San José State University
Department of Economics

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The Economic History and the Economy of Cuba

History

Columbus' first landfall was an insignificant island in what is now the Bahamas. His second landfall was one of the largest islands in the world, Cuba. Columbus' expedition explored along the north-northeastern coast of Cuba. After appparently rejecting Cuba as a colonization site Columbus sailed east to the island of Hispanola where he did establish the first Spanish colony in the Americas.

Spanish colonies were later established in Cuba but only in 1511 after a lapse of nearly twenty years. The task of subduing the natives of Cuba was assigned to Diego Velázquez de Cuellar, the governor of Hispanola who had subdued the natives there. In gaining control over the Cuban natives Velázquez was assisted by Bartolomé de Las Casas, a Dominican friar who went first to the native villages to try to convert them and get them to accept the control by the Spanish. Las Casas was appalled at the severe treatment of the natives and later in Spain participated in an extensive debate on the question of the morality of Spanish conquest of the natives of the Americas. Las Casas' charges were the foundation of the Black Legend of the Spanish Conquest.

When Cortez and Pizarro confirmed that lands to the west contained fabulous treasures Cuba became a staging area for expeditions to the west and a way station for convoys traveling back to Spain.

Although technically the administrators in Cuba were subject not only to the Viceroy of New Spain (Mexico) but also to the local authorities in Hispanola, in practice they functioned with autonomy. The land was and native labor force were assigned to favorites of the administrators to use as they saw fit. An anecdote from the records of one of the early exploratory expeditions for the mainland which stopped for provisions in Cuba gives an idea of conditions in Cuba. A group of natives were being worked so severely by their Spanish overseer that they decided to all commit suicide. One night they went into the woods to hang themselves from the trees there. But their overseer had heard of their plans and followed them into the woods and confronted them. He told them that if they committed suicide he would also do so to follow them into the afterlife and work them even harder and more severly there. This prospect made the natives change their minds about killing themselves.

In Cuba the first industries were stock raising and food production for outfitting the expeditions. In the seventeenth and eighteenth centuries cattle hides for leather were the most important export of Cuba to Europe. Tobacco was also an important crop. Sugar cane growing was encouraged early but was not successful until the eighteenth century and became the major industry of Cuba only in the mineteenth century. It developed as a result of local initiative rather than as a policy decisions from Madrid.

As the native labor force decreased due to disease, social upheaval and ill treatment African slave labor was imoorted. There had been African slaves brought from Spain by the conquistadors. Later slaves were brought from Africa on a massive scale and by 1825 the black population of Cuba exceeded its white population.

In 1762-63 the British occupied Havana and lifted the Spanish mercantilist restrictions on trade. Although the occupation lasted only 11 months it had a long lasting impact on trade with Cuba. The British North American traders who engaged in trade during the occupation were difficult to deter from continuing that trade once Spain regained control of Havana. This was especially true after the successful slave rebellion in Haiti in 1790 cut off access to the sugar and coffee of Haiti.

In the 1850's the U.S. developed an interest in acquiring Cuba, by purchase if possible by invasion if necessary. There were Cuban elements who supported the acquisition of Cuba by the U.S. On the U.S. side the impulse to acquire Cuba was tempered by the opposition of northern elements to exteding the area of the country subject to slavery. After the Civil War in the U.S. and the abolition of slavery the slave-owning elements in Cuba were no longer interested in being annexed by the U.S.

While most of the Spanish Empire territories in the Americas achieved independent nationhood in the 1820's Cuba continued under Spanish control until 1898. There were unsuccessful rebellions, notably in the 1860's, but expulsion of the Spanish came only with the Spanish-American War. As a result of victory in that war the U.S. government gained control of Cuba but in 1902 established a Cuban government subject to certain rights of the U.S. government.

(To be continued.)

Cuba

Few expected the downfall of Bautista in 1959 to bring an ideological revolution. Dedicated supporters of democracy throught that helping Fidel Castro come to power would bring democracy to Cuba. When the celebration of revolution ended and the Castro regime began to effectively nationalize the property of American businesses in Cuba people realized that something different was involved than a routine change of govermment.

There were other rebel groups besides the one led by Fidel Castro. Castro was at the east end of the island when Bautista left Cuba. Castro managed to arrive in Havana before any of the others and take charge of the government. This feat of logistics was apparently achieved by his paying a million dollar bribe to the leaders of Bautista's army to let him through but prevent the other rebel leaders from traveling freely to Havana. The money for the bribe came from funds exhorted from the ranchers in the vicinity of Castro's headquarters in the eastern part of Cuba.

(To be continued.)


The Near-Bankruptcy of the Regime

In October of 2009 four government ministries in Havana closed their canteens that provided free meals to the ministry staff. As with most all institutional meals the quality had been poor, but workers in Cuba have such a low standard of living that the loss of free, although poor quality, meals was a significant loss. The government compensated for the loss by raising staff pay by 15 pesos per day. That is equivalent to about sixty cents American per day. The Communist Party daily newspaper Granma asserted that the free meals were worth less than the 15 pesos. However 15 pesos does not buy much; a bun and a slice of ham is about all.

This change was now only for the four ministries but the government announced that soon the free canteens in about 25 thousand workplances would be closed. Three and half million Cuban workers will lose their free meals and get an increase in daily pay as compensation. Since this change is part of measures to economize in order to deal with the near bankruptcy of the Cuban economy apparently the canteens cost more than 15 pesos per worker to operate and provide meals that were worth less than 15 pesos per day to the workers. Perhaps Raúl Castro is acknowledging the realities of the socialism created by his brother.

The immediate reality is a financial crisis for Cuba in terms of foreign exchange. The free canteens required the importation of about $350 million in food. Another free food benefit that may disappear the ration of staples that all Cubans receive, or at least are supposed to receive, each month. This free ration is subsistence for only a third to a half of the month.

The government is desperately trying to reduce imports. Military officers have been given power to oversee the the financial transactions of the civilian agencies. So far this strategy has reduced the expeditures for imports by 30 percent in 2009 over what it was in 2008.

However the move away from government provision of free meals does foreshadow a burgeoning of free enterprise. The government is expecting the workers who lost their free meals at their workplace to buy meals at the state-run restaurants. The number of permits for Cubans to run micro-businesses such as restaurants is only 200,000 for a nation of 11.5 million. At one time there were 350,000 such permits.

(To be continued.)

For more on the Castro brothers see Castro.


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