Thursday, September 17, 2009

Russia Transition

Some quotes from the article: Cultural Contradictions of Post-Communism:
Why Liberal Reforms Did Not Succeed in Russia. By Nina L. Khrushcheva
(to read the article)

What kind of capitalism Russia needs is now our choice to make. The first type we have already had: a nomenclatura bureaucratic capitalism, in which power, property, and money belong to the government and other officials. Second is the oligarchic type, when power, property, and money belong to a few corporations, companies, and individuals… The best one to have is when all power, property and money belong to as many people as possible. I would call this people’s capitalism.

The lesson Russia and its liberal advisors learnt the hard way is that reform programs require synthetic and creative adaptation, that they are deeply moral and political, not just model-oriented and technical in nature. Another lesson is that “disorder,” which had traditionally always “saved Russia” can and should no more be a solution to its current or future problems, for in the 21st century the country needs a new source of order appropriate to a complex modern society.

The most important issue that Russia faces today, in a new post reform period, is a change in mentality. Russia’s outdated psychology has to date reduced to zero all previous attempts for political and economic change. This problem has always made Russia a place where stable and predictable life is not a norm, in which the difficulties have been routinely blamed on the evils of the patriarchal state, dictatorship, the West, corruption, or bad human material.

If the country is to continue with democratic and capitalist policies, the next era of transition should be concentrated on reforming the mentality of both the elite and the people, which in turn will provide a viable environment for a new, modern, and responsible type of conduct on both sides. Future behavior can no longer be based on fear of the authorities or change but should be that of a people who are accountable for their actions and lives.

Only then, an agreement for mutual benefit—a social contract—between a respected individual and the government of a law based state will become possible.

A simple truth that has been long appreciated by other nations has yet to be welcomed by Russian society: “What man loses by the social contract is his natural liberty and an unlimited right to everything he tries to get and succeeds in getting; what he gains is civil liberty and the proprietorship of all he possesses

Summary of one article about Cuba's Economic Reforms.

Cuba's Economic Reforms in A Chinese Perspective

Jiang Shixue
Chinese Academy of Social Sciences
(This is the paper presented to the Wilton Park Conference on Cuba, October 2002.)

Despite the geographical distance and different population size, Cuba and China have at least two things in common: They are socialist countries and both are on the road of economic reforms. While Cuba began to reform its economy in the early 1990s, China started its reforms and opening-door as early as in 1978. (In December 1978 the Third Plenary Session of the 11th Central Committee of Communist Party of China, CPC, was held in Beijing).
Compared with Cuba, China has made greater progress in stimulating economic development, raising people’s living standards and upgrading comprehensive national strength. From 1978 to 2000, for instance, China’s average annual growth rate was 9. 5%, and for some of the years it stood at 15%. At the same time, inflation rate was often kept below 10% with the exception of only a few years at over 15%. As a matter of fact, few economies in the world have achieved such remarkably high growth rate without high inflation.
It took China 9 years (from 1978 to 1987) to double its average per capita income. But it was 58 years for the United Kingdom (from 1780 to 1838), 47 years for the United States (from 1839 – 1886), 34 years for Japan (from 1885 – 1919) and 11 years for South Korea (from 1966- 1977) to do the same. Then, from 1987 to 1996, China doubled its average per capita income again in 9 years.

I. An Overview of Cuba’s Economic Reforms

The pushing forces that made Cuba walk upon the path of reforms came mainly from the outside. Cuba signed its first major trade and economic agreement with the Soviet Union in February 1960, under which Cuban sugar was provided in exchange for Soviet crude oil and petroleum products, wheat, fertilizer, iron, machinery, and trade credits. It was widely believed that the Soviet Union maintained the Cuban economy by paying “higher than market prices” for Cuban sugar. At the same time Cuba paid “lower than market prices” for Soviet petroleum products. In addition, Cuba joined the socialist trade and economic organization, the Council for Mutual Economic Assistance (CMEA), in 1972 and conducted most of its trade with CMEA countries.
The disintegration of the Soviet Union and break-up of the trade relations within CMEA induced hardest difficulties for the Cuban economy. Between 1991 and 1994, the Cuban GDP declined by 35%, imports dropped by 75%, oil imports fell by half, and people’s caloric intake was reduced from roughly 2800 to 1735 per day. Faced with this harsh situation, Cuba decided to “defend socialism” by reforming the economy.
Cuba’s economic reforms in the past decade can be summarized in the following areas:
1) Decentralization in the agricultural sector;
2) Legalization of the use of foreign currency;
3) Authorization of self-employment;
4) Improving fiscal management ;
5) More integration with the world market;
6) Attracting more foreign investment;
7) Establishing free trade zone (FTZ);
8) Restructuring the economic structure
In China, soon after the June 4 incident of 1989, some leftists were increasingly opposed to the nation’s reform process. In early 1991, concerned with the possibility of retreat on the path of reforms, Deng Xiaoping, who was then celebrating the traditional Spring Festival in Shanghai, said to the Shanghai municipal leadership, “Do not believe that planning belongs to socialism and market belongs to capitalism. Both are instruments. Market can also serve socialism.” He called upon the city officials to be “more liberal, braver and swifter” in pushing forward the reform process.

It seems that Cuba’s reforms are not based on any clear and well-defined theory, although Cuban leader Fidel Castro and other senior Cuban officials have repeatedly said that Cuba’s reforms should be carried out within the principles of socialism. They have expressed their wishes to utilize some forms of the market mechanism, but insist that Cuba will not walk towards market economy. From their perspectives, socialism and market economy are not compatible.

2. Tortoise or hare: Choosing the right speed of reforms
In discussing the speed of economic reforms, people tend to use such words as “gradual” or “shock therapy”.

According to Barbara Stallings and Wilson Peres, the “aggressive” reformers undertook many reforms in a relatively short period of time, while the “cautious” reformers implemented reforms more gradually.

Despite these definitions, however, the specific criteria for defining the reform process as being “gradual” or “shock”, are still controversial in practice.

While many transition economies in the former Soviet bloc are seen as “aggressive” reformers practicing “shock therapy”, China is considered as a “gradual” and “cautious” reformer. As Deng Xiaoping aptly put it, China carried out its reforms like “crossing the river by feeling the stones in the water”. Indeed, because of the following reasons, it is easy to understand why China should wage a cautious and gradual reform process. First of all, as a huge country with more than 1.2 billion people, China should maintain social stability as one of the priorities.

Apparently, Cuba has chosen the gradual approach. This choice is proved to be reasonable and correct. Cuba’s reforms were launched under economic difficulties and harsh conditions, i.e., decades of U.S. blockade and abrupt disappearance of aids from the Soviet bloc. (Remember that, compared with China, Cuba’s initial conditions of reforms were much worse.) If Cuba had followed the style of “shock therapy” as Russia and some other Easter European countries have done, the situation could have gone uncontrolled. However, as some Chinese scholars have pointed out, the Cuban leadership should be more liberal and more brave in such areas as ownership restructuring and opening to the outside world.

3. “Let some people get rich first”, but benefits of reforms should be equally distributed.
Before the 1980s income distribution in China was remarkably equal, or even egalitarian. The Gini coefficient for the urban-rural inequality was only 0.
Deng Xiaoping was wise enough to proclaim that “To get rich is glorious”. He also said, “Let some people get rich first”. Indeed, as many Chinese, including scholars, fully understand, if some people had not been allowed to get rich first, or egalitarianism had still dominated the society, China would not have been able reduce poverty so progressively.
First of all, the gap between urban and rural areas has widened.
Second, while income inequalities within either the urban or the rural areas have become worsened, it is even more conspicuous within the latter.
Third, the whole picture of unequal income distribution for the nation is alarming.
The fact that economic reforms tend to generate worse income distribution has been proved in Mexico, Brazil, Argentina and other Latin American countries that have been marching on the reform paths. Indeed, economic reforms and opening to the outside world tend to create opportunities for people to get rich. But the privileged group tend to acquire more opportunities than the others.
For Cuba, it seems that it is also necessary to “let some people get rich first”. China’s experience has proved that this policy will effectively stimulate people’s initiative to work and therefore to speed up the economy.
4. Improving the ownership structure is the key to successful reforms.

Since China and Cuba are socialist countries, they cannot rely on privatization to improve the ownership structure.15 Rather, they must keep public ownership as the foundation of their socialist economic system. At the same time, however, being in the primary stage of socialism, they need to develop diverse forms of ownership with public ownership in the dominant position.
In the past two decades the non-public sector has increased ostensibly and it is increasingly recognized as an important component of the socialist market economy (see table 1). In some places, particularly in the eastern part of China, the non-public sector has become the most important engine for the development of local economy.

Table 1 China’s changed ownership (%)
1978 1999
Public ownership 78 40
Non-public ownership 22 60

Cuba has been trying to diversify its ownership system. Compared with China, Cuba needs to quicken its steps in this regard. As some Chinese scholars put it, the Cuban leadership should take a more tolerant attitude towards the non-public sector.
5. Reforming the state-owned enterprises is essential for the establishment of a socialist market economy.

As mentioned earlier, Cuba and China are socialist countries and the state-owned enterprises (SOEs) should play an important role in the economy. However, before reforms were initiated, the SOEs could not raise their efficiency, and some of them had long been money-losers, incurring a heavy fiscal burden on the state budget.
Many countries in Latin American and Eastern Europe have privatized the majority of their SOEs. In some extreme cases, almost all the SOEs have been sold to private investors. Results of privatization have been mixed.

In China, the Party and the Government have recognized that well-executed reform of the SOEs is of vital importance to building a socialist market economy and consolidating the socialist system, and the best way to reform them is to establish a modern corporate system.
By World Bank standards, most of Cuba’s industrial plants are considered “large”. Their production cannot be considered as efficient, mainly due to the lack of modern equipment, input and innovation as well as poor management. Many Chinese scholars agree that it is better for Cuba to integrate the reforms of the SOEs as an integral part of the whole reform process, and lagging behind would produce negative impact upon reforms in other areas. In addition to raising efficiency by adopting a modern corporate system, Cuba might need to make greater use of the private and foreign capital and even close down some of the big “money-losers”.
It is encouraging to see that as early as in 1998 the Council of State of Cuba passed the Decree Law 187, stipulating detailed measures to reform its SOEs. Its principles include:

1) Enterprises have to achieve self-financing within the approved social objective.
2) Incentives for the workers are the heart of the business system.
3) Profits, after payment of taxes, are distributed by the appropriate body. One part is set aside for enterprises’ reserves.
4) Appropriate differentials are to be created to encourage the qualified and responsible workers.
5) Labor and wages policies are to be closely linked.17
According to the Chinese experience, Cuba should get well prepared to tackle the problem of rising unemployment as SOEs reforms tend to turn a large number of workers out of their post. If re-employment opportunities and social security benefits could not be provided to them, social stability might be in danger.
6. Corruption is detrimental to reforms.
Corruption simply means the use of public office to pursue private gain in ways that violate laws and other formal rules.

Unfortunately, China is also suffering from corruption, which has aroused public anger and generated economic costs. The idea that corruption can facilitate economic development is wrong. A well-known Chinese economist by the name of Hu Angang categorized corruption activities in China into four types:

1) illegal exemption of taxes and tariffs;
2) underground economic activities like smuggling, drug trafficking and so on;
3) embezzling public funds; and
4) rent-seeking, mostly in the form of market monopoly.
As many commentaries put it, corruption and smuggling are two malignant tumors growing together, and the only way to wipe out smuggling is to eliminate corruption.

On the other hand, the officials should build what the media suggest an “ideological Great Wall” to resist decadent ideas, greed and self-indulgence.

“When the window is opened, a screen is needed to keep the misquotes and flies out of the house”.

As socialist countries, Cuba and China should have their own values compatible to their political system and traditional cultures. Indeed, for them, socialist modernization requires both a prosperous economy and a flourishing culture, and economic reforms need to serve this objective.
In China, the Party has long been promoting socialist culture with Chinese characteristics. As Jiang Zemin said at the 15th National Congress of CPC, “ In building socialism with Chinese characteristics, we must redouble our efforts to raise the ideological and ethical standards and scientific and educational levels of the whole nation and provide a powerful ideological driving force and strong intellectual support for economic development and all-round social progress.
With the reform process proceeding forward, Cuba would be increasingly faced with a similar task of “keeping the mosquitoes and flies out of the house” Particularly, U.S. government sponsored radio and television broadcasting to Cuba (Radio and TV Marti), begun in 1985 and 1990 respectively. So Cuba would confront additional threat.

III. Conclusions

As Deng Xiaoping put it, “Do not believe that planning belongs to socialism and market belongs to capitalism. Both are instruments. Market can also serve socialism.” In order to speed up socialist constructions, China and Cuba need to implement economic reforms, and it is encouraging to see that both nations have achieved remarkable results.
In the light of China’s experience and lessons, the following implications are important:

1) pay more attention to theoretical innovation for the reform process;
2) choose the right speed of reforms;
3) “let some people get rich first”, but benefits of reforms should be equally distributed, 4) improve the ownership structure in a more effective way,
5) privatization is not panacea, but the SOEs should be reformed,
6) corruption is highly detrimental, and
7) “put a screen on the window when it is opened”.

Globalization is proceeding more swiftly than ever. Both China and Cuba must take an active attitude towards this tendency. As President Castro said, “Globalization is an inevitable process. It would be pointless to oppose a law of history.”18 But globalization poses both opportunities and challenges to socialism. As long as Cuba and China can stick to the policy of reforms and opening to the outside, socialist constructions will achieve great progress in the new century.

Tuesday, September 15, 2009

Gobierno & Sociedad Civil.

La noticia de ayer es la nueva convocatoria que ha hecho el gobierno cubano para discutir los problemas nacionales. No es claro cual será el objetivo directo de esta convocatoria, pues hace apenas dos años se realizó algo similar y todavía no se han visto los frutos. Por otra parte cada vez que se realizan estos “debates” se deja claro que cualquier tipo de queja o proposición deben estar dentro de los limites que marca el gobierno y el partido, lo cual elimina la posibilidad que se pueda cuestionar y responsabilizar al propio gobierno por sus políticas erróneas.

El gobierno cubano siempre ha evitado la posibilidad de que cualquier individuo o grupo puedan cuestionar su autoridad y ha usado como su principal recurso la descalificación y el ataque directo a sus oponentes. Esto ha imposibilitado crear cual tipo de proyectos alternativos que puedan tener un impacto importante en la sociedad cubana.

Uno de los síntomas mas evidentes de este férreo control es la escasez de iniciativas colectivas. Generalmente solo encontramos proyectos individuales que en el mejor de los casos pueden agrupar a cierto numero de seguidores, pero que no llegan a alcanzar mayor trascendencia en la población. Uno de los pocos ejemplos que pudo lograr notoriedad dentro de la sociedad cubana ha sido el proyecto Varela y todos conocemos cual fue su final.

Para el gobierno ha sido muy útil este monopolio del poder, pero ¿hasta que punto seguirá siendo beneficioso?

Los posibles escenarios de una Cuba futura son diversos. Sin dudas dentro de los más probables esta el de un cambio en la estructura del control político y económico, posibilidad que cada día toma más fuerza debido al estatismo que impera ante la profunda y larga crisis que vivimos.

Frente a este escenario, ¿que resulta más beneficioso para el gobierno cubano? Tener interlocutores con legitimidad y apoyo con quien establecer acuerdos dentro de un proceso de transito organizado a una sociedad plural, o tener que iniciar un proceso de tal envergadura con un interlocutor débil. En este último caso se correría el peligro de que parte de la población no sienta como legítimos los acuerdos alcanzados, pues no se sentiría representada ni por el gobierno, ni por la oposición.

Esa fue la ventaja que existió en Polonia con el movimiento Solidaridad. El gobierno polaco tuvo interlocutores que aglutinaban a las principales fuerzas opositoras, esto garantizó la legitimidad del proceso de diálogo y de posteriores reformas.

En Cuba se necesita una oposición organizada y madura, con proyectos claros que constituyan una opción política viable, de lo contrario se estará caminando sobre un terreno incierto. La posibilidad de inestabilidad social sería una espada de Damocles que pendería sobre nuestra nación.

La sociedad civil cubana deben estar conciente de la necesidad de reclamar su protagonismo dentro del momento actual. Seguir postergando tales responsabilidades constituyen un ejercicio fatal que no traerá ningún beneficio, sino solo una mayor agudización de nuestros problemas.

Pero para que lo anterior ocurra en forma ordenada y pacifica el gobierno debe permitir de una vez por todas la aparición de estas nuevas alternativas que puedan garantizar el bienestar del pueblo cubano. De nada sirve intentar detener un proceso que terminará imponiéndose.

Tuesday, September 8, 2009

Cuban Communist Party Congress

Jorge Calaforra

In the context of the new events related with Cuba I would like to comment an interesting article by Larry Cata Backer about the postposition of the Cuban communist party congress. I quote some parts of his article:

“I have written before that it is possible to build the foundations of rule of law constitutionalist states within the normative framework of Marxist Leninist states. See Larry Catha Backer, The Party as Polity, the Communist Party, and the Chinese Constitutional State: A Theory of State-Party Constitutionalism, Journal of Chinese and Comparative Law, Vol. 16, No. 1, 2009. In the context of the project of polity building within China, I noted that:

The basis of Chinese state-party constitutionalism requires a reconception of an understanding of constitution - to include both the document constituting the state and that constituting the Party as equivalent components that together form the national constitution as understood in the West. It is also based on a different understanding of the character of the Communist Party - not as a political party or as a private actor but as an integral part of the institutional structure of government, and more importantly, as the holder of political citizenship. These insights produce substantial consequences for the ways in which Chinese constitutionalism are understood and evaluated under global constitutionalist standards, which are discussed in the last section of the paper. These include the reflection of the party-state construct (1) in a division of the character of citizenship between economic and social citizenship, claimed by all persons, and political citizenship, which can be exercised through the Party, (2) in an understanding of political organization in which the state power and its institutions are subordinate to political authority, (3) in an institutionalization of political authority within a collective that serves as the source and conduit of constitutional values to be applied by the holders of state authority, and (4) in a system in which Party elaboration of rule of law values is contingent on state and party self discipline. Chinese constitutionalism, understood as state and party constitutionalism can, together, serve as a basis for understanding the way in which rule of law governance is legitimately possible where the disciplinary focus of constitutional duty is focused, not primarily on the state apparatus, but instead centers on the Party apparatus. Rule of law constitutionalism in China, then, is better understood as state-party constitutionalism, with a necessary focus on party rather than state, grounded in separation of powers principles in which the administrative function is vested in the state and political authority over all is vested in the Party under law. But thus constructed, even state-party systems can claim a certain legitimacy as a constitutionalist system - though one whose substantive values are inconsistent with those of secular transnationalist constitutionalist states. This is constitutionalism with Chinese characteristics.

Id. The great vehicle of this scientific development of a polity from out of a Party structure is both an institutionalized Party structure and a willingness to move to institutional values. that increasingly are open to individuals willing to support the basis of political organization in the state. Backer, Party as Polity, supra.”

As Hu Jinato noted, under the constitutional system, the CCP must:

“Improve the mechanism of restraint and oversight and ensure that power entrusted by the people is always exercised in their interests. Power must be exercised in the sunshine to ensure that it is exercised correctly. We must have institutions to govern power, work and personnel, and establish a sound structure of power and a mechanism for its operation in which decision-making, enforcement and oversight powers check each other and function in coordination. We will improve organic laws and rules of procedure to ensure that state organs exercise their powers and perform their functions and responsibilities within their statutory jurisdiction and in accordance with legal procedures. We will improve the open administrative system in various areas and increase transparency in government work, thus enhancing the people's trust in the government. Hu Jintao, Hold High the Great Banner of Socialism with Chinese Characteristics and Strive for New Victories in Building a Moderately Prosperous Society in all Respects, Report to the Seventeenth National Congress of the Communist Party of China on Oct. 15, 2007, at Part VI, 6).”

“But that requires a move toward an institutionalization and bureaucratization of the Cuban Communist Party. That, in turn, requires the elaboration of an institutional framework for Party organization in which governance principles, like American constitutional principles, can be developed and applied uniformly to Party, state and cadres. While the Chinese model might not transpose easily to Cuba, the forms of that model might ensure the construction of an institutional framework that would permit the development of a rule based system. A key element of that development in China has been the work of the Party Congresses, especially from the time of the leadership of Deng Xiao Ping. Whatever its flaws from an American perspective, the system has been important in the institutionalization of organizational structures and governance principles that have bureaucratized and diffused power within the Chinese system. The broader and more inclusive the Party Congress, the more likely the possibility of building a more broadly based institutional structure for the exercise of political power among a larger number of people committed to the preservation of that system. And, of course, the broader that participation, within the Party apparatus, the greater the ambit of political participation among the people.”

“It is possible that the leadership is unprepared for the deployment of this exercise of democratic centralism in the lead up to the Party Congress. But postponement could suggest a lack of maturity in the institutions of the Party. It could also suggest a need to pay greater attention to the mechanics for dealing with changes in the leadership. In a state seeking stability at a delicate moment, even the symbolism of a postponement might be regrettable. And indeed, from outside the Island, the postponement reinforces the sense that the current governance framework is fragile. The recent removal of Felipe Perez Roque and Carlos Lage suggests the fundamental nature of that fragility.”

“Perhaps the most prominent of those ousted, Foreign Minister Felipe Perez Roque, was the youngest of Cuba's top leaders and had been widely mentioned as a possible future president. Perez Roque, 43, was replaced by his own deputy, Bruno Rodriguez. Vice President Carlos Lage, 57, apparently kept his job as vice president of the ruling Council of State, but was replaced as Cabinet Secretary by Gen. Jose Amado Ricardo Guerra, who had been a top official in the military that Raul Castro ran for decades. Lage was credited with helping save Cuba's economy by designing modest economic reforms after the Soviet Union collapsed.Perez Roque was once personal secretary to Fidel Castro and a former leader of the Communist Party youth organization. He had been foreign minister for almost a decade. Carlos Lage and Felipe Perez Roque replaced among other changes in Cuban government, Cuba News Headlines, March 22, 2009.”

“Postponement after a shake up of this magnitude might suggest, especially abroad, an inability to control or disciplinary issues extending down to the Party rank and file. Indeed, it appears that Party officials at the highest levels have been very sensitive about the removals.”

"An official video that presents the reasons for the ouster of Vice President Carlos Lage and Foreign Minister Felipe Pérez Roque has been shown for the past several weeks to selected groups of Cuba's ruling elite, according to information received by El Nuevo Herald from Havana. . . .The video is shown in two versions: one lasting almost three hours, the other, seven. Both contain compromising images and statements made by Lage and Pérez Roque about retired leader Fidel Castro, current President Raúl Castro and First Vice President José Ramón Machado Ventura, according to those familiar with the footage. Both versions show conversations between Lage and Pérez Roque in which they make jokes about Fidel Castro's infirmities and his years in power, and question Raúl Castro's ability to govern the country." Video shows why two top Cuban officials were ousted,The Miami Herald, May 23, 2009.

“But it also adds fuel to the increasingly vocal sentiment among opponents of the current government that it is moving not towards Chinese style Marxist Leninist rule of law Party-State, but to a conventional model of military dictatorship with socialist rhetoric, a sort of perverted Peronis.”

“More importantly, perhaps, lingering dissatisfaction, hinted at by Lage and Perez Roque, might also be found among Party faithful. That dissatisfaction might have exploded into the open at a Party Congress. Party Militants, it seems, have the right to "Demandar en todo momento la aplicación de la política del partido y el cumplimiento de lo establecido en estos estatutos y los reglamentos, así como de los acuerdos del partido." Estatutos del PCC, at art. 8 ("Demand at any time the implementation of the policy of the party and compliance with the CCP rules and regulations, as well as the agreements of the party). Yet, if one cannot trust one's cadres, the bearers of political rights within a Marxist Leninist state, then one runs the risk of moving away from a rules and group based system, however limited the extent of political rights, to one which is seen as increasingly individual rather than group centered. And even if the reasons for the postponement was to sort through the difficulties of the current economic crisis and its effects in Cuba, the postponement itself serves to suggest that the situation is graver within the Island than has been reported. That might make potential economic partners more jittery. The next few months will suggest the way in which the Party leadership in Cuba intends to fashion the Party-State institutional framework for the future. They might do better to reconsider the Stalinist model that the postponement suggests.”

Taken from Law at the End of the Day
Postponing the Cuban Communist Party Congress
Larry Cata Backer