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Is this the end of socialism in Cuba as we know it?

The former beacon of socialist revolution and rebellion is now facing one of the most complex moments in its history. Raul Castro, who inherited the presidency from his brother Fidel, told legislators that as a result of the country’s economy woes, there would be some major changes next year, including a move toward more capitalist ventures that will help to bolster the socialist nation. Part of this plan includes laying off half a million government employees by March 2011. Laid off government employees will be encouraged to start businesses for themselves in hopes of boosting the country’s productivity.

No doubt that the most important issue for Cuba right now is the future of its economy, but in what direction should it go and more importantly, after being the lone wolf of communism, will capitalism be Cuba’s saving grace?

The Cuban population is nearly one-third larger than it was at the time of the 1959 revolution; however, its economy—which has been devastated by U.S. trade embargoes, economic blockades,and the fall of the Soviet Union and other former socialist countries—has failed to exceed the prosperity it achieved in 1960. Since then, wages have been inadequate, housing and transportation have deteriorated, and high unemployment has destabilized the country both economically and politically.

Cuba has instituted many reforms to create material and wage incentives for workers, who have long been conditioned to solely rely on the government. Increased tourism—thanks to the recent decision of the U.S. to to lift some travel restrictions for students and artists—hasn’t hurt either, but to what extent will these reforms impact the country’s long-standing history of providing free public services and subsidies, as well as impact Cuba’s fundamental principles of social equality?

It may seem contradictory to promote both socialism and capitalism, but countries throughout Europe have done just that—promoted the virtues of making money and building wealth, while providing universal services such as free healthcare and education. Then there is of course China, which once stood as the powerhouse of communism, but now has did a complete 180 and is enjoying a rather fruitful capitalist economy. It should come as no surprise that both Castro brothers have referenced China’s progress and has even renewed trade agreements and deals with the country.

However, Cuba is not in the same political and economic position as China was after the Cold War. As all indicators suggest, a China-style reform may be ill suited for an island nation of 11 million with a relatively small agricultural sector, a heavy reliance on service industry jobs, and the misfortune of being too close in proximity to one of the world’s largest economies.

Truthfully, it’s hard to say for certain which direction Cuba will go in. But it will certainly be interesting to see how Cuba evolves and if it will fully embrace America’s system or try to model itself after other European nations.

Charing Ball is the author of the blog People, Places & Things.

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