New reforms another masquerade

Posted on Sunday, 11.21.10
Cuban economy
New reforms another masquerade
By Jose Azel - jazel@miami.edu

The VI Congress of the Communist Party of Cuba — now scheduled to meet
April 2011 to ratify Gen. Raúl Castro's economic directives, including
the firing of 500,000 state employees — is viewed by some with hope that
finally Cuba is moving toward a market economy, by others with
substantial skepticism and by Marxists with horror as a betrayal of
communist orthodoxy.

So where is Cuba headed?

Most likely, nowhere fast.

Ironically, the official announcement of the firings was made by the
Cuban Workers Union (CTC) — the Communist Party-controlled labor union.
Anywhere but in repressive totalitarian regimes, an announcement
dismissing 10 percent of the government's workforce would have been met
with the massive protests and international indignation usually
associated with reforms required by the International Monetary Fund or
the World Bank. In Cuba, there was nary a peep on the streets.

Add to this Fidel Castro's apparent Freudian slip that the "Cuban model
doesn't even work for us anymore," and you have a textbook recipe for
ideological bewilderment, bureaucratic paralysis, opportunism,
uncertainty, incongruous policymaking and more.

In the Cuban version of Orwellian doublespeak, the dismissals are
labeled as an "actualization of socialism," where government will grant
permits for those fired to seek to make a living "outside the state
sector." It is unspeakable to talk of a private sector.

The firings reveal changes anchored not in a desire for
political-economic reforms to help the Cuban people, but rather focused
on the regime's survival. In an economy with developed private
competitive markets, employees dismissed from one firm have a fighting
chance of securing employment in another. But in Cuba's economic system,
there is no private sector to absorb the unemployed. Where will they
find employment?

Perhaps most bizarre is that the dismissal measure seems to assume that
everyone is suited to be an entrepreneur and able to make a living in
fields that may be far from their work experience and professional training.

The Cuban government is betting on the resourcefulness and
entrepreneurship of the Cuban people to somehow make up for the
inefficiencies of the state sector and to do so without access to cash,
credit, raw materials, equipment, technology, or any of the inputs
necessary to produce goods and services. Ironically, the likely source
for these inputs will be the Cuban diaspora, eager to help their jobless
relatives and friends.

Cubans will somehow make do, but in terms of actual economic
development, these measures will not work; they are not designed to.
Allowing Cubans to read tarot cards or to make paper flowers — two of
the now permitted activities — are not serious economic development
measures. But just in case, the government is ready to collect onerous
taxes of 25 percent for social security and up to 40 percent on income
depending on the activity (e.g., food production will be taxed at 40
percent, artisans at 30 percent, and so on).

If the intentions of the Cuban government were truly to undertake a
major shift toward a market economy, it would not seek to limit the
permitted economic actions to some 178 mostly individual activities
(fruit-peeling, shoe-shining, etc.) and then impose stifling regulations
and taxes. It requires a vivid dreamer's imagination to see in this
announcement by the Castro government a move toward a free-market economy.

One lesson to be learned from the transitions of former Soviet-bloc
countries is that the success of reforms hinges on placing individual
freedoms and empowerment front and center. This is not where Cuba is
headed with its "actualization of socialism."

For now, the firings only highlight the dismal state of the Cuban
economic model succinctly depicted by the old Soviet joke that described
their centrally planned economic system as one in which "we pretend to
work and they pretend to pay us." The bankrupt Cuban system cannot even
pretend to pay its workers anymore. So it is now changing its maquillage
to make-believe capitalism.

José Azel is a Senior Research Associate at the Institute for Cuban and
Cuban-American Studies, University of Miami. He is the author of the
recently published book, "Mañana in Cuba."

http://www.miamiherald.com/2010/11/21/1935727/new-reforms-another-masquerade.html