The ‘economic foundations’ of the new Cuban Constitution

Sep 7, 2018 by

The ‘economic foundations’ of the new Cuban Constitution

The ‘economic foundations’ of the new Cuban Constitution

HAVANA – The most important political process in Cuba at this moment is the ongoing discussion surrounding the new Constitution.

The new Magna Carta proposes transformations in a group of key areas of the country’s economic, political and social lives. However, the final form these changes take, and their true scope, will be defined later in the legislative process that will adopt the corresponding legal norms, and their practical application. This last element is not a minor thing in the Cuban context — which suffers from legal hypertrophy in some areas, frequent overlapping of the different rules and regulations, together with omissions and a lack of clarity that provides ample space for discretion. Unfortunately, the new proposal leaves open that possibility as will be seen later.

Even so, we should assume that active and honest participation in this debate is a right and the duty of every citizen. Our country’s transformation requires, among other elements, this type of process. A frank and profound discussion requires information and elements to be debated, and opinions heard from all sides. Explaining what has been done with the initial draft and trying to prove its merit is only part of that process. The public media should play a key role here by offering opportunities to responsible citizens with differing opinions to express themselves and their points of view while making others aware of their thoughts.

One of the aspects that stands out with experts and ordinary citizens is related to forms of ownership. Title II includes the so-called “Economic Fundamentals,” while other rights of this type are included in Title IV’s “Rights, Duties and Guarantees.” In general, Title II’s “Economic Fundamentals ” follows three basic guidelines. First, it adheres to the provisions of the so-called “Conceptualization” of the Cuban economic and social model. This is one of the central documents adopted at the VII Congress of the Communist Party in April 2016, specifically chapters two and three. Hence, it drags some of the contradictions and omissions of that document, which have been discussed in one of my previous columns. 

Secondly, the new Constitution establishes a type of State based on the predominance of social ownership over the fundamental means of production and planning as the nucleus of the economic management system. Although the rule makes sure to underline that in Cuba the typical market economy system does not apply, it introduces appreciable transformations that bring the effective model closer to what are known as mixed economies, those where different forms of property coexist and there is space for market relations. This is a remarkable change whose scope goes beyond the text of a Constitution, and will depend essentially on how the new economic policy is handled within the framework of the new contradictions that are going to occur in practice.

Thirdly, it is important that the text explicitly recognizes private ownership of certain means of production. There is no doubt that this is one of the milestones of the proposal, and one of the changes that has the greatest potential to generate future transformations. In addition, the possibilities of mixed ownership are recognized and extended, which can generate interesting possibilities for the repositioning of companies of different types. Likewise, for the first time the market is mentioned as part of the economic and social model. The treatment given to both constitutes an implicit acknowledgment of the non-viability of the centralized national planning model, tested over several decades in Cuba, and which has not produced the welfare quotas required by the nation.

The intersection of Articles 21, 22 and 28 leaves us with the fact that in practice, the only private property that the Cuban State does not promote, and to which it provides less guarantees, is the private property owned by Cuban nationals. In other words, Cuban citizens enjoy fewer property rights in their own country than foreigners.

While considering the notion of migrating to another model, the greatest danger lies in producing an incomplete transformation from the very beginning. In this sense, several weak points are detected that can be a source of confusion and discretion later. Ones that stick out the most are the bias against private property, the abstract hierarchization of the merit of the different forms of property, the feeble treatment of social control over companies that are recognized as “socialist property owned by all the people,” and the constraints placed on the full exercise of property rights.

The wording transmits a bias against private property, both in the exercise of the corresponding rights and in its socio-economic role. In the description of the different types of property, the only one mentioned bounded “in accordance with the provisions” is private property. It is argued that the superior form is the socialist state enterprise and that the State encourages the forms considered more social. The superiority of one form of property over another should not be a legal, ideological or administrative matter. The regulatory framework should encourage everyone to develop their potential to the fullest, under predictable and fair rules of the game, which avoid the hijacking of decision-making to favor one over the other. The alternative is the slow advance of the productive forces, as it has been up to now, compromising the present and the future of the country, especially of the new generations. There is no empirical evidence in Cuba, or anywhere else, that supports the pre-eminence of one form over another.

The bias is especially striking because Article 28 reads that the State promotes and provides guarantees for foreign investment, which is private. The intersection of Articles 21, 22 and 28 leaves us with the fact that in practice, the only private property that the Cuban State does not promote, and to which it provides less guarantees, is the private property owned by Cuban nationals. In other words, Cuban citizens enjoy fewer property rights in their own country than foreigners. It is difficult to understand how the Constitution of a country could legitimately enshrine this type of discrimination against its citizens. The explanation of this contradiction can not be ideological, given that the merit of foreign private property was accepted. The argument is essentially political.

Unfortunately, we will not reach the necessary prosperity quotas until the productive forces within the country are fully liberated. And that implies equal consideration to domestic private investment. Predictably, the limits to the concentration of property will fall essentially on nationals, which is another error. If this results from proper management and compliance with taxes, it should be considered legitimate. The exercise of generally recognized property rights is severely limited. For example, private property of land is regulated by a special regime. In practice, both the limits that are explicitly established in Article 29, and those that presumably will be incorporated into specific legislation, imply that the actual exercise of these rights has been curtailed so that their recognition is practically a formal exercise. This reappears again in Article 57 of Title IV, which very narrowly recognizes these rights to quickly limit that this right must be in accordance with the provisions of the law.

In Title II itself, the term “due” is used instead of “just” to refer to compensation in the case of expropriation of property for reasons of public interest. Interestingly, it is used in the case of land. This is very curious because in the absence of a land market it is not very clear where information for fair compensation on pricing would be obtained. The Magna Carta draft is ambiguous in this case, which results in an effective lack of protection of property rights.

Unfortunately, this is also true for everyone’s socialist ownership rights. In this case, the State represents these rights. The problems suffered by public entities in terms of the interests of the owners, and those who represent them, are well known. It is reflected in specialized literature as the contradiction between the agent (in this case the State, and those it designates to represent it) and the principals (the owners, in this case the Cuban people).

What has happened in practice in these contexts is that management and decision-making has been bureaucratized, alienating not only the entire people (the owner) but their own workers (part of the people, and the most direct owners, if you will). Given that the new constitutional project manages to be so specific in other aspects mentioned above, the inclusion of some basic principles for a change in the management of the state company that provides guarantees for the exercise of citizen control and its workers should be considered.

In general, Titles II and IV contain positive aspects and numerous contradictions. There are advances impossible to ignore which will generate new dynamics in Cuban society. A characteristic that is perceived throughout the text of the proposal is that virtually all provisions and guarantees are limited by “what is established in the law.” That is, legal norms of lower rank have the ability to define and interpret the provisions of the Constitution. At the height of the second decade of the 21st century there remain too many lags of the old nationalized model, which did not produce what was promised so many times in the past. 

Article 13, paragraph (e), states that the State’s objective is to promote development that guarantees individual and collective prosperity. Well, it is regrettable that you miss the opportunity to equip yourself with all the possible means to achieve such a laudable goal, and that in this way, your own citizens do not have the opportunity to exploit their full potential.

Dr. Ricardo Torres is a professor of economics at the University of Havana.

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