Global Policy Forum

The fundamental instinct at the heart of Cuba's revolution in 1959 was that slower wealth creation and limited political repression were a price worth paying for fairer distribution, and the consequent eradication of extreme poverty. It may not have been articulated as such, but that is how it has played out.

Along with South Korea, Cuba probably has one of the most impressive and distinctive stories to tell in the annals of modern development. Apart from achieving near 100% literacy many years ago, its health statistics are the envy of many far richer countries. It is a small country, but not too small – with 11 million inhabitants it is the same size as Bolivia and four times the size of neighbouring Caribbean island Jamaica.

No other similar country adopted Cuba's approach to development, although some tried, and the differences between poverty in Cuba and other Latin and Caribbean countries are stark. While average income has grown in Cuba at a similar speed to other Latin American countries such as Bolivia, Colombia and El Salvador, the poverty and social conflict still experienced in the mainland countries is very apparent. In Cuba, the extremes of opulence and misery are banished in favour of a generalised level of wealth, best described as "enough to get by".

Cuba has certainly forfeited any chance of becoming an economic powerhouse because of the egalitarian policies it adopted, but that possibility was always a long shot anyway. Holding out for some kind of big economic takeoff may be a fool's game for most countries – and that might be one of the most important lessons for other countries that want to log the kind of development statistics Cuba has achieved. As former president Jean-Bertrand Aristide said of his country's aspirations, Haiti was not seeking grandeur but the more limited ambition of moving "from misery to poverty with dignity".

It is easy to get seduced by Cuba's impressive development indicators and its assertions of idealist possibilities. The statistics are certainly dramatic, as Overseas Development Institute research emphasised last year. And Fidel Castro has certainly contributed as many wise and progressive thoughts to the world as he has unfortunate ramblings. But there are serious problems at the heart of the Cuban development model that have been left unaddressed for far too long.

Castro's leadership was the key factor in rapidly rising living standards for the poorest. In 1958, under the Batista dictatorship, half of Cuba's children did not attend school. The literacy campaign begun by Castro in 1961 led, in 1970, to Unesco declaring Cuba the country with the highest primary and secondary school enrolment in Latin America. These development gains, among others, have continued to this day.

But there have been two broad consequences. First, a generation of educated young people aspire to more in terms of living standards and life chances than their parents ever did. It is no coincidence that the older generation is more uncritically supportive of the revolution than the young – it knows what Cuba was like before.

Second, state-led development and investment is costly, especially when the international context becomes less favourable. Relying on goodwill, volunteering and accumulated capital has worked perhaps longer than anyone anticipated, but eventually wealth must be created and that, as the critics have always maintained, means a platform for the private sector to grow.

So it is better late than never that Raúl Castro, Fidel's brother, has finally bowed to pressure and taken two major reforms through the national assembly. First, travel restrictions will be loosened, making it much easier for Cubans to travel abroad. And second, authorisation and encouragement will be given to small businesses. These follow on from other reforms and are part of a gradual but significant shift in Cuban development theory intended to strengthen a weak economy.

Apart from the notable economic benefits that should accrue from shifting thousands of jobs from the public to the private sector, the cultural and psychological effects will be enormous. Cuban youth has been immensely frustrated in recent years by the perceived inability to let its creativity flourish beyond a tight set of parameters. Right from the start, the Cuban revolutionaries acknowledged that policy decisions should encourage human flourishing rather than simply economic advantage, yet the consequences of denying opportunities to young people have contradicted these ideals.

The Cuban development model is as distinctive and worthy of study as those of the east Asian tigers. It has spent the last 60 years proving the doubters wrong, despite the constant attention of powerful ideologues gunning for its humiliation. The question is, how fast and deep do reforms need to be to ensure that the gains made are retained, while the aspirations of Cuba's people for more freedom and opportunity are met and the economy holds up?

In my view, it is appropriate and important that changes be implemented carefully and slowly. The gains made by the Castro regime in terms of state provision of basic public goods may seem solid enough, but the national and global economies are the objects of surprises and shocks.

If the challenge in the 1960s and 1970s was to establish a way of working totally counter to what had gone before, the challenge now is to demonstrate that the model can evolve into something more appropriate for the present context, without undermining its most impressive achievements. If it can do that, it will continue to present, as its detractors correctly feared, the "danger of a good example" and merit the attention of development theorists and practitioners seeking proven means to eradicate poverty.