Loosening the Cuban economy

There’s much enthusiasm for the dramatic economic changes announced by Cuba’s Communist Party last month. Most people I spoke to said they were well overdue.

For years the Cuban state has run almost everything from factories to restaurants and taxis. This “command” economy hasn’t been particularly efficient, with extensive “featherbedding” to keep people in work.

In one respect Cubans feel secure, with a free high-quality health and education system and the provision of basic food items through rationing. But they do want more disposable income. Very few people can afford a computer, for example.

The new project is to transfer, less than five years, around one million people from their present jobs – a huge task in a population of only eleven million. The government’s terminology is similar to that we hear in New Zealand – jobs to go in the back-office first, rather than from the front-line – except that Cuba’s public service is actually over-staffed.

It is hoped that workers moving to a now unleashed private sector will take up much of the slack. Up till now the only private businesses have been small family concerns – only allowed to employ family members – such as the little pizza place I pick up tasty cheese and ham pizzas each day, or the farmers stalls we now see on the side of the road.

Now people in 178 different listed occupations – virtually all tradepeople and those providing hospitality, professional and other services, will be able to set up their own small business and employ people.

Interestingly, this will increase the state’s tax revenue, as state employees currently don’t pay any income tax but those starting up their own businesses will have to. I understand the taxes will be progressive, given the potential for this development to create big wealth differences in Cuba.

The economic reforms are expected to create a more productive modern economy. The ration books, which create a lot of anomolies, will probably also go.

One plus I see is that more people will have the cash to buy computer. They’ll then be able – through the internet – to better connect with the global community. At the moment there is a certain isolation  – international magazines and newspapers, for example, aren’t readily available to the general public.  More Cubans on Facebook will also allow them to dialogue with each other in communities of interest, and allow more horizontal communication outside official channels.