The economic sphere is full of peculiar and interesting anomalies. The Cuban economic system is one that has been left behind by time. On a bad day, a taxi driver expects to earn 60 dollars, whereas doctors earn no more than 40 dollars a month and engineers earn even less than that. Doctors and engineers are one of the best paid professionals elsewhere. So, why do these skilled workers have such miserable wages?
Cuba had a socialist revolution in 1959 which was led by Fidel Castro. After the revolution, the socialist regime seized control over all private enterprises. Every spec of land and every asset became the property of the government. The government decided the wages of people and set prices for everything. Today most government-owned small businesses are in a shabby condition. It doesn’t matter whether they sell a hundred products or none at all the workers will still earn the same miserable salary. This economic model is not practical. Cuba survived for many years because of subsidies from the Soviet Union. After its collapse, the Cuban economy went into free-fall.
In the 1990s the government realized that the problem was getting worse. So, they decided to give private licenses which created a small but influential private sector. This brings back the case of taxi drivers. These drivers have private licenses and their salaries are not set by the communist regime. This system creates another problem as it leads to highly skilled professionals leaving their area of expertise and taking up work in the private sector. Cubans had an average salary of 25 dollars per month in 2016 and most of the workers in the private sector earn more than that in a single day.
Cuba also has a strange dual system means that public sector workers and those in private enterprise are paid in different currencies. A worker under the public sector earns in Cuban pesos, whereas, a person who is self-employed or works in the private sector is paid in ‘convertible pesos’, which are worth 24 times more. The Cuban government operates a national health system and assumes fiscal and administrative responsibility for the health care of all its citizens. There are no private hospitals or clinics as all health services are government-run. Even the engineering companies are owned by the government. This system makes the survival of a worker in the public sector near impossible.
The workers from the public sector need to do something else along on top of their official jobs just to fulfill their basic needs. Cuba has a highly active informal/black market where workers make money on top of their official salary. In the rest of the world, we tend to associate black markets with dangerous activities like drug dealing, illegal arms trade, etc. But, in Cuba people sell stuff like illegal ice cream and illegal newspapers.
Cuba has clearly shown that communism and socialism are not good ideas. They are in most cases destined for failure. Cuba’s economic crisis can be solved easily by adopting “capitalism”.