Cuba

From Economic Take-off to Collapse Under Castro

Jorge Salazar-Carrillo, Jorge Salazar-Carrillo, Andro Nodarse-Leon

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351524766
• Edition: 1
• Topic: Política y relaciones internacionales
• Subtopic: Política

This book is a study of Cuba's economic development under communism over the last fifty-five years. The authors find that Cuba's socioeconomic development has gone backward since the Cuban Revolution in 1959. The authors conclude that Fidel Castro's revolution has been an economic disaster for Cuba.

The book first outlines Cuba's economic position prior to the revolution. It reviews Cuba's rankings with respect to Gross Domestic Product (GDP) per capita in the 1950s and examines the strength of pre-Castro Cuba's foreign reserves and the health of its monetary system. It also presents pre-Castro Cuba's investments in health care and education and documents the island's development potential in the 1950s. The last few chapters describe the precipitous decline in all of these areas of Cuba's economy under Castro.

Despite the socioeconomic catastrophe of the Castro years, the authors envision a post-Castro Cuba, where this book can provide a benchmark to measure the developmental success that the Cuban work-ethic and entrepreneurial spirit can generate in a free-market system.

1

The Economic History of Cuba before 1950

Cubans are very proud of their country’s achievements as a free republic. This pride has sometimes led to lively exchanges among academics and professionals on the matter of why Cuba was in fact so distinguished among nations. One such exchange famously occurred in Washington, DC, between Felipe Pazos, first president of the Cuban central bank (Banco Nacional de Cuba) and the Englishman Philip Glaessner, whose PhD dissertation at Harvard was the cornerstone of perhaps the most famous book on the economics of the island at the time: Henry Wallich’s Monetary Problems of an Export Economy: The Cuban Experience 1914–1947.¹ In a debate between Glaessner and Pazos on the drivers of Cuba’s economic development, Glaessner went on and offered up a long list of intricate postulates to explain the island’s economic progress. As Glaesner finished, Pazos, who had been waiting to get in a word, quickly took the Englishman off of his pulpit with a quick punchline: Cuba’s developmental success, Pazos stated, was simply the result of it benefiting from the mysterious blessing of being a large island proximate to a prosperous continent. Quickly connecting Pazos’s comments to his own home country (the UK), Glaessner had no choice but to reply, “Ah, so true, so true.”

The mystery of Cuba’s economic development really started with the Indian population, so different from those of the rest of the Caribbean and the northern part of South America. The tainos and siboneyes that originally populated the island were sedentary, as opposed to the caribes, who dominated, by incursions and force, the rest of the territory and who were hunter-gatherers. Thus, Cuban primitive societies were more advanced. At the same time, however, the population of the island at the end of the fifteenth century was sparse, which facilitated the conquest by the Spaniards at that juncture. By 1510 the circumnavigation and conquest of Cuba had been accomplished and the first capital established in Baracoa (1511), its most eastward city, and very close geographically to Hispaniola (today the Dominican Republic and Haiti), which had been the initial choice of Columbus, but which was much smaller and was populated by fierce Indians. By the time the conqueror Diego Velázquez (under orders by Diego Colón, the governor of Hispaniola) became the first captain general of Cuba, the capital had been established in the most guarded and promising harbor city of Santiago de Cuba, from where Hernán Cortés, who had aided the former in the conquest of Cuba, was sent to Veracruz for the eventual conquest of Mexico.

The premier position of Cuba strengthened further when the city of Havana was founded in its northwestern coast, almost diagonally opposite to Santiago de Cuba, beginning in 1514, finally settling where it now stands in the year 1519. The city became such an important military and naval hub that it was dubbed “the key to the New World” very early after its inception. This was officially recognized by Regent Queen Maria Ana of Spain in 1665, when Havana’s coat of arms was approved to include a key in its design.² It was also from Havana that the expeditions of Cuban Governor and Commander of Florida Hernando de Soto originated into what is now the United States of America. Within less than a half-century later the similar expeditions of Pedro Menéndez de Avilés left from Havana as well.

As a result of the importance of Havana, and its close relation to Florida, it was continuously embattled by pirates, corsairs, and filibusters of British, French, and Dutch origins seeking to capture treasures from Spanish galleons. At the time, the routes for the Spanish Royal Fleets, which operated from and to the port of Cádiz in Southwestern Spain, branched into three as they approached Caribbean waters. One went to Cartagena in present-day Colombia, another to Portobelo in present-day Panamá, and the third to Veracruz, in Nueva España (New Spain), a vice-royalty, and presently Mexico. There they delivered foodstuffs and manufactured products from the mother country³ and loaded up with gold and spices in the former ports, and spices and silver in the latter. With that precious cargo onboard they converged in Havana, to jointly undertake the return voyage. Because of that important convergence, in addition to the attractiveness that it already presented to the buccaneers and naval agents of the contesting sea powers, Havana became fortified with three stupendous fortresses, abundant garrisons, and provisions, and the berthing of armed ships.

To understand the situation fully, and Havana as its centerpiece, it should be explained that the Spanish Royal Fleet returned to Spain with its precious cargo using the force of the Gulf Stream that passes north of Havana and borders the east coast of Florida up to St. Augustine, sharply swerving toward Europe at this point. Therefore, it was essential for the Spaniards to control activities in Florida, and so they did from the vantage of Havana, to the oldest American city of St. Augustine and its strategic fortifications along the Matanzas inlet (Fort Matanzas) and the castle fronting the city and bay (Castillo de San Marcos).⁴

All this explains the importance that early on was attained by Havana as a hub and entrepôt. As agriculture, commerce, and industry prospered, Havana’s government became the centerpiece of the Spanish colonies in the Americas, tying together, through seafaring lanes, the Vice-Royalty of Nueva España (Mexico), the Capitanía General de Guatemala (Central America) and the Province of Nueva Granada (Colombia, Ecuador, and Venezuela, including Panamá). One additional important factor that allowed Havana to gain even greater strategic importance, and also served as an important driver of urban expansion throughout the island beyond the seven cities (really villages in terms of today’s populations) originally founded by Velázquez, was the fact that Cuba was large and had abundant forests with high-quality wood. Cuban cedar was reputedly the best for battleships, and forestry became the basis for shipbuilding in what became the Royal Dockyards of Havana.⁵ As a result, Havana and Cuba became the biggest builder of military vessels in America, ranking as equal to the Spanish navy yards in Galicia and Vizcaya. This continued until the late 1700s, creating an abundant supply of carpenters, caulkers, and blacksmiths⁶ and turned Havana into “an unparalleled maritime city”⁷ during the sixteenth, seventeenth, and eighteenth centuries and “an important military and naval hub”⁸ known as the Royal Arsenal of the Navy, or alternatively the Royal Dockyard of Our Lady of Bethlehem. In the eighteenth century well over 30 percent of all the ships of the Spanish Navy were built at Havana.⁹ Although tourism was an insignificant part of the international exchange of goods and services at the time, the fact is that the Havana dockyards represented a tourist attraction, particularly during the launch or the careening of a ship at the Arsenal.¹⁰ This constituted an additional contribution to the strength of the Cuban economy during these centuries. After the British invaded and controlled Cuba in 1762, the novel yard had to be rebuilt when they left in 1763. This required four thousand laborers and substantial funding, being completed only by 1765. That year Havana was declared “primary port and naval station.”¹¹ The “renewed yard boasted four levels of tiers, one shipway for small vessels, two piers, a set of tackle blocks, a factory to make sails and a rigging loft, warehouses, a foundry, forges, hydraulic saw, a hospital, a prison gallery, a cemetery, the residential quarters of the commanding general, and many other facilities.¹² Its length was over one kilometer. The dockyard began to decline at the beginning of the nineteenth century, but it was still active until the 1890s, although the Colón, the last ship built there, was launched in 1852.¹³

It should be understood that Havana represented during this period about 40 percent of the population of Cuba. In fact, the census of 1794 calculated it as 44 percent. It was a purveyor of food, beef, green vegetables, and fruit for Spain.¹⁴ The city was also where tobacco was first cultivated, mostly destined for the city of Seville, the principal consumption point in Europe. Cattle ranching was the other important activity, which vied with the tobacco growers for the governance of the Spanish colony. As tobacco production doubled during the eighteenth century, even the ranchers became involved in what became the principal export product of the island, and its most profitable and famous (and indigenous) plant. The ranchers in turn were still actively exporting leather and beef, directly or indirectly (through the treasure fleets) to Spain.¹⁵ The sailors consumed basically jerked or dried beef during their voyages.

But at the end of the eighteenth century something new and different was brewing in Cuba that would justify the saying of Abbé Raynal: “The Island of Cuba alone might be worth a kingdom to Spain.” This had to do with sugar and its rapid expansion. So profound an influence it had over the island that “in the late 1820s Cuba had become the richest colony and the largest sugar producer in the world,”¹⁶ with the United States as its main trading partner despite Spanish tariffs. This was greatly aided by the demise of sugar production with the independence of Saint Domingue (soon called Haiti). Saint Domingue’s production of sugar had declined by almost one third between 1791 and 1802, and to practically nothing by 1825. Production significantly declined as well in Jamaica. As a result, the price of the sweet increased twofold between 1788 and 1795. And finally, many of the planters from the old Saint Domingue established themselves in and brought their sugar producing practices to the easternmost territory of Cuba.

Yet it has to be recognized that fertile grounds for this expansion had been prepared by the technology-minded creoles in Cuba, led by the Sociedad Económica de Amigos del País. The leader of the Sociedad, Arango y Parreño, brought the first steam-powered mill to Cuba in 1794 from Europe, although its application was not completely successful. But where this experiment failed, water wheels proved to be a success. As a result of the expansion of sugar, controlled mostly by the merchant and commercial classes, roads were built to cut transport costs to the port of Havana. Production spread throughout the island, spurred by the high sugar prices of the 1790s, and it seemed that “the Cubans now almost had the world sugar market in their hands.”¹⁷ After the Napoleonic Wars the production of sugar¹⁸ increased greatly, together with that of tobacco and coffee, which diversified still more the fundamental activities of the island. But most importantly, in 1818 the North American market was legally opened for the Cuban merchants.¹⁹

As the century moved on, the “wealth of Cuba between 1825 and the end of the nineteenth century grew to first-class levels.”²⁰ It depended in part on the newly attained importance of coffee until 1840, but overwhelmingly on sugar. Havana was its most important center of population, which according to the 1827 census reached 112,000 inhabitants, this made Havana larger than any city in the United States, with the exception of New York City, which in the 1820 census had a population of 123,706 inhabitants. In the countryside the sugar plantation experienced a complete improvement in technology, mostly on the industrial side, (the first sugar mill steam engine was introduced in 1794), attaining the form common in the twentieth century. The plantations expanded well outside the capital, based on extensive farming of cane, having as a consequence the “destruction of the great mahogany and cedar trees of Cuba begun by the navy and the builders of the Escorial.”²¹ The extension of planting, harvesting, transporting, milling and exporting of sugar cane all over the island led to levels of importation and adaptation of transport and industrial machinery that were well ahead of the mother country. Steamboats (1819), railways (1830s), port facilities, telegraphs (1851), warehouses, refineries, and modern sugar industrial mills provided a solid base for the expansion of a modern manufacturing and transportation mentality all over Cuba, which built itself on the shipyard experience that had continued from earlier centuries.²²

Many would probably question how all this could be possible given the Cuban Wars of Independence during the last third of the nineteenth century between the islanders and the Spaniards in the “ever faithful Island of Cuba,” as they used to say in Spain. The Ten Years’ War that started late in 1868 was mostly confined to the Eastern province, mostly Puerto Príncipe (Camagüey) and Oriente. These were vast expanses where the cattle industry, another major pursuit of the landed class in Cuba (although not as important as the major triumvirate of sugar, tobacco, and coffee referred to above) was predominant. Sugar being relatively unimportant there, it is not surprising that the record harvest ending in June 1868 of 750,000 tons (double the production in the 1850–54 quinquennium) was almost matched by the 725,000 tons of 1869, which was almost equal to the harvest of 1870 (by then Cuba produced 42 percent of the world’s sugar supply), while a new record of 775,000 tons was set in 1873. Even after the Western invasion staged by General Máximo Gómez in 1874 burned eighty-three plantations in Sancti Spiritus and Cienfuegos, just southwest of Camagüey, the 1875 harvest came in well over 700,000 tons. But the next three years felt the impact of the war in that region and in Oriente in terms of sugar production, although the crop recovered in 1879.

However, although the Ten Years’ War and the much smaller Guerra Chiquita did not significantly affect what was now King Sugar in the island, the early 1880s saw a retrenchment to levels that had been achieved twenty years earlier (the 1880–84 mean production was 527,400 tons per year), which was partly recouped in 1885–90 by an increase of over 150,000 tons per year over the previously mentioned five year average.²³ But there was a quick recovery in the 1890s, with bumper crops exceeding 900,000 tons yearly from 1891–1895, with the last year attaining a million tons for the first time.

What was behind the success in the last decade of the nineteenth century? With the end of the slave trade the merchants saw their finances deteriorate, which had been the wherewithal for the planters, although at high interest rates (over 20 percent per year frequently would be charged). But this was partially explained by the legal prohibition of encumbering the mills to pay for debts. But a new mortgage law introduced in the 1880s made this possible, adding land as well (befo...