The Government Guidelines for the Economy and the new Cuban Economic and Social Structure / Estado de Sats / State of Sats

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The Government Guidelines for the Economy and the new Cuban Economic and

Social Structure / Estado de Sats / State of Sats

Estado de Sats / State of Sats, Translator: Unstated

By Antonio Rodiles

The government document regarding guidelines for economic and social

policy seeks to outline a new design for Cuban society. This new design

envisions an economy essentially separated into three distinct sectors:

1) Large Enterprises: This segment contemplates those sectors with the

highest profitability. Here we find tourism, the new Economic Zones (for

example, the Port of Mariel), telecommunications, transport, nickel

production, and chain stores. These include State Enterprises and Joint

Ventures.

1a) State Enterprises: It is important to note that within the large

state enterprises we find the Armed Forces (FAR) and the Ministry of the

Interior (MININT). Both institutions currently control many of the most

profitable business in Cuba. In recent years, unlike in many countries,

these institutions have behaved as corporations.

1b) Joint Ventures with Foreign Capital: Cuban capital is excluded from

this sector. One of the countries showing increased interest in

investing in Cuba for long-term profitability is Brazil. It's clear that

Brazil is betting on a future change in relations between Cuba and the

United States, and is looking to position itself for that moment, hence

the great interest it is showing in the Mariel Zone project.

2) Small and Medium-sized Enterprises (SMEs, or, in Spanish known by the

acronym PYMEs)

2a) Cooperatives (regional collectives). Sectors of light industry,

services, food production. Cuba manages this sector through usufruct – a

leasing arrangement – in which the State maintains ownership of the

enterprises, while allowing a certain independence to those who hold

them in usufruct. So far it is not clear under what tax structure they

will operate.

2b) Local Governments. These enterprises are tied to local governments

and have greater autonomy. Their existence depends on their profitability.

3) Micro-enterprises (referred to in Cuba as timbiriches). Small

manufacturing, small restaurants, rental homes and offices. Tax rates

for these businesses are extremely high, there are limitations on

contracting for labor, as well as other restrictions that will not allow

the natural growth of the sector.

The State will retain control over professional services, which includes

sending professionals to other nations. These professionals will

continue to receive only a tiny part of the salary paid to the Cuban

Government for their services.

There are two key points mentioned in the Government Guidelines document:

1. The economic policy of the new stage corresponds to the principle

that only socialism is capable of overcoming the difficulties and

preserving the conquests of the Revolution, and that in the updating of

the economic model planning will be supreme, not the market. [1] (The

document does not reference what exactly is understood by socialism

under the new economic-social design.)

2. The concentration of ownership will not be permitted. [1]

This is another area that raises many questions. Is it referring only to

the micro-enterprise sector? Or does it also refer to State monopolies

or enterprise groups?

One very striking aspect of the document is the lack of any reference to

the mechanisms of transparency in this new economic structure. There is

not a single sentence that explains to us how a Cuban citizen can verify

government spending, the amounts of national and foreign investment, or

the financial statements of companies and ministries, including the

Armed Forces and the Ministry of the Interior.

This roadmap seeks, undoubtedly, to approach in the medium and long term

the "market socialism" model in place in China and Vietnam, but with

marked limitations. The key differences are directed at private

enterprise and national and foreign investment. In the case of China,

the investment from Chinese in the diaspora was crucial, while in our

country the very mention of this factor is taboo. The proposed model is

visibly marked by the fear of losing control of the change process, as

well as a strong ideological counterweight, which continues to hold back

the transformations needed in the country.

In recent times, within the island, certain trends that promote "renewed

socialism" have gathered strength. Some of these take as a social

paradigm a system structured around Sector 2, above — small and medium

sized enterprises. A product of the failure of socialism in Eastern

Europe and of the profound crisis facing Cuba, the promoters of this

approach advocate less centralization and a flatter power structure.

They do not, however, renounce the collectivist vision as the essential

framework of Cuban society, that is, they will look for collectivization

on a micro-scale. This thinking continues to demonstrate a rejection of

the growth of private enterprise and capital for Cubans, as well as the

full development of individual freedoms. It is very important to mention

that these new visions do not point to Communism as "the end of

history," or at least do not make reference to it.

I would like to mention a figure who appeared in the Economist Magazine,

relating to the performance of private enterprises in China. At a

conference in November of 2010, Zheng Yumin, director of the Zhejiang

Provincial Administrative Bureau for Industry and Commerce, said there

were 43 million companies in China, of which 93% are privately owned,

employing 92% of the total workforce.[2] These statistics show the need

to allow small, medium, and also large private enterprises to play their

rightful roles in the economy of any nation.

A design like that proposed in the Cuban Government's Guidelines, is

clearly biased against the growth and development of the nation, in

social, economic and political aspects, because it establishes strong

constraints on individual initiative, a basic element of any

contemporary society. While it may be a step forward in pursuit of

decentralization and the possibility of new forms of ownership, it is

important that the changes undertaken reflect a depth consistent with a

long-term vision, and do not end up serving as a straitjacket on society.

In the 21st century it is essential to analyze the development of

nations as a process that refers not only to the economic sector, but

that also encompasses various social and political aspects from a more

holistic vision. Societies structured as multi-level systems in each

one of their building blocks, or basic elements, should have the ability

to establish a spontaneous order. This spontaneous association

guarantees that properties such as "emergence" — also referred to as

"self-organization," a central tenet of Marxism — can function; that is,

the system generates new forms that are not obtained as a sum of its

constituent parts.

In 1999, James D. Wolfensohn presented a new comprehensive framework for

analyzing development in terms of three factors[3]:

1) Development of Social Institutions (system of government, judicial

system, financial institutions and social programs).

2) Human Conditions: education and health.

3) Physical Infrastructure: water, energy, transportation and

environmental protection.

In the same vein, a recent article by Francis Fukuyama and Brian Levy[4]

seeks to establish the essential elements, the building blocks, which

make up a development strategy, assessing this as the multilevel system

it is. The elements they establish are:

1) Economic growth.

2) Development of civil society.

3) The Constitution of the State.

4) Democratic political institutions, including both the rule of law and

a democratic electoral system.

Let us analyze in more detail four elements that undoubtedly create the

necessary basis for a nation to demonstrate a strong social dynamic:

1) Social development implies economic growth, since the latter provides

the possibility of better living conditions, both individually and as a

nation. Economic growth also provides the potential, for both

individuals and the State, to have at their disposal the resources to

develop their projects. In the specific case of the State, we are

talking particularly of those projects that, in turn, allow for

long-term growth: technology and infrastructure, among others. Economic

growth, without a doubt, goes hand in hand with the exercise of economic

freedom, which is a necessary if not sufficient condition, for the

establishment of a prosperous society.

2) Civil society is the engine that generates not only new social

structures, but also promotes the renewal of state institutions,

managing them so that they can adjust to meet growing social demands.

The feedback between civil society and the State must be a factor that

works in favor of the development of nations. A vigorous civil society

only occurs when individuals have the ability to interact within a

framework of full respect for individual rights, governed by a rule of

law. Every State should guarantee the exercise of economic and political

freedoms, and should never function as a straitjacket on society.

Contemporary civil society should be seen as a framework of networks

with the highest connectivity, formed from the individual as an entity,

to more complex social structures, and framed not only in a national

context, but a transnational one as well.

3) An effective state must have as its principal objective the

establishment of law and order through a state of law. This will ensure

the appropriate framework to support social dynamics, in which there is

majority rule with full respect for the minority. Only then is it

possible that individuals can enjoy the benefits of belonging to a

nation. The constitution of the State is, in itself, a multi-dimensional

process[4], beginning with the ability to concentrate the coercive power

of a territory, and passing through the administrative ability to offer

efficient services, as well as to control corruption. The control of law

and order on the part of the State is a necessary condition for a

country to function as an entity. At present the vision of the Nation

State has begun to fade with the appearance of supranational unions. It

is very important to note that, from this perspective, an effective

State is not a large State and is the counterpart of the totalitarian State.

4) The establishment of democratic political institutions plays an

essential role in any strategy for development. The creation of the

mechanisms of transparency, the establishment of laws that prevent

unfair competition and monopolies, are undoubtedly basic elements to

create a dynamic society. Any system that is based on the establishment

of monopolies – be they state or private groups, protected or not by

government institutions – will condemn the country to failure over the

long term. Our economy is a clear example of how a State monopoly ends

up smothering individual initiative and achieves high levels of

inefficiency and ineffectiveness. Other cases, such as Mexico,

demonstrate the results of an economy based on a combination of State

monopoly associated with interest groups. This unholy alliance ends up

creating, in that Aztec county, what was once called "a perfect

dictatorship." The institutions are completely at the service of

specific groups and the country is very far from functioning as a state

of laws. The rule of law remains weak, responding to the interests of

the groups in power. We need to understand the growth in organized crime

— drug cartels — as a direct result of the lack of democratic credibility.

To begin the process of transformation in our country, we must first

consider all the elements that will play a part. Taking into account the

previous analysis, it is clear that a development strategy implies the

most comprehensive changes at the deepest levels. All transformations

need to be designed to promote more effective mechanisms that stimulate

the social dynamic, looking for direct support in our own experience and

in that of other nations.

There are three points that can form a base for these transformations.

This base guarantees a process of development over the medium and long

term that would allow us to avoid unnecessary and painful situations.

These three elements are:

1) Establish a legal framework that sets out clearly and transparently,

the rights regarding private property as well as the ability of

citizens, either individually or in association with others, to make use

of their possessions for private, commercial and social ends. The

establishment of private enterprise across a wide range of economic

sectors is essential.

2) Undertake a modernization of the State, which has as its principal

objective the creation of decentralized and democratic structures.

Consider within this process, among other things, tax reform and the

corresponding mechanisms of accountability and transparency, seeking the

best balance between the performance of the market and the social

responsibilities assumed by the State.

3) Introduce into our country the process of modernization and

globalization that holds sway in the contemporary world. An introduction

that leads to the free flow of information, freedom of movement for

people as well as openness to investments, particularly to encourage

Cubans residing both within and outside the island to be participants in

the process of renewal.

In conclusion I would like to make one final comment. Starting from the

vision that society can be represented as the union of a framework of

networks, occupied at different levels, and responding to different

structures and dynamics, it is then possible to understand why a

pre-established roadmap, as a proposal for the future, is quite inadequate.

The contemporary world shows us that societies can no longer be seen

only as national realities, but that we must understand them as

transnational entities, which adds still more complexity to these

systems. The creation of new levels in this structure will depend on the

capacity for self-generation starting from a spontaneous order and its

interaction with the environment. The result of this dynamic is not

predicable, so to plan its emergence and subsequent evolution is, at the

very least, Utopian. Our aspiration must be to establish strategies that

facilitate and stimulate this spontaneous order as a generating element

and driving force of society, and to ensure the existence of an open

society. It is on this point where I differ completely from planned and

collectivist models, because these undoubtedly end up smothering the

self-generation capacity of these systems.

References:

1) Government of Cuba: Lineamientos de la política económica y social.

(Guidelines for Economic and Social Policy)

2) The Economist Magazine: Bamboo Capitalism. Mar 10th 2011.

3) Bar-Yam, Yaneer. Making Things Work. Knowledge Press.

4) Fukuyama, F. Levy, B. "Development Strategies"

27 March 2011