The recently completed session of the Cuban Parliament gave the economy a privileged space. They released the financial results in 2013 and the proposal for the coming year, in addition to the State Budget Law for 2014 and an assessment by the Committee on Economic Affairs.
In the context of the desire for an economic model to update and create: what are we talking about when addressing economic growth and especially in relation to what development is? What is the path towards development in Cuba? What sectors of the economy need to be boosted? What is pending and what is at risk?
These and other questions led OnCuba to an exchange with the Doctor in Economics Juan Triana Cordoví.
Monica Rivero (MR): What is growth and what is development?
Juan Triana (JT): This is an old story in economic thinking. I would say that the development is one of the newest in Economics matters, it is from the first decades of the last century, then converted into a separate issue from the forties and fifties and has been expanding and enriching to the present, where it is very difficult to speak of development alone. Generally there are economic, social development … which tells us that today the development as such is a multidimensional matter or a fact, touching virtually every sector of life in a country and a person.
What is most widespread and best known is the basic idea of sustainable development, which is just the set of social, environmental and economic issues.
It is a concept that involves not only that economies grow, but people improve on their living conditions. UNDP has a concept to measure this, it’s called perceived good. That is, not only is that economies grow , but for people to improve their living conditions and they perceive it , which is difficult to measure, and it is a concept that has to be very flexible , because the perception of welfare depends highly on different countries and even within the same country.
Definitely part of a reality that cannot be denied: countries seeking development, there are different ways of understanding it and ways of measuring it.
The difference between growth and development is old. Since the forties, for example, in the case of Raúl Previch who was the first executive secretary of ECLAC made this difference by saying that developing was more than growing because it meant improving the living standards of the masses. In the case of Cuba, Carlos Rafael Rodríguez in the fifties made much emphasis on differentiating economic development and economic growth.
It has happened in the history of mankind where countries have grown, but have not been developed. Therefore, we can say that economic growth is a necessary but not sufficient condition for countries to develop.
In Cuba also for a time between the eighties and nineties the idea that it was possible to develop without growing spread, and that to some extent can be said that it is possible but under certain limits, because it is really very difficult for a country to systematically develop without growing, because it is also necessary to develop changes in technology, improvement in the living standards of the people, the quality of life for people, and for that you need to have to do that. You cannot improve from scratch.
The theme at the end is ethical, that is, how to achieve that growth is transmitted to the entire population, how to improve living conditions across the country. That depends on the governments of states, their socio-economic base, depends on the philosophy they practice…
MR: How does this perception of well-being behave in Cuba?
JT: Cuba is a very special case and sometimes it is very-I will use the term-funny. Actually it is somewhat paradoxical because when a group of indicators associated with the welfare and human development of Cuba in relation to other countries goes under review, it may be surprising.
For example, Cuba in the Human Development Index is conceptualized among countries in the high group (above that there is another group which is the more highly developed, where there are Sweden, Switzerland, and Germany …). That being said and the average Cuban is surprised because for us that perception of welfare is very rare, among other things, for being a part of that we have built, is almost genetic.
If one raises the search for any human development indicator, he notices that in Cuba there are things that the revolution solved forty years ago. So what for other countries would be a great achievement in terms of welfare, in Cuba it is an advantage already gained by all Cubans.
It is paradoxical because on the other hand Cubans believe that are living badly. We do not perceive this improvement, we do not understand it. However, the indicators are compared and it is totally different. Sometimes we do not realize that, although we spent a lot of work in many things, in others we spend none. That’s Macondo environment. One hand says “How bad your house in Cuba is,” but incredibly in Cuba 80 percent of the population owns their homes. It is one of the few countries that can display such a good index. So that’s awesome, and part of that perceived goods that we do not perceive it, because we already have it “genetically included”.
Free education , free health are true that sometimes people do not like to even hear and only realize them when they begin to suffer from a not free education or health because they are not things that are not noticeable by their existence, but by its absence.
It happens in Cuba many times, also because we don’t have a system that allows citizens to show how important that is. There are other countries where health care is free, but you go to a hospital and make you an honorary bill where it says how much the operation costs. In Cuba no one knows how much an X-ray costs or how much an operation. It is also true that not everyone goes to the hospital every day, but they have a guarantee for life and that is hard to keep that. For someone to go one day, it must be maintained daily.
The same applies to education. Suddenly we Cubans realized how important education was when our education system began to suffer from quality problems, but while it worked well nobody took care of that. No one ever thought that the state had to spend a lot of money to maintain the system of education, that we all Cubans pay for. A part of our salary is going to those who pay social funds education, but nobody thought of it until it started to fail and today is one of the problems we are all part of. Nobody gave a thought to the primary teacher or how little he earns until suddenly our students began to suffer deficits in quality of education.
Cubans, in human development issues, have set a very high bar. It is very difficult to improve from there because the improvement means a very high marginal cost, it’s like when you’re on top of a mountain and to climb another meter costs too much. There are countries that are very low and are very easy to improve, but there is a group of countries like Cuba where there are issues that are guaranteed and therefore make the improvement perceived cost much. It is one of the big problems we have with this development, the perception of well-being…
There are perhaps very Manichean interpretations on this matter. There is also a kind of popular culture or subculture that welfare is to live as many people live in the first world or live in soap operas, thinking that everyone can live well, not realizing that to some extent there is a big difference between absolute wealth from one country to another, or a kind of tremendous fiction in conveying certain ideographic constructions to people.
Today luckily there are other ideas, for example in Ecuador President Correa speaks of the good life, that’s not exactly to replicate the consumer culture. But Cubans do not usually see it that way, unfortunately. It has to do with the practice of everyday life that our life is.
MR: It also happens that we tend to compare things to what they should be, based on the objective reality…
JT: Maybe. There is always space to make better decisions and have always been bad decisions. Comparing with what can potentially be I think it is also valid, but you also have to understand that this is a small, poor, underdeveloped and blockaded country.
Many times we make this comparison mechanically, almost like an exercise in speculation. I do not really know how far something can be true.
Anyway I think it is good to compare to the potential. I think we’re in a process that, among other things, is trying to regain that and allow people to use that potential as much as possible, and that is creating conditions to require people to do it, but it is a process. We are moving towards that.
MR: Is this process called updating?
JT: That process has to do with these major changes being made to update and create new things. It is really opening up spaces to these potentialities of the people, little by little, step by step. Today as never Cuban citizens have better opportunities to apply this potential by choice. That was not the case a few years ago.
Sometimes I smile because many people say, “Problem is that the state pays me very little.” And I think that’s real: still wages in state sectors are very low; however, people have another option, which is to develop, even while remaining as a state worker, a cooperative work or self-employed activity and improve their income. And many people do not do though they are being able to.
MR: You have referred several times to the “structural weakness of bases” in Cuba and growth potential of the national economy are not “sufficiently exploited.” How would they be sufficiently exploited? What could be done and it is not done?
JT: We start from a situation almost always of sub optimal decisions, because of the blockade. That makes us often decide for options that may not be optimal. Leaving that established, we really have a structural weakness in economic growth that is associated, first of all, to the fact that we have a very weak production system with large gaps in technology issues. There is a large gap between our industry and agriculture in relation to the global state-of-art technologies. We also have a deficit in efficiency, productivity and work organization and incentives of all kinds. That happens in almost all sectors, unfortunately.
We come from a very egalitarian culture, there have been attempts to break up with it, or go changing it, but it will cost you time because, among other things, equality is comfortable.
To improve on these things and go changing conditions that make it structural problems in terms of growth has to do with that combination of factors, is not only a macroeconomic issue , that could be only one currency rates or industrial policies. It is much more comprehensive….
Sometimes Cubans, due to a historical distortion, are used to look for the solution, but these issues have no solution: there is a set of solutions that, combined, lead to improvement. One alone will not solve the problem. That makes it much more complex.
You have to take structural, economic, social measures, create institutions. There is no magic wand. It takes time because they are things to be built, not only upgrade, and involve the thinking and conduct of people. That phrase to change the mind, which has already become so hackneyed, talks about something that is the most difficult of all. Some people will never change; that can no longer change, which already passed the time to change. Also because they don’t want to change; they have adapted to a way of life and do not understand that to continue living they must change.
MR: What can Cuba bet its development on?
JT: Cuba must bet on what has been its most important product: the Cuban, a highly qualified, educated population. The ability we have to train people, things that other countries do not have. The values already established as part of the life of families: their children to study, for example. Our families all have a value set as their kids go to school. And when they finish school, is then when they have to think about work. In many other worlds are not, not only developing, but also in the developed ones.
It is the most abundant resource that we have in Cuba, is the most important of all, it is the most flexible. You have to bet on that we have qualified people and from there develop sectors. Which ones? All those where we can hook into global trends, from tourism to medical services. All of them, for me none is exclusive. I still believe that sugar to Cuba is a great resource and a great sector, but still believe that the biotech industry can be a great opportunity, as well as telephony, as the software industry or production of hydraulic tiles to export.
There is enormous potential to be cultivated, give it support and options, and can fill gaps that today SOEs cannot cover. I would bet on it. I think it’s an error in today’s dynamic, rapidly changing, globalized , to “get married” to just one sector.
Yes I stick to the qualified Cuban, that is in all sectors, is able to put together from a tour company to making machinery to build hydraulic tiles. That’s a great possibility that the country really do not grasp it directly, we need more open space. But we are on that path and we are learning it.
MR: What about the times? It has been said that we cannot afford an excessively long period, because of the expected cost in political and social terms for the credibility and sustainability of the system.
JT: Without a doubt. In fact the development is a goal that must be achieved in the shortest possible time. Cuba has been experiencing for fifty years, to paraphrase the title of a movie, a Cuban struggle against underdevelopment. We are still in the fight. What happens is that the development also has an expression on generations and generations have been in that battle. So I think that times are important and that we can achieve development in a timely manner is important, in a time that does not mean three or four generations. Therefore, the relationship between development and growth is also important, because we need to grow in order to develop at certain speeds and not others.
Even today we are growing at very low speed for the aspirations for development that Cuba has, for the improvements we have achieved, and the marginal cost we must incur to.
For example, we have the lowest infant mortality rate in our history. The expense that the country has to incur to lose a tenth is huge if you compare the costs you had to do to lose 60 to 50 percentage point loss, because you lose a tenth means ensuring special conditions in hospitals and out of hospitals and that costs a lot. Same goes with improving overall health by improving a service group.
Those are the goals of the tremendous development in a country that has already achieved many high rates of improvement in the living conditions of people.
Another example: all our children reach 6th grade, and almost all arrive to 12 degree or technical education. That is a tremendous effort. In Cuba we have spent to put three teachers for two children, there are schools with 6 students and have mobilized a large force. The question is: is it economically sustainable? Very difficult if you focus all on economy, but is part of the welfare of the people , then spend it on the welfare of these people , these families , it is a very large investment and it is being done by a very poor country that is also blocked . Sometimes we do not realize it because we are immersed in the daily life.
MR: Maybe it has to do with been repeated too often and badly…
JT: Maybe, maybe they think that the state is giving us things, when in fact the state is all of us, because we all contribute to giving us things : there is a portion of our salary we do not earn but goes to social consumption funds and it is distributed. Sometimes the very top-down approach is unfortunately very statist from a conception of the subject, I would say, outdated.
If you do the math and tell Cubans: “From your salary you get only the 40 percent, because there is a 60 percent to dedicate it to free education and put it in front of them and say these are the taxes you pay for that education in Cuba is free, so your grandchildren, your children go to school for free, ” I think the vast majority would agree. Unfortunately we never say it, we do not know how much of our wages goes to education, how much will go to health, which part will the elderly keep. It’s something that at some point we should also update.
We say it another way: “The state gives you” , but ultimately the State produces nothing , we are the ones who produce , these people produces that owns the means of production and all contribute to that. It is the best application of the phrase by Louis XIV L’ État c’est moi, I am the State, we all are the State. That sometimes we neither understand why we cannot get people to identify what portion of himself he contributes to the state and which part he does not contribute. No we get people to identify what part he is a creditor or debtor regarding the State. With other accounting perhaps we could do that, that each individual is identified in the State contribution and look at your individual improvement identified by the State, which is all of us. This is also participation.
MR: In your opinion, in Cuba till a few years ago the problems of distribution of wealth did not constitute a significant obstacle to growth, however, given the changes made in recent years, these problems must be considered. What are the risks of this for social policy?
JT: The risk is not recognized and not acting consistently with that in Cuba there is a stratification of income, partly due to work and one with others. This will continue to happen. When you open space for different actors, some will be successful and others not. It is unfair that the unsuccessful worker is not paid according to his success, as it is unfair to leave to the hand of god those who are not in a successful business. The state should take care of these failures on social justice, which should be more active, more directed. This is inescapable.
We must ensure that our retirees live better than we are living, but that we have to make a policy that those who do not need such support don’t get it. It goes through the ration book, for electric service, transportation passes … It is a very complex action, and implement is much more difficult. That does not need to update: this must be done again. We must create sufficient support for a country that has changed. You have to create rules, institutions, and norms. The danger lies in ignoring that.
I think there are many people today really within levels of political decision that knows it and they have been doing little things. You have to get to have a comprehensive policy on that.
MR: Who are defining economic policy in Cuba?
JT: As in every country there are decision makers who play them, are chosen, there is the state, the government, the party, the local powers. They are the important decision-makers; it is the way the vast majority of people want to participate in one way or another. It is the way this instituted in Cuba to participate. They have to improve it, because the country is changing.
I think in this process the guidelines was focused on had a real participation of the people. This document varied by the participation of the people. We must move on participation at the neighborhood level.
The Academy participates, studies, research, produce, discuss, and make suggestions. There’s Council on Science and Technology Commission of implementation, which scholars are constantly involved. As never before, the Academy is participating in these things.
MR: Have we ever made policies that contradict economic principles?
JT: Our aspirations have always been above the reality of our numbers. That’s not bad. The downside is confusing aspirations with reality.
For a long time the country experienced in special conditions, inserted into a socialist country with a very special relationship with the Soviet Union. That allowed having aspirations beyond their own capacities that the country had to maintain them. The positive balance is that we have the population we have today, we have improved the lives of the way it has.
The other part of this issue is that the economic aspirations are very high. Our economic reality fails to meet those needs, but neither is bad because ultimately forces us to be better in economics. It’s something that pulls us up.
MR: How does the economy see the possibility of a prosperous and sustainable socialist model?
JT: I do think it is possible; it is also a phrase that allows us to put together a national vision. It synthesizes the aspirations of the Cuban people: be prosperous, remain socialist and that it can be sustained over time. I am among those who think that the majority of the Cuban population is still identified with what has been known as socialism, in that social aspect, and do not want to give it up.
I do not think being successful is an unattainable goal; in any case it is hard, difficult, high. But it is achievable. It requires doing too many things and changing many others. I think we are playing a part. We are reaching a much more difficult and sensitive stage where maneuvering spaces are little ones and where the dangers of committing a strategic error would have a very high cost. We have progressed from the most obvious and basic things, to changes that increasingly require more fine tuning, for those same costs , because of the depth involved in these transformations.
Socialist, prosperous and sustainable: when you walk inside there is plenty to decode both wondering what is Cuban socialism and what should be, what is to be sustainable, what is to be prosperous in Cuba and what should be, how to secure its sustainability. There is a lot to work there, but it is certainly a magnificent vision of building a country.
MR: At a given time, people thought that prosperity contradicted socialism?
JT: Yes, there were times when things like that spread as part of a philosophy that have been transformed.
Prosperity, as a country’s, as a family’s, as individuals’, is a value that must be spread and get people to see it as part of their goals, both individually and collective.
MR: What are some of these profound changes?
JT: I would say there are several; one is announced, monetary and exchange rate unification. It is a profound measure, which will have advantages and costs. The transformation of Cuban enterprise system would be another: make our companies to be really companies. It is a culture that we have. But we must do it if we want to be good, if we want to compete with the world and have our own space in the world.
MR: Excuse my wording, if you could remove some of the Cuban economy, what would it be?
JT: Not in economics, but in general of Cuban society: the tendency to extirpate unanimity, the trend to the simulation and the tendency to conformism. Those three are a big drag on Cuba.
MR: What obstacles does Cuba face to development?
JT: First, our own structural deformation, and second: the U.S. blockade, third: our aversion to risk in general. In addition to these three trends I said.
Already in economic terms: macroeconomic distortions as exchange rate and monetary duality weak positive incentives, low national saving, low rate of accumulation and investment … Logically, this technological gap that separates us from the trends that mark the lead in the world .
Cuba has many opportunities and obviously has tremendous challenges. But overall we are experiencing a period of significant change. My vision is positive especially since there are many open opportunities to improve, to move the country forward. That goes from the potential that our country has a highly skilled-not-fully exploited population to the fact that Cuba is still a virgin country in many things that can be developed by both companies and the Cuban population as capital from abroad.