National Industrialization Towards Socialism: Some Lessons from Cuban Socialism 

National Industrialization Towards Socialism: Some Lessons from Cuban Socialism 

by Reihana Mohideen

The various attempts to build a socialist society aroused immense hopes among hundreds of millions of people. Vigorous debates emerged over the major economic, social, and political choices involved in the transition to socialism.

Between 1918 and 1926–1927, this was especially the case in Soviet Russia and the USSR, where Vladimir Lenin, Leon Trotsky, Yevgeni Preobrazhensky, and Nikolai Bukharin made some of the most significant contributions to these debates. In Yugoslavia during the 1950s and 1960s, discussions on the country’s socialist transition also took place, though they were less public than those in the USSR during the 1920s.

In Cuba, following the 1959 Revolution, a major public debate on the nature of the economy unfolded between 1963 and 1965, involving Ernesto Che Guevara, Carlos Rafael Rodríguez (a leader of the Cuban CP and one of its leading intellectuals), and others. 

(Ernest Mandel, and Charles Bettelheim)

The great Cuban debate of 1963–1965 extended far beyond the Cuban context. That is precisely why it remains so important to understand today, in all its continuing relevance to the present and for the Philippine left in particular, which has called for a sovereign national industrialization.

A. Che Guevara’s Strategic Role in Cuba’s Socialist Construction

Che Guevara was head of the Department of Industrialisation and President of the National Bank in 1960 when all financial institutions and 84% of industry in Cuba were nationalised. His Budgetary Finance System (BFS) emerged as a practical solution to problems thrown up by the transition from private to state ownership of industrial production.

Cuba had an unbalanced, trade-dependent economy dominated by foreign interests, principally from the United States. The production units which passed under the Department’s jurisdiction ranged from artisan workshops to sophisticated energy plants. Many faced bankruptcy while others were highly profitable.

Guevara’s solution was twofold. First, to group entities of similar lines of production into centralised administrative bodies called Consolidated Enterprises. This allowed the Department to control the allocation of scarce administrative and technical personnel following the exodus of 65–75% of managers, technicians, and engineers after 1959.

Second, to centralise the finances of all production units into one bank account for the payment of salaries, to control investment, and sustain production in essential industries which lacked financial resources.

With the establishment of Cuba’s Ministry of Industries (MININD) in February 1961, the BFS evolved into a comprehensive apparatus which embedded these organisational structures in a Marxist theoretical framework, to foster Cuba’s industrialisation, increase productivity, and institutionalise collective management.

B. The Law of Value and the Great Debate

The understanding and the dispute about the law of value in transition economies is central to the question about the feasibility of constructing socialism in a country without a fully developed capitalist mode of production.

Marx’s analysis of the law of value held that markets and profits are the central drivers of the economy; “labour power” is a commodity that, as uncovered by Marx, solely creates surplus value, the basis of capitalist profits accrued through class exploitation.

The Soviet Union was then the model for countries breaking from capitalism, from Eastern Europe to Africa and Cuba.

The Soviet solution was to rely on the operation of the law of value to hasten the development of the productive forces, applying the profit motive (interest, credit), elements of competition to promote efficiency and innovation, and individual material incentives.

Che criticised individual material incentives: a worker increasing output to earn more money, not because of social need; a factory team competing with another to secure higher bonuses; engineers prioritising projects that bring financial rewards rather than social priorities.

Guevara argued that these were not the only levers for fostering development. Increases in productive capacity and labour productivity were possible without relying on capitalist mechanisms, which undermine the formation of new socialist consciousness and social relations integral to socialism.

This discussion was linked to the practical questions and strategies of building socialism: how enterprises should be organised, how workers should be paid, and whether goods should be exchanged between state enterprises as commodities. Che’s BFS was framed within this context.

The Soviets argued that commodity production, the law of value, and money would disappear only when communism was achieved, but that to reach that stage it was necessary to use and develop the law of value, as well as monetary and mercantile relationships.

“Guevara agreed that the law of value remained under socialism but argued that measures taken by the Revolution to undermine the capitalist market meant that the law could not serve as the dynamic catalyst to productivity and efficiency in the same way as it did under capitalism.[8] Socialisation of the means of production and distribution had ‘blunted’ the tools of capitalism.[9] … He stressed central planning and state regulation as substitutes to such mechanisms.”
(Yaffe, 2007)

Che disagreed:

“Why develop? We understand that the capitalist categories are retained for a time and that the length of this period cannot be predetermined, but the characteristics of the period of transition are those of a society that is throwing off its old bonds in order to move quickly into the new stage. The tendency should be, in our opinion, to eliminate as fast as possible the old categories, including the market, money, and, therefore, material interest — or, better, to eliminate the conditions for their existence.”[11]
(Guevara, Budgetary, 42. Guevara’s italics.)

C. Che’s Critique

Workers’ Role: From Enterprise Subjects to Social Subjects

Che’s critique hinges on how the economic subject is defined.

He rejects the idea that workers primarily act as collective owners of their enterprise:

“The masses must learn to manage the economy, not just their workplace.”

For Che, socialism requires a transformation in scale, from firm-level control to society-wide coordination, and from particular interests to general social interests.

Workers are therefore conceived not as co-owners of discrete units, but as participants in national planning processes, members of a collective social project, and political agents shaping total social production.

The core shift is that the unit of agency moves from the enterprise to the social whole.

This reframes self-management. At the firm level, it risks locking workers into partial, sectional rationalities rather than enabling collective control over the total economy.

Incentives as Social Relations, Not Just Tools

The debate over incentives is, for Che, fundamentally about the kind of subjects socialism produces.

“Material interest… can become the great Trojan horse of socialism.”

By contrast, moral incentives — political consciousness, collective commitment, and social responsibility — are intended to align behaviour with society-wide goals rather than local gain.

The core claim is that incentive systems shape whether workers act as collective social agents or competitive economic actors.

Against Profit as a System Regulator

Che’s rejection of profit is not moralistic; it is systemic:

“We do not consider profit to be a lever for development.”

The core claim is that profit is not just an accounting metric; it is a disciplinary mechanism that compels enterprises to behave as quasi-capital.

For Che, socialism requires the opposite movement: subordinating value relations, dissolving the enterprise as an autonomous subject, and constructing workers as agents of total social coordination.

Although not always explicit, Che’s critique clearly targets the Yugoslav model of workers’ self-management. He argues that systems combining workers’ councils, market exchange, and enterprise autonomy tend to reproduce capitalist dynamics under socialist forms.

The Great Debate crystallises a deeper disagreement.

Che’s position held that socialism requires central planning, suppression of market logic, and transformation of consciousness.

The reformist or market socialist position held that socialism can use markets, enterprise autonomy, and material incentives.

The disagreement is not technical; it is about what socialism is.

Che Guevara’s position in the Great Debate is clear: socialism is not a system of worker-run enterprises competing in a market, but a single, consciously planned economy directed by collective political will. Workers are not owners of firms; they are participants in the governance of the entire social production system.

D. The United States Economic Embargo

The embargo did not just constrain Cuba materially; it shaped the very logic of Che’s economic strategy, pushing it in a more radical, centralising direction. But the effect cuts both ways: it reinforced his theoretical conclusions while also making their practical realisation far more difficult.

An Economy Under Siege

From the early 1960s, especially after the Cuban Revolution and the tightening of the United States embargo against Cuba, Cuba faced the loss of its primary export market (sugar to the U.S.), restricted access to machinery, spare parts, and credit, and exclusion from Western financial systems.

This created a condition of chronic external constraint, not normal development.

The Embargo Reinforced Central Planning

Under embargo conditions, reliance on markets becomes structurally problematic. Cuba could not freely trade on world markets, price signals were distorted or unavailable, and external shocks could not be absorbed through normal exchange.

For Che, this strengthened the case for centralised allocation of scarce resources, prioritisation based on social and strategic need rather than profitability, and tighter coordination across sectors.

The key point is that the embargo made market coordination less viable, thereby reinforcing Che’s push to suppress the law of value internally.

The Turn to the Soviet Bloc: Planning Over Markets

Cut off from the United States, Cuba integrated into the Soviet-led trading system (COMECON): trade based on negotiated agreements rather than world market prices, long-term planning of exports and imports (especially sugar-for-oil deals), and financial flows not strictly governed by profitability.

This environment was closer to Che’s preferred model: reduced exposure to global value relations and greater space for planned coordination.

However, Che remained critical even of Soviet methods, especially their use of enterprise autonomy and profit accounting.

Scarcity and the Rejection of Profit

The embargo produced extreme scarcity, especially in industrial inputs.

Che’s response was not to use profit to ration scarcity, but to reject it. Profit allocates resources to what yields returns, not what is needed. Under scarcity, this would privilege export sectors or high-return activities and risk distorting development away from strategic priorities.

Instead, he argued for administrative allocation and political prioritisation, especially industrialisation and basic goods.

The core logic was that, in a besieged economy, profit is a poor guide to necessity.

Moral Incentives in a Context of Hardship

Material scarcity made Che double down on moral incentives. Wage differentials could not meaningfully compensate for shortages, while reliance on material rewards risked deepening inequality under scarcity.

He therefore emphasised voluntary labour, revolutionary commitment, and collective sacrifice. This was not purely ideological; it was also a response to material limits imposed by the embargo.

E. The Soviet-Led COMECON

The relationship with the Council for Mutual Economic Assistance did not simply “support” Cuba; it reframed the terrain on which Che’s strategy operated. It both enabled parts of his vision and undercut others, often in contradictory ways.

External Buffer: Space to Resist the World Market

COMECON gave Cuba something the embargo denied: stable export markets, especially for sugar; guaranteed imports of oil, machinery, and foodstuffs; and long-term trade agreements insulated from global price volatility.

This reduced Cuba’s exposure to world market discipline.

Planned Exchange Still Carried Value Relations

Despite being planned, COMECON trade was not free of value logic. Exchanges were often based on accounting prices linked loosely to world prices, bilateral balances still required equivalence over time, and efficiency and cost considerations were not absent.

Thus, while markets were muted, they were not abolished; they were mediated differently.

Che’s concern applies here: even without capitalist markets, value relations can persist through accounting systems.

Moral Versus Material Incentives in a COMECON Context

COMECON conditions made Che’s emphasis on moral incentives more viable in one sense because basic stability allowed the state to prioritise collective mobilisation with less immediate survival pressure than in a pure market environment.

At the same time, Soviet-style systems leaned heavily on material incentives, while differential rewards and bonuses were common. Cuba was therefore pulled between Che’s vision of conscious socialist subjectivity and a broader socialist bloc that normalised material motivation systems.

F. The Special Period and Later Reforms

The Special Period (Early 1990s): Forced Re-entry of the Law of Value

After the collapse of the USSR, Cuba lost subsidised trade, guaranteed markets, and external financing.

This triggered a systemic shock that made central allocation alone insufficient.

In response, the state introduced measures Che had explicitly warned about: legalisation of foreign investment through joint ventures, expansion of tourism as a foreign-exchange sector, limited self-employment (cuentapropismo), and reintroduction of hard budget constraints in parts of the economy.

Structurally, enterprises increasingly had to earn foreign exchange, price signals — especially in the dollar sector — gained real coordinating power, and profitability began to matter in practice, if not in doctrine.

From Che’s framework, this represented a partial restoration of the law of value as regulator, driven by external necessity rather than ideological shift.

The 2011 “Updating” Reforms: Controlled Decentralisation

Under Raúl Castro, Cuba formalised reforms through the Lineamientos (Guidelines): expansion of self-employment and small private businesses, growth of cooperatives (especially non-agricultural), greater enterprise autonomy in state firms, and attempts to link wages to productivity and results.

This was not full market socialism, but it moved in that direction. Enterprises gained more discretion over inputs and outputs, financial performance became a key evaluation metric, and local decision-making expanded within a still-planned framework.

From a Che’s perspective, this reintroduced the enterprise as a semi-autonomous unit, precisely what Che rejected in the Budgetary Finance System.

Incentives Rebalanced: From Moral Primacy to Hybrid Systems

Material incentives increasingly coexisted with moral and political appeals, producing a hybrid system rather than Che’s earlier model of moral primacy.

Profit and Enterprise Performance: De Facto Reintroduction

Enterprise profitability and financial performance became increasingly important in evaluating economic success, even while socialist planning structures remained formally intact.

Recent Reforms (2019–Present): Monetary Unification and Deeper Market Signals

Reforms under Miguel Díaz-Canel include currency unification, expansion of MSMEs (small and medium private enterprises), and a wider scope for private accumulation and contracting.

These changes increased the role of prices and costs in decision-making, expanded the non-state sector significantly, and further differentiated income and opportunity.

The structural direction is toward a more mixed economy, where planning coexists with significant market-mediated coordination.

What Has Not Changed

Despite these shifts, key elements of Che’s vision remain: the state retains control over strategic sectors, national planning still sets macro priorities, and socialism is still defined politically rather than purely economically.

G. Relevance Today

Che’s arguments remain central to contemporary socialist debates, not as a blueprint, but as a structural fault line.

Market Socialism Versus Planning

Modern systems such as China and Vietnam reflect the tension Che identified. Enterprise autonomy may increase efficiency, but it also strengthens market logic and inequality between firms.

Cooperatives and Self-Management Today

Worker cooperatives and platform cooperatives often operate in competitive markets, accumulate surplus locally, and behave like mini-firms. Applying Che’s perspective, this risks reproducing capitalist dynamics within socialist forms.

Climate and the Revival of Planning

Contemporary climate transition debates increasingly revisit Che-like arguments. Markets struggle with long-term coordination, while large-scale planning becomes necessary.

The Unresolved Question

The same structural dilemma persists: can socialism rely on decentralised worker control of firms without reintroducing market competition, or does socialism require central coordination of the whole economy?

H. Climate Change and the Return of the Planning Question

Why Climate Change Revives the Planning Question

Decarbonisation is not just about “greener markets.” It requires rapid reallocation of investment across energy, transport, and industry; long time horizons of 20–40 years; and coordinated sectoral shifts linking electricity, industry, housing, and agriculture.

These features clash with market coordination because profits are short-term, prices do not adequately capture long-term ecological costs, and firms act individually rather than systemically.

Contemporary Planning Is Not Socialist Planning

Modern climate policy is primarily planning within markets rather than replacing them. It represents state-guided capitalism rather than post-capitalist coordination.

Contemporary Echoes of Che

Some contemporary currents, structurally similar to Che’s framework, argue for public ownership of energy systems, democratic planning of transition pathways, and non-market allocation in key sectors.

National Industrialization Towards Socialism: Lessons from Cuba

Many people around the world hoped socialism could build a fairer society. Because of this, there were major debates about how a socialist economy should work.

In the Soviet Union during the 1920s, leaders and thinkers like Vladimir Lenin, Leon Trotsky, Yevgeni Preobrazhensky, and Nikolai Bukharin debated how socialism could develop after capitalism. Similar discussions later happened in Yugoslavia.

After the 1959 Cuban Revolution, Cuba also held an important debate from 1963 to 1965. Key figures included Ernesto Che Guevara and Carlos Rafael Rodríguez. Their debate became important far beyond Cuba because it raised questions that still matter today — especially for countries like the Philippines that seek sovereign national industrialization.

A. Che Guevara’s Role in Building Socialist Cuba

After the revolution, Cuba nationalized most banks and industries. Che Guevara became head of industrialization and president of the national bank.

Cuba’s economy was weak and dependent on the United States. Many business owners, managers, and engineers left the country after the revolution, creating serious problems.

Che proposed two main solutions:

• Put similar factories and industries under centralized management so the government could better organize limited skilled workers and resources.
• Centralize finances so profitable industries could help support important but struggling industries.

This became known as the Budgetary Finance System (BFS). Che believed central planning could help Cuba industrialize and develop faster while building socialist values.

B. The Debate Over Markets and Socialism

The central question was:

Should socialism still use markets, profits, competition, and financial incentives?

The Soviet model said yes. Soviet economists argued that socialism still needed:

• profits,
• money,
• competition,
• and material rewards

to increase productivity and develop the economy.

For example:

• workers could earn bonuses for producing more,
• factories could compete with each other,
• managers could focus on profitable projects.

Che disagreed.

He believed these methods encouraged selfish behavior and recreated capitalist attitudes inside socialism. He argued socialism should build cooperation and collective responsibility instead of competition.

Che believed:

• production should serve social needs, not profit,
• planning should guide the economy,
• and people should work not only for money but also for social commitment and solidarity.

C. Che’s Main Criticisms

Workers Should Think Beyond Their Own Workplace

Che argued workers should not only think about their own factory or enterprise.

He believed workers should participate in planning the entire economy for society as a whole.

Instead of:

• “What benefits my factory?”

the question should be:

• “What benefits society?”

Moral Incentives vs Material Incentives

Che warned that relying too much on money and bonuses could slowly restore capitalist behavior.

He promoted:

• political consciousness,
• collective responsibility,
• volunteer work,
• and revolutionary commitment.

He believed socialism required creating new social values, not just changing ownership.

Profit Should Not Control Society

Che argued profit should not determine what gets produced.

Under capitalism, industries follow what makes money. But Che believed socialism should prioritize:

• social needs,
• industrial development,
• healthcare,
• education,
• and long-term national goals.

For Che, socialism was not simply workers owning separate businesses competing in a market. It meant a nationally planned economy organized for the collective good.

D. The U.S. Embargo and Its Effects

The United States imposed a harsh economic embargo on Cuba after the revolution.

Cuba lost:

• its main export market,
• access to machinery and spare parts,
• loans and credit,
• and access to global financial systems.

This pushed Cuba toward stronger central planning because markets alone could not solve these problems.

Che believed that under these difficult conditions:

• scarce resources had to be carefully planned,
• essential industries had to be protected,
• and profit could not be the main guide for economic decisions.

The embargo also encouraged Cuba to deepen ties with the Soviet Union and other socialist countries.

E. Cuba and the Soviet Bloc

Cuba joined the Soviet-led trading system called COMECON.

This helped Cuba by providing:

• stable trade,
• oil,
• machinery,
• and guaranteed markets for sugar exports.

But Che still criticized parts of the Soviet model because it continued using:

• profit calculations,
• enterprise competition,
• and material incentives.

He feared these methods could slowly recreate capitalist relations.

F. The Crisis After the Soviet Collapse

When the Soviet Union collapsed in the early 1990s, Cuba entered a severe economic crisis called the “Special Period.”

Cuba lost:

• trade support,
• cheap oil,
• and financial assistance.

To survive, Cuba introduced reforms that Che had earlier criticized:

• foreign investment,
• tourism expansion,
• small private businesses,
• and greater use of market mechanisms.

Later reforms under Raúl Castro and Miguel Díaz-Canel expanded private businesses and allowed more market activity.

Today, Cuba has a mixed system:

• the state still controls major sectors,
• but markets and private businesses play a larger role than before.

G. Why This Debate Still Matters

The Cuban debate remains important because many countries still face the same questions:

• Can socialism use markets without becoming capitalist again?
• Can worker cooperatives survive without competing like businesses?
• Should economic planning guide development?
• How should societies balance efficiency and equality?

These questions are especially relevant for countries pursuing national industrialization and economic sovereignty.

H. Climate Change and the Return of Planning

Climate change has revived interest in economic planning.

Moving away from fossil fuels requires:

• long-term planning,
• coordination across industries,
• public investment,
• and large-scale transformation of energy and transport systems.

Markets alone often focus on short-term profits, while climate action requires long-term social planning.

Because of this, even some non-socialist governments now use forms of state planning to manage the energy transition.

This has renewed interest in some of Che Guevara’s arguments about:

• planning,
• public ownership,
• and organizing the economy around social needs instead of profit.