Gracias a Penultimos Dias.Executive SummaryMonografia completa: http://www.rand.org/pubs/monographs/MG111/Cuba’s economy is in trouble. Social tensions are rising. Fidel Castrois aging. Now 77 (as of this writing), the end is thus looming for thelinchpin who has held the political system together for more than 44 years. Once this caudillo, or strongman, departs, his successors will besaddled with a weak state, along with daunting political, economic,and demographic problems—in short, a vast array of dysfunctionallegacies from the fidelista past.A post-Castro regime that tries to remain communist may soonfind itself in a cul-de-sac where old policies and instruments nolonger work. If or when such a regime falters, there is a remote possibilitythat a democracy-oriented government could replace it. ButCuba’s civil-society and market actors look too embryonic, and democraticpolitical opposition forces too decimated, for a prodemocracyupheaval to take hold naturally. A more likely scenario isthat the military, arguably Cuba’s most important institution, willtake control of the government (perhaps much as General WojciechJaruzelski did in Poland from 1981 to 1989).Cuba’s Weakening, Distorted StateThe conditions that enabled the Castro regime to function wellfor so many decades have deteriorated sharply since 1989. Three ofthe four pillars—Soviet support, the Revolution, and the totalitarianstate apparatus—that long sustained the regime have collapsed orxii Cuba After Castro: Legacies, Challenges, and Impedimentsweakened. The fourth—Fidel Castro himself—will cease to exist withthe caudillo’s passing, leaving his successors to face a far more precariousfuture than what would have been the case 15 or 20 years ago.The Regime’s Eroding Pillars of SupportThe first pillar to give way was the Soviet Union. The economicsupport that contributed 21 percent to Cuba’s gross national product(GNP) in the 1980s disappeared after 1991 following the collapse ofthe Soviet Union, and the island’s GDP soon plummeted by onethird.Although the economic free fall was subsequently checked,growth rates fell in 2002 and 2003, with the 2003 sugar harvest beingthe worst harvest in 70 years. The result is that Cubans no longer canexpect to regain their 1989 living standards by 2009, as was once thecase.The loss of Soviet (and Council of Mutual Economic Assistance[CMEA]) trade, aid, and subsidies undermined a second pillar: the“Revolution” and the social compact it represented for ordinary Cubans.Soviet largesse had enabled the Cuban government to providecitizens with an array of free or subsidized goods and benefits, whichhelped maintain Cubans’ allegiance. But following the demise of Sovietassistance, Havana had to enact a “Special Period” of heightenedausterity, a period that started in 1990 and continues to this day. Theoft-heralded system of free health care deteriorated badly as basicmedicines became unavailable. Employment in the state sector had tobe cut. Subsidized monthly food rations were slashed to ten days’worth, and shortages in consumer goods spread—all of which forcedCubans to turn increasingly to the black market and other illicit activitiesin order to “resolver” (make do). Meanwhile, income inequalitiesgrew exponentially between those with pesos, who were losingtheir purchasing power, and those with dollars. And even those Cubanswith dollars found themselves barred from stores, restaurants,hotels, and resorts reserved exclusively for tourists. Hence, as populardisillusionment has deepened, Cuba’s “failed revolution” is unlikelyto provide Castro’s heirs with a legitimizing mystique.The regime’s third pillar, the totalitarian state apparatus, hadbeen in place since the 1960s. It had long enabled the regime to peneExecutiveSummary xiiitrate, control, and mobilize the population until the collapse of theSoviet pillar undermined its power and reach. It then mutated into aless penetrative, less controlling post-totalitarian state, which had tocede some economic and social—but not political—space to societyin the early 1990s. A small private sector was thus legalized so thatconsumer shortages and unemployment could be eased. The RomanCatholic Church, Protestant denominations, and Afro-Cuban sectsbecame more active. Political dissidents, human-rights activists, andindependent journalists and librarians came forward, challenging theregime’s grip on all power and information. And in 2002, the VarelaProject collected more than 11,000 signatures for a petition callingfor political and economic reforms. Faced with these challenges, andwary of the growing prospects of unrest, the regime rounded up andimprisoned 75 dissidents and independent journalists and librariansin spring 2003, which decimated the opposition and emerging civilsocietyactors. But if Castro’s successors try to compensate for thestate’s weakness by continuing to use open, heavy-handed repression,they will further risk delegitimizing the new regime.The fourth and final pillar of support has been Fidel Castrohimself. Despite age, illness, and growing irascibility, the lídermáximo still casts an aura of legitimacy over Cuba’s government,state, and Party institutions. He also gives the regime a sense of directionand cohesion. His passing will leave a leadership void that is unlikelyto be filled by his designated successor, Raúl Castro, or by anyother government or Communist Party leader. Regime divisions arecertain to erupt in the absence of el comandante.Dysfunctional Political LegaciesA post-Castro government, whether communist or noncommunist,will find itself burdened by two troublesome legacies from the Castroera: caudilloism, and totalitarianism/post-totalitarianism. The firstlegacy will hobble the new government; the second legacy will leavesociety deformed.The culture of caudilloism (rule by a strongman) will exacerbatethe sense of a leadership void and hamper a new regime’s ability togovern and embark on policy shifts. Rule by Castro led to the stuntxivCuba After Castro: Legacies, Challenges, and Impedimentsing of autonomous institutions after 1959, serving to ensure his ownpower and that of his brother and other ruling elites. In addition,Castro pursued populist policies that a successor government mayfind difficult to deviate from, even if they are known to be not inCuba’s best interest. A case in point is Castro’s ultra-defiant posturetoward the United States; continuation of that posture by a new governmentis certain to deprive Cuba of needed economic and technicalassistance. Another is Castro’s pursuit of a “moral” economy—essentially an egalitarian, classless, nonmaterialist, socialist system.This stance has kept him from accepting market-type reforms, and itmay limit a successor government’s ability to change course for fear ofa fidelista backlash.The legacy of totalitarianism/post-totalitarianism will leave post-Castro Cuba without the rule of law and other legal requisites thatcan help restrain the power of the state, promote a market-basedeconomy, and enable civil-society organizations to act vigorously insupport of a democratic transition. This legacy is bound to exacerbatepolarization between committed fidelistas and those “outside theRevolution” who have suffered directly from not only state repressionbut also betrayal and condemnation by their neighbors, fellow workers,and even family members.Pervasive societal mistrust and politicization have left a growingnumber of Cubans, both old and young, politically exhausted, disenchanted,and disengaged. This condition does not bode a smoothdemocratic transition or even continuance of post-totalitarianism, becausesectors of the population already are resisting the kinds of massmobilizations that were once routine during the Castro era.A People at Odds: Generational, Racial, and Demographic DivisionsThe specter of a people united by Castro and the Revolution concealsa different social reality. Cuban society exhibits three major and potentiallydivisive cleavages that involve youth, race, and an agingpopulation.An Alienated YouthFollowing a common pattern in Cuban history, the Revolution wasmade by a new leadership generation: Fidel Castro was 32 years oldwhen he seized power; his brother and others in the victorious RebelArmy were younger still. Almost at once, the new government set outto ensure the permanency of the Revolution by creating, in Castro’swords, “a more perfect generation” among the young. To this end, itemployed education, the mass media, and membership in the YoungPioneers and the Union of Young Communists, aiming to moldCuban youth (the 16-to-30-year-old age group) in the image of CheGuevara’s “new communist man.”However, relations between the state and Cuba’s youth began todeteriorate in the late 1970s, when exiles returning to the island gaveyoung Cubans a new view of life in the United States. Further strainsdeveloped in the 1980s, when, contrary to Castro’s anti-liberalizationstance, the advent of glasnost and perestroika in the Soviet Union garneredenthusiastic support among Cuban youth. Tensions intensifiedafter 1989, when the young faced heightened austerity, few opportunitiesfor upward mobility, and unfulfilled aspirations––not only material,but also creative and spiritual. As a result, more and moreyouths turned away from official dogma and prescribed norms andbegan embracing Western pop music and other fads, dropping out,hustling, and engaging in prostitution. Cuban youth became increasinglydisaffected and disconnected from politics as the 1990swore on.The regime tried to win back their support by, among otherthings, giving young “loyalists” positions in the Party, in state andmilitary structures, and in enterprises in the new-dollar sectors of theeconomy. Although the bulk of Cuban youth remain disaffected, theyhave split into two remaining camps. On the one hand, the “inbetweens”are alienated because their personal expectations have beendashed, but they might still support a socialist state if it providesgreater personal freedom and authentic political participation thanthe current regime. The “opponents,” on the other hand, reject socialism,attend religious services, adopt Western mores, and are generallymore self-absorbed. The challenge facing the present rexviCuba After Castro: Legacies, Challenges, and Impedimentsgime––and a successor––is to win over the “in-between” group or atleast prevent it from moving into the opposition camp, both of whichactions may become impossible to achieve if heightened repressioncontinues and the economy worsens.The retreat from politics among Cuban youth may pose problemsfor not only a successor communist regime but also a democraticallyoriented one, because each would lack support from this pivotal,alienated sector of the population. Democratic institutions, norms,and practices cannot take root without active acceptance and participation.Mass emigration by disaffected young, in turn, could provedevastating to the island’s future economic prospects.A Growing Racial DivideCastro’s government made great strides in promoting racial equalityafter 1959. Afro-Cubans benefited from the outlawing of overt racialdiscrimination and from the government’s commitment to improvingthe lot of the poor, a disproportionate percentage of whom wereblacks and mulattos. When white middle-class flight opened up jobopportunities and housing stock for blacks and mulattos in the1960s, Afro-Cubans became the most enthusiastic supporters of thenew regime and of the persona of “Fidel” in particular.Despite Afro-Cubans’ obtaining near-equality with whites interms of longevity, education, and occupation, many racial inequalitiespersisted in the 1980s. Blacks and mulattos make up nearly halfthe population, but they continue to represent a disproportionateshare of the prison population, and they still live in the most dilapidatedareas of Havana and other cities. Blacks and mulattos remainheavily concentrated in the poorest, easternmost provinces, whichformerly formed the province of Oriente.In the 1990s, racial inequality and discrimination rose sharplyduring the Special Period. While most Cubans suffered from the SpecialPeriod’s austerity, the plight of Afro-Cubans—especiallyblacks—was made even worse by the dollarization of the economy in1993, which has divided society into those with access to dollars andthose without access to dollars. Afro-Cubans find themselves in thelatter camp. For one thing, they receive far fewer dollar remittancesfrom the mostly white Cuban-American exile community. Second,they are less likely to be small peasant farmers, who can sell surplusproduce for dollars in the farmers’ markets. Third, they (particularlyblacks) have been largely excluded from employment in the touristsector due to discrimination. Internal migration from the lessdevelopedeastern provinces by so-called darker-skinned palestinos hasalso been blamed for rising crime rates in Havana, which has increasedracial tensions and prompted Afro-Cubans to complain ofdiscrimination and police harassment. In the meantime, blacks andmulattos remain quite underrepresented in the leadership ranks of theregime’s key institutions.Such racial issues spell trouble for any future government inCuba. Not even a successor communist regime may be able to attractthe fervent support that Afro-Cubans once offered to the Castro regime,and to Fidel above all. Any type of post-Castro government willhave to better the lot of Afro-Cubans substantially if it is to win theirsupport. But a new government, communist or not, will likely find itspolicy options for expanding the economy constrained because somany Afro-Cubans, along with other skeptical sectors of the population,may oppose liberal economic reforms and increased foreign investmentsas a result of their already-negative experiences with thenew economy. Meanwhile, a new government will need to developthe eastern half of the island if it is to improve employment for Afro-Cubans and stem internal migration. However, such a developmentwill require allocating scarce resources away from other regions andconstituencies, a move that could intensify Cuba’s looming racial andregional divide.In short, race is likely to compound divisiveness in the newCuba because it overlaps and reinforces other divisions between Afro-Cubans and whites. Race is a factor in Cubans’ religious affiliation(Santería and other syncretic Afro-Cuban sects versus Catholicismand Protestantism), preferences for the economic system (socialistversus market-driven), and competing notions about political power(race-based representation, versus continued white control of thegovernment).An Aging PopulationCuba’s prospects for economic recovery and sustained growth will befurther hampered by its overall demographic structure, which resemblesthat of a developed country more than the demographic structuresof its Caribbean and Latin American neighbors. Cuba’s populationhas been growing at less than 1.0 percent per year since 1980,with an even slower growth (0.2 percent) projected for the2003–2025 period. Its aged population (65 years and older) will becomethe most rapidly growing segment over the next two decades.As its population grows older, the size of younger cohorts enteringthe workforce will decrease.As a consequence of these demographic changes, demand for socialservices for the older population––retirement pensions, healthcare, etc.––will increase at the very time that the working populationneeded to support such services will itself be aging and decreasing.This demographic conundrum will be compounded by the depressedstate of the economy, because Cuba will lack the financial resourcesto continue providing early retirement with a state pension for its elderly,starting at age 55 for women and 60 for men.Hence, any new government will face difficult public policychoices with respect to (a) supporting Cuba’s aging population, (b)allocating scarce resources among competing social programs, and (c)developing a labor force to pay for future increases in social expenditures.Finding solutions to these problems will entail political risksthat a future, presumably weaker, government may prefer to avoidand that, in any case, may be unrealistic in the Cuban context. Detailsof each problem are discussed briefly below.Revising the pension system by raising the retirement age, forexample, is likely to produce a sharp reaction from future retirees.Requiring workers to contribute to their own retirement could alsoprovoke strong opposition from younger workers, especially if the realvalue of their wages remains low and the economy depressed. Moreover,shifting pension responsibility from the state to private employershardly seems feasible in the Cuban context, because the state hasplayed the overwhelmingly dominant role in the economy and socialsector for the past 44-plus years. Even if a market-based system wereadopted, saddling the nascent private sector with paying for pensionswould place an enormous burden on it.A new government will have to decide how much of Cuba’sgross domestic product (GDP) should be devoted to social servicesand how to allocate that amount between the young and the old. Reducingcurrent consumption levels, including those for social services,in order to invest in future growth should, in theory, yield higher incomesand resources for future consumption. But such a cutbackwould be painful, if not impossible, given the island’s low levels of incomeand economic development. However, devoting a larger shareof GDP to social services would increase the burden on workers whohave already absorbed cutbacks in real wages and would further increasepolitical disaffection among the young.As to allocating social spending between the young and the old,a new government will find it difficult to find the resources to satisfyboth sectors. An expected decline in the school-age population shouldresult in a decline in total government expenditures for the young,especially for education. But that reduction will surely be insufficientto fund a significant increase in expenditures for Cuba’s aging population.It may make more sense to allocate greater resources to improvingeducation, particularly at the university level, given Cuba’scritical need for economic growth and global competitiveness.1Finally, post-Castro Cuba will face not only a shortage of capitaland natural resources, but also a shrinking labor pool. To expand thesize of its workforce, it could raise retirement ages and/or increase laborforce participation among prime-age workers. However, both optionswould require major departures from the policies of the Castroera: Wages would have to be tied to productivity, thereby reversingthe Revolution’s commitment to reducing income inequalities._____________1 We recognize that increasing the resources Cuba devotes to its higher education systemruns counter to World Bank and Inter-American Development Bank (IDB) experience inthe less-developed countries, where investment in basic skills appears to have a higher developmentpayoff. However, we believe that our approach is better suited to Cuba’s economicsituation. Cubans’ basic educational levels are already high by most developing-country standards,and Cuba’s long-term economic growth will likely hinge on the availability of highlyskilled and professional labor.Moreover, an emphasis would have to be placed on promoting economicefficiency, thereby reversing the Revolution’s old commitmentto full employment. Thus far, the Castro regime has refused to takeeither step. Whether a weaker, successor government can reversecourse remains to be seen.Cuba’s Ever-Failing EconomyCuba’s economy, never in good shape, is now approaching a criticaljuncture. To stem the economic free fall after 1989, the Castro governmentopened the economy to foreign investors and rebuilt thetourist industry in order to recapture hard currency. For a while,these and other modest reforms helped stop the hemorrhaging, butby 2002 new signs indicated that the economy was slowing again.Indeed, unless Castro defies all expectations by further alteringcourse, he will displace onto his heirs the task of making the systemicchanges Cuba needs before it can achieve the sustained economicgrowth that can help legitimize a post-Castro government. It will thusbe left to a new government to raise labor productivity and stem corruptionin both the state and society. And the new government willbe faced with the equally formidable tasks of overturning the commandeconomy, ceding a measure of control to a revitalized privatesector, and transforming the island’s distorted industrial structure.An Unproductive Labor ForceAmong the key factors affecting the prospects for revitalizing theeconomy is Cuba’s highly educated but low-productivity labor force.The low productivity has been exacerbated by the declining state ofCuba’s capital stock, its shortage of investment capital, and its lack ofraw materials. But the Castro regime’s policies regarding full employmentand wages have also played a role. The commitment to fullemployment transformed open unemployment into rampant underemploymentprior to 1989, when Soviet economic support was available,and then worsened it during the Special Period, when the economywas at its lowest ebb. Thus, despite the closure of 45 percent ofthe island’s most inefficient sugar mills in 2002, the Castro regimehas kept the displaced workers on the state payroll. Setting wages accordingto a national pay schedule has further compounded theproblem of low productivity by divorcing workers’ wages from theirproductivity—a policy that has motivated poor work habits and createddisincentives for maximizing production among the labor force.The new regime will thus be faced with a long-term task of motivatingworkers anew through market incentives.A Repressed and Deformed Private SectorAnother impediment is the weakness of the small, deformed privatesector that will be left from the Castro era. The regime has resistedthe development of a healthy private sector, mainly because of Fidel’sideological commitment to socialism and his obsession with his placein history, but also because of other political calculations. His regimeis determined to prevent the rise of a middle class that may challengeits power, and to constrain the growth of income equalities that mayundermine regime support among state employees, Party workers,military and security personnel, and pensioners, many of whom mustsubsist on peso-denominated incomes.Bowing to necessity in 1993, the regime legalized selfemploymentin micro-enterprises to generate trades, crafts, and servicesthat the state was no longer able to supply and to provide newemployment opportunities. By 1997, the number of microenterpriseshad grown to more than 200,000. But when the economyshowed signs of recovery, and the self-employed showed that theywere enjoying substantial dollar incomes, the regime actively discouragedfurther growth of the fledgling private sector by erecting newobstacles. By 2001, the number of micro-enterprises dropped to anestimated 150,000. In addition, the private sector has become increasinglydeformed. The absence of a private distribution system hasled to the widespread pilfering of state stores and to the buying ofstolen supplies on the black market. Moreover, as a result of 40-plusyears of communism, the labor force lacks the kinds of trained managers,accountants, auditors, bankers, insurers, etc., that a robustmarket economy requires.A Corrupt Society and StateYet another obstacle to revitalizing the economy is the prevalence ofcorruption and favoritism. Most materials on the black market arestolen or misappropriated from state enterprises and warehouses. Insidedeals are commonplace between individuals and their governmentcontacts. Privileges are accorded to the nomenklatura (known inCuba as pinchos grandes). And the government selectively privatizesstate enterprises and creates new joint enterprises for the benefit oftrusted civilian and military loyalists assigned to run them.A Postponed Imperative: Restructuring the EconomyIf it wants to promote the island’s integration into the global economy,a new government will also have to transform the distorted industrialstructure that developed as a result of Cuba’s close economicties to the Soviet Union. The intertwining of the Cuban economywith that of the U.S.S.R. not only insulated it from the internationalmarket but also distorted it as a result of the extremely high prices theSoviets paid for Cuban sugar exports and the low prices that Cubapaid for Soviet oil imports (which Cuba could re-export to the worldmarket) and for other raw-material and industrial inputs. As a result,the Castro government long concentrated its resources on increasingsugar production, which reached levels of 7 to 8 million metric tonsin the 1980s, at the expense of diversifying the rest of agricultural andnon-agrarian sectors of the economy. The sugar industry itself becamedistorted under the artificially favorable conditions it enjoyed asinefficient sugar mills and unproductive sugar fields were kept inoperation.Absent Soviet support, sugar production thus began to dropsteadily beginning in 1992–1993. Moreover, the high cost of sugarproduction in Cuba limited its export options, because the cost ofCuban sugar exceeded the declining world-market price for sugar.Despite the restructuring of the industry that began in 2002, includingthe permanent closure of 71 of the most inefficient mills, productionhas now plummeted to a reported 2 million tons in 2003. A newgovernment will therefore be faced with the difficult challenge of furtherscaling down the industry and introducing other efficiencymeasures––including laying off workers––to make it more competitiveon the world market.Additional economic distortions will have to be overcome,which will be no less daunting for the new government. Obsolete industrialplants and equipment, much of it acquired from the formerSoviet Union and Eastern bloc, will have to be replaced. Domesticlinkages, virtually non-existent at present, will need to be promotedin order to bolster the small private sector and ease the economy’sheavy reliance on imported manufacturing inputs. If a market economyis to take hold and thrive, the rule of law, required to protectproperty rights and provide predictable and enforceable contract lawsand a secure environment for investors, will have to be observed byboth government officials and the public alike. These and other undertakingsare likely to take years, possibly generations, to accomplish.Policy Implications for the United StatesThe policies that the United States follows after Castro leaves thescene could have a major effect on whether Cuba remains underhard-line or reformist communist rule, falls under military governance,begins a democratic transition, or is gripped by instability andstrife. To help foster a stable, prosperous, democratic Cuba, theUnited States should observe the following policy guidelines:• Use the prospect of lifting the embargo (if still in effect) as leverageto move a successor communist regime toward a democratictransition. Lift the embargo if a democratically oriented regimecomes to power.• Work in concert with Canada and the United Kingdom, Spain,and other countries in the European Union in trying to influenceevents in a post-Castro Cuba along the lines of a democraticoutcome.• Avoid public postures that incite Cuban nationalism and workto the advantage of hard-liners. Cultivate informal military-to military contacts and use public diplomacy to make clear the United States’ willingness to respect Cuba’s independence, sovereignty, and dignity. But also make clear that Havana needs toreciprocate by respecting human rights and evolving toward amarket-based democracy.• Restore full diplomatic and trade relations once the Cuban governmentis committed to a democratic transition and offer economicand technical assistance to jump-start the economy.• Encourage the private sector, the academy, nongovernment organizations(NGOs), and especially the Cuban-American communityto become engaged and assist Cuba in embarking on ademocratic transition.• Offer to renegotiate the status of the Guantanamo Naval Baseonce the transition is under way.Cuba will be at a critical crossroads when the Castro era comesto an end. Cuba could become a “failed state,” in which case theUnited States would be faced with internal disorder and a humanitariancrisis on the island, and with uncontrolled drug flows and massmigration to the United States. Hence, the United States needs to offerthe Cuban people a new deal along the above lines, with the aimof not only avoiding a worst-case scenario on the island but alsohelping Cuba to move toward a more stable, prosperous, and democraticoutcome.
Categorias
Entidades
Gracias a Penultimos Dias.Executive SummaryMonografia completa: http://www.rand.org/pubs/monographs/MG111/Cuba’s economy is in trouble. Social tensions are rising. Fidel Castrois aging. Now 77 (as of this writing), the end is thus looming for thelinchpin who has held the political system together for more than 44 years. Once this caudillo, or strongman, departs, his successors will besaddled with a weak state, along with daunting political, economic,and demographic problems—in short, a vast array of dysfunctionallegacies from the fidelista past.A post-Castro regime that tries to remain communist may soonfind itself in a cul-de-sac where old policies and instruments nolonger work. If or when such a regime falters, there is a remote possibilitythat a democracy-oriented government could replace it. ButCuba’s civil-society and market actors look too embryonic, and democraticpolitical opposition forces too decimated, for a prodemocracyupheaval to take hold naturally. A more likely scenario isthat the military, arguably Cuba’s most important institution, willtake control of the government (perhaps much as General WojciechJaruzelski did in Poland from 1981 to 1989).Cuba’s Weakening, Distorted StateThe conditions that enabled the Castro regime to function wellfor so many decades have deteriorated sharply since 1989. Three ofthe four pillars—Soviet support, the Revolution, and the totalitarianstate apparatus—that long sustained the regime have collapsed orxii Cuba After Castro: Legacies, Challenges, and Impedimentsweakened. The fourth—Fidel Castro himself—will cease to exist withthe caudillo’s passing, leaving his successors to face a far more precariousfuture than what would have been the case 15 or 20 years ago.The Regime’s Eroding Pillars of SupportThe first pillar to give way was the Soviet Union. The economicsupport that contributed 21 percent to Cuba’s gross national product(GNP) in the 1980s disappeared after 1991 following the collapse ofthe Soviet Union, and the island’s GDP soon plummeted by onethird.Although the economic free fall was subsequently checked,growth rates fell in 2002 and 2003, with the 2003 sugar harvest beingthe worst harvest in 70 years. The result is that Cubans no longer canexpect to regain their 1989 living standards by 2009, as was once thecase.The loss of Soviet (and Council of Mutual Economic Assistance[CMEA]) trade, aid, and subsidies undermined a second pillar: the“Revolution” and the social compact it represented for ordinary Cubans.Soviet largesse had enabled the Cuban government to providecitizens with an array of free or subsidized goods and benefits, whichhelped maintain Cubans’ allegiance. But following the demise of Sovietassistance, Havana had to enact a “Special Period” of heightenedausterity, a period that started in 1990 and continues to this day. Theoft-heralded system of free health care deteriorated badly as basicmedicines became unavailable. Employment in the state sector had tobe cut. Subsidized monthly food rations were slashed to ten days’worth, and shortages in consumer goods spread—all of which forcedCubans to turn increasingly to the black market and other illicit activitiesin order to “resolver” (make do). Meanwhile, income inequalitiesgrew exponentially between those with pesos, who were losingtheir purchasing power, and those with dollars. And even those Cubanswith dollars found themselves barred from stores, restaurants,hotels, and resorts reserved exclusively for tourists. Hence, as populardisillusionment has deepened, Cuba’s “failed revolution” is unlikelyto provide Castro’s heirs with a legitimizing mystique.The regime’s third pillar, the totalitarian state apparatus, hadbeen in place since the 1960s. It had long enabled the regime to peneExecutiveSummary xiiitrate, control, and mobilize the population until the collapse of theSoviet pillar undermined its power and reach. It then mutated into aless penetrative, less controlling post-totalitarian state, which had tocede some economic and social—but not political—space to societyin the early 1990s. A small private sector was thus legalized so thatconsumer shortages and unemployment could be eased. The RomanCatholic Church, Protestant denominations, and Afro-Cuban sectsbecame more active. Political dissidents, human-rights activists, andindependent journalists and librarians came forward, challenging theregime’s grip on all power and information. And in 2002, the VarelaProject collected more than 11,000 signatures for a petition callingfor political and economic reforms. Faced with these challenges, andwary of the growing prospects of unrest, the regime rounded up andimprisoned 75 dissidents and independent journalists and librariansin spring 2003, which decimated the opposition and emerging civilsocietyactors. But if Castro’s successors try to compensate for thestate’s weakness by continuing to use open, heavy-handed repression,they will further risk delegitimizing the new regime.The fourth and final pillar of support has been Fidel Castrohimself. Despite age, illness, and growing irascibility, the lídermáximo still casts an aura of legitimacy over Cuba’s government,state, and Party institutions. He also gives the regime a sense of directionand cohesion. His passing will leave a leadership void that is unlikelyto be filled by his designated successor, Raúl Castro, or by anyother government or Communist Party leader. Regime divisions arecertain to erupt in the absence of el comandante.Dysfunctional Political LegaciesA post-Castro government, whether communist or noncommunist,will find itself burdened by two troublesome legacies from the Castroera: caudilloism, and totalitarianism/post-totalitarianism. The firstlegacy will hobble the new government; the second legacy will leavesociety deformed.The culture of caudilloism (rule by a strongman) will exacerbatethe sense of a leadership void and hamper a new regime’s ability togovern and embark on policy shifts. Rule by Castro led to the stuntxivCuba After Castro: Legacies, Challenges, and Impedimentsing of autonomous institutions after 1959, serving to ensure his ownpower and that of his brother and other ruling elites. In addition,Castro pursued populist policies that a successor government mayfind difficult to deviate from, even if they are known to be not inCuba’s best interest. A case in point is Castro’s ultra-defiant posturetoward the United States; continuation of that posture by a new governmentis certain to deprive Cuba of needed economic and technicalassistance. Another is Castro’s pursuit of a “moral” economy—essentially an egalitarian, classless, nonmaterialist, socialist system.This stance has kept him from accepting market-type reforms, and itmay limit a successor government’s ability to change course for fear ofa fidelista backlash.The legacy of totalitarianism/post-totalitarianism will leave post-Castro Cuba without the rule of law and other legal requisites thatcan help restrain the power of the state, promote a market-basedeconomy, and enable civil-society organizations to act vigorously insupport of a democratic transition. This legacy is bound to exacerbatepolarization between committed fidelistas and those “outside theRevolution” who have suffered directly from not only state repressionbut also betrayal and condemnation by their neighbors, fellow workers,and even family members.Pervasive societal mistrust and politicization have left a growingnumber of Cubans, both old and young, politically exhausted, disenchanted,and disengaged. This condition does not bode a smoothdemocratic transition or even continuance of post-totalitarianism, becausesectors of the population already are resisting the kinds of massmobilizations that were once routine during the Castro era.A People at Odds: Generational, Racial, and Demographic DivisionsThe specter of a people united by Castro and the Revolution concealsa different social reality. Cuban society exhibits three major and potentiallydivisive cleavages that involve youth, race, and an agingpopulation.An Alienated YouthFollowing a common pattern in Cuban history, the Revolution wasmade by a new leadership generation: Fidel Castro was 32 years oldwhen he seized power; his brother and others in the victorious RebelArmy were younger still. Almost at once, the new government set outto ensure the permanency of the Revolution by creating, in Castro’swords, “a more perfect generation” among the young. To this end, itemployed education, the mass media, and membership in the YoungPioneers and the Union of Young Communists, aiming to moldCuban youth (the 16-to-30-year-old age group) in the image of CheGuevara’s “new communist man.”However, relations between the state and Cuba’s youth began todeteriorate in the late 1970s, when exiles returning to the island gaveyoung Cubans a new view of life in the United States. Further strainsdeveloped in the 1980s, when, contrary to Castro’s anti-liberalizationstance, the advent of glasnost and perestroika in the Soviet Union garneredenthusiastic support among Cuban youth. Tensions intensifiedafter 1989, when the young faced heightened austerity, few opportunitiesfor upward mobility, and unfulfilled aspirations––not only material,but also creative and spiritual. As a result, more and moreyouths turned away from official dogma and prescribed norms andbegan embracing Western pop music and other fads, dropping out,hustling, and engaging in prostitution. Cuban youth became increasinglydisaffected and disconnected from politics as the 1990swore on.The regime tried to win back their support by, among otherthings, giving young “loyalists” positions in the Party, in state andmilitary structures, and in enterprises in the new-dollar sectors of theeconomy. Although the bulk of Cuban youth remain disaffected, theyhave split into two remaining camps. On the one hand, the “inbetweens”are alienated because their personal expectations have beendashed, but they might still support a socialist state if it providesgreater personal freedom and authentic political participation thanthe current regime. The “opponents,” on the other hand, reject socialism,attend religious services, adopt Western mores, and are generallymore self-absorbed. The challenge facing the present rexviCuba After Castro: Legacies, Challenges, and Impedimentsgime––and a successor––is to win over the “in-between” group or atleast prevent it from moving into the opposition camp, both of whichactions may become impossible to achieve if heightened repressioncontinues and the economy worsens.The retreat from politics among Cuban youth may pose problemsfor not only a successor communist regime but also a democraticallyoriented one, because each would lack support from this pivotal,alienated sector of the population. Democratic institutions, norms,and practices cannot take root without active acceptance and participation.Mass emigration by disaffected young, in turn, could provedevastating to the island’s future economic prospects.A Growing Racial DivideCastro’s government made great strides in promoting racial equalityafter 1959. Afro-Cubans benefited from the outlawing of overt racialdiscrimination and from the government’s commitment to improvingthe lot of the poor, a disproportionate percentage of whom wereblacks and mulattos. When white middle-class flight opened up jobopportunities and housing stock for blacks and mulattos in the1960s, Afro-Cubans became the most enthusiastic supporters of thenew regime and of the persona of “Fidel” in particular.Despite Afro-Cubans’ obtaining near-equality with whites interms of longevity, education, and occupation, many racial inequalitiespersisted in the 1980s. Blacks and mulattos make up nearly halfthe population, but they continue to represent a disproportionateshare of the prison population, and they still live in the most dilapidatedareas of Havana and other cities. Blacks and mulattos remainheavily concentrated in the poorest, easternmost provinces, whichformerly formed the province of Oriente.In the 1990s, racial inequality and discrimination rose sharplyduring the Special Period. While most Cubans suffered from the SpecialPeriod’s austerity, the plight of Afro-Cubans—especiallyblacks—was made even worse by the dollarization of the economy in1993, which has divided society into those with access to dollars andthose without access to dollars. Afro-Cubans find themselves in thelatter camp. For one thing, they receive far fewer dollar remittancesfrom the mostly white Cuban-American exile community. Second,they are less likely to be small peasant farmers, who can sell surplusproduce for dollars in the farmers’ markets. Third, they (particularlyblacks) have been largely excluded from employment in the touristsector due to discrimination. Internal migration from the lessdevelopedeastern provinces by so-called darker-skinned palestinos hasalso been blamed for rising crime rates in Havana, which has increasedracial tensions and prompted Afro-Cubans to complain ofdiscrimination and police harassment. In the meantime, blacks andmulattos remain quite underrepresented in the leadership ranks of theregime’s key institutions.Such racial issues spell trouble for any future government inCuba. Not even a successor communist regime may be able to attractthe fervent support that Afro-Cubans once offered to the Castro regime,and to Fidel above all. Any type of post-Castro government willhave to better the lot of Afro-Cubans substantially if it is to win theirsupport. But a new government, communist or not, will likely find itspolicy options for expanding the economy constrained because somany Afro-Cubans, along with other skeptical sectors of the population,may oppose liberal economic reforms and increased foreign investmentsas a result of their already-negative experiences with thenew economy. Meanwhile, a new government will need to developthe eastern half of the island if it is to improve employment for Afro-Cubans and stem internal migration. However, such a developmentwill require allocating scarce resources away from other regions andconstituencies, a move that could intensify Cuba’s looming racial andregional divide.In short, race is likely to compound divisiveness in the newCuba because it overlaps and reinforces other divisions between Afro-Cubans and whites. Race is a factor in Cubans’ religious affiliation(Santería and other syncretic Afro-Cuban sects versus Catholicismand Protestantism), preferences for the economic system (socialistversus market-driven), and competing notions about political power(race-based representation, versus continued white control of thegovernment).An Aging PopulationCuba’s prospects for economic recovery and sustained growth will befurther hampered by its overall demographic structure, which resemblesthat of a developed country more than the demographic structuresof its Caribbean and Latin American neighbors. Cuba’s populationhas been growing at less than 1.0 percent per year since 1980,with an even slower growth (0.2 percent) projected for the2003–2025 period. Its aged population (65 years and older) will becomethe most rapidly growing segment over the next two decades.As its population grows older, the size of younger cohorts enteringthe workforce will decrease.As a consequence of these demographic changes, demand for socialservices for the older population––retirement pensions, healthcare, etc.––will increase at the very time that the working populationneeded to support such services will itself be aging and decreasing.This demographic conundrum will be compounded by the depressedstate of the economy, because Cuba will lack the financial resourcesto continue providing early retirement with a state pension for its elderly,starting at age 55 for women and 60 for men.Hence, any new government will face difficult public policychoices with respect to (a) supporting Cuba’s aging population, (b)allocating scarce resources among competing social programs, and (c)developing a labor force to pay for future increases in social expenditures.Finding solutions to these problems will entail political risksthat a future, presumably weaker, government may prefer to avoidand that, in any case, may be unrealistic in the Cuban context. Detailsof each problem are discussed briefly below.Revising the pension system by raising the retirement age, forexample, is likely to produce a sharp reaction from future retirees.Requiring workers to contribute to their own retirement could alsoprovoke strong opposition from younger workers, especially if the realvalue of their wages remains low and the economy depressed. Moreover,shifting pension responsibility from the state to private employershardly seems feasible in the Cuban context, because the state hasplayed the overwhelmingly dominant role in the economy and socialsector for the past 44-plus years. Even if a market-based system wereadopted, saddling the nascent private sector with paying for pensionswould place an enormous burden on it.A new government will have to decide how much of Cuba’sgross domestic product (GDP) should be devoted to social servicesand how to allocate that amount between the young and the old. Reducingcurrent consumption levels, including those for social services,in order to invest in future growth should, in theory, yield higher incomesand resources for future consumption. But such a cutbackwould be painful, if not impossible, given the island’s low levels of incomeand economic development. However, devoting a larger shareof GDP to social services would increase the burden on workers whohave already absorbed cutbacks in real wages and would further increasepolitical disaffection among the young.As to allocating social spending between the young and the old,a new government will find it difficult to find the resources to satisfyboth sectors. An expected decline in the school-age population shouldresult in a decline in total government expenditures for the young,especially for education. But that reduction will surely be insufficientto fund a significant increase in expenditures for Cuba’s aging population.It may make more sense to allocate greater resources to improvingeducation, particularly at the university level, given Cuba’scritical need for economic growth and global competitiveness.1Finally, post-Castro Cuba will face not only a shortage of capitaland natural resources, but also a shrinking labor pool. To expand thesize of its workforce, it could raise retirement ages and/or increase laborforce participation among prime-age workers. However, both optionswould require major departures from the policies of the Castroera: Wages would have to be tied to productivity, thereby reversingthe Revolution’s commitment to reducing income inequalities._____________1 We recognize that increasing the resources Cuba devotes to its higher education systemruns counter to World Bank and Inter-American Development Bank (IDB) experience inthe less-developed countries, where investment in basic skills appears to have a higher developmentpayoff. However, we believe that our approach is better suited to Cuba’s economicsituation. Cubans’ basic educational levels are already high by most developing-country standards,and Cuba’s long-term economic growth will likely hinge on the availability of highlyskilled and professional labor.Moreover, an emphasis would have to be placed on promoting economicefficiency, thereby reversing the Revolution’s old commitmentto full employment. Thus far, the Castro regime has refused to takeeither step. Whether a weaker, successor government can reversecourse remains to be seen.Cuba’s Ever-Failing EconomyCuba’s economy, never in good shape, is now approaching a criticaljuncture. To stem the economic free fall after 1989, the Castro governmentopened the economy to foreign investors and rebuilt thetourist industry in order to recapture hard currency. For a while,these and other modest reforms helped stop the hemorrhaging, butby 2002 new signs indicated that the economy was slowing again.Indeed, unless Castro defies all expectations by further alteringcourse, he will displace onto his heirs the task of making the systemicchanges Cuba needs before it can achieve the sustained economicgrowth that can help legitimize a post-Castro government. It will thusbe left to a new government to raise labor productivity and stem corruptionin both the state and society. And the new government willbe faced with the equally formidable tasks of overturning the commandeconomy, ceding a measure of control to a revitalized privatesector, and transforming the island’s distorted industrial structure.An Unproductive Labor ForceAmong the key factors affecting the prospects for revitalizing theeconomy is Cuba’s highly educated but low-productivity labor force.The low productivity has been exacerbated by the declining state ofCuba’s capital stock, its shortage of investment capital, and its lack ofraw materials. But the Castro regime’s policies regarding full employmentand wages have also played a role. The commitment to fullemployment transformed open unemployment into rampant underemploymentprior to 1989, when Soviet economic support was available,and then worsened it during the Special Period, when the economywas at its lowest ebb. Thus, despite the closure of 45 percent ofthe island’s most inefficient sugar mills in 2002, the Castro regimehas kept the displaced workers on the state payroll. Setting wages accordingto a national pay schedule has further compounded theproblem of low productivity by divorcing workers’ wages from theirproductivity—a policy that has motivated poor work habits and createddisincentives for maximizing production among the labor force.The new regime will thus be faced with a long-term task of motivatingworkers anew through market incentives.A Repressed and Deformed Private SectorAnother impediment is the weakness of the small, deformed privatesector that will be left from the Castro era. The regime has resistedthe development of a healthy private sector, mainly because of Fidel’sideological commitment to socialism and his obsession with his placein history, but also because of other political calculations. His regimeis determined to prevent the rise of a middle class that may challengeits power, and to constrain the growth of income equalities that mayundermine regime support among state employees, Party workers,military and security personnel, and pensioners, many of whom mustsubsist on peso-denominated incomes.Bowing to necessity in 1993, the regime legalized selfemploymentin micro-enterprises to generate trades, crafts, and servicesthat the state was no longer able to supply and to provide newemployment opportunities. By 1997, the number of microenterpriseshad grown to more than 200,000. But when the economyshowed signs of recovery, and the self-employed showed that theywere enjoying substantial dollar incomes, the regime actively discouragedfurther growth of the fledgling private sector by erecting newobstacles. By 2001, the number of micro-enterprises dropped to anestimated 150,000. In addition, the private sector has become increasinglydeformed. The absence of a private distribution system hasled to the widespread pilfering of state stores and to the buying ofstolen supplies on the black market. Moreover, as a result of 40-plusyears of communism, the labor force lacks the kinds of trained managers,accountants, auditors, bankers, insurers, etc., that a robustmarket economy requires.A Corrupt Society and StateYet another obstacle to revitalizing the economy is the prevalence ofcorruption and favoritism. Most materials on the black market arestolen or misappropriated from state enterprises and warehouses. Insidedeals are commonplace between individuals and their governmentcontacts. Privileges are accorded to the nomenklatura (known inCuba as pinchos grandes). And the government selectively privatizesstate enterprises and creates new joint enterprises for the benefit oftrusted civilian and military loyalists assigned to run them.A Postponed Imperative: Restructuring the EconomyIf it wants to promote the island’s integration into the global economy,a new government will also have to transform the distorted industrialstructure that developed as a result of Cuba’s close economicties to the Soviet Union. The intertwining of the Cuban economywith that of the U.S.S.R. not only insulated it from the internationalmarket but also distorted it as a result of the extremely high prices theSoviets paid for Cuban sugar exports and the low prices that Cubapaid for Soviet oil imports (which Cuba could re-export to the worldmarket) and for other raw-material and industrial inputs. As a result,the Castro government long concentrated its resources on increasingsugar production, which reached levels of 7 to 8 million metric tonsin the 1980s, at the expense of diversifying the rest of agricultural andnon-agrarian sectors of the economy. The sugar industry itself becamedistorted under the artificially favorable conditions it enjoyed asinefficient sugar mills and unproductive sugar fields were kept inoperation.Absent Soviet support, sugar production thus began to dropsteadily beginning in 1992–1993. Moreover, the high cost of sugarproduction in Cuba limited its export options, because the cost ofCuban sugar exceeded the declining world-market price for sugar.Despite the restructuring of the industry that began in 2002, includingthe permanent closure of 71 of the most inefficient mills, productionhas now plummeted to a reported 2 million tons in 2003. A newgovernment will therefore be faced with the difficult challenge of furtherscaling down the industry and introducing other efficiencymeasures––including laying off workers––to make it more competitiveon the world market.Additional economic distortions will have to be overcome,which will be no less daunting for the new government. Obsolete industrialplants and equipment, much of it acquired from the formerSoviet Union and Eastern bloc, will have to be replaced. Domesticlinkages, virtually non-existent at present, will need to be promotedin order to bolster the small private sector and ease the economy’sheavy reliance on imported manufacturing inputs. If a market economyis to take hold and thrive, the rule of law, required to protectproperty rights and provide predictable and enforceable contract lawsand a secure environment for investors, will have to be observed byboth government officials and the public alike. These and other undertakingsare likely to take years, possibly generations, to accomplish.Policy Implications for the United StatesThe policies that the United States follows after Castro leaves thescene could have a major effect on whether Cuba remains underhard-line or reformist communist rule, falls under military governance,begins a democratic transition, or is gripped by instability andstrife. To help foster a stable, prosperous, democratic Cuba, theUnited States should observe the following policy guidelines:• Use the prospect of lifting the embargo (if still in effect) as leverageto move a successor communist regime toward a democratictransition. Lift the embargo if a democratically oriented regimecomes to power.• Work in concert with Canada and the United Kingdom, Spain,and other countries in the European Union in trying to influenceevents in a post-Castro Cuba along the lines of a democraticoutcome.• Avoid public postures that incite Cuban nationalism and workto the advantage of hard-liners. Cultivate informal military-to military contacts and use public diplomacy to make clear the United States’ willingness to respect Cuba’s independence, sovereignty, and dignity. But also make clear that Havana needs toreciprocate by respecting human rights and evolving toward amarket-based democracy.• Restore full diplomatic and trade relations once the Cuban governmentis committed to a democratic transition and offer economicand technical assistance to jump-start the economy.• Encourage the private sector, the academy, nongovernment organizations(NGOs), and especially the Cuban-American communityto become engaged and assist Cuba in embarking on ademocratic transition.• Offer to renegotiate the status of the Guantanamo Naval Baseonce the transition is under way.Cuba will be at a critical crossroads when the Castro era comesto an end. Cuba could become a “failed state,” in which case theUnited States would be faced with internal disorder and a humanitariancrisis on the island, and with uncontrolled drug flows and massmigration to the United States. Hence, the United States needs to offerthe Cuban people a new deal along the above lines, with the aimof not only avoiding a worst-case scenario on the island but alsohelping Cuba to move toward a more stable, prosperous, and democraticoutcome.