The Dangerous Persistence of Illusion

Prices, salaries and the Cuban Marxist

Rogelio Manuel Diaz Moreno

Buying potatoes.  Foto: Juan Suárez
Buying potatoes. Foto: Juan Suárez

HAVANA TIMES – Comrade Erasmo Calzadilla (who I hope won’t be offended at being addressed in this “outmoded” way) recently offered his latest contribution on the subject of prices, salaries and markets. I would have liked him to take into consideration some ideas if only to refute them. At the risk of being a nuisance, I’d like to repeat that the problem of high prices and low salaries in Cuba isn’t so hard to understand; rather, it can be clarified with a dab of basic political economy from the old boys: Adam Smith, Richard Wolff and Karl Marx, plus a little raw objectivity.

In believe many valuable tools of these theories can be clearly applied here in Cuba. This option, however, has been hampered by the dogmatic and slanted implementation that was seen here and which didn’t merit the name of Marxism, not to mention the deliberate distractive techniques of those who knew better. Another well-used technique born of bad faith, opportunism, demagogy or other spurious interests was to complicate things in order to make them sweeter or to confuse their adversaries. This has not contributed to realistic solutions.

Starting with the obvious, we can see that Cuba is – unfortunately – a poor Third World society, with a disastrous agriculture and an industry that is generally unproductive, obsolete and decapitalized. This has its causes, but I prefer to leap directly into the core issue of prices and salaries.

Simply speaking, a society that suffers from poverty can’t fully satisfy the material necessities of its entire population. In other times, there were other methods here for distributing the wealth – great or small – that was produced or given to us. Today, nothing is given to us and the market is the fundamental mechanism for distributing the little that is produced. We have a very simple marketplace, none of the financial complications of the XXI century. Basically, it’s a market of equivalents, of merchandise exchange. Real values are interchanged – food, industrial goods, services – and also abstract values as represented by money.

Market stall.  Photo: Juan Suarez
Market stall. Photo: Juan Suarez

The national poverty implies little per capita disposable wealth. The subjective impression is that the products in the market “are expensive”. Expensive for whom? The social differences that strike us imply that the majority go to the market with scant buying power, while a minority bring a much greater capacity. For these latter, the products are not so expensive.

Many people sustain that in the more or less near future the laws of supply and demand will “balance” the prices with the purchasing power of the majority, (income from their salaries or from small businesses). They claim that this hasn’t happened quite yet only because some rascals work badly while others hoard, and still others “won’t allow” this law to work well. But – they claim – when we have become like the “normal” countries, these economic laws will cause production to rise and prices to fall.

In the first place, neither the market nor the famous laws of supply and demand obligate the producer – or the intermediary – to increase the quantity of real value that is delivered when money is exchanged for merchandise. Rather, this is discouraged, and they are induced to hoard or simply let a part of this value be lost when their market realization – commercial gain – lessens.

All of this reveals the dangerous persistence of a certain illusion or fetish that sees the market as the supposed motor force of development and prosperity. This deeply ingrained fetish is one of the greatest victories of the capitalist ideology in our country; not even the daily clash with reality has discredited it. I’m not trying to Satanize the market; I concede that it plays an important role, and certainly resolves that matter of interchange of equivalent merchandise. But I want to note its key limitations. In the marketplace that we have today, today’s law of supply and demand is at work. The perceived situation of high prices is nothing more than the inexorable effect of little produced wealth and a concurrence to purchase it, together with a minority with high buying power and a majority with less.

Eventually, a certain increase in production is produced, as with the tomatoes that Comrade Calzadilla threw. The people who suffer from the market fetish wait for this increase in the supply and then despair when they don’t see the price go down. The problem that remains outside their view in this dangerous illusion is that the increase then seeks to line up with another increase that is produced – that of the total purchasing power. Due to the latter, the segment that’s going to buy, considered as a whole, now has more abstract value to offer the seller of the real value.

Fruit and vegetable market.  Photo: Juan Suarez
Fruit and vegetable market. Photo: Juan Suarez

Unfortunately, in these global increases, it’s not unusual to see the wealthy minority come out better and the precarious majority end up worse off. This is at play in the moments of an increase in the disparity of wealth, as we see in many of the poorer countries of the Third World – and lately, even in the First World. This also describes the current scene in our country. In the end, only the already favored minority can couple their demand with real solvency in order to afford the luxury of increasing their own consumption as well as inputs for their own investments. The demand of the majority sector with less buying power lacks the solvency to maintain itself at that same level. That majority, then, perceives the price level as not coming down but going up; this has been happening here for a long time.

Increasing salaries, in itself, won’t bring a better balance or welfare through the market because bills are an abstract value, not real in themselves but merely a reflection of the real value of the consumable wealth and services.   In this point I differ from the perspective of Pedro Campos. It wouldn’t give time to increase the productivity of those deficient companies, nor of the wealth being offered. Rather, a rapid inflationary spiral would provoke a rapid redistribution of those abstract values and the purchasing power of the impoverished majority would be left the same as before. For this reason, the State can’t resolve the problem in this way.

Under the reins of the state economy, the majority of the population won’t be able to get out of this trap. The deterioration of their living conditions is linked therefore to a discourse that tries to falsely represent this as socialism, while at the same time all of the pro-capitalist ideological mechanisms are reinforced. The capitalist marketing practices of a few lucrative state companies reinforces this idea still more. Consciously or unconsciously, this favors the conviction that the solution lies in more markets, more private economy, more capitalism.

If the kind readers see this article and add their passionate comments, it’s possible that the editor may consent to my further musings with respect to all this.

2 thoughts on “The Dangerous Persistence of Illusion

  • To deny that market work is to ignore the impact of incentives and individual creativity. All humans have a measure of discretionary creativity and productivity. The sloths less the naturally productive more. All can share in a greater bounty when the society is more productive. To reward the most productive while sharing the bounty with the most vulnerable is about establishing a balance between private and public enterprise. The capitalism incentives that Cuba has put to use are hardly a threat to it’s core socialist system.

  • China has shown that increasing reliance on markets and private initiative are keys to ending poverty. More than 400 million Chinese have risen out of poverty since reforms were started more than 30 years ago according to objective studies by the World Bank. That is more than the rest of the world combined. Cuba has strengths in tourism and medical technology, a productive land base and an educated population. These can be combined to achieve high growth rates. The tourism sector can increasingly rely on the private sector to create jobs at higher incomes as demand from visitors from the United States will increase by leaps and bounds. From a level of 3 million visitors in 2014 the total may well double in the next five years. This expected increase will require large investments and offer more opportunities for employment and well as a demand for greater supplies of food from domestic sources. To maximize results the Cuban government must reduce reliance on state enterprises and allow the private sector to reach its potential.

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