Sunday, December 2, 2012

How Capitalist Are the Cubans?

How Capitalist Are the Cubans?
Published: December 1, 2012

A man in his shoe repair shop in the doorway of his home. New business
regulations have allowed thousands of citizens to make money for
themselves for the first time since 1959.

IT was just a small sign, red, round and electrified, advertising
homemade pizza — the kind of thing no one would notice in New York or
Rome. But in Havana? It was mildly amazing.

Cuba, after all, has been dominated for decades by an all-consuming
anticapitalist ideology, in which there were only three things promoted
on billboards, radio or TV: socialism, nationalism, and Fidel and Raúl
Castro. The pizza sign hanging from a decaying colonial building here
represented the exact opposite — marketing, the public search for
private profit.

And it wasn't just tossed out there. Unlike the cardboard efforts I'd
seen in the same poor neighborhood on a visit to Cuba last year, the
sign cost money. It was an investment. It was a clear signal that some
of Cuba's new entrepreneurs — legalized by the government two years ago
in a desperate attempt to save the island's economy — were adapting to
the logic of competition and capitalism.

But just how capitalist are Cubans these days? Are they embracing what
Friedrich Hayek described as the "self-organizing system of voluntary
cooperation," or resisting?

"It's a combination," says Arturo López Levy, a former analyst with the
Cuban government now a lecturer at the University of Denver. "When more
people get more proactive and more assertive, then other people —
whether they like it or not — have to do the same. They have to compete.
I think that's the dynamic."

Indeed, like Iraq, Russia, Mexico or other countries that experienced
decades of dictatorial rule that eventually ended, Cuba today is a
society marked by years of abuse, divided and uncertain about its
future. The changes of the past few years — allowing for
self-employment, freer travel, and the buying and selling of homes and
cars — have been both remarkable and extremely limited. The reasons
small things like signs matter so much here is because everyone is
concerned with momentum, and no one seems to know whether Cuba is really
on the road to capitalism, as The Economist asserted in March, or if the
island is destined to simply sputter along, with restrained capitalism
for a few and socialist subsistence for the rest.

The debate is all the more complicated because the same leaders who
rejected capitalism for so long are now the ones trying to encourage
people to try it out. Raúl Castro was notoriously the revolution's most
loyal Communist; now, as the country's president, he is the main booster
for free market reforms. On one hand, a recent gathering of Cuba's
Communist Party earlier this year included a session on overcoming
prejudices against entrepreneurs; on the other, Raúl Castro has said he
would "never permit the return of the capitalist system."

"They are kind of schizophrenic," says Ted Henken, a Cuba expert at
Baruch College. "They are saying they are changing, but they treat these
things as gifts and not as rights."

And yet, there is no longer any denying that pockets of controlled
capitalism are emerging in Cuba. In Havana, in particular, small
businesses are everywhere. Entire urban industries, including taxis and
restaurants, are being transformed through a rush of new entrants, who
are increasing competition for customers, labor and materials. Even the
most elemental tasks that used to be managed by the state — such as
buying food — are increasingly in the hands of a private system that
sets its own prices based on supply and demand.

Though the initial burst of activity has slowed, some experts say the
explosion in commerce showed just how capitalist Cubans were all along.
Of the roughly 350,000 people licensed to be self-employed under the new
laws by the end of 2011, 67 percent had no prior job affiliation listed
— which most likely means they were running underground businesses that
then became legitimate.

Some of the most successful entrepreneurs are optimistic about Cuba's
becoming more open to free market ideas. Héctor Higuera Martínez, 39,
the owner of Le Chansonnier, one of Havana's finest restaurants (the
duck is practically Parisian), says that officials are "starting to
realize there is a reason to support private businesses." He has given
people work, for example, and he brings in hard currency from
foreigners, including Americans.

"Before, we had nothing," he said. "Now we have an opportunity."

He is doing everything he can to make the most of it. When we met one
night at the restaurant, he had already written up several pages of
notes and charts explaining what his industry needed to grow — from
wholesale markets to improved transportation for farmers to an end to
the American trade embargo to changes in the Cuban tax code. In an
ingeniously cobbled-together kitchen, in which only one of three ovens
worked, he mostly seemed to salivate at the thought of vacuum packing so
his meals could be delivered more efficiently.

HE was about as capitalist as it gets. But will his ideas ever be
adopted? Like everyone else, he faces severe limits. He can hire no more
than 20 employees, for example. He does not have access to private bank
loans, and the government has shown little inclination to let people
like Mr. Higuera succeed on a grand scale.

Instead, when success arrives, the government seems to get nervous. This
past summer, officials shut down a thriving restaurant and cabaret
featuring opera and dance in what had been a vacant lot, charging the
owner with "personal enrichment" because he charged a $2 cover at the
door. A news article from Reuters had described it as Cuba's largest
private business. A few days later, it was gone, along with 130 jobs.

The Castro government has tried to keep a lid on innovation in other
ways, too. It has not allowed professionals like lawyers and architects
to work for themselves. And its efforts at political repression have
focused over the past few years on innovative young people seeking space
for civil discourse in public and online — the blogger Yoani Sánchez, or
Antonio Rodiles, director of an independent project called Estado de
Sats, who was arrested in early November and released last week after 18
days in jail.

So for now, what Cuba has ended up with is handcuffed capitalism: highly
regulated competitive markets for low-skilled, small family businesses.
What economic freedom there is has mostly accrued to those whose main
ambition is making and selling pizza.

Which again raises the question: is Cuba really heading toward
capitalism or not? Skeptics are easy to find. "Every place in the world
that has had real change, it has changed because the regime itself has
allowed some significant openings and the door has been pushed wide
open," says Senator Robert Menendez, Democrat of New Jersey. "That's not
what's happening here."

Many Cubans say they are hesitant to let go of a reliable system summed
up by a common joke: "We pretend to work, they pretend to pay us." Taxi
drivers told Mr. López Levy that they were working harder for less money
because of increased competition. A farmer I met at the wholesale market
outside Havana equated capitalism with higher prices, and said that the
government needed to intervene.

But mostly, this is an aging crowd and Mr. López Levy — who still has
friends and relatives in government — says that even among Cuban
bureaucrats, the mentality is changing. If so, more capitalism may be
inevitable. Because with every new entrepreneur it licenses, Cuba
becomes less socialist, less exceptional, less of a bearded rebel
raising its fist against the horrors of Yankee capitalism. In the eyes
of some Cubans, the jig is already up.

"The government has lost the ideological battle," said Óscar Espinosa
Chepe, a state-trained economist who was sent to jail in 2003 for
criticizing the government. "The battle for ideas was the most important
battle, and they've lost."

Damien Cave is a New York Times correspondent based in Mexico City.

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