CUBA'S ECONOMIC REVOLUTION

...Cuban planners are now able to utilize vast amounts of idle lands, in addition to a large number of under-employed farm workers...

...The rice crop this year is roughly one-third greater than last year...

...For one thing, top government salaries have been slashed as much as fifty per cent...

...Output gains have not been fully sufficient to absorb the total increase in money wages...

...Undoubtedly the political cadres in charge of manufacturing plants, mines, and other non-agricultural operations have been guilty of as many errors of judgment as their rural counterparts...

...I have witnessed stands of corn destroyed by the application of inappropriate fertilizers, and I was told that in one instance a mahogany forest was felled to supply railroad ties for a new branch line...

...only after private companies were nationalized, for example, were their resource studies made available to the government...

...Moreover, the great disparities in the distribution of income which arose from inequalities in the distribution of property have given Castro considerable "play" in his reconstruction program...

...For instance, ways have been found to turn bagasse, sugar's main by-product, into newsprint, a large import item in recent years...

...More recently, there have been shortages of poultry and eggs, and carrots are now dear in urban centers...

...Last, the new urban reform law will absorb much of the purchasing power of landlords, although it risks alienating an important class of small property owners...

...Consequently, great tracts of arable land were left idle...

...Third, a sharp rise in the income tax has sopped up a portion of the increase in money wages...

...Second, while INRA's budget is unquestionably inflationary (the excess of expenditures over revenues amounted to roughly $400 million last year), many appropriations were lopped off last summer to keep the deficit within manageable limits...

...The decline in food imports from the United States—from $165 million in 1958 to $132 million in 1959 and probably less than $100 million last year—is further evidence of INRA's progress in diversifying agriculture...

...Three trends in Cuba's approach to development planning seem to bear on this question: One—A willingness to experiment with central planning...

...In industries protected by high tariffs, firms had no incentive to rationalize production processes...

...Again, Swiss chemists have developed for INRA a new process for canning sugar juice, an old problem unsolved until recently...

...I was told by Jacque Chonchol, a Latin American agronomist employed by INRA, that Cuba's import needs in this field will eventually be reduced to only $50 million annually...

...This is a new departure in socialist economic planning, a policy which will reap for Castro long-run political benefits as it enlarges the island's capacity for the production of consumer goods...

...The hope is that a market for the latter will be created by an expansion of light industry, thus averting short-run over-capitalization in such sectors as steel and basic metals...

...Two—An emphasis on light industry...

...There will soon be no "slack" in the economy by which the planners can profit...

...In 1959 INRA built more than 10,000 new homes, INAV nearly as many single-unit dwellings and apartment houses...

...the government also has been forced to bring its fiscal powers into play...

...the D.N...

...It is still true that the government is responsive to the Cuban people...

...the rise in tobacco consumption has been of a similar order...

...News, to mention but two sources, predicted that Castro's schemes would bring economic ruin to the Cuban people...

...Evidently, we are still in no mood for the truth...

...Food canning and processing industries, textiles, and tobacco, especially, responded immediately...

...Far more dramatic are the revolution's accomplishments in construction...

...To begin with, most of Cuba's agricultural resources are tied up in the production of a single, homogeneous crop: sugar...

...Quite the contrary...

...The Wall Street Journal reported recently, for instance, that a mine administrator intent on surpassing his production quota blasted away support-columns of rock and ore...

...This is not the point, however...

...Second, because the sugar crop cycle is highly seasonal, more than one-half of the industry's labor force is unemployed seven or eight months each year...

...Two or three decades ago, Western economists would have shared this view...

...In 1946, for example, only one-half of all tillable land was under cultivation...

...Cuban planners have made similar strides in utilities and construction...

...This has had momentous implications for the historical development of the industry, most prominent of which has been the dominance of the giant latifundia, the great sugar monopolies...

...INRA, INIT (National Institute of Tourism), INAV (National Institute of Housing and Savings), and the Ministry of Public Works have diverted nearly all of the island's construction facilities from the private to the public sector, a vast once-and-for-all redistribution of capital and materials...

...This does not mean, however, that Cuba will neglect capital goods industries...

...Hand in hand with the nationalization of industry and agriculture, and the transfer of control from private owners to public administrators, has gone the evolution of a central planning structure, the Junta, or Central Planning Board...

...More important, the island's resources could easily support a diversified chemical industry, including plastics, and a modest iron and steel industry...

...Nor has nationalization of industrial enterprises been entirely an unmixed blessing...

...Castro has no intention of sacrificing the immediate welfare of the Cuban people to bring about rapid industrialization...

...plans for a rolling mill are now being discussed...

...Time is on the side of the political administrators, most of them eager and conscientious men, whose abilities will improve with experience...

...in fact, it is fair to say with regard to domestic affairs the state is the political instrument of the workers and peasants...

...Knowledge of mineral deposits and other natural resources falls short of what is essential for coherent and viable economic planning...

...By suppressing the bourgeoisie as a class through expropriation and nationalization, he has been able to redistribute resources, land, and capital from the private to the public sector of the national economy...

...Since then, agreements have been reached with nearly every Communist country, as well as with a number of neutralist nations...

...Electric power facilities have been improved...

...Ironically, the Soviet bloc itself will provide Cuba with her new capacity for turning out consumer goods...

...Western journalists have failed to realize, though, that these shortages and differential price increases reflect distribution rather than production problems, the former invariably accompanying the shift from free markets to a planned economy...

...Construction and extension of hospital facilities have provided nearly 17,000 new beds...

...It is true that prices of selected commodities, particularly luxury goods, have risen...

...But there are no plans to imitate the Soviet experience of the 1930's...

...Last February, Cuba signed its first commercial agreement with Russia...

...I must emphasize, though, that these are short-run problems, and, in those industries where Cuban technicians remained in their managerial posts, marginal ones...

...What are Cuba's prospects for sustained economic growth...

...What is more, Castro has been left with no alternative but to enlarge trade with the Eastern world...

...Eleven days earlier, the government had seized 380 Cuban-owned companies, together with twenty large American corporations...

...When Fidel Castro's revolutionary government undertook the total reconstruction of the Cuban economy, many North American journalists confidently told their readers to expect run-away inflation, general shortages, and subsequent economic chaos...

...Salvage operations will be costly and, meanwhile, production has stopped...

...For these two reasons, Cuban planners have succeeded in raising the level of investment and consumption simultaneously...

...investments in Cuba remaining under private control—a total of 166 firms —was expropriated by the revolutionary regime...

...Humanistic" is the description Fidel Castro gives the Cuban revolution...

...Three—A reliance on Soviet bloc aid...

...A portion of the lands expropriated by INRA (National Institute of Agrarian Reform) has been used for investment purposes—sugar production, for example, which as an export earns foreign exchange or is bartered for Soviet and East European capital equipment...

...Barring a full-dress invasion by counter-revolutionary forces now training in Florida and Guatemala, the odds are that Cuban planners will succeed in modernizing the island's economy and at the same time maintain the material standards of the island's peasants and workers...

...The government will barter sugar and other commodities for Eastern European brush, canning, cutlery, household appliance, and other factories, delivered ready to assemble...

...Castro therefore has to rely almost wholly on Soviet bloc trade, as well as loans and grants...

...the D.N...

...INIT facilities—motels, beaches, and restaurants—have sprung up all over the island and have absorbed a large (although unknown) portion of the increase in money wages...

...For this reason, Cuban economists can employ relatively simplified planning methods, such as production controls, and techniques of allocating the work force...

...For the first time in recent years, Cuba is a net exporter of tomatoes...

...Contrary to popular belief in the United States, there has been no general price inflation, even though average money wages have risen forty per cent since 1958 and the money supply soared from $483.5 million on January 1, 1959...

...Expected momentarily is a king-sized deal with Russia under which Cuba will barter her entire 1960-61 sugar crop (expected to reach 5.7 million tons) for vast quantities of machinery and spare parts, raw materials, and technical aid...

...The production of fruits (exports to the United States will total about $7 million in 1960-61), peanuts, cotton, potatoes, beans, and corn are all up...

...Under Regino Boti, a Harvard-trained economist elevated to the post of Minister of Economy and technical secretary to the Junta, are three divisions required by economic planning in Cuba—the Direction National de Planificacion, which evaluates investment projects...

...Production gains so far seem to have been confined largely to the utilization of idle capacity, the redistribution of capital, and the rationalization of existing plant...

...magazines reasoned that central economic planning would expose the island's economy to irrationalities, imbalances, and distortions which a "free market" system seldom reveals...

...Eventually the government will lay open the vast mineral and power resources of Oriente, now chiefly an agricultural province, and, placing a new emphasis on science and engineering, turn the educational system, completely outmoded and corrupted under Batista, into an instrument of economic and social progress...

...Fourth, two new payroll taxes, a "working tax," combined with an "industrialization" tax, have reduced disposable incomes of all Cuban workers by a total of seven per cent...

...In a free-market economy, this would pose an obstacle to economic progress and impose on the governing class a severe political handicap...

...central planning has proved to be at least equal, and possibly superior, to a system of private markets in coordinating economic activity and harnessing economic resources...

...butter, for example, was scarce for a brief period last summer...

...So far, for example, forage by-products (e.g., the chaff of rice plants and cane tops) have been wasted...

...His meaning is partially revealed by the emphasis Cuban planners place on light, at the expense of heavy, industry...

...Quality improvements in textile products were apparent almost from the beginning, and, at the moment, Cuba's sixty-one textile mills nationalized in October 1959 run twenty-four hours a day...

...to $750.8 million on July 31, 1960...

...Chief among INRA's mistakes, reports Professor Rene Dumont, France's best-known agricultural expert, was its failure to promote a mixed agriculture, a simultaneous and complimentary development of food production and livestock breeding...

...However, inexperienced and at times careless management under the state controlled program has prevented Cuba from fully realizing its agricultural potential...

...These U.S...

...Up to a few months ago, the various Institutes, and some of the Ministries were de facto independent and autonomous planning agencies...

...The recent export embargo ended any lingering hopes in Cuba of United States aid to the revolution...

...this, I think, is Cuba's message to its Latin American neighbors...

...Where the cadres are aware of their want of skill and experience, rather than bungle the operation, they often allow assistants to follow independent policies, creating a kind of administrative anarchy by default...

...in May, a far-reaching trade pact with Poland...

...It is true that the Russians will pay only roughly two-thirds of the old United States' price under the quota system...

...while the monetary value of imports purchased with sugar export earnings was greater under the old system, Russian trade is far and away more significant for Cuba's economic development...

...The Junta has not stripped the public agencies of their power altogether...

...in a socialist economy, planners can draw on under-utilized labor to raise production levels of other crops...

...Prior to the recent export embargo, Cuban imports in 1960 were running at a rate of only $250 million annually...

...Idle land and labor may be employed either on irrigation or construction projects (investments), or in the production of tomatoes, beans, and other consumer goods...

...the political and economic powers of INRA, especially, transcended those of the government itself...

...Third, there are important economies of large-scale production (lower average costs accompanying large production units) associated with sugar cultivation and processing...

...O'Connor has written for a number of professional and general publications—The Editors...

...Ultimately, all foreign investments will be liquidated, and the independent national bourgeoisie confined to retail trade and small service industries...

...Moreover, the spontaneous nature of local reconstruction imposed limits within which planners were compelled to remain if they were to draw fully on the potential of the masses...

...How well Cuba has used its idle capacity and exploited income inequalities is disclosed by movements in the general price level...

...In ten years or so Cuba will have a steel industry...

...In addition, Professor Dumont has criticized INRA's over-willingness to exploit new lands to the exclusion of raising productivity on fields already under cultivation...

...Under Batista, Cuba "bartered" sugar for luxury consumer goods and dividend and interest payments to foreign investors...

...More than 1,200 new schools (providing 15,000 classrooms) were put up by INRA alone...

...de Estadisticas, the statistics-collecting branch...

...This is an important failing of central planning, and Cuban economists are much aware of the problem...

...The Institute has diverted the remainder into consumption channels...

...The lack of inflation is especially striking when it is realized that commodity imports from the United States, which amounted to seventy-one per cent of total imports in 1958, fell from $540 million three years ago to $436 million in 1959...

...Had the industry been competitive, more land would have been brought into cultivation, outputs increased, and prices lowered...

...by integrating and balancing the work of the National Bank, INRA, and the Ministries of Economy, Health, Education, Communications, Work, and Public Works, the Junta has smoothed the way for each to realize its latent possibilities...

...Castro would not dare arm .200,000 militiamen if it were otherwise...

...What was most striking about manufacturing industries under Batista's capitalism was their pervasive inefficiency...

...Castro's willingness to take this risk is one sign that future headway will depend upon advancements in technology and productivity, in the absence of which the level of private and public spending would in fact be inflationary...

...The relatively small capital investment that light industry requires is its immediate economic rationale...

...The rise in Cuban agricultural production has been of truly spectacular proportions...

...Here, in my judgment, are the beginnings of a truly workable planning structure...

...Forty thousand new telephones have been installed since 1959...

...According to Cuba's last agricultural census (1946) of the island's nine million hectares in farms, nearly two million were owned by only 114 agricultural corporations...

...de Organization Economica, set up to deal with problems, of commodity price and quality control...

...Tobacco output rose from $23.4 million in 1958-59 to $41.4 million in 1959-60...

...To be sure, Cuba, like most underdeveloped countries, lacks skilled native workers, technicians, and engineers...

...The Soviets, for example, have been unable to streamline their distribution network, even after thirty years experience...

...Moreover, there has been some indiscriminate slaughtering of cattle by ill-advised administrators...

...When the present government clamped down on imports and at the same time raised money wages while enforcing price controls, powerful incentives were created in industries manufacturing import substitutes to improve work flows, utilize machinery more efficiently, and step up production generally...

...According to Chonchol, Cuba will become fully self-sufficient in rice (a savings of $40 million), fats and oils (an additional $40 million), and cotton ($10 million...

...At regular intervals beginning in mid-1959, Time and US...

...on the average large, administrator-operated farm, only 14.9 per cent of total holdings was cultivated...

...In spite of these handicaps, investments in by-product research, education, and industrial diversification— investments of energy, imagination and faith, as well as money—have already yielded partial dividends, likely to multiply in the future...

...At the other extreme, United States goods easily out-paced Cuban products on the basis of quality as well as price, and consequently threw many firms into a state of permanent defeatism...

...The concluding article, scheduled for the February issue, will assess American foreign policy toward Cuba and the revolutionary government...

...On October 25, 1960, all but $100 million of U.S...

...Events in the Soviet Union, however, have shown it to be false...

...When a whole people have decided to redeem themselves from half a century of economic misery, then they will do so...

...Nowhere are central planning methods more feasible than in Cuba where, today, a two and one-half billion dollar industrial empire—forty-three banks, thirty insurance companies, all transport, mining, and fishing facilities, together with ninety-five per cent of the island's agriculture—are owned by the government...

...An economist at Barnard College, Mr...

...Yet the popular image of what is in store for a country which replaces the free market with state planning has lingered on...

...Consumption of processed foods went up roughly thirty-five per cent...