[Marxism] More on those currency and wage changes in Cuba

Walter Lippmann walterlx at earthlink.net
Fri Jun 13 11:28:50 MDT 2008


Since there's been so much interest in the new rules which
are being implemented regarding salaries and the prospective
changes in Cuban currency, I'm sharing the comments about it
by Simon McGuinnes of Ireland, whose opinions make a lot of
good sense to me. In addition to Simon's comments, readers
may also want to look at the last Cuban state resolution on
wage scales, which was posted publicly three years ago and
gives us a sense of the range of wage rates. (Spanish, but
you'll be able to grasp some of the most important parts.)

Simon's point about the exchange rate changes and surtaxes
as being essentially a tax on remittances is correct, with
the added proviso that the extra 10% surcharge on the US
dollar also helps to both discourage its use on the island,
as it evokes, quite literally, "less bang for the buck"
not to speak of having an important political dimension

SALARY SCALES - FROM Cuba's "Official Gazette"
http://www.walterlippmann.com/docs1986.html

A further reason why Cuba is presently able to make some of the
changes and address some long-standing problems is that it's 
doing exceptionally well in the production of industrial nickel.
There are Cuban and joint venture companies together with the
Canadian Sherritt International involved in these projects.


Walter Lippmann
Vancouver, B.C. Canada


SIMON McGUINNES comments:
It is difficult to reflect the complex economic mechanisms behind the 
dual currency in a short few words - Nelson Valdes is technically 
correct - the dual currency is just the "fall guy" for the disparity 
of income created by remittances.  But the CUC also gives access to 
goods not available to people with national currency, so it has long 
been regarded by the population as a symbol of inequality.  I have 
just used the term CUC as a shorthand so as not to get bogged down in 
an economic discussion about a political decision.  Economic purists 
may be right to seek to clarify the economic point but the political 
point I was trying to make - that the measures are not aimed at 
increasing income disparity, but reducing it by increasing the 
relative value of the national currency - remains.

There is no suggestion that the Cuban government has any intention of 
preventing remittances, so essentially finding a way to tax them 
progressively is what is involved here.  You cannot, for example, 
convert US dollar to national currency without going through the 
CUC.  Each stage of the conversion attracts an exchange surcharge 
which is essentially a tax on remittances.  The more goods and 
services there are that have to be bought with national currency, 
the more tax is paid by those receiving remittances. In fact, dollar 
remittances used to purchase goods in national currency attract 
double taxation.  Stopping remittances would cut Cuba's foreign 
earnings by something around 20% - it is a source of income that 
isn't going to be cut off any day soon, however much the purists 
might like.

The world is being told today by Reuters and every other 
western "authority" on Cuba that this measure is a step away from 
socialism.  Nelson may agree with that spin - I don't know. My own 
view is that it is part of a process to stimulate food production and 
other production with a view to rebalancing income distribution by 
increasing the purchasing power of state salaries and pensions.  That 
strengthens socialism and helps to reduce the distorting effects the 
liberalisation of dollar use which was introduced by the Cuban 
government during the dark days of the 1990s as an emergency 
measure.  

The CUC itself was an economic tool specifically invented to ensure 
that Cuba had the power to control the worst effects of the US dollar 
on the Cuban economy.  It has been highly effective in that role.  
Indeed, the government has managed to re-positioned the CUC as an 
unattractive alternative to national currency because of its 
declining value trajectory, partly due to the conversion tax and 
partly due to the weakness of the US dollar.  Neither of these 
effects are accidental, both actually indicate a clever strategy in 
play which is controlled by Cuba and takes energy, when available, 
from international currency fluctuations. The CUC was always 
something of a "stooge" to undermine the US dollar within Cuba.  
The government is committed to removing it and will kill it off by a 
thousand cuts.  

This measure is one of the cuts.  

I don't expect the average western journalist to be able to follow 
this argument, let alone interpret it and get it published in his 
newspaper. So, one more untruth, adding to the capitalist confusion, 
is added to the Cuban jigsaw.  - SMcG

=========================================
     WALTER LIPPMANN
     Los Angeles, California
     Editor-in-Chief, CubaNews
     http://groups.yahoo.com/group/CubaNews/
     "Cuba - Un Paraíso bajo el bloqueo"
=========================================




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