CIPR | Center For Inter-American Policy & Research

Tulane University

Paolo Spadoni on Cuba's Socialist Economy Today

On March 28, 2014, Paolo Spadoni, former post-doctoral fellow at CIPR (2008-09) and current assistant professor of political science at Georgia Regent University, discussed his upcoming book Cuba‘€™s Socialist Economy Today: Navigating Challenges and Change, to be published by Lynne Rienner in May 2014.

Spadoni‘€™s new book analyzes the Cuban economy in depth with an emphasis on the macroeconomic environment but also by sector, exploring the new reforms implemented by Raul Castro since he took over from Fidel in 2008.

The most important economic problems facing Cuba are large fiscal and merchandise deficits, growing foreign debt, sagging productivity and efficiency, stagnant real wages and pensions, and the dual monetary system. Cuba‘€™s economic driver has been the service sector, with rising exports of professional services and an increase in tourism revenues. Yet productivity in all major sectors remains low and the country continues to be heavily dependent on food and oil imports.

Spadoni estimates that approximately 80% of consumer goods are imported, most importantly food and oil. With deeper agricultural reforms, including land redistribution and cultivation, Cuba could successfully increase domestic production for many of these goods and lessen its import dependence.

The labor market is also experiencing changes as government jobs are insufficient to keep the population fully employed. Raul Castro‘€™s desire to layoff 1.2 million state employees to increase efficiency and decrease corruption has remained short of the mark as job creation is lagging. A more successful job creation program could allow Cuba to avoid the flight of highly skilled professionals to service sectors in which they can earn hard currency but where their technical knowledge is underutilized.

Spadoni noted that salaries and pensions are currently one quarter and one half, respectively, of what they were in 1989. This has forced Cubans to turn to remittances from abroad, tips from tourism and hospitality, and black market activities to satisfy their needs. He noted that it would be impossible for the state to decrease the rationing system or change the current dual monetary system until state enterprises produce more, raising the real wages to a point where Cubans can subsist on their salaries.

Spadoni commended Raul Castro‘€™s stance on corruption and the embargo. Castro has acknowledged that corruption has created many of the problems Cuba is currently facing, and he is encouraging Cubans to stop blaming the embargo for the country`s failures. Instead, he has started looking for internal solutions. His reforms are well conceived, but they do not go deep enough. Priority should be on job creation and productivity increases, as well as full realization of property rights for cooperatives and new entrepreneurial initiatives.

Paolo Spadoni is also the author of Failed Sanctions: Why the U.S. Embargo against Cuba Could Never Work (University Press of Florida, 2010).

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