Monday, September 20, 2010

A new, risky Cuban revolution

Globe Editorial

A new, risky Cuban revolution
The Cuban government's surprise announcement this week that it is laying
off 500,000 state employees could trigger unrest, but the reforms are a
welcome first step.

From Monday's Globe and Mail

The Cuban government's surprise announcement this week that it is laying
off 500,000 state employees – about 10 per cent of the state sector –
shows the desperate state of the economy. Free-market reforms are long
overdue in the Caribbean island, one of the last bastions of
Soviet-style Communism. But to expect state employees, especially the
least enterprising, to succeed in the private sector is politically risky.

By 2011, the government will lay off workers from every government
sector, selecting those who are least productive. These workers will
then be expected to form private co-operatives, find jobs at foreign-run
companies or set up their own small businesses. The government helpfully
suggests a list of possibilities, including raising rabbits, making
bricks, driving a taxi and organizing parties. Cubans who are not made
redundant will face a new salary structure that rewards productivity.

This is the most significant economic shift since the 1990s, when the
collapse of the Soviet Union forced Cuba to legalize use of the U.S.
dollar, and allow people to operate restaurants in their homes,
initiatives that were scaled back once the economy improved.

This development, however, appears to be longer-term. It will allow the
government to rid itself of unproductive workers, and indicates that
Cuba is ready to move in the direction of a more "marketized economy,"
says Arch Ritter, an expert on the Cuban economy at Carleton University.
"Once people aren't reliant on the goodwill of the state, they are much
less manageable. So there is a political risk," he adds.

Cubans will still be entitled to a few months of unemployment benefits,
as well as subsidized housing expenses and free education and health care.

While the government of President Raul Castro made the announcements,
his older brother Fidel appeared to agree, recently telling an American
journalist that the "Cuban economy doesn't work." Mr. Castro later said
he had been misinterpreted, but the comment could also be read as tacit
support for Raul's reforms.

An internal government document acknowledges the difficulty of this
strategic transition, noting many businesses won't last because Cubans
lack experience, drive and initiative to succeed in the private sector.

While the Cuban government doesn't appear to have a strategy to help
them make the transition, some Cubans may adapt more quickly than
predicted. For years, Cubans have been forced to supplement their meagre
state earnings and insufficient food rations by reselling stolen
products on the black market – everything from cigars and cement to
second-hand clothing. They already make exceptionally good capitalists.

Cuba is still far from fully embracing the free market to the extent
that China and Vietnam have. But these reforms are a welcome first step.

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