By Barry Sheppard
The "special period" that opened in 1989 as the Soviet bloc collapsed has been a major challenge to the Cuban Revolution.
Before the 1959 overthrow of the Batista dictatorship, the United States was Cuba's main trading partner. When Washington began imposing trade sanctions and other measures against the revolution, Cuba turned to the Soviet bloc for trade.
Over the years, as the US sanctions became a virtual blockade, this relationship with the Soviet bloc was deepened; by 1989, 85% of Cuban trade was with the Eastern bloc.
This trade was carried out under terms that were more just than those in the trade between advanced capitalist countries and the dependent capitalist countries. The advanced capitalist countries control the world market, and have higher productivity. The result has been a steady increase in prices for finished goods for the Third World and a decrease in prices for the commodities and raw materials from the Third World.
With the collapse of the Soviet bloc, Cuba lost not only its major trading partners, but also the advantage of a more just trading agreement. It had to deal with the harsh capitalist world market.
At the same time, Washington stepped up its efforts to prevent Cuba from entering the world market, by tightening its own embargo and seeking to punish other countries that trade with Cuba, passing the Torricelli law in 1992 and the Helms-Burton Act in 1996.
The Cubans refer to this situation as the "double blockade". From 1989 to 1993, the Cuban economy contracted by 35%, inflicting shortages and hardship on the Cuban people.
Many industries shut down because of shortages of energy and materials. Agriculture lacked fuel, fertilisers and pesticides. Motorised transportation was severely cut back. Hospitals were hit by power outages and scarcity of medicines. Schools lacked pens, paper and books.
One response of the government was to encourage people to use bicycles, both imported and produced in Cuba. You see bicycles everywhere in Havana.
I attended the first US-Cuba Friendship Conference, held outside Havana in July. One of the speakers, Jose Luis Rodriguez, the minister of the economy and planning, outlined how the government and people have coped with this difficult situation.
"Since September 1990, we have been carrying out an emergency economic program", he said. "We have tried to resist and overcome the crises, and to redesign the economy to maintain the principles of a planned economy while making some concessions to a market economy. Our guiding principle has been to seek to benefit all sectors of society, not only one group."
Economic changes
One measure was to cut defence spending from 13% of the budget to 5%. Thirty per cent goes to public health and social security programs. Lest this tempt the Pentagon, Rodriguez said the cut didn't hurt the island's defences. The army is adequate to the task, and every worker has their gun, is trained to use it and is ready to mobilise at their factory where the guns are kept, should the need arise.
To deal in the world market, Cuba needed currency that the market would accept, which means currency from the advanced capitalist countries, especially US dollars. The US blockade makes it even more difficult to get dollars, since trade in other "hard" currencies requires them to be converted to dollars on the world currency market, and the currency sharks take their cut.
To obtain hard currency, Cuba greatly expanded its tourist trade. It opened this sector to joint ventures with foreign capital. In 1993, some 300,000 tourists visited Cuba. "This year there will be 1,400,000", Rodriguez predicted, which will bring $1.8 billion into the economy.
In 1995, the government passed a law allowing foreign investment in many other areas, although the monopoly in banking and foreign trade is maintained. There are now 340 joint ventures in 34 branches of the economy, especially in telecommunications, tourism, nickel mining and oil prospecting.
Today, Latin America and Canada account for 40% of Cuba's trade, Europe 35-40% and Asia 15%.
"We were receiving 13 million tons [11.8 million tonnes] of oil in the 1980s", Rodriguez said. "We now get oil from Venezuela, Mexico and Europe; about 6 million tons."
"In 1993, we opened up space for self-employment. It was already happening in the underground economy, but we had no control over it", he said. "Now we regulate it." On the streets you see small vendors of food, flowers and other goods. People are allowed to open small restaurants in their homes.
The National Assembly of People's Power also legalised the possession of dollars and six other hard currencies. Two parallel markets have developed, one in dollars and the other in Cuban pesos. In 1995, 15% of products sold in Cuba were bought in foreign currency; now 40% are.
All these necessary measures have increased inequality of incomes. Those with access to dollars, including workers in the tourist sector or in joint ventures, and those who receive money from relatives in the US, are better off than those who get only pesos. They also have access to the dollar stores, which have scarce goods.
The government and other organisations have taken steps to counter growing inequality. The Cuban Workers' Federation, the central union body, has a campaign asking tourist workers to donate part of their tips to a medical program to fight cancer, and raises $1 million a year.
"From October 1993 to May 1994", Rodriguez explained, "we organised a discussion throughout society about a new tax system applying to the joint ventures, cooperatives and the self-employed to reduce the budget deficit, strengthen the peso and reduce inflation.
"Hundreds of thousands of proposals from the population were forwarded to the National Assembly. We decided to increase the prices of alcohol, cigarettes and gasoline. No income taxes were placed on the wages of workers."
Rodriguez explained that when workers receive bonuses for exceeding production norms in enterprises that normally pay in pesos, these bonuses are paid in dollars. About 50% of workers receive at least some of their pay in dollars.
Workers in the joint ventures are covered by Cuba's labour laws, and conditions are enforced by the existence of the unions and Communist Party units in these factories.
He said the goal of his ministry is eventually, but without haste, to reach the situation where the relation between the dollar and the peso settles down as the Cuban economy recovers, so that a real relation between the dollar and peso is reached on the world market, and a single-currency market in pesos can be re-established in Cuba.
In 1993, the official exchange rate was $1 to 1 peso, but this wasn't real. "The dual market was a way to avoid a sudden devaluation", Rodriguez explained. "In 1994, the exchange rate was 150 pesos to the dollar. Now it is 21 pesos to the dollar."
One of the biggest changes in the "special period" has been in agriculture.
"In 1992, 15% of the arable land was in the hands of private peasant families, 10% was farmed by peasant cooperatives and 75% was in state farms", Rodriguez said.
"Now 52% of the arable land is under the cooperatives, 15% is still in the hands of individual peasants, and 33% is in state farms. The agricultural subsidy has been reduced by 75%."
Revolutionary priorities
In assessing the Cuban economic situation, it has to be emphasised that certain gains of the revolution have remained the top priority.
Education is free to the end of university. Medical care is free, although the US blockade hurts the ability to get medicines cheaply. Some 200,000 Cubans need insulin, but the world's major producer can't sell to Cuba because of the embargo.
Time and again, people in Cuba proudly point to these two priorities.
Infant mortality is 7.9%, the lowest in Latin America, comparable to the US rate of 7.5%, and lower than many US cities. Life expectancy is 75 years. There is no illiteracy in Cuba, unlike the rest of the world, including the US.
Basic foodstuffs like rice, beans and cooking oil have been rationed since the beginning of the revolution to ensure that even in times of scarcity, there is equal distribution of the basics. Food has become more abundant since the low point of 1992-93.
Even then, when milk was scarce, the ration of milk to children under seven years old was maintained at one litre every other day, at a cost of one US cent.
One of the first acts of the revolution was to limit rents to 10% of family income. This 10%, without interest (it's not a mortgage), goes toward paying the value of the home. The result is that 85% of the population now own their own home, and the remaining 15% are paying it off.
In another area of urban reform, while the New York Times has implied that the project to rebuild Old Havana (a historic section of the capital city) had almost ground to a halt, I saw with my own eyes that this reconstruction is proceeding vigorously.
I came away from Cuba with the understanding that the revolution is far stronger, both politically and economically, than I had been led to believe by the US media.