Economy of Cuba During the Cuban Revolution
In October 1962, the United States teetered on the verge of nuclear war. Soviet missiles, stationed in Cuba, had the range to strike Chicago and kill millions of Americans. Cuban communist revolutionary Fidel Castro and Soviet leader Nikita Khrushchev reached an agreement to construct missile launch facilities just miles from the Florida coast. How did this crisis happen? Why did Castro harbor Soviet nuclear missiles? Why did Cuba align with the Soviet Union? The answer to this can be found in the Cuban Revolution. Beginning on July 26th, 1953, Fidel Castro and his small band of rebels 150 factory and farm workers attacked the Moncada barracks in Santiago. Although unsuccessful, Castro’s insurgency expanded over the next 5 years, sparking a communist revolution in Cuba. On January 1st, 1959, Cuban military dictator Fulgencio Batista fled Cuba by plane. Fidel Castro embarked on a long victory march, arriving in Havana in January 8th as a hero of the communist revolution.
The Cuban Revolution and Castro’s rise to power created far reaching global consequences, as seen in the Cuban Missile Crisis. From an economic lens, we can explain how Fidel Castro and his 150 measly fighters sparked a national revolution. Foreign control of Cuba’s industries set the stage for the communist movement, as Cuban society rose up under Fidel Castro’s leadership to take back control of their domestic industries. The exploitation of Cuba’s economy by foreign powers created fertile ground for a communist movement and laid the groundwork for a revolution. Economic factors contributed heavily to the Cuban Revolution.
Cuba’s dependence on exports, trade relationship with the United States, and widespread corruption were critical in causing Fidel Castro’s rise to power.
Cuba’s export dependence was a crucial contributing factor to the Cuban Revolution. The Cuban economy was heavily dependent on sugar cane exports: in the 1950s, an estimated 80% of Cuba’s exports consisted of sugar cane, and over half of these were shipped to the United States. Cuban annual exports accounted for about 3 million of the roughly 6 million ton global market. Castro’s rise to power cannot be explained without an understanding of the importance of the sugar cane industry. In Cuba’s cash crop economy, the livelihoods of the Cuban people were dominated by their sugar exports. Sugar cane was a lucrative commodity, and the demand from sugar consuming countries provided income and prosperity for Cuban society.
The disadvantage of this one crop economy was their dependence on a single export. The U.S./Cuban Reciprocity Treaty suppressed Cuba’s ability to diversify its economy. In a diversified economy, one industry doesn’t dominate the country’s affairs. For example, in the diverse economy of the United States, when the auto industry suffers from foreign import restrictions or low demand, the economy can shift its focus toward pharmaceuticals or mining. When auto workers are laid off, they can seek manufacturing jobs. When one industry fails, another can pick up the slack. Cuba did not have this luxury. In a diversified economy, when the demand for cars falls, those resources can be redirected into oil drilling. By distributing a country’s resources across multiple industries, fluctuations in demand and import restrictions won’t be as devastating than in a single commodity economy.
By spreading out the risk, the country as a whole isn’t as susceptible to economic hardships. Cuba’s dependence on a single industry sugarcane caused economic instability and social unrest. The heavy reliance on sugar cane exports created ripe conditions for a communist revolution. By relying too much on a single export, economic hardship in Cuba was rampant. Economic instability caused social instability, making Cuba vulnerable to coups and revolts. Fidel Castro took advantage of these unstable conditions, leading an uprising against Batista and consolidating power for himself. Cuba’s over reliance on sugar cane exports directly contributed to the Cuban Revolution.
As their leading trade partner, economic policies made by the United States heavily swayed Cuban affairs and greatly contributed to Castro’s communist revolution. The relationship between Cuba and the United States was dominated by the sugar trade. American influence in Cuba cannot be overstated. Earl E. T. Smith, former United States ambassador to Cuba revealed in his 1960 Senate testimony that, “Until Castro, the U.S. was so overwhelmingly influential in Cuba that the American ambassador was the second most important man, sometimes even more important than the Cuban president.” When Batista suspended the Constitution and consolidated power in a dictatorship, he increased Cuban dependency on the United States. Batista understood his country’s dependence on US trade and fostered this economic relationship. Under Batista’s regime, American companies controlled a significant share of the sugar cane industry, and Havana became a playground for wealthy Americans.
This private control of Cuba’s development by foreign capital played a vital role in the Cuban Revolution, as Castro viewed this as exploitation, and inspired the Cuban people to reject this foreign meddling.
From 1942 to 1947, the United States and Cuban governments negotiated the sale of the entire Cuban sugar crop in a single annual bulk shipment. When U.S. import quotas took effect, it wasn’t feasible for Cuba to compensate for its losses by shifting exports to other markets, as other countries had their own protectionist policies. For example, sugar consuming countries in Europe enacted legislation to limit their Cuban imports in order to bolster their own colonial holdings. Portugal sourced its sugar from Brazil. Great Britain wished to expand its sugar mills in Jamaica and Barbados. France wanted to grow its sugar cane operations in Haiti. Spain imported much of its sugar from the Philippines. Colonialism spawned competition, as countries wanted to develop their own profitable sources of sugar cane in Latin America and the Caribbean. Mercantilism the economic theory that nations should generate wealth by acquiring raw materials from their colonies was put into practice through protectionist policies. This strategy left Cuba with lots of sugar and few places to send it, making access to the US market crucial for Cuban stability. When the United States introduced quotas to protect its domestic sugar production, Cuban citizens faced financial hardship, which created social unrest. Fidel Castro capitalized on this and inspired many desperate Cubans to join his revolt. Thus, U.S. import restrictions directly contributed to the Cuban Revolution.
Cuban sugar companies were highly speculative and depended on foreign political conditions. Countries often set limits on their sugar imports or set high tariffs to protect their own domestic sugar industry. This protectionism wreaked havoc on Cuba’s economy and created social unrest. Into this volatile environment entered Fidel Castro. His revolutionary message was especially appealing to the lowest economic class. It’s no coincidence that his original band of 150 rebels were poor farmers and factory workers these Cubans suffered most from their country’s economic challenges. U.S. trade policies caused economic stresses that weakened Batista’s political and military support. U.S. laws restricted sugar imports by placing quotas on foreign suppliers. This had a devastating effect on Cuban society, and in that environment, Castro’s communist ideology flourished. Thus, U.S. import restrictions allowed Castro and his anti American views to oust Batista and consolidate power.
Lastly, the quotas and corruption Cuba imposed on its own citizens contributed to the communist movement. During Batista’s rule, production quotas were assigned by the government to each sugar cane grower. These consisted of 2 export quotas (one for the U.S. and the other for the rest of the world), and one “special reserve” quota, which required growers to leave a portion of their land open and available for use by the military and government. This special reserve quota caused over 1/5th of Cuban land to lie idle instead of being used for in more productive ways. It was Batista’s desire to reform the Cuban economy that opened up Cubans to Castro’s more drastic changes. Under these quotas, land and labor were poorly utilized.
In addition to the inefficient use of land, corruption was rampant in Cuba, and disposing of it was a key motivation behind the communist movement. In the years preceding the Cuban Revolution, government corruption scandals were all too common. Nepotism defined Alfredo Zayas’s administration, as friends and family were appointed to government positions, allowing them to siphon off wealth from the Cuban people. Carlos Prío Socarrás, the President of Cuba from 1948 until he was deposed in Batista’s military coup, was believed to have stolen over $90 million in public funds, a quarter of Cuba’s national budget! This pattern of misdirecting or outright stealing money destined for public works roads, bridges, hospitals which were desperately needed by Cuban society was certainly a contributing factor to Fidel Castro’s ascendance and the establishment of a socialist government.
Economics permeate the Cuban Revolution. The one crop export economy created political instability. U.S. tariffs and trade policies spawned social unrest. Under quotas imposed by the Cuban government, land was under utilized, and financial hardships worsened. Corruption and graft made a socialist movement appealing to the Cuban people. Into this volatile climate stepped Fidel Castro. Met with great celebrations in Havana, Castro forever changed the future of Cuba. It can be seen in the 1950’s era American cars that fill Havana streets, the latest models available due to the U.S. embargo. It can be seen in Cuba’s current Secretary of the Communist Party - Raul Castro. The Cuban Revolution has far reaching effects that can still be seen today, and the causes behind it can be examined through the lens of economics.