Raulonomics: Tough Diagnosis and Partial Prescriptions in Raul Castro’s Economic Policies

Cuban President Raul Castro has been at the head of Cuba’s government for nearly three years, as acting President since July 2006 and as President since February 2008.

His time in office has been marked by stark assessments of Cuba’s economic problems in official speeches and the state media. Among these are inefficiency; insufficient work incentives; low agricultural production; a dual‐currency system that distorts prices and incomes and sharply limits many Cubans’ purchasing power; high import bills; and a demographic crunch brought about by an aging population, an aging workforce, and low birthrates. External events, such as three hurricanes that battered nearly every province in 2008 and the global economic downturn, have recently added to Cuba’s economic woes. The government’s forecast for growth in 2009 was revised downward from 6 percent to 2.5 percent.

Raul Castro has stressed principles such as incentive pay to increase productivity and has raised expectations for economic policy change through his own words and by encouraging a nationwide debate. However, apart from a substantial agricultural reform now in progress, his policies to date seem decidedly inadequate to spur the across‐the‐board growth in employment, incomes, and output that is needed to solve the problems he has identified. The government has generally opted for policies that squeeze more production and efficiency out of current economic structures. Outside agriculture, options for liberating Cubans’ productive energies by allowing greater private or market‐based activity have generally not been pursued.

The result is that the distinguishing feature of Cuban economic policy today is the large gap between the government’s own dire diagnosis and its relatively limited policy prescriptions.

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