Ri Insights

Havana Blues

By Geoffrey Martin

Rai Insights Contributor

 

Kuwait: While Kuwait is generally described as a traditional society with emphasis on family values, religious conservatism, and tribal social structures, the nature of government support is decidedly socialist in nature. In some respects, you could almost say that the relationship between state and society is communitarian, both in terms of identity politics as well as government support for different groups in society.

 

But it is interesting to compare to socialist countries, as there are lessons to be learned. Cuba for example has a lot of similarities to Kuwait on an economic as well as social level. While Kuwait has literally no resource other than oil, for historical reasons Cuba relied heavily on sugar production for its revenues leading to a similar socio-economic situation.

 

This is no mistake to make this connection. The historical influences of socialism in the Arab Gulf as well as the Caribbean are significant and both countries were heavily influenced by external ideologies. During the Cold War and the post-independence period of the Gulf States huge influxes of Indians, Palestinians, Egyptians, and Yemenis. The respective countries of these nationals were significantly influenced by the socialist ideals of the Soviet Union and its rapid industrialization programs leading them to prefer centrally planned economies. This led a trend of building of cradle to the grave welfare benefits and subsidized food programs. In Cuba, the Cuban Revolution in 1959 spurred a nationalization campaign that Kuwait never needed to implement but the style of economic policies was not that different as an outcome.

 

Paralleling this trend is local norms and underlying sources of potential identity conflicts. In Bedouin culture and Islamic teachings, redistribution of wealth is inherent in the nature of tribal relations, and in the concept of zakat and charity for the poor. As Old Kuwayt developed from a small fishing town to a modern city these cultural norms became a key part of social norms and government policy, as the wealthy merchants and royal family became integral to providing fresh water and eventually other services to the population as the town grew. At the same time, the small city-state was deeply divided along religious, urban and rural lines, which have persisted to this day.

 

Cuba also has a strange parallel in identity politics. A small island country with deeply divided classes instead of tribes – Spanish upper class, a small but powerful middle class, and former Africans slaves – brought to the New World in bondage, brought together a highly volatile mixture. For both countries, socialist ideals rested on a secular, scientific view of society and focuses on redistribution of wealth to alleviate class conflict and create equality for all individuals in society. This had a marked impact on reducing identity conflict. In Kuwait’s case this has also reduced the potential for sectarian conflict witnessed in neighbouring states.

Economically there are even more similarities. Due to a mixture of chance, planning, and intervention from foreign powers both oil and sugar, for Kuwait and Cuba respectively, relied on a single resource to develop their economy, leading to a ‘mono-culture’; the cultivation of a single crop or resource.

 

In Cuba, the sugar industry came to dominate the island from the 1830s. It became the richest colony (of Spain) in the world. But production instabilities, especially after Cuban independence in the early 1900s was heavily impacted by the penetration of the Cuban economy by the United States. By 1959 over 90% of Cubans (160,000 workers) were employed in North American firms in Cuba. While the Cuban Revolution of 1959 led to the nationalization of almost all foreign businesses, the Cuban economy became highly dependent on another power, the Soviet Union, for both imports and exports.

 

Sugar, like oil, not only dominates the economy, it also distorts the outlook of people. When the resource price is good no other business venture is as profitable, but when times are bad the mono-culture leads to all other activities suffering, as we are seeing in the Gulf right now with low oil prices. It becomes a cyclical phenomenon. Great diversification away from the single resource was always blocked by the dominance of the single resource, which discourages diversification because of the profitable times.

 

Both Cuba and Kuwait have become highly dependent on international trade, as depending on exports from others, and inability to control fully tariffs, changes in tastes, economic fluctuations, and wars leads to a level of permanent instability.

 

After the fall of the USSR the Cuban economy, which was heavily reliant on revenues from Soviet imports and exports, crashed and led to the ‘special period’ that has continued to this day. Overnight Cuba lost over $5 billion in trade and preferences and between 1990 and 1994, the average Cuban lost 20 pounds.

 

Of course, Kuwait is in a very different situation than Cuba. It has a significant sovereign wealth fund, the Kuwait Investment Authority, and steady oil revenues (for now). But it is not without its troubles. The Al Manakh stock market crash, oil price dips in the 1980s and the First Gulf War all led to significant instabilities in the domestic market. What the Kuwaiti government needs to do is focus on keeping the socialist safety net intact for the likelihood of potential fluctuations in revenues.

 

Cuba’s government and political system has survived the devastation of withering sanctions and in many ways prospered considering the impediments to economic growth. This is no small feat. How then? Cuba and Kuwait’s social welfare institutions are surprisingly similar and Kuwait could learn somethings from Cuba’s social institutions.

 

Cooperatives. Cuba ‘cooperativos’ are neighbourhood run like Kuwait’s own cooperatives. Key to the rationing system and surviving the harsh sanctions of the United States have been collective efforts to grow local produce, share the burden of local infrastructure and social costs. Recently, Kuwait has moved to privatize some of its cooperatives, which I regard as a serious mistake. If Kuwait’s energy market revenues disappear these institutions will be some of the only things that keep people surviving.

 

Health care has always been a major benefit for Cuba and its healthcare system is one of the  most highly regarded and exported services Cuba has. Strong investment in science, education, and other forms of research and development over decades have ensured that the Cuban people have the skill-sets and capabilities to create a private sector economy, or diversify away from a mono-culture economy.  Cuba has 2 percent of Latin America’s population but 11 percent of its scientists.  As the Cuban economy is slowly opened up to the outside world the entrepreneurial Cuban people, tested by over 25 years of hardship, will likely perform outstandingly when the opportunity arises. Cuba’s social services have made sure that they are in the position to do that. Kuwait needs to expand such education in the very near future and move from an expatriate based economy. The shock of an oil crash will come suddenly, but the skills to protect the people of the country will take decades, as the Kuwait 2035 program outlines.

 

On one hand, Kuwait may end up like Cuba if it’s not careful and does not diversify its public sector and grow its private sector.  But it also needs to keep its public institutions and the ready. Selling off all or portions of the significant social services will endanger the country and also reverse an important compact between citizen and government, something that socialist values have engendered along with local cultural norms.

 

And let’s be honest. Just like the sugar market, the energy market is always volatile, no attempt to predict or control it have ever really worked for any country in history. Cuba went from selling 8 million tons of sugar in in the 1980s to selling less than half that in the years after the Iron Curtain. Kuwait could share the same fate and needs to be better prepared.


* Geoffrey Martin is a PhD student at the University of Toronto and currently is a visiting researcher at the American University in Kuwait. He currently resides in Kuwait.


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