Cuba 2005: The “Alice in Wonderland” Economy (Part 2)
Posted: 03 March 2006 06:10 AM   [ Ignore ]
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Fictitious Growth

Since 2002 President Castro has been outspoken on the weaknesses of the methodology developed by the United Nations to estimate the gross domestic product (GDP) of a nation, arguing that it underestimates Cuba’s economic growth. In his report to the National Assembly at the close of 2003, Minister Rodríguez already reported two rates of growth for Cuba, one based on the “conventional” GDP methodology and another one (higher by 46%) based on a “new methodology” that adjusted GDP to account for the free services that the Cuban population received. For 2004, he announced a growth rate of 5%, stating that the calculation was based on a partial revaluation of services offered to the population, and warned that in the future “the calculations must continue to be perfected […] at the same time that we continue to develop other methods and indicators that will reflect more adequately our social and economic advances”
(Informe sobre los resultados económicos del 2004 y el Plan Económico Social para el 2005, http://www.cubagob.cu/mapa/htm).

In presenting the whopping 11.8% growth rate for 2005, Minister Rodríguez cryptically explained that “it includes the value added by social services offered to the Cuban population and that have also benefited citizens of other countries.” Osvaldo Martínez, head of the Economic Affairs Commission of the National Assembly and a former Minister of Economics and Planning, was more explicit:

The Cuban reality, where important sectors with high levels of employment such as education, public health, culture, sports, are not based on the sale of their output, as is the case in capitalist economies, does not fit within the traditional GDP methodology. […] According to the traditional GDP methodology, their contribution to economic activity should be measured by aggregating expenditures, thereby underestimating the value added by these fundamental services in social and human terms. Our [new] method has improved the calculation of value added generated by these services, although we are still applying rates well below international standards.
[http://www.cubaminrex.cu/Actualidad/2005/Intervención del Pdte de Asuntos Económicos.htm].

In other words, what Cuba has done in 2005—and partially in 2004—is to value social services at some shadow market price and to include the total in the value of the production of goods and services of the nation. This means that the value of output generated by Cuban statisticians for 2005 is neither comparable with output for previous years nor with output measures produced by other countries that follow the United Nations GDP methodology. ECLAC did not include the 11.8% growth rate reported by Cuba in its publication regarding Latin American economic performance in 2005. In its brief analysis of Cuban performance in 2005, it included a footnote saying that the data on growth provided by the Cuban government, “included in its calculation a very high level of exports of social services to various countries, particularly to the Bolivarian Republic of Venezuela. ECLAC is evaluating this calculation in light of the methodology developed by the United Nations, an evaluation that is still ongoing, and therefore ECLAC does not have estimates of its own. In addition, Cuba has begun to apply a new valuation of social services, which is also being analyzed” (ECLAC, Balance Preliminar de las economías de América Latina y el Caribe, 2005, 169).

Alice in Wonderland Economy

What can we say, then, about Cuban economic performance in 2005? Unfortunately, not very much that is based on hard statistical data. Performance of the agricultural and industrial sectors—the sectors that put more food and basic products in the hands of consumers and generate electricity to provide lighting and preserve food—seems to have been lackluster at best. The average Cuban consumer does not benefit from a revaluation of the value of social services or of exports of teachers or physicians to Venezuela.

The perverse effect of the fictitious economic growth statistics is that they provide fodder for misguided triumphalism by Cuban government officials, such as Castro’s statements that Cuba is on its way to “economic invulnerability” (whatever that means) or by National Assembly Deputy Martínez that these figures demonstrate “the superiority of Cuba’s social system within Latin America.”

Minister Rodríguez has forecast a growth rate of 10% in 2006, a year that promises further centralization of economic decision-making and dismantling of what is left of market-oriented reforms (under the guise of combating theft, corruption, and illegal economic behavior), a new “energy revolution,” a very large housing construction plan that foresees building 150,000 new dwellings, and an (unspecified) set of “strategic actions” to combat the problem of droughts. As Alice cried out, “curiouser and curiouser!”■

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Posted: 10 July 2007 07:17 PM   [ Ignore ]   [ # 1 ]
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