Democracy Lab

The Cuban Paradox

Why is Havana so cautious about reform? Perhaps because its reformer-in-chief is also a stalwart of the revolution.

On Jan. 1, Cuba marked the fifty-fifth anniversary of the Cuban revolution, when the country's citizens rose up to topple the weak and short-lived dictatorship of Fulgencio Batista. The revolution led to a power vacuum that was quickly filled by the powerful and long-lived dictatorship of Fidel Castro. Fidel ruled Cuba until 2006, when, citing health reasons, he transferred power to his brother, current President Raúl Castro. (In the photo above, Raúl participates in a ceremony to mark the anniversary in Santiago de Cuba.)

Aside from the fact that Cuba's socialist state has managed to endure for 55 years, there is little for Raúl to celebrate. Cuba's overall income and caloric consumption per capita today are not that much higher than they were in 1958. In 1958, Cuba was at the top among Latin American nations in terms of the number of newspapers, TV stations, TV sets, telephones, and automobiles per capita; today, it is at the bottom.  The government claims that independence from Washington was a significant achievement, but today the Revolution is embarrassingly dependent on Miami, which in 2013 sent remittances amounting to $5.1 billion, enough to provide $1000 for every Cuban worker in a country where the average annual salary is less than $260.

Cuba is a developmental anomaly. It has some of the highest numbers in average years of schooling in the world (as is typical in totalitarian states), but also has one of the lowest economic growth rates in the world. It is hard to find a comparable case: typically, these higher averages go hand-in-hand with higher incomes.

Many blame the U.S. embargo for Cuba's economic underperformance. But the embargo has always been offset by the massive subsidies that the Soviet Union provided during the Cold War and that the petro-state of Venezuela has provided since 2001. And yet, despite these direct subsidies (and Cuba's newly burgeoning trade relations with countries around the world), the state is still unable to produce anything efficiently.

Cuba's only value-added export is the talent of its people, who have been emigrating in droves for the past 55 years despite the lack of civil strife since the mid-1960s. This year, the government liberalized exit visas (though it did not lower the cost of passports), leading to a 35 percent increase in departures relative to 2012. So far, only 45 percent of those who managed to "travel abroad" have decided to return.

Medical doctors also leave in large numbers, usually as part of the state's foreign missions. But Cuban doctors often take the order to go abroad happily: they seem to prefer working in the slums of Venezuela, Brazil, and Haiti to the "socialist paradise" they call home, even though they are paid only a fraction of what the Cuban government charges for these services.

The Cuban economy's dysfunctional nature has not escaped Raúl Castro. In fact, the economy's trials have become a favorite theme in his speeches. Every time he has a chance to talk about local conditions, Raúl admonishes some aspect of the status quo: the "inefficiency" of state-owned companies, the "laziness and proclivity to stealing" of Cuban workers, the "corruption" of managers and bureaucrats, the "absenteeism" of teachers, the "complacency" of the party's leadership, the decline of "morals" and even "manners" of Cuba's youth. While Fidel Castro was the denier-in-chief, famous for speeches that were groundlessly triumphalist and blind to the regime's catastrophes, Raúl does nothing but complain about the system. Whereas Fidel was the Revolution's greatest propagandist, Raúl has become the Revolution's most outspoken fault-finder.

Raúl Castro's attention to the system's flaws is no doubt a breath of fresh air for Cubans tired of living in la-la land. It has compelled Raúl to introduce some of the most sweeping market-oriented reforms of the last 55 years. But the problem is that Cuba's president is acting both as a reformer and a stalwart of the long-standing revolutionary regime. Raúl wants to reform and preserve the system, and this is producing hesitant and confusing reforms.

Raúl's deep roots have made him as repressive as he is open, limiting the economy and curtailing private enterprise. On the one hand, Raúl has created more opportunities for Cubans to become self-employed, to use remittances from exiles, and to buy and sell their assets such as homes and vehicles. These are huge reforms. Today, a record number of Cubans -- 444,109, to be exact -- have obtained self-employment licenses, and a real estate market is burgeoning for the first time since the revolution. From a fiscal point of view, these economic reforms have been successful: fiscal revenues from the private sector are up by 18 percent since 2011.

But as is typical of old-line communists, and especially of his brother, Fidel, Raúl remains apprehensive about the private sector. He worries that the private sector could become too large and thus able to challenge the state's stranglehold on society. Therefore, rather than boosting the private sector with further reforms, the government is holding fast to restrictive policies.

Key areas of the economy remain closed to competition. Self-employment is still banned in most professions that require advanced skills, such as engineering, architecture, software development, and the medical sciences. Large-scale hiring is prohibited, so private enterprise is limited to micro firms and family businesses. Credit for the private sector is virtually non-existent. The self-employed continue to be overregulated; many are closing their businesses because they cannot afford taxes or find enough customers, since the bulk of the population is still employed by the state and receives meager wages. Consequently, the self-employed sector remains far below the goal of 1.5 million individuals set by Raúl when he launched his reforms in 2011.

Raúl's reformer/conservative duality is equally visible in politics. He has expanded the freedom of expression in a number of decrees that liberalize access to cell phones and the Internet -- major steps in the expansion of speech opportunities. Raúl has also voluntarily supported a new amendment to Cuba's constitution that establishes a five-year term limit -- a move that is remarkable even by contemporary Latin American standards, where presidents are wont to relax rather than restrict term limits. Earlier in 2013, he said this would be his last term, which means that he intends to leave office in 2018. And internationally, Cuba is fully cooperating with peace talks in Colombia, a process that is vital for U.S. interests in South America.

But meanwhile, Raúl has also increased Cuba's political repression. Arbitrary detentions have increased from 2,074 in 2010 to more than 5,300 in 2013. The state arrested more than 909 human rights activists in October 2013 alone. This included some members of the Ladies in White, a peaceful, pro-human rights women's association fighting for the rights of Cuban prisoners. Cuba Archive, an organization that monitors human rights, argues that under Raúl's government, the state has overseen at least 166 deaths and disappearances, all politically-motivated, including the possible assassination of Cuba's most important civil rights leader, Oswaldo Payá, in 2012. Politically, therefore, Cuba is not moving forward, but backwards.

Maintaining his old-line roots, the Cuban president also continues to privilege the military over any other sector. During his tenure as minister of defense, Raúl oversaw military operations, and after becoming president, he accelerated Cuba's transition to a pseudo-military regime by appointing key military officials to his cabinet, often to replace civilian fidelistas to consolidate the transition to his own government. Raúl also increased the military's control of industries in Cuba that engage in foreign trade. And though Raúl is critical of almost every sector, he never criticizes the military. In fact, he is openly supportive of it. Just this year, the government launched the construction of three new "military cities," state-of-the-art housing development projects for members of the Armed Forces.

In political science, we are not that surprised by duality. From Russia to China to the Arab World, new leaders often emerge who try to act simultaneously as reformers and old-liners, hoping to overhaul the status quo while maintaining the main elements of the existing regime. While political scientists expect one side to prevail, they are used to the idea of conflicted leaders.

But in Washington, this duality only worsens the divide between those who favor rapprochement and those who oppose it. Raúl's duality raises hope among some groups who feel the time is ripe for the United States to open to Cuba, and vice versa. But others see Raúl the old-liner, and they become even more adamant about vetoing any efforts to rebuild the ties between the two states. The result is a continued impasse in U.S.-Cuba relations.

Raúl Castro seems to be fine with this middling approach. Just two weeks after the famous controversial handshake between Obama and Raúl during Nelson Mandela's funeral, Raúl gave a speech where he addressed U.S.-Cuban relations. Rather than take the opportunity to lambast the empire, as his brother would have done, Raúl stated that officials from both countries have been meeting productively on immigration and other issues, proving that bilateral relations can be "civilized." In his tone and approach, Raúl has shown a pragmatic and even self-satisfied side.

But he also said this: "We don't demand that the United States change its political and social system, nor will we negotiate with ours." With this simple line, Raúl displayed the core of his conservatism. His duty as supreme leader of Cuba, he once affirmed, is to ensure the survival of the system. He won't pay the price of better relations with the United States if that means system change.

Raúl's words were also a warning to his compatriots: namely, that his government is uninterested in real change. For Cubans who found hope in Raúl's initial reforms, this statement is hard to swallow -- not just because of its innate conservatism, but because it comes from the very same man who makes, at every opportunity, the strongest case for a system overhaul than any Cuban official has made in decades.

At some point, Raúl Castro might find himself forced to choose between reform and tradition. While it is common for leaders to want to be reformers and old-liners at the same time, they eventually select one approach over the other. Reforms have a tendency to be self-generating: more freedoms lead to demands for more freedoms, and this in turn means a deeper overhaul of the system. Raúl will need to decide to either yield to these demands or to block them to preserve the system that he and his brothers founded 55 years ago. So far, he hasn't faced this choice. The freedom to be that ambivalent was probably Raúl's biggest cause for celebration on the anniversary last week -- but that freedom won't last forever.



A Moderate Proposal

A nuclear deal is going to be the key to domestic reform in Iran in 2014 -- or its downfall.

2014 promises to be a make or break year for U.S.-Iran policy -- and for the very future of Iran itself. Indeed, the Obama administration's capacity to influence events in the wider Middle East will hinge, in part, on whether it can negotiate the November 2013 Interim Nuclear deal to a final agreement. The administration has already taken the very step that no previous one had dared imagine: it has decisively embraced diplomacy over military force, and brought strategic coherence to U.S.-Iran policy. But in moving forward the White House has also precariously raised the stakes: A collapse of the negotiations would not only signal that the region's most enduring global conflict is beyond the pale of rational solution -- the failure of nuclear diplomacy would kill also off the chances for internal political reform in Iran itself.

The prospects for opening Iran's political arena have always partly hinged on ending, or at least attenuating, the three-plus decades of U.S.-Iranian cold -- and sometimes hot -- war. Iran's hardliners have benefitted from, and even depended on, this conflict to sustain their domestic power. Going back to the mid-90s, they invoked the U.S. "threat" to justify repressing a reform movement which they accused of being a fifth column for a U.S. cultural "invasion." But their consolidation of power was also informed by the hard-liners' key assumption, and hope, that the U.S. would never run the military or political risks of a decisive choice between war or diplomacy. This bet in favor of strategic incoherence in U.S.-Iran policy turned out to be a good one.

Strange as it seems, this absence of strategic coherence was predicated on sanctions. Imposing sanctions supposedly proved U.S. determination to be "tough" on Iran, but by themselves they did not constitute a strategy. Instead, they acted as a Rorschach test to reflect the different desires of the key players. Many Israeli and Saudi leaders -- as well as some members of the U.S. Congress -- hoped that sanctions would force Iran to totally dismantle its nuclear enrichment program. Barring that unlikely outcome, sanctions were depicted as either a device to weaken Iran in the lead up to a military attack, or an ineffective mechanism whose inevitable failure would compel the U.S. to resort to force.

Israeli Prime Minister Benjamin Netanyahu has deployed both of these seemingly contrasting but ultimately converging views, declaring sanctions useless one day, only to praise them later as a tremendous success. Either way he probably never saw sanctions as an integral part of "dual track" strategy designed to facilitate a diplomatic solution. Seeing their diplomatic potential requires accepting the elemental premise that sanctions can, and indeed should, be eventually removed in return for a negotiated solution -- their purpose is not to achieve total victory, but rather to facilitate making peace.

The longer this politically expedient arrangement of everyone pretending to agree on the purpose of sanctions lasted, the more it benefitted Iran and its closest allies, including Syria. After all, a decade plus of strategic indecision allowed Tehran to expand its enrichment programs and to protect them by digging deeper. This not only ensured that Iran would have more to "bargain away" in any talks, it also raised the strategic costs and risks for the use of force. If by 2010 U.S. military leaders were signaling their lack of enthusiasm for an attack, this was because many had concluded that a military approach required weeks if not months of war with Iran -- after Iraq and Afghanistan it wasn't only the American public that opposed new military adventures.

Such calculations pointed to only one reasonable option: a diplomatic solution. It is interesting to note that the Obama administration apparently came to this conclusion months before Hassan Rouhani's surprise election -- well before most U.S. Iran experts could envision Iran's domestic politics tolerating the return of former Ambassador to the UN Javad Zarif, and his pragmatic foreign policy camp, as Rouhani's foreign minister. Now that they are leading Iran's nuclear policy team -- with, of course, the Supreme Leader's critical blessing (or at least acquiescence) -- the challenge facing the administration is to negotiate a final deal that Zarif and his allies can defend as a reasonable compromise without provoking retaliation from either domestic hard-line opponents or those in the U.S. and the Middle East who still think that Iran's total capitulation is a feasible goal.

Creating this sweet spot will be impossible if the U.S. imposes more sanctions. The oft-repeated Washington mantra that "sanctions got the Iranians to negotiate" is true, but only in a very limited sense: Sanctions have enhanced the domestic leverage of foreign policy pragmatists who, under Zarif's leadership, argue that the Obama administration is ready for a compromise that includes removing all nuclear-related restrictions. New sanctions will not only destroy the pragmatists' credibility -- it will decimate their wider bid to advance a new domestic reform project.

This project is far more about politics than economics. Rouhani is leading a still wobbly alliance of reformists and more moderate conservatives who are trying to reopen a political field that had become dangerously polarized after eight years of repressive rule. Thus the notion that Rouhani is nothing but "wolf in sheep's clothing" is profoundly wrong; Iran's new president and his political allies are more like agile rabbits trying to avoid the sharp claws of hard-line predators who would like nothing more than to reassert their mastery of the political terrain.

What separates hard-liners and pragmatists is elemental: the pragmatists want a more inclusive political détente at home, but cannot make progress without new policies of economic and political détente directed towards the Arab Gulf, Europe and the U.S; it is exactly this crucial link between domestic reform and international engagement that worries hard-liners. The hardliners know very well -- as do many advocates of a more pluralistic politics -- that a nuclear deal is a prerequisite for ending what Rouhani himself has called "the suppression and radicalism of the last eight years."

Thus far the Supreme Leader has restrained the hard-liners. Khamenei's support for the pragmatists is driven not merely by his desire to end sanctions, but more fundamentally, by his interest in reestablishing a political consensus that would rehabilitate his own authority as the master arbiter of the political arena. Whatever his ideological priorities -- always a matter of intense speculation by Washington's Iran specialists and foreign policy pundits -- it is hard-nosed calculations of political survival and state interest that are probably keeping the Supreme Leader in the game.

Should the U.S. and other P5+1 states indulge such calculations? Not if it means accepting a final nuclear deal that lacks the intrusive inspections and other tough safeguards mechanisms that the international community has demanded. But if Washington can get a reasonable compromise, it will align nuclear diplomacy with the long-term quest for a more open politics in Iran. Rather than take actions that derail this still fragile dynamic, the U.S. should emphasize the strategic gains that will accrue to all Middle East states when and if Iranian leaders who favor détente at home and abroad can finally claim a measure of real victory.