Javier is a newly qualified engineer in the largest country in the Caribbean, Cuba. Being the first in his family to graduate from university, his economic prospects must be immense relative to his father’s, who works as a chef. However this is shockingly not the case. The reason behind this is Cuba’s deep-seated economic problems, the ramifications of communist policies.

When Fidel Castro took over in the socialist revolution of 1959 the new communist government seized almost all private property and businesses; every plantation, factory and restaurant now belonged to the state. The government set the prices for all goods and determined everyone’s pay cheque; it was quintessential communism. This came with many drawbacks, namely a huge loss in incentives leading to catastrophic economic inefficiencies. People employed by the state get paid the same amount whether they make one product or fifty. This lowers incentives for people to work harder or overtime as there is little to no rise in pay. There is also a huge block to entrepreneurship, people cannot start their own businesses if they are unable to own private property.

On the other hand however the policies have yielded some impressive achievements. It has a robust enviable educational system as it reached 99.8% literacy rate, compared to 60.7% in neighbouring Haiti. It also has a strong health care system with a life expectancy of 77/81 compared with Jamaica’s 74/79. Cuba has compressed the extremes of poverty and opulence into a steadily growing generalised level of wealth. Ultimately the rhetoric advocating Cuba’s economic policy as a great accomplishment is that slower wealth creation, as a result from repressing entrepreurship, and limited political expression are a worth paying for somewhat fairer distribution and consequent reduction of extreme poverty.

This would be a very compelling argument however the general levels are stagnating. As shown below the Cuban GDP is plateauing, very lacklustre in comparison to Capitalist Puerto Rico.

Government salaries have hence been dwindling such that many people struggle on their salaries and have to take up additional work in the black market just to get by. This includes just about anything; from selling clothes and food items to more conventional black market items like drugs. The state controls all the media allowed so there is even a black market for films and music downloaded in flash drives from Florida. Ultimately this model has been crumbling ever since the Soviet Union disbanded. With subsidies from the Soviet union Cuba was able to thrive with their economic model. The Cuban economy has allowed some people to have private licenses in taxi companies and paladars, Cuban privately-owned restaurants. The result is a very dangerous situation where Javier is now better off working in his father’s paladar than being an engineer for the government. This is happening all over Cuba where trained professionals such as teachers, accountants and doctors take up typically lower jobs like being drivers due to higher pay. For example a Doctor makes about $40 a month in Cuba but a taxi driver can make $60 in a good day. This destroys a lot of potential growth as people will choose to produce the services that are less valuable in society just because it offers a better salary. This means that Cuba’s great education system will not result in increasing economic growth as it churns out doctors that just ultimately become cooks and drivers.

Today however Cuba has been forced to make several economic reforms and is warming-up relations with the USA. These are steps in the right direction to the ultimate goal of boosting and restructuring the economy with a stronger private sector that will lead to greater growth causing a greater reduction in poverty. The forces of entrepreneurship and allowing qualified professionals to work privately will be more powerful in generating growth than an inefficient interventionist state. This transition is inevitable as Cuba faces internal and external pressure to open up, parallels can be drawn to China as it transitioned from communism. However the transition will be slow as it will be contradictory to the values of the government’s ideologies, this will however mean that when the private sector is eventually allowed the government will have measures in place to allow the wealth generated to be shared somewhat equitably, for example necessary redistributive taxes and improvements in their already impressive education system.

Dylan Parekh