Solving Cuba’s Two-Currency Dilemma Is Not So Difficult

By Repatriado

HAVANA TIMES — If you ask any Cuban to list the most pressing economic problems that need to be solved, they will mention our dual currency. The media’s united push to make this “problem” the keystone of economic ideas is such that it might be the first thing you think about. Once again, the government has managed to impose its discourse by placing the focus wherever is more convenient for them.

Both openly government economists, such as Marino Murillo, and the government’s allied economists who dedicate themselves to more theoretical work, such as Juan Triana, are contributing to this fantasy. Some use it to explain their failed improvement processes, while others use it as a subject to publish brainy analyses about the possible consequences and problems of currency unification.

Don’t be fooled, currency unification is as simple as the CADECAs (1) establishing the purchasing and selling exchange rate at 1 CUC(2) to 25 CUP(3) and allowing the Cuban people to use both of these currencies for any transaction made within Cuba, full stop. Thus our currencies would be unified and giving or receiving 1 CUC or 25 CUP would be the same thing. It would also prevent the need to suddenly take all CUC out of circulation and compensate this value by making more CUP, which is an expensive task.

When it comes to currency unification, you don’t need to beat around the bush or do financial magic to unify these two currencies, and you don’t need to make the earth shake because of effects that are incomprehensible financially-speaking.

Why aren’t they doing this instead of feeding this obscurantist and mystical atmosphere around the subject?

First of all, because the financial mess that the Cuban business system has created by juggling all of these different exchange rates(4) in order to hide their failure is so great that even they can’t fix it and so they prefer to continue on living in this game of Monopoly where the USSR used to work as the Bank, and now Venezuela. Currency unification would shed light on this bubble that has been hidden in the deliberately complex national accounting, thereby exposing the great failure of 60 years of the State centralized economy and how unwarranted it has been to keep up this practice.

Second of all, keeping this debate open gives the feeling that there is still a margin in which our economy, in the way it’s currently set up, can still improve (which is extremely important for our leaders). The following line of reasoning has been promoted in the collective mind: “if having two currencies is a heavy burden for our economy, when they finally manage to solve this issue, which must be extremely difficult, our economy will make progress.”

This kind of argument is the same as what the Aztec elite used to use when they justified their own existence by sacrificing thousands of people so that Popocatepetl wouldn’t erupt, a false premise which led to a mistaken conclusion. The State Council seems to be our shaman circle, but its best we don’t give them ideas of sacrifice.

The third and the most important reason, in my opinion, for targeting and sacralizing currency unification is the excuse it gives them, the pretext to win more and more time without making much-needed economic reforms, the justification to make people keep on believing that the State isn’t increasing wages or lowering prices among other things, which are extremely important, because until these two currencies are united, everything else is irrelevant; thus, making currency unification the precursor for everything else.

The answer to all of this is simple: the Cuban State’s monopoly capitalist economy is a disaster with no temporary solutions, it is beyond reform and nothing done within its current ideological premises is sustainable. Only a change in the system can lead to the country making progress.

Cuba’s biggest problem is productivity. Cuban workers are extremely underproductive and this is where we find another lie that government economists like to feed by upholding the mistaken idea that it’s true that people don’t work because they aren’t paid proper wages, but, how can you pay them more if they don’t work?

This dichotomy is false and Alfred Marshall already resolved this in theory more than a century ago when he said: “ “highly paid labor is generally efficient and therefore not really expensive,” and Fordism has empirically proven the benefits of highly motivated and well-paid labor as a preliminary step to increasing production.

Of course, the Cuban economy can’t increase wages with the ridiculous level of services and products it produces, it would lead us to today’s Venezuela-style inflation. Private investment is the only way to break this cycle, which includes, but isn’t only limited to, foreign investment.

However, opening up the economy requires an absolute turn-around of the structure in which our controlled economy operates, where our shamanic leaders sit so comfortably.

Like I’ve said in previous posts, Cuba doesn’t have an economic problem, (how are we going to have an economic problem when we don’t even have an economy?), we have a political problem.
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Notes:

1 CADECA, acronym for Bureau de Change, a state-owned company dedicated to the hard-currency market where the price of buying CUC for 24 CUP and selling it for 25 CUP has been established for years.

2 CUC, Cuban currency equivalent to the US dollar.

3 CUP, Cuban currency which National Accounts are written in and used to pay public sector wages.

4 As well as the CADECA’s official exchange rate, Cuban businesses use different exchange rates for the same currency written in their books, which makes it impossible to know the real situation our economy is in.