Monday, October 25, 2010

Cuba's pre-existing condition

José Azel:
Cuba's pre-existing condition
12:00 AM CDT on Sunday, October 24, 2010

José Azel is a senior scholar at the Institute for Cuban and
Cuban-American Studies at the University of Miami and author of "Mañana
in Cuba." This essay was first published in Foreign Policy. He can be
reached at

Last month, the Cuban government said it planned to fire 500,000 state
employees, and perhaps more than 1 million, saying "our state cannot and
should not continue supporting ... state entities with inflated
payrolls, losses that damage the economy, are counterproductive,
generate bad habits and deform the workers' conduct."

Some heralded the announcement as a long-awaited sign that Havana under
Gen. Raúl Castro is finally moving toward a market economy, others
voiced substantial skepticism, and Marxists denounced it as a betrayal
of communist orthodoxy. So, where is Cuba headed? Most likely, nowhere
fast. Far from being a hopeful indication that Raúl is serious about
economic reform, the abrupt layoffs reveal a government that is simply
desperate to make ends meet. And they offer yet more evidence that Cuba,
one of the last countries in the world to cling to Joseph Stalin's
bankrupt ideology, is not interested in joining – or, to be charitable,
does not know how to join – the globalized, 21st-century world.

Ironically, the official announcement of the firings was made by the
Cuban Workers Union – the labor union controlled by the Communist Party.
Anywhere but in repressive totalitarian regimes, the dismissal of 10
percent of all government workers would have been met with massive
protests. But this is Cuba, where even though about 85 percent of the
workforce of 5 million is employed by the state, there was nary a peep
on the streets.

No room for growth

The announcement, couched in typical Orwellian doublespeak, raises more
questions than it answers. "It is necessary to revitalize the socialist
principle of distribution and pay to each according to the quantity and
quality of their work," it read, a blundering contradictory attempt to
tie the layoffs to Karl Marx's socialist maxim, "from each according to
his ability, to each according to his needs." The government also said
it would grant permits for those fired to seek to make a living "outside
the state sector" as if it is unspeakable to talk of a private sector.

In Cuba, a state permit is required even to shine shoes – along with 178
other private economic activities that include mostly individual service
activities from baby-sitting to washing clothes. It is also unclear
exactly how those selected for dismissal will be chosen; seniority,
patronage, friendship, ideological purity or some form of capitalist or
socialist merit? Will race or gender play a role in these massive
firings? Will the dismissals disproportionately target those who receive
remittances from abroad? Perhaps more important, how are those fired
supposed to find jobs? 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, the
government controls most economic activity. 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 temperamentally suited to be an entrepreneur and make a
living in fields that might be far from his or her 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 do so without access
to cash, credit, raw materials, equipment, technology or any of the
inputs necessary to produce goods and services. Ironically, the most
likely source for these inputs will be the Cuban diaspora, which will be
eager to help its unemployed relatives and friends. Manuel Orozco, a
remittances expert at the Washington-based think tank Inter-American
Dialogue, underlines that, telling Reuters, "Liberalizing the economy
could lead to 10 percent of Cubans receiving remittances to invest in
small businesses."

This could be a motivation for the Cuban government to
disproportionately target remittance-receiving workers for dismissal.
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 baby-sit or make paper flowers to sell to tourists
are not serious economic development measures. But just in case, hoping
to capitalize on any additional economic production, the government is
ready to collect onerous taxes of 25 percent for social security and as
much as 40 percent on income depending on the economic activity (e.g.,
food production will be taxed at 40 percent, artisans at 30 percent, etc.).

Ripe for black market

The government is projecting a 400 percent increase in tax revenues,
presumably to be collected from the fired employees turned
entrepreneurs. More likely, Cubans will find ways to avoid paying taxes
by relying on the black market for these economic activities. Cuban
economist and dissident Oscar Espinosa Chepe writes from Havana of the
impact of Cuba's economic situation on civil society: Cuban children, he
tells us, grow up witnessing how their parents, obligated by
circumstances, live by theft and illegality.

Because Cubans cannot live by the results of their legitimate labors and
work has ceased to be the principal source of one's livelihood, a
survival ethic has evolved that justifies everything. One lesson to be
learned from the transitions in the former Soviet bloc is that the
success of reforms hinges on placing individual freedoms and empowerment
front and center. In the decade following the collapse of the Soviet
Union, the most successful transitioning countries were those that
embraced political rights and civil liberties decisively: the Czech
Republic, Estonia, Poland, Slovenia, East Germany and Hungary. This is
not where Cuba is headed with its "actualization of socialism."

The main reason is Cuba's Stalinist political order, which remains
unchanged by this announcement. In a system that denies basic freedoms,
society is debilitated and corrupted by a miasma of fear. For five
decades, fear has been an integral part of the everyday Cuban existence.
This fear must be conquered if any national project of transition is to
stand a chance of success.

The Cuban penal code that is used to suppress dissent defines
disobedience, disrespect, illicit association, possession of enemy
propaganda and socially dangerous and more as "crimes against socialist
morality." In Cuba, the crime of "social dangerousness" permits the
government to imprison people for activities they may commit in the
future. Until this totalitarian document is reformed or wiped away,
expect little to change.

Yet, some Cuba observers characterize Raúl Castro as a more pragmatic
leader than his older brother. And though this might be the case in some
aspects of governance, it is not a pragmatism that will lead him to
embrace policy changes that may jeopardize his hold on power. More
likely, this pragmatism that will induce him to formulate policies
designed to perpetuate power. When Soviet leader Mikhail Gorbachev
visited Cuba in 1989, Fidel Castro reportedly warned him "if you open a
window [to democracy] you will lose all power." Even after his brother's
passing, Raúl is unlikely to open the window.

Hope in succession

There is another model that Cuban leaders ought to know well: Spain's
rapid transformation in the 1970s from a dictatorship led by another
aging tyrant, Francisco Franco, to a vibrant democracy that has posted
some of the most impressive growth numbers of the last few decades. The
ideal Cuban transition would look at lot like Spain's, though Cuba most
likely doesn't have a strong enough civil society to pull it off.

Another, less hopeful parallel is that Cuba goes the way of the Soviet
gerontocracy epitomized by Leonid Brezhnev, who was barely functional
before his death in 1982. His successor Yuri Andropov, who was 68 years
old, died two years later. He was, in turn, succeeded by the also
elderly Konstantin Chernenko, who died a year after and was succeeded by
Gorbachev. Compare this progression to Cuba: Fidel Castro is 84 years
old and in poor health, Raúl is 79, and his supposed successor, José
Ramón Machado Ventura, will turn 80 this month.

A new generation of Cuban leaders eventually will assume power. To be
sure, they will likely favor continuity over radical change, but unlike
the Castros, they might be receptive to democratic reform. These (likely
military) officials will inherit not only a bankrupt economy, but also
paralyzed, dysfunctional institutions, a discredited ideology, a
disenchanted society, myriad social problems and more. Cuba will be
close to meeting the technical definition of a failed state, one that
can no longer reproduce the conditions necessary for its own existence.

The Castros' successors will become heirs to a dangerous, unstable
situation. With questionable legitimacy and a repressive apparatus in
disarray, they will have to confront significant internal and external
opposition. Their options will be very limited.

They can stay the totalitarian course and face the potential unfolding
of uncontrollable events, culminating in a Ceausescu-like bloodbath, as
happened in Romania. Or they can choose to become leaders of a
democratic political opening and confront more manageable political
loses. It may take the death of both Castros for this to pass, but they
will likely conclude that, for them, the safer and more prosperous life
is the latter.

For now, the firings only highlight the dismal state of the Cuban
economic model, perhaps best depicted by the old Soviet joke: "We
pretend to work, and they pretend to pay us." The regime in Havana is
peddling a similar story today: They will pretend to reform, expecting
that the world will pretend to believe it. Let us hope nobody in
Washington is buying.

José Azel is a senior scholar at the Institute for Cuban and
Cuban-American Studies at the University of Miami and author of "Mañana
in Cuba." This essay was first published in Foreign Policy. He can be
reached at"

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