PAUL SOLMAN: For the newcomer, Cuba, and especially Havana, is a surprise. Yes, there are plenty of the expected third-world vignettes: The make-work jobs, the makeshift travel arrangements, a public transportation system bursting at the seams, the occasional beggar in the street-- this one was deaf. Reminders that as recently as a decade ago when the Soviet Union collapsed and its subsidies vanished, people were nearly starving here. But today a major makeover is in progress.
Cuba has decided to sell its culture, its climate, its beaches to foreigners, and so tourists are pouring in all over the country, from all over the world. Hotels abound, especially in Havana, and new ones are going up, built by everyone from the Spanish to the Chinese. Joint ventures with the Japanese and Koreans have brought in household gear you might see at Electronic Eddie's or Home Depot, and supermarkets offer an almost all-Cuban clientele everything from Brazilian diet Jell-O to Jack Daniels and Johnnie Walker Red. This year's sales at the Super Mercado...
ALBERTO LOTTI, Supermarket Manager (Translated ): Up to this moment, they are $6,324,000. The average bill per customer is $17.36.
PAUL SOLMAN: That's right. Here you pay not in Cuban pesos but in U.S. dollars, officially allowed after the Russians pulled out. Tourism and foreign investment contribute to dollars now reaching, it's estimated, more than half the Cuban population. In short, it seems like capitalism is taking root. (Pig snorting) on the other hand, many Cubans still think capitalists are pigs, business is dirty, and that all production should be sold to and through the state as these real pigs will be as soon as they fatten up.
PIG FARMER (Translated ): The state gives me everything I need-- the grain, the breeding stock-- so my commitment is to them. Sometimes the private guys show up, but I don't trust their scale. With the state, I always have confidence.
PAUL SOLMAN: The state, meanwhile, still tries to command the economy. Every family gets subsidized food with a national ration book. Fidel Castro has banned billboard advertising, making Havana look like some sort of Soviet throwback featuring Che Guevara, and slogans like "This is the socialist revolution right under the nose of the U.S." And when we tried to interview a would-be emigrant, the police stopped us, took our documents, and wanted to take us downtown. We sneaked these shots from our van. True, the government itself didn't object to our interviewing prominent dissidents like Elizardo Sanchez, but the dissidents themselves insisted Cuba's less free than ever.
ELIZARDO SANCHEZ, Dissident (Translated ): What we have here is closer to the Soviet totalitarian system, an absolute state monopoly that controls virtually everything down to the barbershops.
PAUL SOLMAN: In Cuba, then, an economics correspondent can feel whipsawed. At some moments you think Castro has saved Socialism, and right under Uncle Sam's nose. At other times it seems clear the free market is burrowing irresistibly from within. This elite Lenin High School, we figured, might be one place to sort things out. Only one in 100 is admitted here in a country with a whopping 99 percent literacy rate. At Cuba's training ground for the next generation, a group of English speakers awaited them.
STUDENT: Schoolmates, I tell you, you're welcome, and I hope you get satisfied with our school, with out students, with us. Thank you.
PAUL SOLMAN: Well, thank you.
PAUL SOLMAN: We got the red carpet treatment and it kept getting redder.
STUDENT: We don't want capitalism. We have... We want socialism, because we want equality to all the people.
STUDENT: We don't want to be like the United States because right now we have fewer children in streets... I mean, I would say, almost anywhere, almost no kids in street asking for money.
STUDENT: We are the same people. We have the same clothes, the same things. It's not that the other countries that you're better than me because you have a new Adidas and I don't.
PAUL SOLMAN: The kids at Lenin High seem determined to sustain socialist equality at almost any cost. As for the market changes Cuba has made?
STUDENT: We don't want those changes. We have to put them there... They're there because we need them. When we don't... If we don't need them anymore, we will fade it.
PAUL SOLMAN: Fade it.
PAUL SOLMAN: They will fade it-- that is, phase out the market reforms of the post-Soviet special period. Now maybe the reforms are temporary, and schools like this will restore Cuba's purist past, or maybe instead Cuba's many private markets are already beyond a point where anyone can fade them. Food production has exploded, for instance, because of free market incentives that let farmers sell privately some of what they produce. So incentives work.
MAN (Translated): Clearly, yes. It's obvious. That's the way it works everywhere.
PAUL SOLMAN: Incentives not only mean more food more available without waiting on line, they also mean better food at the private markets.
SALESMAN (Translated): It's better quality. This is what people are looking for. There's less fat. There's less bone. Do you understand?
PAUL SOLMAN: The more we saw of Cuba, the starker the contrast between capitalist experiment and socialist ideology. Alberto Lotti, for instance, who runs this state-owned dollar store, plays by market rules like pursuing profits in competition with similar stores.
ALBERTO LOTTI (Translated): Competition exists, and it's good for the consumer. Competition is about who offers the best product, the best quality, at the best price in the battle to lower costs. That's what satisfies consumers' needs.
PAUL SOLMAN: But of course, needs are always being redefined more broadly in an economy where there's more to buy. Do you worry that you'll become too much of a consumer society if you have more and more of these things?
ALBERTO LOTTI (Translated): I think this is not a consumer society. Economic development itself requires monetary mercantile exchange.
PAUL SOLMAN: Muchas gracias.
PAUL SOLMAN: So not capitalist, but not really socialist either; in fact, a distinctly Cuban straddle concluded with a distinctly Cuban sendoff. Meanwhile, in Lotti's parking lot, there was more evidence that Cuba may become a consumer society as soon as it can afford to. In Cuba's famous health care system, we heard a similar mixed message. On the one hand, the head of the country's national cancer hospital says he devoutly believes in socialized medicine.
DR. ROLANDO CAMACHO, Cancer Specialist: Health is something that is the right of a human being. If you put it in the hands of the one depending of your pocket, that's terrible.
PAUL SOLMAN: Free health care and free education were recently hailed by the World Bank-- no friend of Castro's-- as model investments, yet this doctor thinks the forced move to the free market was good economic medicine.
DR. ROLANDO CAMACHO: In that sense, I believe it's a good thing. It starts to make people to face the reality and not to... Because we were so accustomed that the government provided everything. You just have to ask, 'I need this, I need this.' And we don't know from where it comes, how it costs, nothing like that.
PAUL SOLMAN: You even see socialism versus capitalism down at the old ballpark. Omar Linares is a slugging superstar who's had million dollar offers from U.S. teams, but turned them all down. Why?
OMAR LINARES, Baseball Player (Translated ): I prefer to stay in Cuba because this is my country. Everything I've accomplished I owe to the revolution.
PAUL SOLMAN: On the field, the socialist party line; in the stands, however, entrepreneurship run rampant. Get a load of this transaction.
PAUL SOLMAN: Donde?
SALESMAN: Cuanto? Five dollars.
PAUL SOLMAN: Five dollars.
SALESMAN: Omar Linares?
PAUL SOLMAN: No, it doesn't say Linares. There's a different name.
SALESMAN: ( Speaking Spanish ) ( translated ): It's the way he signs. He does it real fast.
PAUL SOLMAN: He signs with another name?
SALESMAN: ( Translated ): I don't know. Maybe he was in a hurry.
PAUL SOLMAN: In fact, capitalists were budding everywhere we looked. Bottle collectors moonlighting from state jobs who wouldn't talk on camera, stilt walkers who wouldn't tell us what they earned. It's about art, they sniffed, not commerce; then complained when we made a donation that we'd underpaid them. And then there was this paledar, one of the small private dollar-only restaurants that dot Havana. When it comes to moving the merchandise here, Cuba's favorite cocktail, say, the mojito, owner Juan Carlos uses very clear market incentives.
JUAN CARLOS (Translated ): If my waiters sell more mojitos, they get paid more money. But if they bring the mojito to the table and it's not properly prepared, I fine them.
PAUL SOLMAN: You could call this capitalism with a vengeance. The government tolerates it, but puts legal hurdles in the paledar's path to protect the many state-owned restaurants.
JUAN CARLOS (Translated ): A private restaurant can only sell certain things. You can't sell beef or lobster. You can only have 12 seats.
PAUL SOLMAN: Some paledars like this one, whose identity we promised not to reveal, have responded with hidden rooms. Others have simply given up. And that makes Elizardo Sanchez believe the capitalist experiment in Cuba is about to end.
ELIZARDO SANCHEZ: Ahora. (Translated ) Today there's less free enterprise than there was three years. Paledars are closing down. They can't survive. Their workers are unemployed or working for the state.
PAUL SOLMAN: Sanchez spent eight years in prison for his politics. He's sure Cuba won't let capitalism do its thing.
ELIZARDO SANCHEZ (Translated ): The situation has changed in Cuba, but sadly it has changed for the worse rather than the better-- especially with regard to human rights.
PAUL SOLMAN: But you're now not in prison...
ELIZARDO SANCHEZ (Translated ): True. There have been some small steps, but nobody can be sure that tomorrow things won't change back.
PAUL SOLMAN: And yet capitalism continues to make inroads, it seems, almost everywhere; even in Cuba's creaky sugar industry, with nearly half a million workers, the country's largest. Having arrived in 1511, the Spanish decided to satisfy Europe's sweet tooth by transplanting sugar cane from the East Indies and slaves from Africa.
At this factory they lived in these very barracks. Sugar has been the backbone of the Cuban economy ever since. At this mill outside Havana, the propaganda was as abundant as the cane, but here, too, they've changed to market practices like incentive pay. They just insist the changes won't change them.
JOSE ANTONIO SANCHEZ, Sugar Mill Foreman (Translated}): The more we produce, the more we can offer salary and other benefits to our workers.
PAUL SOLMAN: This sounds like capitalism.
JOSE ANTONIO SANCHEZ (Translated ): Hey, we're surrounded by capitalism. We don't have much choice but to apply some of the formulas of capitalism to resolve our problems.
PAUL SOLMAN: Do you worry that the more capitalist techniques you use, the less socialism you'll have?
JOSE ANTONIO SANCHEZ (Translated): No. These are just methods of organizing production. We still have our benefits: Social equality, health care and education for all. We are not making any concessions to capitalism; all we're doing is applying certain techniques.
PAUL SOLMAN: But can social equality hold out as the market marches in? Our search for an answer brings us back to the émigré we were trying to interview when the police stopped us. Medical Dr. Giselle Castro-- no relation-- lost her job when she applied to leave for the U.S. Lord knows she's no fan of Socialism. But what did she complain to us about? Growing market inequality in Cuba.
DR. GISELLE CASTRO, Physician (Translated ): What's happening here is that those who have now have more, and those that don't continue to slide. Right here on this block you can see the inequality. Look at the differences between that house across the street and the one down the block-- that house and that house, they're different classes.
PAUL SOLMAN: You can see the inequalities, says Giselle Castro, and we could and did. In the end, this new fact of Cuban life-- the growing gulf between those with access to dollars and those without-- may well prove to be the core of the country's dilemma. It's a dilemma now so widespread it provides the punch line to what may be Cuba's hottest joke, about a girl who dumps her boyfriend. "He swore he'd struck it rich at the Hotel Nacional," she gripes, "claimed he'd actually landed the job of doorman." But she dropped him when she learned the bitter truth, that he was just another Cuban neurosurgeon -- a state job, that is, with no ties to the dollar economy.
So, in the end we were left with one big question: can Cuba, or any planned economy for that matter, encourage the free market and resist it at the same time? The only sure bet is that Cuba will grapple with that question for some time to come.