The social democratic model

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By FERNANDO NOGUEIRA DA COSTA*

Social democracy is based on a mixed economic system by combining market elements with a broad social protection network and state intervention

Social democracy does not necessarily require the complete nationalization of the means of production, as is common in more radical socialist systems. Instead, social democracy is based on a mixed economic system by combining market elements with a broad social protection network and state intervention to ensure the well-being of the population.

Among some characteristics of the social democratic model, in relation to the ownership of the means of production, are the following.

It constitutes a mixed economy, because it respects private property as a social advancement in the face of the exclusive possession of wealth, whether of the nobility in the Era of Absolutist Monarchies, or of the State in the Era of Mercantilism. Most means of production remain in the hands of private companies and they operate on the basis of profit and market competition.

However, the government plays an active role in regulating the economy, implementing policies to correct market failures, promote equal opportunity, and protect the rights of workers and consumers.

There is selective nationalization. In some countries, sectors considered strategic for the public interest, such as energy, transport, health and education, are partially or fully nationalized to guarantee universal and equitable access to these services.

The State maintains shareholding or majority control in public companies that provide essential services or hold strategic monopolies such as the extraction and sale of oil. But there may also be private companies competing in these sectors.

The most characteristic of social democracy is to promote a broad social protection network. It includes unemployment insurance, public health, free education, retirement and other social benefits financed by the welfare state.

Labor policies such as minimum wages, limits on working hours, parental leave, and protections against unfair dismissals are established. They protect workers’ rights and guarantee decent working conditions.

There is regulation of the labor market and redistribution of income via fiscal policy. Progressive taxes are applied to higher income brackets to finance social programs and reduce income inequality, ensuring a more equitable distribution of wealth and opportunities.

The Monetary Authority implements regulations to control the financial system. Prevents abuse, guarantees economic stability and access to credit for individuals and companies.

Although social democracy may involve some selective nationalization of strategic sectors and strong state intervention in the economy, it does not completely nationalize the means of production as self-styled socialist states do. Instead, social democracy seeks a balance between the market and the State, with the aim of ensuring the well-being of the population, promoting equal opportunities and mitigating social and economic inequalities.

It is important to note: although the so-called Socialist Revolutions had popular participation, social achievements were not as intense as in Nordic countries with social democracy. Of course, it is necessary to “allow” for the crucial difference between population sizes, although Cuba’s is similar to Sweden’s. But Europe is a better neighbor compared to the United States…

The Russian Revolution (1917) was driven by worker protests and the desertion of soldiers from the tsarist army. Councils of workers, soldiers and peasants were established in Soviets and played a crucial role in organizing the revolution. Peasants actively participated in land redistributions and local revolts against landowners. In the end, the nomenclature of the CP of the USSR predominated.

The People's Liberation Army in the Chinese Revolution (1949) was composed mainly of peasants, led by the Chinese Communist Party. They mobilized peasant support through the redistribution of land and the fight against feudal lords. Afterwards, they experienced hunger and death.

The 26th of July Movement of the Cuban Revolution (1959) included students, workers and peasants. Everyone joined the guerrillas led by Fidel Castro and Che Guevara. After the revolution, literacy and land redistribution policies mobilized popular support. Today, everyone is hungry, except the soldiers of the former FAR (Revolutionary Armed Forces), dominant in the economy.

“The FAR is part of Cuba's power structure, constituting a central pillar of the stability and continuity of the so-called socialist government. The Cuban Revolution did not produce a democratic government in which councils of workers, peasants and combatants were part of political decisions. On the contrary, it created a bureaucratic, centralized and controlling State, stifling popular freedoms through repression and exile, in the name of the dogma of socialism.”

Laura Tedesco and Rut Diamint, authors of this sentence in “Cuban Armed Forces: Business is the Homeland”, chapter of the book Between Utopia and Fatigue: Thinking about Cuba today (2024), do not characterize it as a military dictatorship just because the strong concentration of power is registered in the Communist Party.

This despite commenting: “the country is the worst left-wing version of Latin American military dictatorships”. Social control in Cuba is capillary, detailed in each block, through the Committees for the Defense of the Revolution, founded in 1960, where militants of officialdom immediately denounce any dissent.

With the loss of the government's monopoly on information, thanks to social networks (although with very precarious internet access), the new generations, raised in a regime of scarcity, criticize the country's governing bureaucratic-military oligarchy. They have living conditions that are far from the rest of the people.

The FAR controls tourism, the foreign exchange market, air transport and mining. GAESA (Grupo de Administración Empresarial SA), headed by a general (former son-in-law of Raúl Castro, brother of Fidel), has more than 800 businesses, responsible for more than half of the country's revenue, a large part of these resources invested in paradise tax in Panama to escape the US embargo. It is estimated that the FAR controls 844 companies, including tourism, commerce, stores that collect foreign currency, communications and agricultural production.

In another chapter, “Why protests broke out in Cuba”, Jessica Dominguez Delgado reports: “the precarious economic situation of an increasing number of people, the dollarization of the economy and the difficult access to food and basic necessities – sold since the end of 2019 in foreign currencies – increased inequalities and were some of the main reasons for civic unrest in 2021”.

Despite all the communication efforts to discredit dissident actions as “counter-revolutionary”, the shortage (of food and electricity) and the censorship of young critics created fertile ground in natural conditions for a social upheaval. “Although the Cuban government does not recognize its legitimacy and prefers to speak of 'a coup promoted and orchestrated by the United States', it bears responsibility for the accumulated causes that provoked the protests.”

The formalization of the parallel exchange rate for purchasing dollars did not stop the devaluation of the peso in the market and caused hyperinflation in Cuba since the end of the bi-monetary system (peso and dollar) at the beginning of 2021. Practically all everyday consumer goods have seen an increase in prices around 1.200%. The minimum wage, raised to 2.100 pesos by the economic reform, equivalent in 2021 to 87,5 dollars, became worth just 17,5 dollars with the new exchange rate. Soon, the Cuban population with income in national currency became impoverished, drastically losing purchasing power.

The food and economic crisis in Cuba worsened when consumption was forced to be paid for in foreign currency and with an overpriced parallel market. To obtain dollars and send them to families, there is massive emigration abroad, mainly of young people and women to the United States, with the breakdown of family nuclei. After all, staying on the island means going hungry, wasting hours of the day in queues and suffering long power outages. They say: enough!

*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP). [https://amzn.to/3r9xVNh]


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