs that is strained by the following highly complex problems: the combination of the international economic crisis with elements of an internal crisis; low productive efficiency; growing social inequalities; the obstacles of the U.S. blockade that hinder both the advance of the country to more advantageous places in the global economic system, and the construction of a path to economic sustainability for the social project of socialism. With this party congress, a new phase of social policy has begun, aiming at a new pattern of development that we might call “multi-actor” socialism (in opposition to the state-centric socialism that has characterized the Cuban experience).

The reforms aim to reinforce a system that is both universal and focused, establish efficiency as a criterion for social spending, and more strongly connect social programs to the economy by expanding the tax system to constitute the principal means of supporting them. This means that even as social programs remain universal, offering free and equal services in areas considered to be fundamental (education, health, culture and sports), they will undergo a transition to rely more heavily on instruments that target vulnerable groups and that measure cost-effectiveness.

In this new, third period of post-revolutionary social policy, there are four basic areas of transformation:

1. Changes related to employment and income policy. These include measures like providing more stimulus to joint ventures, cooperatives, small farmers on usufruct land, landlords, self-employed workers, and other forms of non-state economic management; allowing cooperatives to merge; seeking more foreign investment; making cooperatives independent of state companies; developing non-state activity in lodging, gastronomy, and other tourist services that would compliment those of the state; opening larger spaces for non-state activities in local industries; using profits to create entrepreneurial funds; creating executive staff for independent businesses while establishing a maximum salary; and reducing state employment by developing processes to increase the availability of work in the non-state sector.

2. Changes in the budget and social spending. These will be limited by a number of factors, including the financial resources generated by the country’s economy; consumption that is increasingly made possible by income and less so by social funds; expanding social services, adjusted to the dynamism of the productive and the goods-and-services sectors; a newly strengthened tax system as a redistributive agent; the elimination of excessive personal services and subsidies, establishing compensation to people in need; and the progressive elimination of ration cards.

3. Changes in social security and the targeting of at-risk populations. These include improvements in how vulnerable populations are protected and social assistance is guaranteed to those who need it. There will also be a decrease in the relative amount of state funds in financing social security, while the contribution of state workers will be expanded and special tax regimes for non-state sectors are applied.

4. “Municipalization” and territorial decentralization. This process includes creating a business tax to contribute to local development, paid to the Municipal Administration Councils in the zones where they operate; the development of local projects, especially in food production, that will receive funds from the Ministry of Economy and Planning; the creation of special Development Zones in selected localities; greater leeway in decision making for local governments, making management more flexible; the development of attractive tourist offerings as part of the municipal initiative to increase sources of income and foreign currency; establishing housing programs at the municipal level, using existing materials and available technologies in each location.

Among these areas of public policy, the “municipalization” of government, and the configuration of a labor market deserve special attention. The first is significant for its potential to widen the margins of local participation and configure the community and local levels of society as a stage for designing and implementing social policies—thereby giving more weight to micro-scale decisions in the social agenda, and better attuning policies to local needs. This important process will confront at least three risks: insufficient training of local managers and civil societies to create specific participatory policies that are both connected to national policies and enjoy a certain degree of autonomy; the insufficient information about vulnerabilities, poverty, and gaps of inequality at the local level; and marked territorial differences in creating budgets, which the Cuban government should mitigate by creating tax and redistributive instruments.

With respect to the creation of a labor market and the so-called process of availability and sustainability (that is, laying off state workers whose positions are considered superfluous and who will have to be absorbed by the non-state sector), we must bear in mind the inequalities among Cubans in their capacity to take advantage of new opportunities for employment that reforms will open—including knowledge, capital, goods to generate commercial activity, information, connections and networks that allow access to newly created economic spaces, and so on. The expansion of self-employment and micro-enterprises without adequate public support or incentives (for example, microcredit, training, and legal and technical assistance) can generate a precarious informal economy that will provide below survival conditions and will increase poverty.

We can conclude that the current stage of reform has the potential to strengthen social equity in Cuba, improve the socio-economic situation of disparate social groups, and overcome the old limitations of social policy. Yet it could also provoke the deterioration of equality, and at least in the short term, its predicted impacts will be contradictory and ambivalent. How things shape up in the medium and long term will depend on whether policies targeting social equity are adopted.

Recuperating the economic sustainability of the socialist project in the current conditions of the global economy—as the strategy of change intends to accomplish—is a pertinent and decisive goal. But it is necessary to advance toward a more integral vision of social policy with greater protections for the vulnerable, and greater support for the productive ventures of those who do not posses individual capital to generate their means of subsistence in an autonomous way. That includes focused and positive instruments that would complement universal policies to address the inequalities that are being reproduced in Cuban society.

 


 

Mayra Espina Prieto is a researcher at the Havana-based Center for Psychological and Sociological Research (CIPS) and an editorial board member of the Cuban journal Temas (www.temas.cult.cu).


 

1. For data sources and a fuller discussion of the new inequalities and social policy, see Mayra Espina Prieto, “Viejas y nuevas desigualdades en Cuba. Ambivalencias y perspectivas de la reestratificación social,” Nueva Sociedad, no. 216 (July–August 2008): 133–49.

2. On the rise in the Gini coefficient, see Angela Ferriol, “Política social y desarrollo. Una aproximación global,” in Política social y reformas estructurales: Cuba a principios del siglo XXI, Elena Álvarez and Jorge Máttar, eds. (Mexico: ECLAC-NIER-UNDP, 2004).

3. Figures from State Committee on Statistics Committee, Censo nacional de población y viviendas (Havana, 1981) and National Statistics Office, Anuario estadístico de Cuba (Havana, 2006).

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