Unit 1: Cuba moving to market economy shocker!!!

Since his seizure of power in 1959, Fidel Castro turned Cuba into a centrally planned economy. But in a recent interview the former dictator has expressed doubts about the effectiveness of a centrally planned system.

'The Cuban model doesn’t work for us anymore'

His remarks appeared to support his brother Raul’s attempts to encourage a greater role for private enterprise.

When a headline ‘Cuban Model Doesn’t Even Work For Us Anymore’ appeared 3 weeks ago, it appeared to signal a change in attitudes at the top towards entrepreneurs setting up their own businesses, and a significant move away from the dominant role of the state in a planned economy.

Within in a couple of days Raul Castro, the head of the Cuban government announced that approximately 500,000 to 1,000,000 public sector jobs would go, out of a working population of 5.5 million.

Capitalist Storm Clouds Over Havana

“"Our state cannot and should not continue maintaining companies, productive entities, services and budgeted sectors with bloated payrolls [and] losses that hurt the economy,” said the official

Cuban labour federation, which announced the news. “Job options will be increased and broadened with new forms of non-state employment, among them leasing land, co-operatives and self-employment, absorbing hundreds of thousands of workers in the coming years”.

The Party newspaper Granma announced that “250,000 licences would be issued to allow people to establish their own firms, and Cubans will be allowed to employ people other than relatives.”

Plans to triple the communist country’s private sector

The removal of some of the controls on private employment provide some scope to increase production levels and efficiency. It remains to be seen if the Cubans have sufficent transferable skills to adapt to these changes, given the power of the state, and limited opportunities to make profits legally.

Is Cuba now about to join the ranks of the transformation economies albeit 21 years after the sweeping changes in Poland, Hungary and East Germany. The island’s population now braces itself for significant changes in prices, employment and growth.

In conclusion there is scope for debate over how far there would be a shift across an economic spectrum as a result of the proposed reforms.

Questions:

Why do you think Cuban politicians want to change?

What problems may they face when trying to open up its markets?