Be more libre

Be more libre
The transformation of the economy needs to happen much faster
May 16th 2015 | From the print edition

IT HAS been five months since Cuba and the United States announced that
they would end their long cold war, but Cuba's president, Raúl Castro,
is still basking in the afterglow. On his way home from Russia this week
he stopped off at the Vatican to see the pope, and said he might return
to the Catholic faith. Later François Hollande paid the first-ever visit
to Cuba by a French president; he was granted an audience with Fidel
Castro, Raúl's ailing brother, who led the revolution in 1959 and ruled
until 2008.

But beneath the bonhomie lies unease. Cuba's creaky revolutionaries
spent half a century blaming the American embargo for all the island's
woes. Now they resist American capitalism for fear of being overrun. The
result for most ordinary Cubans is not too much change but too little
(see article). The island is poorer than many of its neighbours. Doctors
earn just $60 a month—after a 150% pay rise. Food and other basics are
in short supply. Boat people still flee to Florida's shores.


Cuba deserves a proper democracy and a robust market-based economy.
Sadly, that is unlikely to happen soon. Some things are changing.
Private guesthouses, restaurants, barber shops and the like have begun
to flourish, creating the kernel of an entrepreneurial middle class. But
if Cubans are to benefit from the opening with America, their rulers
need to reform more boldly and quickly than they have done so far.

A cocktail of reform
Where to start? Cuba should begin by opening up many more sectors to
private enterprise. Currently, Cubans can be "self-employed" in 201
activities (including reading Tarot cards), but few that require a
university degree. In place of a "positive list" of permitted private
activities, the government should publish a negative one that reserves
just a few for the state. All others would then be open to private
initiative, including professions such as architecture, medicine,
education and the law. The new bourgeois are potential customers for
professional services; catering to that demand would in turn expand the
middle class.

Liberalisation is urgent in wholesale markets. Today enterprises such as
restaurants are forced to buy supplies from state-run supermarkets where
ordinary people shop, which exacerbates shortages. This undermines
popular support for the emerging private sector.

The climate for foreign investment must also improve. Cuba woos foreign
investors for the expertise, jobs and currency they bring, but treats
them shabbily. Under a supposedly friendly new law, they must still
recruit workers through state agencies, to which they pay hard currency;
the agencies then pay out miserly salaries in pesos. Imported inputs
pass through bureaucratic state-run enterprises. Worst of all, legal
codes are vague and their application is arbitrary. In recent years
several foreign businessmen have been imprisoned (and later released)
with little explanation.

How much of this thicket Mr Castro is prepared to clear away is
uncertain. The party's leadership has hinted that its congress would
strengthen the National Assembly, a rubber-stamp body. A proper
legislature that could write laws would give security to enterprise.
Cuba is also bracing for a painful currency unification, which will end
a huge subsidy to state companies (see article).

For many of the revolution's ageing leaders reform and privatisation are
yanqui-inspired dirty words. The regime looks to China and Vietnam,
where communist governments have embraced capitalism without yielding
power. The Cuban communists are wary: they fear that, if they give up
too much economic control, they will be obliterated just like the
communists of eastern Europe. Yet the bigger risk would be merely to
tinker with a system that keeps Cubans poor at a time when their
aspirations are rising.

Source: Be more libre | The Economist -
http://www.economist.com/news/leaders/21651216-transformation-economy-needs-happen-much-faster-be-more-libre