US Researchers Say Cuban Model More Damaging than the Embargo
HAVANA TIMES – The study “The New Economy of Cuba and the International response” was distributed to the media Monday by the Brookings Institution, a self-described independent American think tank based in Washington, D.C. In the document, researchers allege that Cuban economic model is more harmful than the US blockade of the island, reported EFE.
The study concludes that despite the progress made by the current government, the Cuban economy remains stagnant, with its most serious brake being the “outdated economic model inherited from the Soviet Union.”
“To achieve the faster growth demanded by its suffering population, Cuba must embrace the global economy and open up more to foreign investment, eventually including US companies,” proposes the study’s author, Richard E. Feinberg.
He recommends Cuba approach organizations like the International Monetary Fund and the World Bank, leaving aside past misgivings. Likewise, he suggests the US not oppose the readmission of Havana into international financial institutions.
Corrections to the above:
(1) The “5,000” pesos down payment was a typographical error. It should have been “10,000” pesos.
(2) The line “A capitalist bank, making the same 120,000 peso loan . . .” was a mistake. It should have read: “A capitalist bank, making a 90,000 peso loan . . .”
Griffin, sorry for the delay in responding. You raise a key question.
If charging interest were replaced by service charges, banks would still evaluate credit worthiness, as in the past. Also, collateral would have to be put up, in order to ensure that those receiving credit extensions produce in the economy and pay off the principal debt out of their earnings. But since interest (usury) could not be charged, banks would have to “tack on” a reasonable and sufficient creditization and payback administration fee.
Here is an example. Let’s say a citizen meeting the proper criteria were extended, let’s say, 100,000 Cuban pesos to buy a house or brick and mortar business. The cooperative bank might then need a 30,000 peso fee, in order to make a sufficient profit and stay in business.
The credit extension–after the borrower puts down, let’s say, 5,000 pesos–would be 90,000 pesos. But the 30,000 peso fee would be added on to the credit debt, making the borrower’s debt total 120,000 pesos.
It would be a simple matter then to divide the debt by the amount the borrower could reasonably pay per month (plus homeowners insurance against fire, flood, etc.), and come up with the total number of payments needed overall. In this scenario, the debt principal might be paid off in a dozen years.
A capitalist bank, making the same 120,000 peso loan, by contrast, would charge time-based interest, as though it had loaned out preexisting money from its vault–which would be fraudulent. The borrower’s term of amortization might then be thirty years, instead of the dozen under a cooperative republic.
In this capitalist scenario, the borrower would end up paying three or four times the purchase price of the house or business, most of it be unjust, unnecessary, massive interest.
You see, Griffin, banks–whether they exist under capitalism or under a socialist cooperative republic–do a vital creditization function in society. But under a capitalist system they are able to pretend that they are loaning preexisting money that they own, or have control of.
But that’s not what they do. They legally “poof” credit into existence on a fractional reserve principle, and proceed to suck out the substance of society to an obscene degree.
Banks also, to maintain control and increase profits, manipulate the media and political parties, in order to extend credit to government, and hook tax-payers on eternal, growing public debt. This has gotten to such a point that governments all over the world are paying so much unjust interest to banks and other creditors, that there is less and less left over for public service workers and essential government services.
I hope this long reply satisfies your curiosity.
These comments always crack me up. Those who object the most to Cuba having been — or becoming again — a little whorehouse for Uncle Sam never take into consideration the fact that Cuba went from being a little whorehouse for the US to being a little whorehouse for the Kremlin. And right now, it appears to be a very willing little whorehouse for anyone that wants to rape her – from the Spanish to Italian to the Canadian and everyone else in between. It must be nice to have such a power to conveniently select and weed out that which is inconvenient to the narrative of one’s preferred political position and/or mental masturbation.
The Brookings is as “indepedent” as the Castros as “democratic” – Brookings is a Right Wing think tank and as such it should be treated. I caution everyone to proceed with caution when it comes to anything that has to do with the wingnuts. I also caution them to proceed with caution when it comes to their brethren on the other side of the street for that matter. ha ha! Oh, the US is sooooooo screwed! Clowns to the left and clowns to the right.
If charging interest was replaced with service charges, how could lenders evaluate and adjust for risk and credit worthiness?
Moses, you apparently are ignorant of the realities of national and international banking. Banks do not loan money. They extend credit. This credit is not money from their vaults. It is “place-holder” new systemic money, poofed into existence on the basis of the ability of loanees to produce use-values in the economy, and be able thereby to retire the place-holder principal–which then disappears on the books and vanishes–and pay exploitative, unjust interest, and even compound interest.
People like you, Moses, are duped into believing that the banks are loaning out and perhaps even sometimes losing money, when nothing could be further from the truth. You and others like you believe you are patriots, defending what is right and just. In fact, you are naive individuals allowing yourselves to be led by the political nose by the monopoly bankers.
What is needed in Cuba and in the US and the world is the legal abolition of usury–interest charges on credit debt–and its replacement by a financial system wherein credit is extended for what it truly is, a generation and amortization service fee. These fees would be lucrative enough to reward financial institutions fairly, but persons receiving credit loans would not be enserfed by unjust interest charges.
But I imagine you wouldn’t admit it, even if you were to learn a thing or two about money, credit and banks.
Grady, surely you are not so blinded by your socialist utopian fantasties as to ignore the fact that even Cuba’s closest friends charge interest on the loans they extend to Cuba. Even Venezuela! Rejoining the World Bank and receiving IMF loans would reestablish credibility. As it is, Cuba is perceived as among the world’s greatest credit risks. Their costs to do business internationally, exacerbated by the embargo, is still largely due to the historical fact that Fidel chose to default on hundreds of millions of dollars of IMF loans and continues to be known as a slow or no-pay regime (Just ask Mexico about a recent $400 million loan). Until you and your socialist talkers ante up to fund an international lending source to provide credit to your pet progressive states, the capitalists still have the best game in town, even where the sun don’t shine!
Manuel Mercado is absolute correct. The worst mistake Cuba could make would be to allow the IMF and World Bank to inject the country with interest-bearing credit debt. Let Richard E. Feinberg put his “international financial institutions where the sun don’t shine!
To be clear, if the will of the people in Cuba would be to sustain socialism or (this may surprise you) the will of Americans in the US was to become a socialist state and this was brought about through open, fair and peaceful democratic means, I would cheer (yes, cheer) this new system. My criticism with the Castros is that they have decided for themselves and for more than 11 million other Cubans to not just be socialist but to be a totalitarian dictatorship. Cuban poverty is a direct result of the limitations put upon the Cuban people by Fidel and his minions. The lack of basic human rights in Cuba reflects the disastrous policies of the Castros to hold power. If Cuba chose to be socialist (like maybe Sweden?) who could complain? Instead the Castros want to be like North Korea.That demoralizes me.
The US has no intention of bombing Cuba. The idea of using military force against Castro ended with the Cuban Missile Crisis. Covert actions were tried for a while, but those too have been dropped. For now the intention is to wait them out. When Castro & the other historicos finally pass on, the Cuban people will rise to regain political control of their country.
A recent Gallup poll showed that 39% of Americans view socialism more positively than capitalism.
The USA might make Cuba capitalist with their bombs at some point, but ultimately socialism will prevail in the USA itself; the American working-class has yet to speak: no amount of military and secret service spending will stop that.
Moses, you’re struggling against the mighty current of history, you will end your life demoralized.
It’s sad that some readers would rather engage in rote denunciation of America rather than actually read the paper referred to in the story above.
If you would trouble yourself to read the paper you would learn that the authors endorse a well considered programme for Cuba of gradual reintegration into the world economy. This includes admitting Cuba to international financial institutions such as the IMF, extending exceptions to the US embargo, expanding trade relations with Cuba and leading to the eventual elimination of the embargo. Examples from the experiences of Canada & Europe are described as ways in which Cuba can expand foreign trade relationships.
These are not the preferred policies of intransigent Miami exiles here!
The reason the propose a gradual step-bystep programme is to avoid the shocks and distortions to the Cuban economy & society than would accompany a sudden change of policy, such as an immediate elimination of the embargo.
If you think this is a terrible proposal, go ahead and make the case. But it sounds like the very same goals the Cuban government have been calling for recently.
This to laugh, to enjoy the naive way in which this organization, tried to fool everybody in the world.
What they are thinking, that the Cuban People is going to follow their suggestion?? because is that is the proposition, I can tell them that the Cuba People know what are they doing perfectly well, they do not need this kind of suggestion or study, apply it to the USA Economy, that it is very needed of a deep change.
You are absolutely right Moses, although it’s not exactly accurate to say the internal blockade is imposed by Cubans upon themselves. It is imposed by the Cuban regime upon the Cuban people. Rest assured the elite don’t suffer from the effects of either blockade.
The Brookings Institute is known worldwide for its well-constructed and highly-researched studies. I have no doubt that this study is no less well-founded. That said, WHAT A WASTE OF MONEY!!! Just spend a month living in Cuba and even a blind man could see that Cuba’s biggest problem is Cuba! (Insert Castros here) Cubans always say there are two blockades…the US blockade and the internal blockade that Cubans impose on themselves.
Well the “think tank from Washington, DC.” and the third paragraph are enough for a big laugh.
His propositions – “He recommends Cuba approach organizations like the International Monetary Fund and the World Bank” represent what the US really want when they demand ‘change’ in Cuba: to become international Capital’s little whorehouse again, under the tutelage of Uncle Sam.