Markets in Cuba and the former Soviet UnionThis panel was chaired by Al Campbell, an ex-SWPer who now teaches economics at the University of Utah which is quite an anomaly. The economics department here is reputed to be one of the most Marxist-friendly in the country, while the state of Utah is also the base of the notorious anticommunist and racist Mormon sect.
Dave Kotz spoke first on markets in the former Soviet Union. Kotz is the co-author of "Revolution from Above," with journalist Fred Weir, which is about the capitalist transformation taking place there. Based on the powerful analysis made by Kotz, I would recommend that everybody rush out and buy this book. And if you, like me, already own a copy, don't waste any time and begin reading it. Doug Henwood has a short piece in a recent Lingua Franca survey touting this book as the most important he'd read in the past year on the global economy. And if that recommendation ain't good enough for ya, I say nuts to ya.
Kotz made the point that a market economy is not the same thing as a capitalist economy. When the first term is used, the whole question of PRODUCTION tends to get lost in the shuffle. When Soviet economists first began to become recruited to neo-classical economics in the 1960s, the lost track of this distinction and the results were catastrophic for the Russian people. He added, however, that this might not have made a difference to them because the top Soviet officials never saw capitalism as a way of lifting up the Russian people, but only as something that would benefit them. By all objective measurements, the Soviet economy was functioning quite well up until the mid-70s. What this upper crust of the officialdom was reacting to was not poor performance, but their own class interests.
It is certainly correct that markets have "worked" in the former Soviet Union based on the proliferation of small banana stands in the early years of the Yeltsin regime. Small entrepreneurs made contact with foreign wholesalers and bananas flooded into the country. As the supply increased, the price went down. Unfortunately, the true measure of an economy is what is being PRODUCED and by this measure the fSU was about to collapse.
The most dramatic proof of this is that fully one-half of all households are self-provisioning. They grow food in their own backyard in the same manner that peasants did in precapitalist Europe. The problem is that one can simply not supply one's daily nutritional needs through a tiny cabbage and potato patch in the backyard and millions of Russians go to bed hungry each night.
Production in the fSU collapsed because Soviet enterprises were geared to central planning and when central planning disappeared, they lacked the survival mechanisms necessary to make the transition to capitalism. These firms were generally monopolistic. They also were the economic hubs of the towns and cities that they were built in. Social supports such as healthcare, childcare and education were intimately linked to the plant. When the plant died, nothing came along to replace them.
Very few of these plants were profitable or meant to be. Financing was automatic, as was marketing. Each had a steady supply of both raw materials and purchasers. By the criterion established in 1917, they were successful. By capitalist criteria, they were failures and shut down. Foreign companies have filled the gap and mass unemployment has set in. Kotz remarked that the Chinese have observed the fSU's troubles and are reluctant to privatize right now, because of the social and political costs. What this means is that I was probably way too negative in my assessment of the CCP's attitude toward capitalism and that Henry Liu was more correct.
Kotz argues that the Soviet economy was closing the gap with the west through the 70s until it went into a slump around 1975. That year the Soviet economy was rated at 50% of the west's from the standpoint of productivity. This slump was possible to overcome within the parameters of socialism, but the ruling bodies had already begun considering dumping the system for capitalism.
The most interesting points were made around the question of innovation. Kotz makes a convincing case that competition such as the kind that exists in the Adam Smith model is HOSTILE to technical innovation. Capitalist firms would under-invest normally because their competitors can easily mimic the new improvements without undergoing the same expenditures. In reality, monopolistic firms are generally the ones that promote R&D, especially those that receive tax subsidies or have ties to the military. Bell Labs was a major innovator for many decades, but as soon as the phone companies were broken up, Bell Labs switched to market research from pure science or engineering. The implication for socialists is clear. Socialism, rather than capitalism, is potentially a source of rapid modernization and progress rather than capitalism. Kotz mentioned that the most extensive development of these ideas is contained in Pat Devine's articles and books.
Frank Thompson spoke next on the completely opposite approach to markets taken in Cuba.
He described the context in which Cuba has introduced market elements, but not capitalism. When the USSR collapsed, 85% of Cuba's trade disappeared. The response of the Cuban government to this calamity was first off not to liberalize the economy, but to actually tighten it up. Rationing was introduced to make sure that everybody had equal access to food and other consumer necessities.
Steps were then taken to introduce elements of private enterprise, but they were done with great caution. State ownership of production was maintained, while joint ventures with foreign companies was done in a manner that was relatively disadvantageous to the capitalist investors. They have to deal with state labor contractors, who ensure that Cuban workers are not super-exploited as they are in places like El Salvador or the Dominican Republic. As far as Cuban state firms are concerned, they now have the right to buy freely from capitalist firms and sell on the open market.
The sugar industry has not performed well in recent years, but this is more a function of declining commodity prices worldwide than Cuban mismanagement. The pharmaceutical industry is one of the most innovative in the hemisphere and enjoys the kind of support that the American oligopolies enjoy. The produce goods for the third world market and try not to compete with imperialist giants such as Pfizer.
Agriculture has been privatized extensively but has taken the form of cooperatives rather than individually-owned farms. Furthermore, since tobacco and coffee production lend themselves best to smaller, more labor-intensive, operations, they have meshed well with the forms of property ownership encouraged by the Cuban government.
Cuba has recovered from the disaster that befell it when the USSR collapsed, but its per capita income is still only 1/3 of what it was that year, around $2000. Cuban economists believe that it will take another decade to recover and one can only hope that a successful revolution in a more advanced country might relieve pressure on the island.
Unfortunately, another invited speaker, Luis Aguilera of the University of Holguin in Cuba, had been prevented from entering the US. He would have spoken about his major research topic, the impact of markets on the Cuban working class.
The final speaker was Al Campbell, who presented some highly revealing statistics some from the Gallup Poll based in Miami. It reported that 69% of Cubans considered themselves revolutionaries. This was during the lowest point of the economic collapse. 58% thought the Cuban revolution had produced more achievements than failure, while 31% held the opposite view.
He discussed what a double-edged sword tourism is. While it has produced material benefits to the island in terms of employment and as a supply of foreign currency, it has had negative ideological effects. The message that tourism conveys is that other countries have money to spend in poor Cuba because they have capitalism.
Al made a convincing case that the market has a much narrower base in Cuba than is commonly perceived. Only 3 percent of firms operating in Cuba are joint ventures. Less than 2% of Cuban workers are employed in the tourist industry. Less than 5 percent of Cubans are self-employed. 300 thousand Cubans belong to co-ops, out of an agrarian workforce of 4.5 million. Furthermore, the presence of the dollar has not automatically been at the detriment of Cuban production. If you visit dollar stores in Cuba, you will discover that nearly half the goods for sale are made in Cuba.
During the discussion period, Rafael Causa from the Cuban Mission to the UN made the case that Cuba introduced markets because it had no choice. He also explained that the embargo has been tightened in recent years, despite the perception that trade with Cuba has been relaxed.