Market Prices For Cuban Cane And Cuba example essay topic

Although the Cuban economy may be thought of as to some as a complete failure, the command system structure can still be an effective way of creating a successful economy, if the correct steps are taken in it's planning. From the 1960's revolution to the 1990's collapse of russia, the soviet union managed to maintain the Cuban economy by trading them sugar in return for oil (web). The USSR paid "higher than market prices" for Cuban cane, and Cuba paid "lower than market prices" for Russian petroleum products. This arrangement which Cuba benefited from, allowed Castro to provide benefits to the citizens such as higher education, free total medical care, and subsidized food and housing. Now, ever since the deal with the Soviet Union has collapsed, the Cuban economy has fallen by 35% from 1989 to 1993 (web). Instead of the island being maintained or enhanced, it is barely be sustained.

Although the lack of aid from the Soviet Union has had a great influence in the Cuban economy, it still has some hope because of increased tourism, agricultural trade and additional US dollars. The Cuban economy is strongly based on a command system, where the government has nearly complete control of the economy. Just as any other economic system is required to do, the command system must answer the 3 basic economic questions. what to produce, how to produce it, and who gets what (Lyons, Brian 1987). The government controls things such as the quantity of each good that is to be imported and exported, prices of goods and services, wages, housing. etc. Through the governments control, they can decide who recieves what share of the economic pie.

Unfortunatly, this means that they can us this power to there own advantage and limit the amount of income that each citizen receives. In Cuba, each working age citizen is "given" a job which pays them from 250-500 pesos a month. In US dollars it only equates to $10 - $20 (John Skorburg, 1999). The government also holds a primary role in the Cuban economy and controls practically all foreign trade. The government has undertaken several reforms in the past few years which have been designed to stem excess liquidity, raise labour incentives for workers, and increase the amount of food, consumer goods and services to pull them up from depressed levels.

In 1994, the liberalized agricultural markets were introduced. The State and private farms were authorized to sell any of their above quota production at unrestricted prices, have broadened legal consumption alternatives and reduced black market prices. The governments efforts to reduce subsidies to loss-making enterprises and shrink the money supply caused the black market rate to decrease rapidly. In the Cuban marketplace, the number of self-employed workers has slowly increased from 160,000 in the early 1990's to able 250,000 today (web). The Government still continues to discuss the concern of the growing number of the self-employed, and the increasing disparity in wealth.

The need for economic growth has somewhat replaced the age old ideologies. When soviet forces were defeated in 1989 and an end to Soviet subsidies was realized, the Cuban economy suffered the equivalent of an economic shutdown. (John Skorburg, 1999). The economy dropped even further from the result of inherent inefficiencies of the Cuban industrial base. In 1995, the slide was halted by government programs that resulted in a 2.5% increase. In 1995, export earnings rose by 20% to $1.6 billion. (web).

This was largely caused by higher world prices for common commodities and increased production of nickel through the cooperation with a canadian firm. Higher exports and new credits from European firms and Mexico enabled Havana to increase it's imports. In 1996, an act to seek international sanctions against the Castro government in Cuba was put into place, to plan for support of a transition of government leading to a democratically elected government in Cuba, and for other purposes as well. The international debate surrounding the adoption and implementation of the Helms-Burton law had revealed different approaches to the idea of promoting democracy in Cuba. The United States' NAFTA partners, the European Union and the rest of Latin America had came up with three different views on how to persuade Cuba's democratization.

The dynamics of the debate and its solution to the problem had major indications for Cuba to become part of the international economy. The US policy inevitably shapes and will continue to shape Cuba's international reinsertion, even if it does not occur in the way that are intended. As codified into law by the Helms-burton act, the official position of the United States is the promotion of democracy in Cuba by isolating the island economically. This would have been meant to limit the amount of fresh investment entering Cuba and minimize most forms of normal contact. The underlying plan was that the form of pressure used would lead to the demise of the political power of Fidel and Raul Castro and a rapid transition to democracy (web Cuba / Helms Burton. html). Although the Cuban economy may be thought of as a failure, the command system structure can still be an effective way of creating a successful economy, if the correct steps are taken in it's planning.

The Cuban economy is an example of an economy that could have been successful if the correct steps and desicions were made. Instead, the Castro government took advantage of their power and abused it, ruining the economy. Steps are now being taken to turning the eco mony around by taking power out of Castro's reach.