Castro’s economic legacy

The tributes to Fidel Castro from western leaders, let alone from those of Russia, China and Iran, came fast and furious through the weekend. Justin Trudeau, Canada’s Prime Minister called him “a remarkable man.” Jean-Claude Juncker, President of the EU Commission, said he was a “hero to many.” President François Hollande of France called him a “towering figure of the 20th century.” Labour leader Jeremy Corbyn said he was a “champion of social justice.” In death and in life, Castro is a controversial figure, with diehard supporters and detractors arguing the toss between Cuba’s achievements in health and education for his people versus the dictatorship and repression by which he ruled since the revolution in 1959. The argument won’t ever be settled, but it is worth considering just how strong and enduring Castro’s economic accomplishments might be. There is little question that Castro transformed Cuban society, lifting the basic quality of life for the country’s citizens, defined to include healthcare and life expectancy at birth, and educational attainment and literacy. According to official data, Cuba is now spending about 11 per cent on heathcare and 13 per cent of its GDP on education. Healthcare reform was adopted very early on by Castro. When he came to power in a mainly agrarian economy, Cuba had one rural hospital and infant mortality in the countryside was about 100 per 1,000 live births. Castro built up a national system that over time won plaudits from global health institutions for the quality of preventive and primary care, its workforce, its ability to tackle diseases, and more recently, its biomedical research infrastructure and pharmaceutical exports. Life expectancy in Cuba is about 79.4 years, which is about 36th in the ranking of 185 countries. But it is not significantly lower than Hong Kong, at the top of table with 84 years, and the only non-oil developing countries that surpass Cuba (just) are Chile and Costa Rica. Yet, when we look at the World Health Organisation’s data on healthcare spending per head of population, in 2014 Cuba spent $817, about 70 per cent of the world average, and ranks 59th. Several emerging and developing countries are ranked more highly, including Barbados, Chile, Trinidad and Tobago, and Brazil. None of these countries, let alone the bulk of the 58 countries above Cuba, are run as repressive dictatorships. In a 2014 World Bank report on teaching and education in Latin America and the Caribbean, Cuba was a standout in a continent where the authors judged that no teaching faculty came close to the high quality that characterises the education systems of, say, Singapore, Shanghai, and South Korea, not to mention many others in the west. In Cuba, by contrast the quantity and quality of educators was considered not only exemplary but key to raising the quality of human capital in the economy. Cuba’s literacy rate is close to 100 per cent, putting it up there at the top of the world league with the developed economies, Russia and China. Primary education enrolment and attendance rates are pretty much 100 per cent. They drop off a little at secondary level to about 85 per cent, according to Unicef data. Yet, barely 12 per cent of working people have tertiary level qualifications and it is self-evident that such a low level will not suffice in future if the economy is be modernised and transformed. So it is fair to point out that, looking back, Castro certainly scored high marks for bringing good health practices and care and high literacy to the population. For many people, the question is at what political price? Others wonder whether the legacy might contain the seeds of its undoing. Having brought up a generation of well-educated young people who owe less to the revolution and presumably hold higher aspirations than their parents, what happens if those aspirations go unfulfilled? And having ploughed large amounts of state spending into health and education, how is that effort going to be maintained, especially as Cuba ages, without a new focus on wealth and resource creation? Cuba is basically a less developed country with developed market problems that span its trade, structure and demographics. It remains relatively poor with income per head at about $6,000. But this is at the end of a 20-year commodity boom from which Cuba benefitted in spite of not being properly engaged with the global economy and being subject to a US trade embargo. The fading of the boom now puts Cuba, whose exports rely on sugar, nickel and tobacco as well as on pharmaceuticals, at a big disadvantage. An opening up of trade with the US could help, if the president-elect agrees, but the loss of cheap, subsidised oil from failing Venezuela will hurt. Cuba needs globalisation and a strategy to promote manufacturing industries at the worst possible time for globalisation, and with an economic structure that is quite inappropriate. Compare Cuba with Vietnam, which opened up to trade and investment in the mid-1980s a decade after a long and punishing war. At the time though, the Vietnamese economy was roughly 33 per cent services, and 57 per cent industry. Under astute management, it was able to seize the opportunity to leverage into globalisation. It is now one of the main beneficiaries of low-end manufacturing being shed by China. Cuba though is 75 per cent services and small service businesses, and 20 per cent industry, having experienced years of industrial decay and little manufacturing, and facing an unfriendly regional environment for trade and growth. Finally, Cuba’s fertility rate is 1.62, putting it well below the population replacement rate. About 19 per cent of the population is aged over 60, and this is predicted to rise to 31.5 per cent in 2030 and almost 40 per cent by 2050. In this process, the number of working people per retiree will drop from 4.5 today to 2.5, about the same as in many of the fastest ageing countries on Earth. Without the necessary savings, and investment rates and without an economy that can create wealth in the future, Cuba will simply become another less developed country getting old before it gets rich. Castro may well have survived the US’s best attempts to overthrow him, deflected blame for precipitating the 1962 missile crisis, and seen his country into the 21st century, leaving it with the healthcare and literacy rates of the developed world. He also left it relatively poor, unbalanced, and underdeveloped, and dependent on commodity exports that now face a troublesome future. The generation that is taking up Cuba’s challenges today will have to resolve whether its aspirations can be realised without radical reform and change. What his brother Raul has introduced so far—for instance, relaxing travel and study restrictions and helping small businesses, falls a long way short of what is now needed. Bearing the legacy in mind, it’s clear that Castro thought highly enough of his people to provide them with high standards of health and education, but it is not clear this makes him remarkable, a hero or a champion. Progress is not evident in other areas of policy, and clearly not reflected in the economy he has bequeathed to others to sort out. In this respect, he is like many other leaders that make great strides in some economic or social areas, but otherwise blot their records.