Are Changes to Central Planning Enough to Fix the Cuban Economy?

A Cuban farmer makes extra money turning the invasive marabou weed into charcoal for export. (14ymedio)

14ymedio biggerElías Amor Bravo, economist, June 18, 2019 — Central planning is the basic tool used by the Castro regime to control the Cuban economy. More specifically, it replaces the market as a tool for allocating resources while at the same time taking private initiative out of the economic decision-making process.

Since the establishment of the Central Planning Board (aka JUCEPLAN) in the 1960s, Cuban economic planning, based on the Stalinist model, has never been able to reach its targets. The sad memories of Che’s failed “industrial plans” and the unsuccessful push to harvest 10 million tons of sugar in 1970 stand as historic paradigms of the inconsistencies and inadequacies of communist central planning.

Now it seems Cuba’s new economics minister, Alejandro Gill, has come up with a new twist. In 2020, he says, “the plan will be based with a new concept: It will be developed without specific directives or limits.” He explains that this is because “it will be predicated the active participation of the workers in each company.”

But don’t get too excited. As long as central planning rather than the marketplace remains the tool used to allocate financial resources, the economy will still have all the same problems as before. Getting rid of the plan is a necessary condition for opening avenues to economic freedom but not enough to overcome the inertia and inadequacies that characterize the Cuban economy. The central plan is the cause, though not the only one, of the Castro-led disaster.

There is no point in making central planning the responsibility of businesses and workers without allowing them to make other decisions as well. I acknowledge it is a step in the right direction but it is not enough. But at this point, what’s the use in kidding ourselves? Taking economic planning out of the hands of communist bureaucrats — people who see themselves as better than the rest of us mortals at making decisions about what to consume, produce, import and export, and invest in — is not a bad idea. But I have the sense that at the end of the day, Mr. Minister, turning the central plan into some sort of — to use your words — “collective construction” intended to “identify potential opportunities in the nation’s businesses” amounts to more of the same.

In making this decision, the minister acknowledges something important. Basically, formulating a plan based on a global economic model from which the sector-specific directives would later be issued, requests for goods and services would be made, and the level of imports and exports would be predetermined make little sense.

The economy is much more than an isolated exercise in bureaucratic calculus. If you want to set up supply chains, you have to get rid of the so-called straitjacket and introduce objective, realistic and conscious decision-making methods. When it comes to doing this, nothing beats the market. A new mindset is clearly what is needed. Things have not been done this way in Cuba for sixty years but at some point you have discard what you cannot use and get to work.

The minister should know that, before embarking on this process, it is not enough to create a bottom-up plan. As long as certain structural reforms are not carried out, the results achieved from switching from a top-down to bottom-up approach will be negligible. Nor will they provide the efficiency necessary for a functioning economy.

I dare say that, without first carrying out the necessary structural reforms, this change could end up producing results even worse than those we have now. And it could generate numerous organizational problems for the economy. Given the very dramatic conditions in the country at the moment — among them, economic and legal restrictions and the impact of recent measures adopted by the United States — such a change would certainly not be advisable.

Before happily committing to any new bottom-to-top plans, to which President Diaz-Canel seems to have given his blessing, important decisions have to be made to guarantee a successful outcome. Among them are legal decisions involving property rights. I believe sixty years is more than enough time to conclude that the communist state’s monopoly ownership of the means of production has been one of the most negative factors impacting Cuba’s progress and economic prosperity.

It is the factor that most impedes improvements in overall quality of life and societal well-being. Given current conditions, there is no justification for all productive assets to be controlled by the state, or for the private sector to be limited to marginal activities such as small-scale self-employment and the long-term land leases.

The Cuban economy needs structural reforms and so the priority should be on restoring property rights and returning ownership of the nation’s capital and means of production to Cubans themselves. Privatizing the nation’s businesses and productive assets is necessary if the economy is to operate effectively again. There is no point in having bottom-up plans if those on the bottom lack the incentives, motivation and buy-in on the project for which they are working. Otherwise, they know they will never be able to take advantage of the fruits of their labor, or see the earnings from their work rise over time, or freely commit themselves to goals that have meaning for them, because they do not have ownership. It’s that simple.

Why work, why exert themselves, why dedicate time and effort to something that will not benefit them? We have to remove the Castros’ straightjacket and reorient productive capital and business towards the private sector, establishing a stable and respectable legal framework which would allow them to exercise their rights. This can be done quickly, as quickly or faster than the so-called revolutionary law-decrees that nationalized businesses after 1959. A couple of laws should be enough. Just transfer property rights to their owners and stop pretending once and for all that people’s assets should be controlled by the state and all the other communist nonsense.

The solution to the Cuban economy’s problems does not lie in government plans but rather, I strongly believe, in their elimination, or at least in a change to the planning process that will effectively tackle a chaotic technical situation in no one knows what to do. The solution lies in the field of property rights, in the idea that there must be private-sector economic players with decision-making power. They must be autonomous, independent of the state, people who can generate wealth for the benefit for their stakeholders. Modern and efficient individuals dedicated to a single principle: to provide the best possible service to their clients. This step is essential to correcting the badly damaged Castro economy. Without this step, there is nothing that can be done. The Chinese and Vietnamese did it and look at the results. Why not Cuba?


The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.