The Cuban Government adheres to socialist principles in organizing its largely state-controlled planned economy. Most of these means of production are owned and run by the government and most of the labor force is employed by the state. Recent years have seen a trend towards more private sector employment. By the year 2006, public sector employment was 78% and the private sector at 22% compared to the 1981 ratio of 91.8% to 8.2%. Capital investment is restricted and requires approval by the government. The Cuban government sets most prices and rations goods to citizens. Moreover, any firm wishing to hire a Cuban must pay the Cuban government, which in turn will pay the company's employee in Cuban pesos.

While the form of government of Cuba is theoretically opposed to class privilege, preferential treatment exists for those who are members of the Communist Party or who hold positions of power within the government. Access to transportation, work, housing, university education and better health care are a function of status within the government or the Communist Party.

Starting in the late 1980s, the Soviet subsidies for Cuba's state-run economy started to dry up. Before the collapse of the Soviet Union, Cuba depended on Moscow for sheltered markets for its exports and substantial aid. The Soviets had been paying above-market prices for Cuban sugar, while providing Cuba with petroleum at below-market prices. The removal of these subsidies sent the Cuban economy into a rapid depression known in Cuba as the Special Period. At one point, Cuba received subsidies amounting to six billion dollars. In 1992, the United States tightened the trade embargo. Some believe that this may have contributed to a drop in Cuban living standards which approached crisis point within a year.

Like some other Communist and post-Communist states following the collapse of the Soviet Union, Cuba took limited free market-oriented measures to alleviate severe shortages of food, consumer goods, and services to make up for the ending of Soviet subsidies. These steps included allowing some self-employment in certain retail and light manufacturing sectors, the legalization of the use of the U.S. dollar in business, and the encouragement of tourism. In 1996 tourism surpassed the sugar industry as the largest source of hard currency for Cuba. Cuba has tripled its market share of Caribbean tourism in the last decade, with large investment in tourism infrastructure this growth rate is predicted to continue. 1.9 million tourists visited Cuba in 2003 predominantly from Canada and the European Union, generating revenue of $2.1 billion. The rapid growth of tourism during the Special Period had widespread social and economic repercussions in Cuba. This has led to speculation of the emergence of a two-tier economy and the fostering of a state of tourist apartheid on the island.

The Cuban government has significantly developed its medical tourism capabilities as a key means to generate income for the country. For many years, Cuba has operated a special division of hospitals that treated foreigners and diplomats while excluding Cubans. Every year, thousands of European, Latin American, Canadian and American consumers with hard cash visit to access medical care services at up to 80 percent less than U.S. costs. There are some who criticize Cuba's medical tourism industry because ordinary Cubans do not have access to the kind of quality healthcare that medical tourists receive.

Since 1959, Cuba has experienced slow growth in its Gross Domestic Product relative to other countries that were in a similar situation in the 1950s stagnant trade. and amassed a significant debt amounting to some 16.62 billion in convertible currency and 15 to 20 billion dollars with Russia. Cuban citizens themselves have experienced a decrease in their caloric intake and a shortage of housing.

For some time now, Cuba has been experiencing a housing shortage because of the state's failure to keep pace with increasing demand. Moreover, the government instituted food rationing policies in 1962, which were exacerbated following the collapse of the Soviet Union and, according to supporters of the government, the tightening of the US embargo.As late as 2001, studies have shown that the average Cuban's standard of living was lower than before the downturn of the post-Soviet period. Paramount issues have been state salaries failing to meet personal needs under the state rationing system chronically plagued with shortages. As the variety and amount of rationed goods available declined, Cubans increasingly turned to the black market to obtain basic food, clothing, household, and health amenities. The informal sector is characterized by what many Cubans call sociolismo.In addition, petty corruption in state industries, such as the pilferage of state assets to sell on the black market, is still common. In recent years, since the rise of Venezuela's Socialist President Hugo Chávez, Venezuelan economic aid has enabled Cuba to improve economically. Venezuela's assistance of the Cuban economy comes chiefly through its supply of up to 80,000 barrels of oil per day in exchange for professional services and agricultural products. In the last several years, Cuba has rolled back some of the market oriented measures undertaken in the 1990s. In 2004, Cuban officials publicly backed the Euro as a "global counter-balance to the U.S. dollar," and eliminated the US currency from circulation in its stores and businesses. Increased US government restrictions on travel by Cuban-Americans and on the numbers of dollars they could transport to Cuba strengthened Cuban government control over dollars circulating in the economy. In the last decade, Cubans had received between US$600 million and US$1 billion annually, mostly from family members in the U.S.. This number is influenced by the fact that U.S. government forbids its citizens to send more than $1,200 to Cuba to immediate family members, and then only once per year.

Cuba, the largest of the Caribbean holiday islands, is becoming an increasingly popular tourist destination.

In 2005 Cuba exported $2.4 billion, ranking 114 of 226 world countries, and imported $6.9 billion, ranking 87 of 226 countries. Its major export partners are the Netherlands 18.5%, Canada 18.5%, China 16%, Bermuda 14.1%, Spain 5.1%; major import partners are Venezuela 27%, China 15.8%, Spain 9.7%, Germany 6.5%, Canada 5.6%, Italy 4.4%, US 4.4% (2006). Cuba's major exports are sugar, nickel, tobacco, fish, medical products, citrus, and coffee; imports include food, fuel, clothing, and machinery. Cuba presently holds debt in an amount estimated to be $13 billion, approximately 38% of GDP. According to the Heritage Foundation, Cuba is dependent on credit accounts that rotate from country to country. Cuba's prior 35% supply of the world's export market for sugar has declined to 10% due to a variety of factors, including a global sugar commodity price drop making Cuba less competitive on world markets. At one time, Cuba was the world’s most important sugar producer and exporter. As a result of diversification, underinvestment and natural disasters, however, Cuba's sugar production has seen a drastic decline. In 2002, more than half of Cuba's sugar mills were shut down. Cuba's most recent sugar harvest of 1.1 million metric tons was its worst in nearly one hundred years, comparable only to those of 1903 and 1904. Cuba holds 6.4% of the global market for nickel which constitutes about 25% of total Cuban exports. Recently, large reserves of oil were found in the North Cuba Basin leading US Congress members Jeff Flake and Larry Craig to call for a repeal of the US embargo of Cuba.