Finding Our Bearings in the Stormy Seas of Cuba’s Food Industry (Part II)

“In the market, the price of goods is the outcome of rivaling forces, and the law of value cannot become fully functional without a completely free market.” (Ernesto “Che” Guevara, Critical Notes on Political Economy, 2012)

Vicente Morin Aguado

HAVANA TIMES — In my previous post, I depicted the monster that our agricultural and livestock market is today. It is naïve to think that such an abomination could function in accordance with the universal laws of supply and demand. We are dealing with a deliberate distortion of this economic category, which came into being with our first civilizations and was considered the devil himself in our efforts to forge the saintly “New Man”, the pillar of communist construction proclaimed by Che Guevara.

Below is an opinion expressed during a seminar sponsored by the Center for the Study of the Cuban Economy (CEEC), held on October 14 in Havana, a gathering reported on by Reuters but passed over in silence by the local press:

“In one way or another, our State-command culture (production and trade organized by and for the State) will have to begin moving towards a more open conception by and for society.” (Cuban economist Jorge Mario Sanchez).

The control over monetary and trade relations also constitutes one of the most efficient tools used by authoritarian socialism to survive its continuous failure to meet production plans. In the book quoted above, the guerrilla leader, paradigm of the authentic communist, added: “we believe, but are not entirely certain, that the basic law of socialism is the law of planning.”

Before enumerating the reasons that prevent a drop in prices in Cuba’s food market, it would be advisable to recall the six components of this complex system, outlined in part 1 of our analysis:

Rationed State Market (MRE), Parallel State Market (MPE), Hard-Currency Stores Market (TRD), State Agricultural and Livestock Market (MAE), Offer and Demand Market (MOD), ad Black Market (MNI).

These are the arguments:

• The dismemberment of the six components, manipulated by the authoritarian State. There is no commercial freedom. The renowned university professor and economist Juan Triana made the following remarks on this issue during the CEEC seminar:

“The cost of failing to recognize the importance of competition to development is a growth rate beneath our potential, the improper allocation of resources, and productivity and efficiency rates below the country’s possibilities.”

• To produce food means to unleash the productive forces of the countryside. Cooperatives and individual farmers must be freed from government intervention and State companies must be granted true autonomy.
• To get this engine (essential to all economies in critical condition) running, the abovementioned economic actors require direct financing, particularly in hard currency, in addition to subsidies.
• The market must be conceived as a whole. The tacit interconnectedness of its current six components is in fact evident: a product sold on the black market cannot be sold at a price higher than that at a TRD. When establishing prices at the MAE, the State takes those in the MOD into consideration. Finally, all markets look to the TRD because it is the best stocked, not only in terms of food products, but all other vital articles as well.

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  As two currencies are in circulation, the values calculated using the stronger currency determine the whole. I should add that the problem would persist even after the elimination of the two-currency system, as only a piece of paper, not the economic equation, would disappear.

• General growth figures are so low that experts are speaking of “mere reproduction.” Though low, these data are questionable because of the two-currency system and parameters than have been imposed whimsically.
• The slight increase in agricultural and livestock production is being absorbed by the wage reform, as are the increasingly large remittances coming from abroad.
• The State is playing the survival game, skillfully manipulating its monopoly in the domestic market. Foreign trade, particularly through the TRD, takes in the better part of the remittances without an increase in demand.
• Self-employment directly affects market offer because there are no wholesalers designed to supply the new businesses, many of which are restaurants, with products. Such a “strain” will grow, considering current plans aimed at extending cooperatives, as well as the renting of locales to the private sector. The emerging economy is improving services but also increasing prices.
• Cuba is far from achieving self-sufficiency in the food industry. As it depends on foreign trade, international prices are necessarily reflected in the domestic market. Yet another monopoly, critically addressed at the abovementioned seminar, complicates the situation: “The so-called State monopoly over foreign trade [imports/exports] is probably a large obstacle in the way of diversifying the economy and broadening exports,” said Miguel Alejandro Figueras, winner of Cuba’s 2007 National Economics Award.

To put it clear in Cuban parlance, “the table has been served.” The food industry continues to be hijacked by politics, under the control of a bureaucracy that is an expert in distributing scarcity, avoiding conflicts here and there without allowing for the free unfolding of the market.

We are told these are the advantages of socialism, but I believe such centralization is useful only in case of a natural catastrophe, a war or similar event. Authority has been misused excessively and become a kind of daily practice, ruining the efforts put into any economic undertaking.

The essence of socialism is to distribute wealth in an equitable fashion. To achieve this, we must first give the subjects of this equation, the producers capable of creating this wealth, the freedom to do so.