Sunday, January 23, 2011

157. Cuba Reforms Its Socialism

May Day March in Havana
By Cliff DuRand, January 3, 2011

"Revolution is a process and a socialist society must be self-consciously constructed by those who live within it."
 -Ron Ridenour

For the last three years there have been several rounds of public discussions of problems in Cuban society and suggestions for solutions amidst a growing sense of urgency in the face of a worsening economic situation due to declining prices for Cuba's exports (especially nickel), rising costs for food imports, large damage from monster hurricanes, and lackluster domestic production.  Now at last these discussions are approaching their final phase with the release in November 2010 of draftEconomic and Social Policy Guidelines for the Party and the Revolution.

Consisting of 291 points filling 32 pages, these
 Guidelines are now the focus of countrywide discussion in workplaces, neighborhoods and schools in the months running up to the April 2011 6th Congress of the Cuban Communist Party. What follows is a summary of the major points of this document along with a few preliminary questions these reforms raise.

Writing in 
Havana Times Nov. 30, Ron Ridenour summarizes the proposed reforms as follows:

"The essence of these guidelines, which aim to increase efficiency and production, and decrease the budget deficit, balance exports-imports, and pay the foreign debt ($20 billion), is to reduce the state's role, delegate more authority to local governments and work sites, increase taxes and other revenues while cutting back on social benefits and subsidies."

In addition, there will be more private enterprise and foreign investment openings, and integrating more with progressive neighboring governments. Nevertheless, the document maintains that "only socialism is capable of overcoming the difficulties and preserving the conquests of the Revolution".

The state will continue to be the central economic planner using the budgetary method but it will permit more farm land as usufruct property, greater self-employment (in 178 areas) and small businesses which, for the first time, will be allowed to employ people outside the family. 

I would add to this excellent list an increased reliance on material incentives to motivate work, separation of government from state enterprises which will become responsible for their own gains and losses (including the possibility of bankruptcy), promoting cooperatives, using a tax system to redistribute income (#56), and moving away from the ration book (#162) and the dual currency system (#54).  [References are given by number to the 291 items in the 
Economic and Social Policy Guidelines for the Party and the RevolutionMarce Cameron, trans.]

Rafael Hernandez, editor of 
Temas and a leading thinker, has suggested that the current reform process be seen as a continuation of the rectification process begun in the mid 1980's but interrupted by the emergency of the Special Period in the 1990's. That turn away from the bureaucratic Soviet model of socialism is now made all the more urgent by the impact of global economic conditions on the Cuban economy. And so now, after over two years talking about the need for reforms in its economic model, Cuba's leadership is finally launching comprehensive initiatives.

The proposed 
Guidelines are prefaced by the principle that "only socialism is capable of overcoming the difficulties and preserving the conquests of the Revolution," adding that "in the updating of the economic model, planning will be supreme, not the market." It goes on to clarify the operative conception of socialism by stating "socialism is equality of rights and opportunities for the citizens, not egalitarianism. Work is both a right and a duty; [it is] the personal responsibility of every citizen and must be remunerated according to its quantity and quality."


International media coverage of Cuba's reforms has focused largely on the downsizing of the state employed workforce. A half million redundant state employees are to be released into other forms of employment in the next six months and eventually another half million. Some will form cooperatives, others become self employed. Short term unemployment benefits are offered and credit needed to set up small businesses and wholesale access to needed materials are being established to help the newly self employed. It is acknowledged that this transition will be a difficult one and time will be needed to iron out all the problems. In August 2010, Raul Castro assured people that "no-one will be abandoned to their luck. The socialist state will offer the support necessary for a dignified life through a system of social assistance to those who really are not able to work. We have to eradicate forever the notion that Cuba is the only country in the world in which you can live without working."

What is the significance of the expansion of self employment to 178 occupations from its limited beginnings during the Special Period when 
paladarescasa particulars and home repair services were authorized? Basically it is a recognition that the state cannot do everything and that a petty bourgeoisie is compatible with socialism. At the same time however, care must be taken to license, regulate, and tax small private businesses so the petty bourgeoisie does not become a big bourgeoisie. As the Guidelines state, "In the new forms of non-state management, the concentration of ownership in legal or natural entities shall not be permitted." (#3)

COMMENT:  Given proper preventative measures, I don't see the emergence of a petty bourgeoisie as a major problem. But a little discussed attendant measure is problematic and of questionable necessity in my opinion. This is allowing private businesses to employ wage labor. Previously, employment in such businesses was limited to family members. But now they can employ others outside the family as wage laborers. There is a requirement that employers pay social security taxes for their employees (as well as for themselves) to compensate the state for the social benefits it provides. But how does a socialist state justify the private exploitation of labor? And is it even necessary? If a business needs more labor power than is available in the family, why not organize it as a cooperative? That way all can benefit from their collective labor and participate in collective decision making.

Take for example farming. Since unused state land began to be given in usufruct to individuals in 2008, they were allowed to employ wage labor. Given the seasonal character of agriculture it is necessary to have additional hands during planting and harvest. But if additional labor is required year round, why not make the farm into a cooperative?  What socialist justification can there be for creating a permanent class of wage laborers exploited for private gain? Its existence raises important questions about the role of the Central de Trabajadores de Cuba (CTC) and Cuba's unions and calls for legislation to protect wage laborers. The formation and promotion of cooperatives is a far better alternative. This is specifically mentioned in the
Guidelines in agriculture (#182), transportation (#262), and construction (#282). But why then allow for private wage labor at all? [For an excellent discussion of this with some concrete proposals see Camila Piñeiro Harnecker "Risk's in Expanding Non-state Enterprises in the Cuban Economy and Recommendations for Avoiding Them."]


The opening section of the Guidelines on the Economic Management Model brings into focus the changed relation between the state and society that is envisioned.

The management model must recognise and stimulate (along with the socialist state enterprises, which are the principal form of the national economy) mixed capital enterprises [i.e. joint investment with foreign capital] , cooperatives, lessors of state-owned land in usufruct, lessors of state facilities, self-employed workers and other forms which may contribute to increasing the efficiency of social labour. (#2)

Note that these are referred to as "forms of management" rather than forms of property and that all labor is seen as social labor.

The socialist planning system is to remain "the principal means to direct the national economy" (#1), but will be adjusted in view of the above new forms. Planning is to include the state enterprises and mixed capital enterprises and will regulate the non-state forms (#5). Even the state enterprises are to be separated from the state (#6) in that they will have greater control over their material and financial resources (#8) without "intervention by outside bodies" (#12). "Control over enterprise management will be based principally on economic-financial mechanisms, in place of administrative mechanisms" (#14) so that enterprises can "decide on and administer their working capital and investments up to the limit specified in the plan, and according to the regulations that will be established." (#13). Further, "enterprises, as a rule, will not receive budgetary financing to produce goods and services." (#17) In fact, state enterprises that sustain financial losses can face "liquidation" (#16), i.e. bankruptcy. In short, state enterprises are to function as businesses with considerable autonomy in a market system, although with a social responsibility set forth in the plan. 

COMMENT:  This withdrawal of the socialist state from the economy has far reaching implications.  There are important lessons that Cuba could learn from the Chinese reforms in this regard.  As I pointed out 20 years ago, China's experiment in market socialism made it possible for well connected private entrepreneurs to gain great market advantages through their personal or political connections (guanxi) with state officials.  What resulted was a kind of bureaucratic capitalism that combined the worst features of state socialism and monopoly capitalism.  Cuba may avoid this outcome because the enterprises are to remain subject to the plan rather than become independent of the state.  Nevertheless, there is potential here that must be carefully guarded against.  In a similar vein, Esteban Morales, in a recent controversial essay, warned that corrupt officials could be the undoing of the Revolution.  However he pointed to foreign rather than domestic interests as the agent that could compromise officials.  "Corruption - The True Counter-Revolution"   and ]

 Guidelines also call for a reduction of those entities that are included in the state budget. Some can become self-financing, others will be converted into enterprises, as is happening to the former Sugar Ministry. Health care and education, the two crowning achievements of the Revolution, will continue to be provided by the state (#30). However, the aim here as well as in culture and sports is "to reduce or eliminate excessive costs in the social sphere" (#132).   Similarly, in view of the aging of the Cuban population it is necessary to "reduce the relative contribution of the State Budget in the financing of social security, [by] expanding the contribution of state sector workers and applying special conditions on the non-state sector" (#154).

COMMENT:  The new autonomy state enterprises are to enjoy -- autonomy from the state -- suggests they will be subject instead to market forces. What is it then that will ensure they fulfill their social responsibilities? As Michael Lebowitz has emphasized in The Socialist Alternative, market relations promote an individualistic mentality rather than social solidarity. In this Cuba seems to be going in a different direction than its sister Venezuela. There is also the important question Ron Ridenour raises: "How much say will workers actually have within the companies? Who will be the managers and how will they be selected?" Again, as Lebowitz points out, it is through participation in decision making at the workplace that workers develop their human capacities and a sense of collective responsibility.

A sober quotation from Fidel Castro: "Capitalism tends to reproduce itself under any social system because it is based on egotism and on human instincts. Human society has no other alternative but to overcome this contradiction; otherwise, it would not be able to survive." "The law of the jungle", October 13, 2008.

Cliff DuRand, Ph.D.
Research Associate, Center for Global Justice
Coordinator, Research Network in Cuba
VoIP 301-685-3344 

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