The Stalinist states were “Transitional Societies”, states stuck in the transition from capitalism to socialism due to the rule of counter-revolutionary bureaucracies which blocked the advance of socialist revolution both at home and internationally. As Trotsky predicted in his writings, these states were and could only be transitional phenomena: they had to either move forward by means of political revolution against the bureaucracy or move backward with a social counter-revolution and the restoration of capitalism.
Internationally, the numerous blows against the workers’ vanguard by capital and their reformist and Stalinist lackeys, as well as the betrayal and decomposition of the centrist Forth International, paved the way for the second, negative option: the disintegration of the degenerated workers’ states and the successful restoration of capitalism in Eastern Europe, the USSR and China from 1989-92.
Therefore we wrote in 2000: “The only workers' states today - both degenerate ones - are Cuba and North Korea. If and when it can be shown that the government and decisive forces within the bureaucratic-military apparatus in these states promotes fully-fledged capitalist restoration rather than limited market reforms we should then define them as capitalist states.” 
We now think that this situation has changed and that by 2010/2011 the Castro regime turned decisively to restore a capitalist economy in Cuba based on the law of value. As we already have written above, Castroism has come full cycle and returned to its bourgeois roots.
This is not surprising, since the collapse of all Stalinist-ruled degenerated workers’ states has left Cuba, a small and industrially underdeveloped island, with no allies. As indicate earlier, after the embargo by US imperialism and its Castro’s affiliation with the Stalinist camp from 1961 onwards, Cuba was completely dependent economically on the USSR. It is possible that, by the 1980s, Soviet assistance to Cuba reached a level of as much as one-third of the island’s national output. 
Consequently, when the USSR collapsed, Cuba’s economy collapsed as well, and it has not recovered since. By 1993, Gross Domestic Product (GDP) had fallen by 31.6% from its 1989 level, per capita GDP had gone down by 34% and the economy ran at an estimated 60% of its capacity at best.  Sugar production – the traditional main export commodity of Cuba – sharply declined and has not recovered, as is shown in Figure 1. By 2008/09, sugar production was less than 1/5 of its level in 1984/85.
Figure 1 (see PDF file): Cuban Sugar Production, Area under Cultivation, and Yield (1984/1985 = 100) 
Cuban industry, aside from sugar production, was not fared much better. In 2010, industrial output was still only half of its level in 1989 (see Figure 2).
Figure 2 (see PDF file): Cuban Domestic Industrial Output 1989-2010 
Consequently, between 1989 and 2008, the industrial share of GDP fell from 28% to 15%. Accumulation of means of production – expressed as the share of Gross Fixed Capital Formation of GDP – fell from 25.6% in 1989 to only 8.2% in 2010 (compared with a regional average of 22.4% in 2008). (See also Table 3 on this) This inability to renew production apparatus or even to cover the depreciation of existing facilities, is a clear sign of outright economic stagnation.
Table 3 Gross Fixed Capital Formation in Cuba, 2002-2010 (as Percentages of GDP) 
2002 2003 2004 2005 2006 2007 2008 2009 2010
9.1 8.2 8.3 9.0 11.5 11.0 11.4 9.5 8.2
While production declined, debt to foreign banks and states grew massively. As of the end of 2008, Cuba’s total known foreign debts – including its debt to the imperialist so-called “Paris Club” – in convertible currencies had grown to nearly US$31.7 billion, which is as high as 69.7% of GDP.
The Castroite bureaucracy reacted to the economic crisis by cutting back the state sector and social security, and encouraging the private market. An observer writes:
“In late 1993, the Cuban government began implementing a series of policies that would stabilize the economy and result in modest recovery. The new policies decriminalized the possession and use of hard currency legalized transfers of dollars from abroad, and allowed very limited forms of self-employment. State farms were converted into cooperatives, and farmers’ markets, where most products could be sold at free market prices, were legalized. Foreigners were allowed to own property, and foreign investment in the form of joint ventures with the government were encouraged. Government employment was reduced. Over the period between 1993 and 2000, real GDP grew by 29.3 percent and per capita growth by almost 26 percent. Yet by 2000, GDP and GDP per capita were still 12 percent and 17 percent below their respective 1989 levels. (…)
With the collapse of the Soviet Union, this system became untenable, and after initial resistance the Cuban government was forced to reduce state employment and allow the appearance of a small, but significant, private sector to absorb some of the displaced workers. Other workers were absorbed through government joint ventures with foreign firms, mostly in the tourism sector. These firms have to hire their workers through a government employment agency. The salaries of such workers are paid in dollars to the government agency, which then pays the workers in pesos at an exchange rate of one-to-one. The market exchange rate has not been below 20 pesos per dollar since possession of dollars was legalized, so the effective tax rate has been 95 percent or higher. Some reduction in state employment also appears to have been achieved through early retirement.
From 1989 to 1998, the state sector’s share of employment fell from about 95 percent to 79 percent, or about 687,000 workers, and the civilian government workforce fell by about 583,000, according to my research. Most of the decline followed shortly after the reforms of 1993-1994. This decline in government employment was accounted for by (1) converting most state farms into cooperatives (264,000 workers), which, though they have some autonomy, are far from being private enterprises; (2) increasing employment in the joint ventures between the government and foreign firms mentioned above (131,000 workers); and (3) the true private sector, made up for the most part of small farmers and the newly permitted self-employed (254,000 workers). The remaining decline in public sector employment was accounted for by declines in the labor force (82,000 persons). Unemployment was actually lower in 1998 than in 1989 (a decline of 65,000). The official data does not adequately account for informal activity, so the relative decline of the state sector may be understated. From 1989 to 1998, the size of the working age population rose (with 424,000 more people), and postsecondary enrollment fell (by 140,000 fewer students). Together with the declining size of the labor force, these numbers suggest an increase in the informal sector” 
Social Gains of the Revolution in Danger
The consequences for the Cuban masses were severe. After the establishment of the workers state in the early 1960, a new unified and state-managed pension system was established, increasing labor force coverage from 63% to 91%. In 1989 the Cuban pension system had wide coverage and generous entitlement conditions, with low retirement ages (55 for women and 60 for men) and average retirement spans of 26 years for women and 20 years for men. Pensions were supplemented by a social protection network: subsidized prices for rationed goods, free health care services, free or low-rent housing and inexpensive public utilities. All this made Cuba’s pension system the most progressive in Latin America – retirement spans were the longest on average, due to the second-highest life expectancy in the region.
Life expectancy at birth in Cuba today is the same as for US citizens at 77 years and Cuba’s infant mortality rate was 6 per 1,000 live births, a figure less than that of the United States, which was 7.0 per 1,000 live births in 2007. Cuba’s patient-to-doctor ratio is still among the lowest in the world and significantly better than those of the United States and Canada. 
However the 1990s crisis undermined the positive features of the pension system: the number of private sector workers increased from 4% to 15% of the labor force between 1989 and 2001. Hence, fewer salaried workers were mandatorily covered by pensions, while self-employed workers and private farmers who voluntarily join the state pension scheme must now pay 10% of their earnings, a disincentive for affiliation. Tax legislation from 1994 which made obligatory pension payment contributions by private sector workers was suspended due to socio-political reasons; later, a 5% contribution was gradually implemented for workers employed by state enterprises under the Sistema de Perfeccionamiento Empresarial (one-fifth of all enterprises).
Another social achievement of the Cuban revolution was the substantial increase in the standard of living for the Cuban masses. As we can see from Table 4, availability of food and beverages, clothing, housing, education and health all demonstrate the progressive effects of the social revolution which occurred after 1960/61.
Table 4 Availability of Basic Goods and Services per Capita--Cuba 1958-1978 (1958 = 100) 
Year Food & Beverage Clothing Housing Education Health
1958 100 100 100 100 100
1962 99 52 107 173 105
1968 102 52 107 173 105
1972 110 90 103 224 120
1974 120 95 103 275 151
1976 123 100 103 363 175
1978 125 100 104 446 202
As a result of the crisis and the Cuban government’s measures, real social expenditures per capita decreased by 78% and unemployment rose to 8%. Average wages in the state sector dropped in real terms by 85% in the period 1990-93. Less than one-third of public transportation functioned, daycare construction halted, and nutrition dropped as people consumed 30% fewer calories. Today real wages represent only 27% of the 1989 level.
These social cutbacks particularly impacted the lower strata of the working class - women, Afro-Cubans, the unemployed and those with only a primary education. While the government does not publish poverty data, an academic study estimated that the urban population “at risk of having a basic need uncovered” rose from 6.3% to 14.7% between 1988 and 1996 (in Havana it grew from 4.3% to 20.1%). Despite increasing poverty, the real average social assistance benefit decreased by 29% between 1989 and 1994.
It is therefore clear that the Castroite bureaucracy had to conclude that the old system of Stalinist planning could not be perpetuated. In order to retain its power and privileges, the regime had to turn towards restoration of capitalism and Cuba’s full integration into the world market.
However, there was and is an important obstacle to this Cuban restoration of capitalism: The nearest and most powerful capitalist power – the United States – is as deeply hostile to the Castroite bureaucracy as is the Cuban exile bourgeoisie (the reactionary “Gusanos”) This means that any capitalist restoration undertaken by command of US imperialism spells the complete loss of power for the Castroite bureaucracy. This, therefore, was not an option.
There was, however, an alternative: restoring capitalism the Chinese way, under the auspices of Beijing. As China is an emerging imperialist power that already has close allies like Venezuela and other ALBA states, joining the Chinese bloc was a viable option for the Castroites.
Before we l more closely examine Cuba’s march towards capitalism and China’s role in it, let us briefly view the different roads to capitalist restoration.
Many Roads Lead to Capitalist Restoration
It is a widespread myth amongst a number of so-called Marxists that the only road to capitalist restoration is the one taken by the Eastern European states and Russia, i.e., via the rapid destruction and privatization of state-owned industries and the formal introduction of bourgeois parliamentarian democracy. The propogation of this myth was certainly not hurt by its being that espoused by Western bourgeois market harbingers. However, recent history has shown that there are also other roads.
As we have already elaborated in The Great Robbery of the South and other documents, in China we find a different model of capitalist restoration: a state-capitalist road with the Stalinist party firmly holding power, disguised by the use of “socialist ideology”. Such a road was also chosen by the Vietnamese bureaucracy. In these countries the bureaucracy managed to transform itself into a ruling capitalist class as a whole (which now includes both private and state capitalists as well as the ruling state-capitalist bureaucracy). In contrast, in Eastern Europe and Russia, some sections of the former Stalinist bureaucracy lost power via the restructuring of the state apparatus after 1989-91.
Of course, the state-capitalist road does not preclude the systematic promotion of private capital by the regime. Quite the opposite, as we have shown: the private capitalist sector is growing massively in these countries too. However, the ruling class has retained a significant state-capitalist sector in industry and banking, while at the same time allowing a gradual accumulation of private capital , studiously avoiding the so-called “shock therapy” espoused by neoliberals.
Yet another form of capitalist restoration has been introduced in various Central Asian states as well as in Belarus. Here too, the bureaucracy abandoned any formal attachment to “socialist ideology” and has formally adopted bourgeois parliamentarian democracy. However, it has also retained a significant state-capitalist sector and managed to more or less preserve the political regime by renaming the Stalinist party. The regimes of Nazarbayev in Kazakhstan, of the Aliyev family in Azerbaijan, of Islam Karimov in Uzbekistan or Lukashenko in Belarus –are all renamed Stalinist parties ruling since the early 1990s.
Table 5, below, shows how the different forms of capitalist restoration express themselves in the different rates of transition to privatization during the first decade (1991-2001). In some countries –those industrially more developed and with closer relations to Western imperialist capital – the restoration process took the form of rapid privatization of the economy. In other countries, the share of the private sector in national output measured in Gross Domestic Product, as well as in employment, increased at a slower pace.
Table 5 Private Sector Share in GDP and Employment in Eastern Europe and the Former USSR 1991-2002 
In GDP In Employment
1991 1995 2002 1991 1995 2001
Albania 24 60 75 - 74 82
Armenia - 45 70 29 49 -
Azerbaijan - 25 60 - 43 -
Belarus 7 15 25 2 7 -
Bulgaria 17 50 75 10 41 81
Croatia 25 40 60 22 48 -
Georgia 27 30 65 25 - -
Hungary 33 60 80 - 71 -
Kazakhstan 12 25 65 5 - 75
Kyrgyz Republic - 40 65 - 69 79
Latvia - 55 70 12 60 73
Lithuania 15 65 75 16 - -
Moldova - 30 50 36 - -
Poland 45 60 75 51 61 72
Romania 24 45 65 34 51 75
Russia 10 55 70 5 - -
Slovenia 16 50 65 18 48
Tajikistan - 25 50 - 53 63
Turkmenistan - 15 25 - - -
Ukraine 8 45 65 - - -
Uzbekistan - 30 45 - - -
As we have already described, the Chinese Stalinist bureaucracy took a state-controlled road to capitalism. This is illustrated in the tables 6-8.
Table 6 China: Employment by Ownership in Selected Years 1980-2000 (in thousands) 
Year Total SOE TVEs Private Enterprises
1980 42,361.0 8,019.0 3,000.0 -
1985 49,873.0 8,990.0 4,152.1 2,826.9
1990 64,749.0 10,346.0 4,592.4 4,672.3
1995 68,065.0 11,261.0 6,060.3 6,801.7
2000 72,085.0 8,101.9 3,832.8 8,986.8
Legend: SOE: State-Owned Enterprises; TVEs: Township-Village Enterprises
Table 7 China: GDP by Ownership in Selected Years 1980-2000 (in Billion Yuan) 
Year Total SOE TVEs Private Enterprises
1980 199.7 151.7 28.5 -
1985 344.9 223.7 56.3 21.0
1990 685.8 374.5 167.3 83.1
1995 2,495.1 830.7 935.9 523.6
2000 4,003.4 1,377.8 942.5 1,773.1
Table 8 China: State Share of Gross Industrial Output Value, 1991-1999 
Year State-owned or state-controlling share holding in percent
Similarly, we can observe the gradual, state-capitalist road of the Chinese bureaucracy in Figure 3 which shows the slow decline of the state sector in capital accumulation.
Figure 3 (see PDF file): Capital Formation in China: 1978-2007 
Crossing the Rubicon in Cuba: The 2010/11 Reforms
As described in the previous section, in the early 1990s the Castroite-Stalinist bureaucracy adopted the promotion of the market to solve Cuba’s deep economic crisis. However, fear of losing power – a fear fanned by the spontaneous rebellions of sectors of the masses in Havana and other cities in 1994 – led to a temporary halt of economic liberalization.
But the continued economic decline, the successful model of Chinese capitalism, as well as the opportunity to become Beijing’s satellite, finally convinced the Castroite regime to decisively turn towards the restoration of capitalism.
This transformation is even recognized by anti-communist Western experts like Adrian H. Hearn who observe political and economic developments in Cuba: “As in China, the goal appears to be a mixed economy in which citizens follow their entrepreneurial dreams while generating tax revenue under the ‘supreme guidance of the state.’ “These developments suggest that the Cuban government is distancing itself from Fidel Castro’s 50-year-long rejection of capitalism, and moreover, that China is committed to guiding the Western hemisphere’s only communist nation toward reconciliation with international conventions.”
The strongly anti-communist US think-tank Freedom House also praises Castro’s reforms: “The opening of a private sector, while still limited, is driving genuine change in Cuba. This is the most significant positive change to have taken place in Cuba since communism was introduced half a century ago. Cubans are moving from the state to the private sector, becoming entrepreneurs in growing numbers, taking the initiative to earn their own living, and in many cases succeeding to do better than Cubans in government jobs.”
What is the essence of this turn towards capitalist restoration?
* implementing the law of value in state-owned enterprises by mass lay-offs and restructuring
* promoting a private capitalist sector
* helping to strengthen the formation of a domestic capitalist class of private property owners
* cutting back the social benefits to create an industrial reserve army of labor and hence a more exploitable working class
* opening the economy for imperialist capital and becoming imperialist China’s bandwagon
* keeping the authoritarian rule of the Stalinist PCC
As we will see below, the decisive steps towards capitalist restoration began in the autumn of 2010, when the Castroite regime announced their plans for economic reforms. At the 6th Congress of the PCC in April 2011, these “reforms” were formally endorsed and the decision was taken to sign up for a 5-year-plan with China. Therefore, we maintain that Cuba’s regime and state machinery became fully capitalistic with the 6th Congress.
Let us now look concretely to these qualitative changes in Cuba’s economy and society.
Implementing the Law of Return in State-Owned Enterprises: Restructuring and Mass Lay-Offs
One of the most important decisions of the PCC leadership was its announcement in Granma, the party’s daily newspaper, in September 2010 to eliminate half a million of jobs in the state sector. This is the equivalent of about 1/8 of the total state-sector labor force which constituted at that time about 85% of all employed. The statement – which was cynically issued as an announcement of the official trade union federation Central de Trabajadores de Cuba – said: “Our state cannot and should not continue maintaining companies, productive entities, services and budgeted sectors with bloated payrolls (and) losses that hurt the economy, are counterproductive and form bad work habits.” While this half a million state workers should be sacked in a year’s time (!), the statement added, that this was not enough and that another 500,000 “nonproductive” workers should be laid-off in the next few years.
This was a very clear admission on the part of the Castroite leadership of their desire to run the public sector consistent with criteria of profitability. To achieve this goal, it intends to sack ¼ of the total state sector labor force. Or in other words, 1/5 of all working Cubans are threatened with unemployment in the near future.
The Castroite government proved with deeds that these announcements were not merely words, deeds which reflected the regime’s determination to restore capitalism. In 2011, more than 370,000 former state workers lost their jobs and turned to non-state forms of employment. In 2012, another 170,000 state-workers are said to have lost their jobs. And according to latest reports, it is expected that by the end of 2013, this figure will reach 600,000 state workers who have lost their jobs since the beginning of the capitalist restoration in 2010/11. Another report from Economy Minister Adel Yzquierdo Rodriguez from December 2012 – which differs slightly from the figures cited before – stated that the government cut 228,000 public jobs in 2012, on top of the previously announced 137,000 in 2011, homing in on its goal to lay off 20%, or nearly a million jobs, by 2016.
Some leading representatives of the Castroite-capitalist regime even proclaim higher targets. The finance minister projects that 1.8 million workers will join the “non-state” sector by 2015. Whatever the concrete numbers will be, they all demonstrate beyond any doubt that the Castroite-capitalist regime continues to march on its restorationist road. The new line – the “Cuban Road towards capitalism” – was endorsed at the Sixth Congress of the Cuban Communist Party, albeit these decisions were obviously masked with diplomatic language.
It is only logical that unemployment rose dramatically since the beginning of the capitalist restoration. While the official unemployment rate was 1.6% in 2009, this figure rose to 3.8% by the end of 2012. 
To this one has to add that there is a huge number of Cubans working in the informal, “grey”, sector. Economy Minister Rodriguez admitted that the official unemployment figures do not include a million Cubans who he said "do not actively seek employment."
Furthermore, like the Chinese Stalinist-capitalist regime after 1992, the Cuban government wants to transform the state-owned enterprises into units which compete in the market based on the law of value. The regime grants the management greater autonomy in labor, investment, and pricing policies. At the same time, state subsidies to firms will be cut, and those firms facing repeated losses will be liquidated. (In 2010, state transfers to firms and cooperatives cost 11.2% of GDP.) According to pro-restorationist economists from Havana University, the wage schema in the state sector must also be totally overhauled, since currently “the egalitarian wage structure (…) does not contain performance incentives (the highest wages are just 4 or 5 times higher than the lowest ones).” 
Promoting Capitalism in the Agrarian Sector
This capitalist restructuring of the state-owned enterprises goes hand in hand with the strengthening of market forces in agriculture. In the 1970s and 1980s most of the land was in state hands (80.8% by 1981) This has changed significantly. In 2010, private farmers worked 41% of Cuba’s farmland and accounted for 71% of the value of farm production. 
A significant percent of Cuban lands are idle (40%). One of the first pro-capitalist reforms of Raúl Castro was a decree issued in July 2008 which initiated a process whereby individuals and cooperatives could apply for 10- and 25-year leases to work idle land owned by the state. Through April 2011, 1.2 million hectares (of a total of l.9 million hectares) was allocated to 132,000 private farmers and cooperatives to use for productive activities.
By these measures, the Castro regime hopes to accelerate the formation of a capitalist agriculture market in order to reduce its extreme dependency on food imports (60-80% of its food consumption). This dependency is a result of the agriculture policy adopted by the regime in the 1970s and 1980s, to devote more than the half (53%) of arable land to export crops. This makes Cuba a prime victim of drastic changes of food prices at the world market.
Promoting a Private Capitalist Sector
Another aspect of the Cuban regime’s turn towards capitalism is its determination not only to transform state-owned enterprise into state-capitalist units but also to massively expand the private capitalist sector. As already mentioned, there are plans to move 1.8 million workers to the private sector by 2015. Vice President Esteban Lazo predicted in April 2012 that the private sector’s share of GDP would grow from 5% to 45-50% within five years. And Political Bureau member Esteban Lazo Hernandez recently predicted that by 2017, the growth of the private sector will see the state’s share of GDP fall from 95% to around 40%.
However, massive changes have already been introduced in the recent past. The combined share of workers employed in the private or cooperative sector rose from 16.9% to 22.7% in 2008-2011 (see Table 9).
Table 9 Workers Employed in the Entire Economy, and the Private and Cooperative Sectors, 2008-2011 (thousands of workers) 
2008 2010 2011
Total 4,948.2 (100%) 4,984.5 (100%) 5,010.2 (100%)
Cooperative Sector 233.8 (4.7%) 217.0 (4.4%) 208.7 (4.2%)
Private Sector 602.1 (12.2%) 589.4 (11.8%) 928.5 (18.5%)
The government has recognized 178 categories of work or trade for non-state employment. To enhance the creation of private capitalist markets, Cubans can now sell homes and vehicles– even to foreigners or temporary residents. Businesses will be granted greater autonomy, and multiple licenses will be available for conducting business not only in one’s hometown but anywhere in the country. Private restaurants can expand from 12 to 20 seats. The government has also turned over about 2,000 small state-owned businesses to their employees.
During the last two years, the official number of people working in the private-sector has doubled to 1.1 million. The majority of the non-state workers, or about 610,000, were farmers, whose numbers have grown under Castro's agricultural reforms. The rest of the non-state workers are mostly in small retail businesses or are self-employed, such as carpenters, seamstresses, photographers and taxi drivers. Starting in 2013, the state plans to turn more than 200 medium-sized businesses, from shrimp breeding to construction and light manufacturing, into private cooperatives. The experiment will be expanded if successful. Since October 2012, the number of licenses granted to micro-enterprises has surpassed 113,000, a nearly 50% increase from before the start of the reforms.
A Western advocate of capitalism hails the reforms of the Castro regime as the necessary steps towards the creation of a private market-economy: “Most important, the purpose has changed. In the past, when no thought was being given to changing the socialist model, entrepreneurship seemed to be viewed as a necessary evil, of marginal importance to the economy. It is now viewed as a strategic necessity for a government that is determined to cut costs and boost economic output by reducing government payrolls and expanding the private sector.”
Helping to Strengthen the Formation of a Domestic Capitalist Class of Private Property Owners
The Castroite goal behind the promotion of the private sector is the formation of a domestic capitalist class. Surely, at the beginning, this will be mostly composed of relatively small capitalists. But it is nevertheless essential for the goal of capitalist restoration to create a class of private property owners which has a material interest in advancing this process. Table 10 as well as the figures 4 and 5 illustrate that significant progress has been made in this direction – in a first wave during the early 1990s and in a second wave since 2010/11.
Table 10 More Entrepreneurs in the Workforce 
Entrepreneurs Workforce Percentage
2001 152,300 4.70 million 3.2%
2005 169,400 4.82 million 3.5%
2006 152,600 4.85 million 3.1%
2007 138,400 4.96 million 2.8%
2008 141,600 5.03 million 2.8%
2009 143,800 5.16 million 2.8%
October 2010 157,371 5.11 million 3.1%
2011 357,000 5.11 million (est.) 7.0%
April 2012 371,200 5.11 million (est.) 7.3%
June 2012 385,775 5.11 million (est.) 7.5%
Figure 4 (see PDF file): Cuba: Self-Employment Licenses Granted 1989-2012 (in thousands) 
Figure 5 (see PDF file): Cuba: Self-Employment as Percent of Total Employment 1970-2011 
Cutting Back the Social Benefits to Create an Industrial Reserve Army of Labor
Restoring capitalism necessitates the creation of a labor force which can be used and exploited as a commodity by Cuban and foreign capitalists. Beside the massive layoffs from state enterprises, the government has also undertaken substantial cuts of the social benefits in order to create an industrial reserve army of labor.
Cuba’s new leader Raúl Castro stated publicly – repeating a well know neoliberal slogan – that social cuts are necessary to force people not to rely on the social services: “We need to erase forever the notion that Cuba is the only country in the world where one can live without working.”
In February 2010, the Castro regime ended the practice of paying 60% of the salary of workers laid off from their jobs. In addition, the Social Security Reform Law, which became effective in December 2008, increased retirement ages by five years for both sexes, raising it to 60 for women and 65 for men, to be phased in gradually over seven years. Pension calculations will be based on the monthly average of the best five annual salaries in the last ten years; and the number of required work years has increased from 25 to 30. The pension will be increased for each year that retirement is postponed.
In addition, the number of products sold at subsidized prices has been reduced, or the amounts made available have been significantly cut back, resulting in a decline in the availability of certain important consumer products to the population. One consequence of this measure was a 19.8% increase in the average price of agricultural and meat products in markets outside of the rationing system. Expenditures in education and healthcare also have been reduced.
Women Particularly Affected by Capitalist Restoration
Women are a major victim of capitalist restoration. Despite the Stalinist degeneration of the revolution, women’s rights are without doubt one of the areas where one can see the social advances of the workers state. There has been a significant increase in the participation of women in formal employment. While in 1960 women made up only 13% of the work force (and around 70% of these women worked as domestic servants), this figure rose to 38.3% in 1987 and 39.6% in 2010.
Progress can also be measured by the increasing proportion of women in various highly qualified professions. For example, in 2000, 51% of Cuban scientists were women, as were 52% of medical doctors and 50% of attorneys. In 1995, 57.7% of university graduates, 62% of middle- and high-school level technicians, and 42% of scientific researchers were women. An important factor for this progress was the establishment of quality, government-subsidized day care centers. According to a 1989 statistic, at the time 136,000 children received day care in these facilities. Cuba also has the world’s fifth highest share of female deputies in parliament (36%), and about 20% of officers in the Cuban armed forces are women.
Nevertheless, massive inequality has remained. Even fifty years after the victory of the Revolution in 1959, the participation of Cuban women is in the labor force is substantially lower than men’s (65.7%). On average, Cuban women earn less than half of what men make. 
Women are disproportionately more employed in the public sector. They comprise 42.7% of public employees but only about 24% of those working in private enterprise.
The mass lay-offs promoted by the Castroite restorationist regime will therefore hit female workers particularly hard. In addition, given the significantly lower participation of women in the labor force, they are more dependent on social services than men and therefore they will be hit particularly hard by social cuts.
One of the most glaring expressions of capitalism’s advance in Cuba is the massive increase of one of the oldest evils of class society – prostitution. Before the revolution, Cuba was a de facto colony for US imperialism not only economically but also socially. It had a huge tourism, gambling and prostitution industry – largely controlled by the US Mafia – which was frequented by hundreds of thousands of American tourists. According to estimates of the Cuban government, there were 270 brothels and up to 100,000 prostitutes in the country before the Revolution. (Compare this with the approximate total number of 194,000 Cuban women who were employed in 1953!)
Now, prostitution has returned on a massive scale. It is a by-product of the Castroite regime’s decision not to focus on the development of a diversified industry but rather increase the country’s revenues by a massive expansion of the tourism industry in the 1990s. It has surpassed sugar production as the leading source of revenue. Part of the tourism industry is sex tourism, in which wealthy Western men come to Cuba to have easy and cheap sex with young Cuban women (as well as with homosexual men). Given the increasing poverty in Cuba, prostitution provides a way for Cuban woman (and men) to earn their living. While official figures for the number of prostitutes do not exist, according to many reports, this is a wide-spread phenomena and one can expect that this will increase even more so with the advance of capitalism.
Opening the Economy for Imperialist Capital
Given that Cuba is not only a small but also an industrially backward country, it follows that the Castroite regime has to court foreign imperialist capital to invest in the country. Hence a key feature of capitalist restoration is the opening of the country’s economy for foreign capital and, in particular, its strategic alliance with China. As the comrades from the Liaison Committee of Communists correctly stated in their document which we have referred to above and which we will prove below, Cuba effectively has become a semi-colony of Chinese imperialism.
As we have already noted, Cuba is increasingly indebted to various countries. It is mainly indebted to Venezuela, China, Spain and Japan as can be seen in Table 11.
Table 11 Cuba's Creditors, 2008 (2010) 
Creditors (Country) Debt (in US$)
Venezuela $11.367 billion
China $3.170 billion (2010: $4 billion)
Spain $3.200 billion
Japan $2.775 billion
Cuba started to invite the investment of foreign capital during the 1990s. As is shown in Tables 12 to 14, foreign capital in Cuba was virtually absent before the 1990s. However since then it has grown significantly. Foreign Direct Investment (FDI) annual flows have quadrupled between 2006 and 2011 from 26 to 110 million US-Dollars, and doubling its share in domestic capital formation. Note that these figures are estimates and not official statistics because, according to the United Nations, the Cuban government does not publish official statistics on FDI inflows.
Table 12 Foreign Investment Inflows to Cuba, 1993-2001 (in Millions US-Dollars) 
Year Annual Flow Cumulative
1993 54.0 54.0
1994* 563.4 617.4
1995 4.7 622.1
1996 82.1 704.2
1997 442.0 1,146.2
1998 206.6 1,352.8
1999 178.2 1,531.0
2000 448.1 1,979.1
2001 38.9 2,018.0
* The reported flows jump in 1994 when the government decided to fold in flows from years prior to 1993.
Table 13 FDI flows in Cuba, 2006-2011 (Millions of US-Dollars) 
2006 2007 2008 2009 2010 2011
26 64 24 24 86 110
Table 14 FDI Flows as a Percentage of Gross Fixed Capital Formation 2006-2010 
2006-07 2009 2010
0.7% 0.4% 1.4%
Richard Feinberg, a professor of international political economy who worked as advisor for various US presidents and governmental departments, wrote in a recent study on Foreign Direct Investment in Cuba that the figures are much higher, reaching a FDI stock of about $3.5 billion in 2009:
“Perhaps the best informed estimate of the stock of Cuba FDI comes from an international financial consultant (who wished to remain anonymous) with privileged access to foreign investment data. The source noted that according to the Cuban central bank, FDI inflows as of 2001 totaled $1.9 billion (…) and estimated that by 2009 the total stock may have reached $3.5 billion.” 
ECLAC/CEPAL (the United Nations Economic Commission for Latin America and the Caribbean) reported in 2010 that Spanish capital is a major investor in sectors such as tobacco, tourism, hydrocarbons, transport and financial services. Italian capital invests in telecommunications and French in rum production and export, while Canada’s investments are in the nickel industry and oil exploration. State companies from Venezuela, who is also Cuba’s main trading partner, made substantial investments in the oil and telecommunications sectors. These two countries are collaborating on a project to lay a fiber-optic cable that will connect the island to the continent. The French-Chinese company Alcatel Shanghai Bell has been hired to lay the cable. The project involves an investment in excess of US$ 60 million. Brazil’s investments in Cuba have also increased. Brazilian company Oderbrecht is in charge of the US$ 800 million construction project to expand and modernize the Cuban port of Mariel. Oderbrecht will also be the first foreign company to own one of the Cuban sugar mills that were nationalized in 1959.
In addition, Chinese capital is significantly increasing its foreign investment in Cuba, albeit not all projects are known due to the secretive policy of the Castroite government on its foreign investment. China is Cuba’s second largest trading partner. In 2010 China sold Cuba just over $1 billion of a wide variety of vehicles, machinery, consumer goods, and industrial inputs and imported just under $800 million in goods, primarily nickel and sugar. The two countries also announced in 2010 13 joint projects, 7 of which are located in Cuba in the mechanical industry, communications, agriculture, tourism, biotechnology and health sectors. The China Haier Corporation and the Electronics Group of the Ministry of Informatics and Communications of Cuba established a joint venture to manufacture electrical appliances and computer equipment. Also in 2010, the two countries agreed to build a luxury hotel in Havana, with an investment of nearly US$ 117 million. Lastly, China and Cuba announced several joint investments in the oil and oil products sector, including the expansion of the Cienfuegos refinery and the construction of a regasification plant and combined-cycle thermoelectric plant, an investment of US$ 6 billion that was due to start in the first half of 2011 and end in 2013. The Export-Import Bank of China (China Eximbank) is to finance 85% of the investment, which will be secured by China Export & Credit Insurance Corporation and guaranteed in full by the Government of the Bolivarian Republic of Venezuela in the form of oil from Petróleos de Venezuela (PDVSA).
In 2009, the Government of Cuba has announced changes in the tourist property sector, such as the extension from 50 to 99 years of the right of foreign companies to use state land and the issuing of permits for the construction of additional golf courses. If the land is to be used to build holiday homes or apartments, a perpetual lease may be granted.
Corporations are interested to exploit the – as it is expected – significant oil reserves in Cuban waters. The US Geological Survey estimates that there are five billion barrels of oil lying in front of Cuba’s coast, while Cuban surveys claim as much as 20 billion barrels. Brazilian oil giant Petrobras, PDVSA – the Venezuelan state-owned oil explorer – and Spanish company Repsol, have key interests in the region, with the latter contracted to operate a massive platform in the gulf.
Foreign Investment in Cuba takes place to a significant degree via state-capitalist investments from other states which reflect the centrality of Chinese state-capitalist investments. Feinberg reports:
“20 investors accounted for nearly $3 billion of the $3.5 billion; indeed, the top 10 investors accounted for the lion’s share. The remaining universe of some 200 Joint Ventures, therefore, would account for only about $500 million in investment capital, or an average of $2.5 million per project.”
Semi-Colonial Cuba to Get on Imperialist China’s Bandwagon
China’s influence is of decisive importance for Cuba’s transformation from a degenerated workers state into a capitalist semi-colony. It is, besides Venezuela, the largest trading partner, foreign investor and foreign creditor. And Venezuela itself is highly dependent on Chinese imperialism as we have already explained on several occasions. An expression of the close relationship between China and Cuba is the establishment of the first Five-Year Plan for Sino-Cuban cooperation in June 2011.
China has used its influence to spur the capitalist restoration process in Cuba. Adrian H. Hearn, a Western expert on China and Cuba, remarked recently:
“The Cuban reforms formalised by the 2011 Communist Party Congress will support a further convergence of positions, as they propose a more balanced mix of state and market forces. Although Sino-Cuban initiatives are managed under the banner of state-to-state cooperation, Chinese support for Cuba’s liberalisation agenda is prompting the Western hemisphere’s only communist nation toward alignment with international norms. (…) The Chinese government has a vested interest in the success of Cuba’s reforms, reflected in the negotiation of the first Five-Year Plan for Sino-Cuban cooperation in June 2011. As a long-time financier of Cuba’s development, many are looking to Beijing to underwrite the credits and loans aspiring entrepreneurs need to grow small businesses. “ 
In another article, Hearn added: “[China]’s relations with Cuba demonstrate this pragmatism: for over a decade China has been advising the island to embrace private entrepreneurship, and to buy Chinese manufactured products. From refrigerators and televisions to public transport and hospital equipment, China’s impact touches the daily lives of most ordinary Cubans.
Richard Feinberg makes a similar observation:
“Cuba irked the Chinese when it suspended foreign exchange payments during a 2008-9 financial crunch. Today, the commercially-minded Chinese press the Cubans for investment deals that meet basic business tests for financial efficiency and secure servicing of debts. According to a Chinese diplomat in Havana, ‘Chinese banks want business terms, they want to see borrowers’ profitability and means of repayment — and they demand Chinese government guarantees.’ Some observers opine, albeit with some exaggeration, that China has become Cuba’s IMF!” 
Keeping the Authoritarian Rule of the Stalinist PCC
The Castroite regime orientates towards the Chinese model of capitalist restoration not only on the economic level but also in the political arena. Its goal is to combine the formation of a capitalist class and a market economy with the continuation of the political rule by the Stalinist party as happened in China, Vietnam and Laos.
This is combined with a central role of the military apparatus in overseeing the country’s transformation into a capitalist state. Again similarly to the Chinese state-capitalist road, where the Peoples Liberation Army takes a central place not only in the political system but also in the economy, the Revolutionary Armed Forces (FAR) run a number of key sectors of Cuba’s economy. Despite a reduction of non-civilian employment in the crisis-ridden years from 1989 to 1998, according to official figures it still accounted for nearly 13% of the total labor force. It is a major factor in running the economy: “Though official figures are not available, it is clear that the Cuban military is heavily involved in the country’s economy, especially in sectors that earn hard currency, and its officers run many of the largest state enterprises.”
In order to manage a controlled improvement of the economy where any protest of the working class could be suppressed, the PCC regime decided to put the FAR military bureaucracy in charge of key sectors of the economy. The FAR began to play a crucial part in the implementation of the Sistema de Perfeccionamiento Empresarial (SPE), or Enterprise Perfection System, which was designed to increase effectiveness in Cuban industries by making them more market oriented and competitive in their economic output. These were in fact first steps which objectively prepared the state-capitalist road: