Reorganization of the Job Sector: Opportunities and Risks in Cuba

With the dramatically worsening economic situation in Cuba and the accumulation of all types of problems accumulating, the Cuban government has felt obliged to undertake profound set of major transformations, which on the one hand present an opportunity to get out of the crisis, but on the other hand pose great risks in case the measures are not taken in a coherent and transparent manner.

The government has announced the laying off of 1.3 million employees in state-run organizations, which comes to around 25 percent of the active labor force. The process has begun with plans for 500 000 people to be dismissed by the end of the first trimester of 2011. At the same time, the government has announced the launching of a program which will provide jobs to the citizens who are “available for work”. However, only partial information has been released so far. Thus, various job enhancing opportunities will be created such as the possibility of renting out of land in usufruct, forming cooperatives or opening one’s own business – with the possibility to hire manual labor – which will do away with the taboos and dogmas that have been obstructing the national development for decades.

This broad restructuring of the job sector has long been a critical necessity for the economy. It is impossible to organize job centers that are up to their eyes with office employees and are therefore nonproductive, inefficient, lacking discipline and whose workers are paid so little that they cannot make a living on it, as even Raúl Castro has admitted. These factors, together with an immense lack of control, could bring about corruption and crime.

The discharging of so many people, along with the feelings of insecurity this situation produces, will also have an impact on the families of affected persons, which will in turn lead to creating a very sensitive atmosphere in the whole society. Since the reorganization has already gone through its first stage, it can be foreseen that such steps will strongly, directly or indirectly, affect millions of Cuban citizens.

On the political level, this inevitable, though risky, step only underscores the unfeasibility of the system that has been steering Cuba towards a disaster; and highlights the reality that has been repeatedly adverted to by peace-minded citizens, by those who were not listened to and instead were fiercely oppressed, labeled as foreign agents, put to prisons with subhuman conditions with sentences stretching over the whole decades.

At the same time, this situation, with so many workers being dismissed, only highlights the falsity of the government’s propaganda boasting over the country’s full employment and its supposedly paradise-like situation regarding the job market. This lie will prove to be even more unsustainable given the current heavy toll of the financial crisis.

Sadly, this process, painful for the whole society, has still numerous difficulties to confront. To start with, the president announced structural and conceptual changes on 26July 2007. However, not much has happened since. In the same vein, no adequate preparative measures have been taken that would enable the citizens to affront radical lay-offs and that would, at the same time, give them a guarantee of certain securities.

For instance, since the system of economic institutions was destroyed in 1959 and up to this date, no legal body has been established that would be in charge of running the restructuring of the job sector. Institutional there should have been steps taken that expanded the decision powers of the lower-level administration and gradually reducing the still existing centralized system. The centralized bodies should have been reduced decidedly in size and should have transferred their prerogatives to regional bodies, municipalities and companies. Some ministries and public administration positions should have been abolished or merged long ago – a case in point is the ministry of sugar whose existence stopped making sense long ago – or concentrated into just one ministry, as would be the case of various people who are currently in charge of the country’s economy, each of them holding one particular position whose responsibilities should be merged with the responsibilities of other positions. This would speed up processes of the country’s administration and diminish both the operational costs and harm caused by bureaucratic procedures.

In the same vein, the market continues to be enormously fragmented. It is surprising to see various prices being charged for the same product and while the unfortunate double currency is still in use. In addition to these, the government has prepared no conditions to create the very much needed wholesale market to supply entrepreneurs, contractors and other people that have their own business; the result of which is that the economy continues to work largely under the centralized system, an exasperating burden of bureaucracy, which poses absurd setbacks and prohibitions. If this scenario continues to be in existence, the restructuring will be difficult to carry out.

At the same time, though, people are distrustful of the announced liberalization due to several terrible experiences they have been through. The Revolutionary Offensive in 1968 is still vivid in people’s memories, as is the crushing of small private initiatives, which was triggered by Raúl Castro himself and which only ended in 1985 with the Politics of Rectification of Errors and Negative Tendencies. Other things that are hard for ordinary Cubans to forget are “those notions that condemned entrepreneurial work almost to extinction and stigmatized those who decided to legally start their own businesses in the 1990s”, as the newspaper Granma edition highlighted on September 24th.

It cannot be concealed that over the last 50 years, the official propaganda, which has been steered by the most conservative sectors of the government, saved their worst insults at people with entrepreneurial interests by labeling them as ambitious and antisocial. Various humble steps of liberalization and opening of markets ended up being drastically repressed; a sad case in point is the Ministry of Interior’s “Operación Pitirre en el Alambre (Operation Bird-on-a-Wire)”.

Many Cubans are aware of the fact that people holding the most important positions within both the government and the Communist party are advocating for more and more changes and transformational processes. They do so, though, with incoherencies, vacillations and fears. However, it is also no secret that the conservative members of these authorities are unwilling to leave behind their old practices since they fear they might lose power and the privileges that they and their families have enjoyed for so long.

When speaking of production cooperatives and entities with renting rights, many people assume that what is being talked about are the Basic Units of Cooperated Production and Cooperatives of Agricultural Production, which are, however, totally controlled by the state administration, have barely any decision making power, are complete disasters, are unproductive and are presently bottomless pits for the resources of the nation.

Another striking example is giving land in usufruct. After several years, only 46% out of the million of hectares of the land given in usufruct are yielding produce, a fact which can be attributed to a large extent to the excessive bureaucratic procedures whose aim is to maintain control over the farmers. If the new production methods are to work, they cannot be controlled from above. The cooperatives should be formed on a voluntary basis, without a “straight jacket”, without restraints so that the cooperative members can perform their work relying on their own accomplishments and without having to deal with political interferences.

Also, what needs to be adjusted is the tax system so that it would not drown the new entrepreneurs. Professor Carmelo Mesa Lago has suggested that it would be necessary to start with lower taxes that could later on be adjusted. Cuba does not have a tax tradition since the government destroyed it and it needs to be brought back. On top of this, the new entrepreneurs will have to buy their supplies at high prices in retail markets or other sources. If the taxes are very high, a lot of people might feel discouraged or could go bankrupt very quickly. Unless there is a wholesale market and the tax system is well established, the above mentioned recommendation should be followed.

Besides, the authorities have not prepared a simple accounting system that would serve as a coordinating base for the tax system, although a need for this could have been foreseen. If this issue is not approached sensibly, there is a danger that a good number of entrepreneurs will go for the option of doing business outside the tax system so that they do not feel asphyxiated by high retail prices and excessive taxes. The task to provide jobs to so many people will never be easy. This is even more underscored if we impose erroneous policies that can lead to higher rates of unemployment and inflation, aspects that under the Cuban conditions, already affected by a long period of abandonment and frustration felt by asphyxiated Cubans, could trigger a series of social upheavals with their unpleasant consequences.

What is also worrying is the question of how suitable the implemented measures are. In the tourist industry and in the area of hiring employees for work in foreign companies, the prerogative has continued to be subjugated by the state and the party. This practice should be banished completely and replaced by an emphasis on the capacities and productivity of each individual. It is no secret that unions are completely controlled by the government. Therefore, the workers should make an effort to make sure that the process is carried out as transparently and ethically as possibly. If this is not the case, there is a danger that feelings of anger, which the massive lay-offs have already brought about, might grow.

This process is inevitable if the disorder in the labor sector is to end. It will always be very complex and painful. It is taking place during a time of massive economic difficulties; the state lacks even the financial capacity to return a part of funds that foreign companies have deposited in banks. There are also rumors that important business people were able to avoid paying insurance on credit and export. The direction the economy is taking is worrisome. Based on the Cuban National Statistics Office findings, investment in 2009 fell by 15% and in the first trimester 2010 dropped still by 14%; such a situation deepens the de-capitalization process, that began in the early 1990s, and highlights its contribution when it comes to destroying jobs and the impossibility of creating new ones in the pace that would be necessary.

As a result of all this, what this serious situation asks for is a very responsible approach and, mainly, common sense so that the intention of restructuring of the labor sector does not fail. Tendencies to control for political purposes must be done away with. These days there is no longer any place to speak about improving an economic, political and social system that is completely dysfunctional. Now it is time to carry out a series of radical transformations and to recognize the big mistakes that our leaders have made while running this country for decades.

Oscar Espinosa Chepe is an economist and an independent journalist

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