FRFI 217 October/November 2010

‘Accordingly, the individual producer receives back from society – after deductions have been made – exactly what he gives to it.’ (Karl Marx, 1875)

‘Wages today are clearly insufficient to satisfy all needs and have thus ceased to play a role in ensuring the socialist principle that each should contribute according to their capacity and receive according to their work…the Party and government have been studying these and other complex and difficult problems in depth, problems which must be addressed comprehensibly and through a differentiated approach in each concrete case.’ (Raul Castro, 2007)

The announcement by the Cuban Trade Union Confederation (CTC) on 13 September 2010 about plans to reduce the state sector workforce by half a million was greeted with jeering international headlines. Cuba is rarely of interest to the bourgeois press unless it believes there is some crisis to celebrate or that new measures can be interpreted as evidence of a shift from socialism to capitalism. Helen Yaffe reports.

Media coverage has been based on a set of misleading assertions that:

1. This is ‘a dramatic shift for the communist government as it urgently tries to salvage the flailing economy’ (Tracy Wilkinson, Los Angeles Times, 17 September 2010);

2. Workers will be ‘laid off’, abandoned by the Cuban state as it moves from paternalism to market efficiency under Raul Castro, ‘reform that makes Margaret Thatcher look like a leftist

radical’ (Editorial, Financial Times, 17 September 2010);

3. The changes confirm the failure of the socialist ‘model’ under the idealist Fidel Castro, and undercut ‘half a century of thundering revolutionary certitude about Cuban socialism’ (Rory Carroll, The Guardian, 9 September 2010).

The state of the Cuban economy

In 1990, Cuba entered the Special Period of economic crisis resulting from the collapse of the Soviet bloc, Cuba’s principal trading partner; Cuban GDP fell by one third. Despite this, the Cuban government ensured a basic standard of living for its people and socialist welfare was preserved and extended. From 2000 material conditions began to improve. GDP growth was 11.5% in 2005, 12.1% in 2006, and 7.3% in 2007 (Economist Intelligence Unit [EIU] statistics – these are lower than Cuban government statistics). In 2008, growth began to slow to 4.3%, reflecting the global economic crisis and the cost of three devastating hurricanes which struck in late 2008, falling to 1.4% in 2009, but still significantly higher than the regional average and that of the imperialist countries. GDP is expected to rise to 2% in 2010 and 3.7% in 2011, despite the fiscal adjustments underway and effects of a long-term drought on Cuban agriculture.

With the rising cost of Cuban imports, as international food and fuel prices soared, and the fall in value of Cuba’s principal exports, as nickel prices plummeted and tourism slowed, Cuba’s foreign debt and fiscal deficit rose. Efficiency and rationalisation measures have been introduced to tackle this problem and the fiscal deficit has been narrowed from 6.7% of GDP in 2008 to 4.8% in 2009 and is set to fall to 3.5% of GDP in 2010 and 3.1% in 2011 (EIU, September 2010). In 2010, while the government pays off overdue debts to foreign companies, domestic expenditure and investments will be limited, but will subsequently pick up with officially guaranteed loans from China, Venezuela and Brazil. Foreign Direct Investment is expected to rise from $550m in 2009 to $720m in 2011. Cuba’s international reserves have also increased. The EIU foresees ‘improved productivity should begin to lift real incomes, supporting firm domestic demand...[and] industrial production should grow more strongly in 2011’. The government is implementing policies to rationalise and stabilise the economy, in preparation for future advances.

The state of the Cuban economy cannot be assessed without considering the ongoing costs of the US blockade, which is now estimated to have cost the island some $236.2bn and to have damaged every sector of the Cuban economy, including healthcare, education and culture.

The Cuban workforce

The type of major adjustment currently proposed in the employment structure could not be risked in a period of vulnerability. Since 2007, the Cuban government has promoted debate and discussion at all levels of society in an effort to achieve national consensus about the need for such changes. Rather than a knee-jerk reaction to economic problems, it is likely that employment changes were in fact postponed until the present period in which prospects are improving and certain preconditions have been established.

Cuba’s workforce is around 5.2 million, of whom 800,000, or 15.4%, already work in the non-state sector. Most of these are in agricultural cooperatives whose production features in the central plan; they sell a proportion to the state. Just 140,000 Cubans or 2.7% of the total workforce are self-employed. Official unemployment is low at 1.7%, but this figure excludes those who work in the informal economy, where earnings are often higher and no tax is paid, and those who have no work to do but remain on payrolls, receiving a reduced salary.

The CTC statement said: ‘It is known that there are more than one million people working in surplus posts in the budgeted and enterprise sectors. Our state cannot and should not continue maintaining enterprises, productive, service and budgeted entities, with inflated payrolls, and losses that hurt the economy.’ The first stage of restructuring will take place within government ministries. Trade union representatives are meeting with management to determine which posts are expendable. In some areas, where there are labour shortages, no workers will be removed. The 500,000 workers who will be transferred from the state-sector by March 2011 will be given various options: take up employment in agriculture, construction or industry, join cooperatives or enter self-employment. 178 activities are now open to self-employment. They include electricians, plumbers, musical instrument tuners, arts and crafts makers, spectacle repairers and so on. The revolutionary government’s commitment to extend free access to university education has generated shortages in numerous skilled and semi-skilled trades. In 83 of these trades existing regulations, that only family members or cohabitants can be employed, will be removed.

However, for all the media chatter about the market economy, only a small minority of Cuban workers will be self-employed. Their income will be progressively taxed, they will pay social security and be carefully regulated.

The result will be to increase both government income and the provision of goods and services in certain areas, leading to price reductions and falling incomes for those operating in the informal sector. This, along with a continued rise in state-sector salaries, will reduce the relative benefit for individuals operating outside the formal sector.  Accompanying the employment changes is a restructuring of the education system to decrease the number of university students and increase technical training and manual skills.

While the intention is to forge the concept of work as a social duty, the government will not abandon those unable to contribute. In August 2010, Raul Castro announced: ‘No one will be abandoned to their fate. 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.’

The drive for efficiency within socialism

Since the mid-2000s a series of measures have been introduced to improve efficiency within socialism: the recentralisation of finances, de-dollarisation, the raising of salaries and pensions, an energy efficiency campaign, the nationwide implementation of an enterprise management system to improve efficiency, the distribution of idle land in usufruct (rent-free loan), the reduction in imports and the tightening of regulatory and auditing controls. The changes in the employment structure are the latest measures in this process.

A principal complaint from Cubans during the nationwide popular consultation of 2007 was the existence of the dual currency and its impact on society. However, this cannot be resolved without an increase in domestic production, productivity and efficiency. These are also the preconditions to reducing imports, improving the balance of payments and foreign debt, raising salaries, controlling inflation and reducing dependence on the ‘ration book’ (a basic basket of goods provided to all Cubans by the state at highly subsidised prices), which is a major drain on government resources. The current developments cannot be understood from a purely ideological or political perspective. They have to be understood as pragmatic measures introduced by the revolutionary leadership as part of its search for the solution to the problem of building socialism from a position of underdevelopment, in a trade-dependent island, blockaded and attacked. They are not disguised as theoretical advances or political improvements.

Representing the Cuban people, the socialist government must ensure free universal access to healthcare, education and culture – constitutional rights in Cuba. In this regard its record is outstanding. Socialism is a stage of transition between capitalism and communism, it is a dialectical process in which there are many complex issues to resolve: the balance of responsibility for provision between the individual and the state; how such class antagonisms as remain under socialism are mediated; ensuring discipline with resources and at work; how the wealth of socialist society should be distributed; and how much control and centralisation is appropriate. These questions are being addressed in Cuba in the face of a brutal blockade and terrorist attacks. When Raul Castro insists on the need to end the ‘paternalistic’ state in Cuba he is not alluding to health and education services, he is referring to ‘the notion that Cuba is the only country in the world in which you can live without working’ (Raul Castro, 1 August 2010).

Che Guevara insisted on the concept of work as a social duty and advocated salary cuts to those who failed to contribute adequately. Without great strides in productivity and economic efficiency, socialism and communism would not be possible, he believed. ‘We should think about productivity without fear that it makes workers unemployed. Yes, it is true that workers are made unemployed; but every excess worker in a factory means social unemployment…the worker stuck in a job where he has to divide his work with another worker adds nothing to society’ (Che Guevara, 1962). Similarly, in 1986 Fidel Castro warned against ‘speaking about the standard of living as if it was divorced from productivity, from economic and social development, as if it was divorced from the development needs of a country in the Third World, even a socialist one’.

It is neither right nor practicable that a significant number of individuals in Cuba benefit from the socialist state provision without contributing to it. This was recognised by Fidel Castro, while still President of the Council of State, in November 2005, who lambasted Cuba’s ‘new rich’; a small percentage of the population with access to hard currency, who benefited from free universal welfare and education provision while refusing to contribute anything to society. ‘There are several dozens of thousands of parasites who produce nothing’, he said. Fidel highlighted the problem of widespread pilfering of state resources, generated by low salaries and scarce material goods: ‘The Special Period aggravated it, because in this period we saw the growth of much inequality and certain people were able to accumulate a lot of money’.

Highlighting the value of state subsidies for fuel, Fidel asserted: ‘No one knows the cost of electricity, no one knows the cost of petrol, no one knows its market value.’ Introducing efficiency saving and anti-corruption measures he set Cuba on the path to achieving what he called ‘the dream of everyone being able to live on their salary or on their adequate pension’. The long-term plan he revealed was to eliminate the ration book, undermining the parasitic layer in Cuban society, those who can work but won’t. The state would reduce its subsidy on energy consumption, inducing awareness of consumption levels and saving. ‘Subsidies and free services will be considered only in essentials. Medical services will be free, so will education and the like’.

The current changes to the employment structure intend to provide the infrastructure in which all Cubans can contribute towards socialist development. No one will be abandoned, and the measure does not represent an ideological preference for ‘liberalisation’, neither is it a rupture with the socialist revolution nor with its leader Fidel Castro.