The Need for a Cuban Middle Class / Dimas Castellano

Dimas Castellano, 15 April 2016 — Economic and social stagnation in Cuba are related to the lack of a middle class. To defend this thesis and promote debate, I submit the arguments below.

According to Karl Marx, social classes are structured around the ownership of the means of production, while Max Weber saw it from the position of a market that defines access to goods and opportunities. Within this structure, which ranged from the high bourgeoisie to the proletariat, there was the middle class. Since it did not have large amounts of capital, its power and wealth derived from direct participation in business management.

Based on a culture of personal effort, hard work and sobriety and given its beneficial role in economic and social development, the middle class thrived after the 17th century liberal revolutions in England and spread to other countries — particularly the United States — well into the 20th century. There, technical innovations such as the production line made the price of manufactured goods cheaper, raised salaries and created a dynamic economy, which resulted in an improved quality of life and the rise of the American middle class.

Its origins in Cuba date to the 16th century. In conjunction with the emergence of large cattle ranches, a class of small farmers arose, which formed the basis of Cuban national identity. Its growth accelerated with the increased demand for sugar, which led to the collapse of Haiti at the end of the 19th century. This in turn led to the transformation of a large proportion of cattle ranches into sugar plantations and an increase in the number of sugar mills.

However, the introduction of modern machinery and the construction of large mills spelled doom for small producers. This caused a split between agriculture and industry, which gave rise to the colono, a system dedicated exclusively to the production of sugar. This concentration of property ownership increased at the beginning of the 20th century with decrees issued by the government of occupation, which authorized the purchase and expropriation of land for the construction of railroads and new mills to the detriment of small and medium-sized farms.

A parallel process was generating a countless number of small production facilities, shops and services from which a national business class emerged that became an important economic sector during the first half of the 20th century

Cuba’s business community — a sector recognized in the constitution of 1940, which envisioned the state complementing rather than supplanting private initiative — provided the country with one of the three highest standards of living in Latin America. The constitution’s weakness was the absence of commensurate laws that would have allowed for the kind of real reform that would have led to diversification in agricultural property ownership.

In pre-1959 Cuba micro-businesses (those with ten employees or less) predominated, followed by small businesses (ten to forty-nine employees) and medium-sized businesses (fifty to two-hundred fifty employees). Of the roughly 2,300 industrial establishments of that period, half were micro-businesses, a figure that speaks to their broad reach.

In October 1960 the revolutionary government nationalized nearly all Cuban industries that employed more than twenty-five people. The 1959 and 1963 agrarian reform laws brought more acreage under state control than that of all the large estates combined. And the Revolutionary Offensive of 1968 dealt the death blow to tens of thousands of small private businesses which had managed thus far to survive. Their owners were replaced by bosses and administrators who did not share their interest, knowledge or business backgrounds. We are all too familiar with the results.

The failure of its nationalization program forced the government to implement a system of private sector employment under the euphemism trabajo por cuenta propia [literally translation: employment through individual account].*

In October 2010 there were one-hundred seventy-eight authorized types of self-employment. Today there are two-hundred, almost all in the service sector. The number of self-employment licenses went from 121,000 in 1994 to 165,000 in 2005. Today that number is 500,000. This increase along with previous economic reforms have turned this sector into an embryonic new Cuban middle class.

The way to turn this possibility into reality requires freeing the economy from political obstacles; increasing the number of micro, small and medium-sized businesses to include all areas of agriculture, manufacturing and service; establishing Cubans’ right to own property; providing them with legal protections and the freedom to buy, sell and interact with other foreign and domestic producers; motivating them with low tax rates and bank loans; creating a wholesale market, providing them with free Internet access; and instituting freedom of association in order for them to defend their interests. All of which depends solely on the Cuban government.

Creating a middle class was a constant concern throughout Cuban history. In 1808 the bishop of Havana, Juan Jose Diaz de Espada, outlined a system based on a diversified economy of small farms. In 1832, Jose Antonio Saco proposed converting slave plantations into small agricultural plots. In 1857, Francisco de Frias, Count of Pozos Dulces, stated that Cuba should be the country par excellence of small plots and farming on a smaller scale. Martin Morua Delgado, proposed democratizing land ownership. Enrique Jose Varona was a proponent of small farms and encouraged a national middle class. Jose Marti, who defined a rich nation as one with many small land owners, said that it is not the country with a lot of wealthy men that is rich but rather the one where each man has a bit of wealth. Manuel Sanguily, who realized that taking land out of the control of Cuban hands was a blow to nationality itself, submitted a bill to the Senate on March 3, 1903, that prohibited “the sale of lands to foreigners.”

How then does one view the Cuban economic landscape of 1959 as described by the journalist and editor Lisandro Otero in interviews with the country’s business leaders and directors at the time? Their comments shine light on the thinking of that sector, which was swept away by the revolution. Due to space limitations, I am citing excerpts from four of them below:

— Pepin Bosch, president of Bacardi, replied, “I have always had great faith. Cuba is not a poor country. It is past government leaders who have been impoverished by a lack of honesty and competence. They have been incapable of achieving anything near the level of national development that private industry and agriculture have.”

— Victor Pedroso, President of Banco Pedrosos, commented, “In a recent meeting between Prime Minister Fidel Castro and the banks, we discussed agrarian reform, the industrialization of the country and the National Institute of Savings and Housing… What is undeniable is that, if all these plans are implemented in a farsighted and well-studied way, they will achieve greater prosperity for the Cuban people… By adopting new investment measures, the public will learn how to invest, how to do business and in turn gain the satisfaction of having contributed to the collective well-being.”

— Enrique Godoy, CEO of the Godoy and Sayan Organization, noted, “Honesty and the ability to unfailingly instill confidence are the two vital factors for the development of national wealth, capital and employment… Now more than ever before, I envision the development of a middle class: a large consumer of all types of products and services, one that enjoys a high standard of living, constant advancement and the virtual elimination of unemployment.”

— Julio Lobo, the majority shareholder of 11 sugar mills, said, “With an honest, capable and progressive public administration, Cuba will be one of the richest and most developed nations in the world. It’s only natural that the Communists would try to infiltrate the new government and its agencies, as has happened even in the United States and throughout the world. But with a capable, honest and progressive administration, it will be difficult for the Communists to find an opening.”

The level of development prior to 1959 cannot be explained without the existence of micro, small and medium-sized businesses or a national middle class. A new middle class can be justified by the current economic stalemate, by the role the middle class played before 1959 and by the lack of arguments for its absence.

*Translator’s note: The term, which is unique to Cuba, is almost always translated into English as “self-employment.” The common term for this in Spanish, autoempleo, was purposely avoided by Cuba’s communist government.