The New Cuban Social Contract

I

Ever since Jean Rousseau presented his Theory of the Social Contract, it has become a foundation for modern societies. Its essence was that all citizens, free and equal, could come together to manifest their will toward a common agreement (social contract), expressed in the concept of general will. According to his thinking, the rules of association (laws) must be the result of public deliberation, a source of sovereignty; therefore, laws would not be fair if their deliberation does not respect the common interest, or if citizens do not accept the rules. In any time and place, substantial reform processes and revolutions often end in the adoption of new forms of social contracts.

The triumph of the Cuban Revolution generated a new social contract on more democratic bases. These legitimized the new revolutionary state and called for: popular participation, the state to guarantee social justice, and the defense of national sovereignty.[1] The Fundamental Law of 1959 modified the Constitution of 1940 and broke with the old status quo by granting broad powers to the Revolutionary Government, among them, the legislative powers of the old National Congress.

In that first stage (1959-1970)[2], popular enthusiasm seemed to have no limits, and was boosted by the extraordinary socio-cultural advances of the majority. Its catalyst was the Commander-in-Chief, a charismatic figure whose fiery words cried out for radical positions in defense of national sovereignty in the face of aggressions from the United States government and its internal and external allies.

With conditions resembling a social laboratory, and as a place under siege at the time, a large-scale social experiment began abandoning the logic of the market in pursuit of an almost absolute centralization of income in the hands of the Revolutionary Government. These funds were intended to meet defense needs, solve serious, historically forgotten problems, and level the great social differences in a country that had, in 1958, one of the most productive economies in the region.

Breaking away from the consumerism of the previous society, the egalitarianism in distribution and consumption, the direct distribution of goods and services, coupled with a daily growing exposure to guerilla asceticism and militia uniformity, served as the foundation for the new social pact between the working class and its revolutionary state. This state prided itself as being “from the humble, by the humble, and for the humble.” In 1965, the initial socialist economic management systems (Economic Calculation and Budgetary Financing) were abandoned for the implementation of the Economic Registry System, making way for a Creole communism.

Breaking away from the consumerism of the previous society, the egalitarianism in distribution and consumption, the direct distribution of goods and services, coupled with a daily growing exposure to guerilla asceticism and militia uniformity, served as the foundation for the new social pact between the working class and its revolutionary state. This state prided itself as being “from the humble, by the humble, and for the humble.”[3] In 1965, the initial socialist economic management systems (Economic Calculation and Budgetary Financing) were abandoned for the implementation of the Economic Registry System, making way for a Creole communism.

In this way, the State presented itself as the owner, employer, and universal provider, enhancing its paternalistic image as the benefactor of society. This social representation was accepted by the general public because a significant portion of nationalized funds were returned to citizens through large and effective social consumer funds (education, health, social security, recreation, etc.)—the famous gratuities of today. Additionally, the low prices of basic necessities, sold in the regulated market for food and industrial products, made it possible to satisfy the basic needs of families through wage income while maintaining high levels of equity consumption that served as the basis for  political unanimity.

During the stage of Cuban Real Socialism (1971-1991), a new social pact was imposed—a Cubanized copy of the Soviet model— embodied as the Socialist Constitution of 1976. It outlined the powers of the Party/State/Government as a unit, with the same people directing all three. Economically, it welcomed material stimulation for workers based on a distribution according to work, both by way of wages and collective awards according to company level, while promoting a large, complementary (parallel) market that allowed the systematic realization of additional income for workers. During this period, the high growth rates of global socialist products – determined by Cuba providing the entire socialist bloc with sugar at preferential prices – provided a sustainable and equitable quality of life for Cubans. This ensured most citizens could realize projects based on their personal improvements in their fields of study and work.

The advent of the crisis in the 90s (known as the Special Period) began the third stage of the revolutionary process. The sudden economic debacle shattered the old social conscience and created the so-called “crisis of values.” This was due to the combined blows of the fall of the socialist system, the intensification of the US embargo, and a centralized, retrograde model of bureaucratic management with innumerable factors that hindered productivity.

This phase weakened or disappeared the economic bastions of the social contract established in the 70s and 80s, and a new mixed society emerged, where the previous socialist values were mixed with those of emerging sectors: state capitalism in its various forms (joint ventures, associations, foreign exchange wholesale and retail trade networks, etc.); small mercantile producers (farmers, transporters, the self-employed, etc.); and the flourishing, though little studied, underground economy, where corruption and savage capitalism reign.

It took until August 1993 for the government to create the Ministry of Finance and Prices (MFP), headed by José Luis Rodríguez, and begin taking anti-crisis measures that included the legal circulation of the U.S. dollar. Remittances from abroad surged but increased the income of only part of the population and State, while a great majority continued in poverty.

The sad events of the “hot summer” of 1994 and the Rafter Crisis culminated in the signing of a Cuba-U.S. migratory agreement and adoption of measures for decentralizing the economy and opening it to foreign capital. This led to a slow, but sustainable recovery on endogenous bases. Since then, important economists and other social scientists have proposed transformations to put the country back on the path of growth and development.

II

In the mid-1990s the State socialist model seemed to be transforming into a more decentralized, flexible and participatory one; however, the rise to power of Hugo Chávez in Venezuela (1999)—a friend and disciple of Fidel—created high expectations in Cuba of a return to a traditional centralized and top-down model. An ally reappeared that was willing to supply Cuba’s demand for oil and investments in exchange for professional services that aided in missions for social improvement. At the end of that year, the kidnapping of Elián González in Miami originated a massive campaign for his return that began a new stage of the process: The Battle of Ideas, which would last approximately until 2006.

The economic recovery driven by preferential relations with Venezuela caused changes within Cuba. GDP grew to reach 1989 levels in 2005 thanks to a combination of two factors: the abrupt jump in income, aided by the value of free services and subsidies to the population, and the increase in prices for professional services. Internally, this was due to high State demand for the Battle of Ideas programs, and externally, due to requests from progressive Latin American governments. As of 2004, this service displaced tourism as the locomotive of the Cuban economy. The mirage of transforming Cuba into a service country gave value to its central power.

Internally, many of the decentralized channels opened in the mid-1990s were closed, and in 2004, the introduction of the CUC currency further excluded the dollar. Additionally, a controversial 10% tax was imposed on the dollar to discourage the entry of remittances in that currency. Likewise, all the country’s currency was centralized in a single State Revenue Account that the Currency Allocation Committees distributed based on the government’s criteria.

In 2006, a momentous event occurred for the Cuban status quo: President Fidel provisionally delegated his position to Raúl Castro while he recovered from a surgical intervention. Two years later, he did it indefinitely. The Commander-in-Chief ceded leadership to the General-President.

The change was seen immediately at the end of the Battle of Ideas with: the creation of commissions to diagnose accumulated economic and social problems; the promise of “structural and conceptual changes” in a depressed agricultural sector; and the generalization of the so-called Business Improvement System, a form of management developed by the armed forces from capitalist experiences. In 2007, the long-awaited reforms to the Economic Update Process model began in order to “find ways to eliminate obstacles to the development of productive forces” and to build a prosperous and sustainable socialism.

After the global crisis in 2008, it was imperative to boost national production. To do this, Raúl restructured the group of hegemonic power in the partisan/state apparatus with the removal of the two main young leaders: Vice President Carlos Lage and Foreign Minister Felipe Pérez, along with another dozen other senior officials mostly from the so-called Commander-in-Chief Support Group. After the purge, he placed trusted military personnel in key administrative positions and empowered the military holding company GAESA.

In December 2010, Raúl issued a dramatic ultimatum to the National Assembly: “Either we rectify, or we sink.” His message served as a slogan for the “Economic and Social Policy Guidelines of the Party and Revolution” project, in addition to everything agreed upon in the VI Congress of the PCC (2011). However, ten years later, many of his criticisms related to the management of the Party/State/Government remain unresolved and could well be repeated in the next VIII Congress.

The national debate around the “Guidelines” project (November 2010-April 2011) facilitated public deliberation on how to overcome the critical situation without renouncing sovereignty or socialism. But for years, these questions continued to hang like the sword of Damocles on the pressing new Cuban social contract: how did the state-merchant consider it fair to raise prices and rates to obtain greater profits while indefinitely postponing the right of workers to get paid a salary commensurate with the increase in the cost of living? If work is inefficient because the employer-state does not pay stimulating salaries, because if it did, prices would skyrocket in a growing inflationary spiral, would we then be faced with an unsolvable aporia in socialist frameworks in the style of: who came first, the chicken or the egg? Can the economy work effectively with two currencies and different exchange rates?

These contradictions began being resolved only after the implementation of the Regulatory Task due to the global COVID-19 crisis and the Trump administration intensification of the embargo.

III

Despite the good news that arrived between 2014 and 2016 (the foreign investment law, Putin’s visit where he cancelled the debt and resuscitated mutual trade, the resumption of diplomatic relations declared by Raúl and Obama, and an agreement with the European Union to renegotiate the debt with the Paris Club), the foundations for the new model and its assumption in the praxis of the Party/State/Government took too long and the train of reforms imposed the slow and zigzagging gait of the slogan: “Without haste but without pause.”

In April 2016, the VII Congress of the PCC approved the “Conceptualization of the Cuban Economic and Social Model of Socialist Development” and recognized that only 21% of the 313 Guidelines had been implemented. In 2017, Donald Trump arrived at the White House accompanied by the most reactionary sector of the Cuban exile community, which made it more difficult to execute the planned transformations.

The most important measure taken during the past decade has been the expansion of the non-state sector, though the lack of a corresponding wholesale market and bureaucratic obstacles hinder its growth. This measure brought one of the biggest victories over the embargo: the entrance of an underground investment fund in MLC, (freely convertible currency)—calculated at around 50% of total remittances—to finance private businesses. In agriculture, farmer and cooperative production has been established as the largest food producer and has contributed decisively to reducing the inflated State sector workforce.

After April 2018, as Miguel Díaz-Canel was ascending to the presidency, airs of change and renewal blew through Cuban governance, despite his motto: “We are continuity.” The main result was a massive debate around the new 2019 Constitution, with an article that includes more democratic and participatory content—in particular, the recognition of the socialist rule of law—while keeping important obstacles to the bureaucratic socialist model in the form of intangibility clauses that disqualify it from being a radically new social contract. Notably, article 3: “The socialist system that endorses this Constitution is irrevocable,” petrifies the current status quo by preventing open doors to other economic, social, and political models that would lead to a less bureaucratized and immobilized society, in addition to making it more dynamic, democratic and participatory.

Trying to undergo these transformations will be the task of all those who aspire to establish a new social contract that, while preserving socialism as a system, abandons bureaucratic statism as a model, reanalyzes the role of trade unions and the labor movement in the country, guarantees freedoms of expression and association, empowers civil society, includes the right to strike and publicly demonstrate, and provides mechanisms to mediate relations between employers and workers.

In the current state of Cuban society, the need for a new social contract that overcomes bureaucratic hegemony will not be resolved with general guidelines, some constitutional rights, or a new political discourse. Deep transformations in economic relations and overarching structures are required to remove from their positions of privilege the current high and middle level bureaucrats, who today stand on the rights of the people.

Mario Juan Valdés Navia (Sancti Spíritus, Cuba, 1961) is a historian, Doctor in pedagogical sciences, researcher, professor, and essayist. He has published the books: El manto del rey (Ediciones Matanzas, 2019), Fernando Lles and the retail group of Matanzas (Ediciones Matanzas, 2020) and José Martí, Vision of History (Editorial del Centro de Estudios Martianos, 2020). His texts on history, Marti studies and didactics have appeared in books, scientific and cultural magazines, as well as Cuban and foreign websites, particularly in the digital medium La Joven Cuba. He is a visiting professor at universities in Brazil, Haiti and El Salvador and has obtained several awards for his essay work: best essay published in Matanzas magazine (2014 and 2019); Honorable Mention (2015) and Prize (2017) from the magazine Temas y Fundación de la Ciudad de Matanzas 2019.

[1] Julio Guanche: La participación ciudadana en el Estado cubano, Ediciones CLACSO, Buenos Aires, 2011.

[2] Fernando Martínez has compartmentalized the revolutionary process in three stages that I assume: 1959-1970; 1971-1991; 1992-…See: Desafíos del socialismo cubano, ed. CEA, La Habana.

[3] Fidel Castro “Discurso en el entierro de las víctimas de los bombardeos”, 15 de abril de 1961. Playa Girón. Derrota del Imperialismo, Ediciones R, La Habana, 1962, t.1, p. 76.