Thursday, June 02, 2016

Flora Sapio: "Comment to the Cuban 'Conceptualización del Modelo Economico y Social Cubano de Desarrollo Socialista'"

The recently concluded 7th Congress of the Communist Party of Cuba (PCC) produced little by way of surprises.  The tone was set by the First Secretary when he suggested that a slow and steady course, with little deviation, should be the guiding principle of the Congress. It is with this in mind that one should consider one of the principal documents that was produced by the 7th PCC Congress, the 'Conceptualisation of the Cuban socio-economic socialist development model' ("Conceptualización del modelo económico y social Cubano de desarrollo socialista"), which is intended to complement the Guidelines (Lineamientos) of the 6th PCC Congress, and provide the theoretical foundation for its further implementation.  Adopted in principle, the Conceptualización serves to answer the question: what sort of theoretical model will guide the development of Socialism in Cuba. The Conceptualización is of particular interest for its potential divergence from the construction of Chinese post-Soviet Socialist Market theory within the context of socialist modernization.

These two distinct views of socialist modernization deserve some attention, if only because of their potential influence within developing states whose relationship to the dominant normative framework of markets based globalization may not be entirely embedded within their social, economic and political systems.

To that end Flora Sapio and I offer some comments and analysis of the Concepotualización

3. Flora Sapio Comment to the Conceptualización

 This post includes Flora Sapio Comment to the Conceptualización.

Author's note

The act of commenting on the political, social or economic situation of a foreign country raises the problem of the role - overt or covert, conscious, half-conscious or unconscious - the foreign commentator plays (or believes to play).

The problem can be summarized by the following consideration. Any act of commenting and offering suggestions to a foreign system may receive attention, and perhaps produce actual consequences within that system. The commentator, he or she who lives amidst all those material comforts the intended “beneficiaries” of her comments do not enjoy and will never enjoy to the same degree she does, is not in a position to foresee the consequences her comments may have on the system. How can then the act of commenting therefore be ethically justified? And who does the act of commenting benefit?

It is with these questions in mind, that this short comment has been written in English, and with the utmost reluctance in using this medium of expression, as it is intended for a Latin-American audience.

Comment to the
Conceptualización del Modelo Economico y Social Cubano de Desarrollo Socialista
Flora Sapio

The decision, adopted by the VII Congress of the CPP, to approve in principle the Conceptualización del Modelo Economico Y Social Cubano de Desarrollo Socialista, cannot but raise international attention. Cuba occupies, and will for a long time continue to occupy, a focal position on the geopolitical chessboard, and many of the future geopolitical games will be played on the island's territory. In this light the question, first raised by Oscar Fernandez, whether Cuba is moving
“From the traditional state socialism ... towards a more decentralised state socialism? An Asian-style market socialism ... A self-managed socialism of the Yugoslav variety ... To the so-called participatory socialism of the 21st century?” (here)
is legitimate. Yet, this is one of those questions to which no answer exists. The models most international and domestic commentators refer to are models that either are suffering various and well-known negative externalities, or have collapsed. On the other hand, the so-called 21st century “participative socialism” – at least in its European variant – seems to be the latest fad more than a viable alternative for a reforming socialist system.

The Cuban Communist Party finds itself at a crossroad and the Conceptualización – rather than models belonging to the past – is the only tool the CCP can use to try and find the way thta is best for the island.

The observation that
the Conceptualización appears to reject the primacy of markets, unable to distinguish markets from capitalism (as it understands that notion) and sets at its center the ideal of economic activity, including market activity, managed by and under the direction of the state as the highest expression of socialist economics--and politics (here)
Does not find a full interpretive correspondence in the Conceptualización, which instead follows an entirely different logic. In other words, the concept of “market” is not relevant to the Conceptualización. Such a lack of relevance does not derive from any alleged lack of ability, by the Cuban Communist Party or by the residents of Cuba either, to draw a distinction between market and capitalism. Such a distinction is extremely clear to all those who, today, are enduring the consequences of the embargo – the commodification of cultures, traditions, heritages and bodies. Certain policy choices have given life to the embargo. “Markets” - whether they be state-managed markets, collective markets, private markets, or informal markets – are a way to avert the consequences the embargo has produced.

Such a lack of relevance of the concept of “market” is rather due to the fact that the Conceptualización has at its core the concept of property. One of the founding principles of the Modelo is:
e) La propiedad socialista de todo el pueblo sobre los medios fundamentales de produccion, forma principal de la economia nacional y del sistema socioeconimico, base del poder real de los trabajadores

The propiedad, that is property is the very foundation of the power of Cuban residents. “Propiedad” is qualified by its socialist nature, exists in various forms (socialist, cooperative, mixed, private, of political organizations and associations, see paragraph 120) and is the defining feature of Cuba's social and economic system (paragraph 117).

I need not elaborate upon the differences between the concept of “market” and the concept of “property”. I have briefly written about the genesis of the concept of market and the invisible hand (albeit in a different context – see here Chapter 12) here. The concept of property is a well known concept in law. The key difference between “market” and “property”, perhaps, is that the concept of “property” does not bear the same ideological nuances of the idea of “market”. Simply stated: a property right over an object can be understood as the manifestation of individual (or state, or collective) will over an object, regardless of the system where such a will exists.

Such a will over an object can take various forms. One and the very same will can be exerted by different agents (private, state, collective) in different forms over different objects – ranging from everyday use items to domestic and foreign enterprises. There is no reason why, in principle, one kind of will should prevail over the other, as long as each one of these wills contribute to the good of everyone. The Conceptualización acknowledges the fundamental importance of this voluntaristic element at paragraph 117, where it is said of property relations that
“las relaciones de propriedad son determinantes en todo sistema socioeconomico”
Perhaps, the will of each and every Cuban resident (whether considered individually or as part of a broader collective) is the will to have a chance to be able to own all those goods and to have access all those services which make life easier. If satified, this bundle of rights – rights envisaged by the Millennium Development Goals – would spawn social relations more respectful of human dignity. It is true that individual will, a will that strives toward equality broadly understood, can easily be violated:
“markets themselves are becoming free of individual volition” (here)
But, markets can prevail over the will of individuals only if markets are understood as regulated by a transcendental law, a law allegedly superior to and entirely independent from the will of those who – by choosing to trade goods and services – are, in reality, the very Creators of markets.

From this point of view, the main challenge for the Conceptualización is forging property relations respectful of the will of Cuban residents. The Conceptualización attempts to meet this challenge by allowing different forms of property to coexist. This is an enlightened choice. The CCP, however, may want to consider how allowing coexistence among different forms of property is only a first step towards the goal of
“ser tratado y tratar a los demas como seres humanos”
and forging property relations respectful of individual dignity. This and other goals can more easily be achieved if it is admitted – as the Conceptualización does – that property is the very foundation of power. The admission that property is the very core of individual (collective, and state) power is however not enough. The power an individual (a collective, or a state) enjoys is directly proportional to the strength of one's property rights. As the old saying goes:
La mejor fortuna es el tener, el poder y el saber
Where “el tener” is the foundation of power, “el poder” is made possible by the resources one owns, y “el saber” can be used to build up the intellectual scaffolding that justifies both “el tener” and the power that “el tener” produces.

In light of all this, there is one fundamental challenge the authors of the Conceptualización may want to consider. For an economic, and social, system that has been isolated from global markets for the last 56 years, FDIs are a two-edged sword. Paragraph 90 of the Conceptualización is correct in observing how:
La inversión extranjera directa constituye una fuente de desarrollo y via de acceso a capitales, tecnologias, mercados y experiencia gerencial
Whether FDIs will actually contribute to the levelling of those structural disequilibria the embargo has induced will depend on whether Cuba will be allowed to interact with foreign enterprises on a level playing field or not. Such a possibility does not depend on any abstract notions about “market mechanisms” and the rules that ought to shape fair market competition in the abstract, whether these rules are unspoken or codified. Such a possibility depends on the actual power the Cuban government can leverage towards foreign investors....

La mejor fortuna es el tener, el poder y el saber
And, as it is the case, the Cuban economy – at least for the moment being – appears to be on the losing side.

Benefitting from foreign capital, technology, as well as foreign experience in interacting with global markets may be easier if direct economic interaction will involve small or medium-sized foreign enterprises on the one hand, and Cuban private enterprises on the other.

Despite their differences in know-how, both foreign and Cuban small and medium-sized private enterprises would find themselves on a roughly comparable level. The transfer of capital, technology and know-how would involve the owners, managers and staff of Cuban private, and collective enterprises directly. Over the short-term, a direct involvement of foreign small and medium-sized enterprises in the Cuban economy would allow Cuban citizens to enjoy immediate and tangible benefits in terms of increased income and employment opportunities. Over the medium-term, Cuban private and collective enterprises would obtain the know-how, technology, and capital needed to effectively compete on global markets.

A direct involvement in the Cuban economy of foreign MNCs would not be of aid in achieving the goals set by paragraph 49 of the Conceptualización...
La mejor fortuna es el tener, el poder y el saber
...and MNCs are, in this sense, much more fortunate than the Cuban state, and hence more powerful, and more knowledgeable as well.

First, the economic embargo and the current development level of the Cuban economy the embargo has induced could be used as a pretext to argue that Cuban state, collective and private entrepreneurs perhaps do not have those leadership skills needed by MNCs. As a result, investment projects launched by MNCs on Cuban territory would for the most part involve the hiring of foreign personnel, rather than the local workforce.

Second, the current level of development of the Cuban legal system could be used as a pretext to argue that the Cuban state is still unable to provide an adequate level of protection to the intellectual property rights of MNCs. Therefore, any investment project may be conditional the agreement that foreign technology, know-how etc. will remain an exclusive property of large foreign investors, rather than being transferred to Cuban state, collective, or private entrepeneurs.

Third, the entry of MNCs on the domestic market will undoubtedly cause a rise in employment rates. Here, the most pressing question is whether the employment opportunities available to Cuban citizens will allow them to develop those professional skills needed to compete on global markets, or whether Cuban personnel hired by MNCs will be hired to perform low-level manufacturing tasks.

Fourth, other global and domestic factors, that are already active in the economies of the least developed countries of Europe, not to mention neighbouring Latin-American countries, could cause one or more of the following:
(i) the establishment of MNCs in Cuba to enjoy preferential tax policies, and the delocalization of productive processes to cheaper jurisdictions – such as Venezuela or any other neighbouring country. Cuba would thus act as a funnel for transnational capital, without enjoying substantial benefits in terms of employment or technology transfer.

(ii) Even if productive processes, or fragments thereof, were localized in Cuba, the dire economic circumstances in which the country verses would cause the acceptance of conditions prejudicial to the preservation of the island's natural resources.

(ii) Investment projects by MNCs are highly fragmented, and involve an extremely high degree of geographical mobility. The choice to localize one or more segments of the production process in Cuba, today, does not entail any guarantee as to the stability of foreign investments over time.

(iv) The activity of MNCs is regulated by private agreements stipulated in fora other than the legislative organs of recipient countries, such a Cuba. As the country cannot make its voice heard on those private fora, the choice to open up the country to MNCs will certainly result in the Cuban state's loss of regulatory power over MNCs. Such a loss of regulatory power will easily turn a state, which has survived fifty-six years of embargo, into an appendage of global markets.
These risks are limited to MNCs and do not involve small and medium-sized foreign enterprises.

On the other hand, in today's global economy, closing the door to MNCs is not a viable choice. The Conceptualización may want to consider other ways to safely engage MNCs, while taking the time necessary to develop all those legislative and soft power mechanisms (moral norms, social norms, civil society norms, norms shared by the Cuban and international public opinion, legal norms, global media leverage) the island could use to its own advantage.

From this point of view, the “necesidad objectiva” mentioned by paragraph 94 is not only the “necesidad objetiva del reconocimiento del mercado”, but also the objective necessity to ensure the market remains one of the components of a pluralistic, diversified economic system where the different forms of property that exist embody the will of the Cuban residents.

A second, and equally important, necessity is understanding all those legal and non-legal rules that shape the workings of markets, as these rules are conveyed by civil society, the public opinion, and the new media.

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