Inside Look at Cuba
What's it like inside a communist country?
My friend Erich just got back from a trip to Cuba so we had a long talk about the country. One of his two guides explained the basics of Cuban-style communism. Later he confirmed the information with the other guide so he believes the information is quite accurate.
Up until recently the Cuban government "took care" of its 11 million citizens in terms of education, health care, jobs, cars, housing and even food.
Let's start with jobs. The Cuban government is still by far the largest employer in the country running almost all major businesses; transportation, construction, manufacturing, banking and telecommunications. Most government jobs only pay between 50 to 200 dollars a month. A doctor qualifying for the maximum government salary earns $200. But working for a private business can be even worse. Erich met a laundromat worker named Carlos who said he only makes 10 dollars a month from his job at a hotel. And just last year, the government laid off 500,000 workers due to falling exports and rising prices of imports forcing even more workers to enter the private workforce.
Food revolves around a ration card system. A ration card is issued to each citizen once a month. Citizens get free groceries at government-run dispensaries. Ration cards cover the basics like chicken, oil, sugar, rice, and eggs. Ration cards used to cover much more - even toothpaste and detergent. Recently the government has cut back on rations and is considering elimination of the card completely. However, most food is distributed through ration cards and he only saw one supermarket in Havana. There are very few private markets. All Cubans seem to have food with many Cubans a little on the plump side. He occasionally saw line-ups outside the dispensaries.
Houses are provided by the state. Most come with a government job. Although the government provides the homes, it has little money for maintenance. While walking through old Havana, you can see houses literally crumbling. The guide told him that walking during the summer rains is hazardous because of falling bricks. The maintenance issue is so bad, the UN has started a home restoration in Havana intended to save historic buildings. But everybody has a roof over their head. A revolution in real estate occurred two months ago; the government made it legal to buy and sell homes. So far there have been few sales.
Education is provided by the state and most Cubans are happy with their education system. They do complain about not being able to study or work abroad.
Health care is naturally provided by the state and Cubans are content with their health care except for interruptions caused by lack of supplies.
There is only one company that handles all car imports to Cuba, naturally owned by the government. Until 1961, Cuba imported only American cars. After the US trade embargo in 1961 Then Cuba started importing Ladas from the USSR. The government introduced a law called Lada for Life. It was illegal to sell your government-provided Lada and had to remain in the family for life. These ancient Ladas are now worth about 18,000 dollars even though they were originally purchased for $2000. An old Chevrolet is worth about 30,000 dollars and if it's been restored with a diesel engine the price tag jumps to $40,000. In Cuba a car is worth more than a house. This is a great example for Economics 101. Government rules have created scarcity value for vehicles but not for houses. Renting your vehicle or running a taxi can earn hard currency, houses can't.The government recently repealed the "Lada for life" law so a market has opened up in used vehicle.
Health care is again provided by the state. Cubans seem content with thieir health care except for interuptions caused by lack of supplies.
Cuba has not one, but two official currencies. There used to be only the Cuban peso. A second currency has been introduced called the Cuban convertable peso. The value is 24:1. 24 origional pesos are worth one convertable peso. The new convertable peso started with the collapse of the Soviet Union. When the Soviet Union collapsed, Cuba rushed to develop tourism to generate hard currency. They needed a way to have two prices for everything - a tourist price and a locals price. The new currency introduced for tourists is the convertable peso which is worth roughly 90 cents American.
The intention was to only have tourist use the convertible peso. However the new currency hadunintended consequences. The new currency began to take over from the old peso because it had hard value. Stores, hotels, markets, taxis began to prefer the convertible peso over he old peso. Soon many stores, hotels would only accept the convertible peso. Now it is the standard for purchases except for pharmacies, utilities and a few other exceptions. Ironically, the government pays its employees in old cuban pesos but the standard peso is in reality the real currency of Cuba.
All of this probably leaves you wondering how ordinary Cubans survive. The answer has many nuances, but few survive solely on their government pay, ration books and old pesos. Erich's guide detailed the four survival mechanisms for the average Cuban: the black market, tourism, Miami transfers, or a small business.
The black market is a huge part of the Cuba economy. Take transportation - Cuba has over a million old cars and old cars need parts. The government imports some parts, but most parts are imported in shadowy ways by private business men. The black market for car parts is lucrative and risky. These businessmen can wake up at dawn with a knock on the door by the government and be shut down that evening. The black market exists for almost all goods in Cuba; clothes, cigars, even rum. Its the main mechanism for Cubans to make it - to reach the upper class. Ttourism is the biggest source of convertable pesos. For an enterprising Cuban,, a job in tourism can pay more than being a doctor. Miami transfer is a term for money arriving from family members working outside the country. Handling the transfers is big business for Cuban banks in Miami, the heart of the Cuban ex-pat community. Small business is a growing survival strategy. The government lay-off of 500,000 workers came with a new law freeing anyone to open a business and guaranteeing a small business licence within 5 days to anyone who wanted one. There is one taboo - avoid any business that competes with the octopus of Cuban government..
Cuba is a fascinating maverick country with longer life-expectancies, better health care and education than the United States. Warm, outgoing and literate people living on a beautiful island. Cubans are rightly proud and nationalistic. The guide, like young people world-wide. are hungry for a better life, a wider variety of goods, opportunities and more freedom. Communism is trying to adapt - the future looks promising.