by Karina Gálvez
Once again the legalization of self-employment awakens dreams… and disappointments. Sometimes one gets tired of becoming emboldened and then almost at the same moment discouraged for the same reason that you were encouraged. It is already a custom in Cuba. But we know so well the actions of the Cuban authorities, we can say, as a friend heard some time ago, there are not prejudices, only experiences. This self-employment, as designed, will not save the Cuban economy, much less improve the living conditions of citizens.
The new list of self-employment choices promotes dreams in an important sector of the Cuban people because working for yourself is within the human being, part of its nature and more so for Cubans who have a special spirit of entrepreneurship. Also, because it is the recognition of a right that seemed lost for the umpteenth time on this island. I could not ignore that it also represents an oxygenator of a domestic economy that is intolerably weak. And because, despite everything, you believe that it will be possible to live better.
But immediately after building up hopes, questions and responses arise that lower our spirit and provoke disappointment. The list of legal self-employment jobs is truly offensive. The entrepreneurial spirit of Cubans can not be confined to a list where the most profitable business is a small restaurant with a maximum capacity of 20. Not to mention other work, no doubt honorable but also primitive, just enough to get by in the economy of a cave, such as: button sewer, fancy-dress dancer, carter. The figures of dancing couples, musical duos or bands are specifically named: Benny Moré dancing partners, or Amistad duo. We do not know exactly what this means; if one wants to devote himself to dance as self-employment, must it be called “Benny Moré dance partner” to be legal? It turns out that the Cuban people, after 52 years of sacrifice to build the most just social system in the world, now face a situation of insecurity and massive layoffs never expected nor imagined in the minds of those who believe that the Cuban State is the protective father that it has always claimed to be. And the state is faced with the impossibility of solving this situation. Or rather, it is impossible to resolve this situation without its losing its absolute economic power.
However, since it is not prepared to do this, the Cuban State has authorized the new businesses with much reserve. Self-employed workers have emerged as a “necessary evil” for the current Cuban economic system. It is said that it is a remedy for the mass dismissals that are already underway in state enterprises. I do not believe that the government thinks that by doing the jobs in the published list anyone can make up for — we won’t say the salary — but the security that legal employment represents. We must keep in mind that many workers add to their wages from what they can “resolve” in their work places: resources, the ability to use a service, perks for themselves and their friends. In losing a job in Cuba, more is lost than a salary. It is not these kinds of jobs, mostly from medieval times, that can placate the discontent and confusion of being unemployed in a system where there is a single employer.
Therefore, after becoming acquainted the information given, we find that the legal possibility is not real.
The truth is that to make a change in Cuba, however superficial it may be, takes more than legislation. It requires the creation and accommodation of a different background of economic relations that enable the success of self-employed work. For self-employment to be possible and truly successful (albeit on a small scale for now) conditions are required for which the Cuban government has not announced any strategy.
What would it take for self-employment to be a viable possibility in Cuba?
A wholesale market infrastructure would need to be created.
“The optimum is a wholesale market with different prices. But we are not going to be able to do that in the coming years.”
Marino Murillo Jorge, Minister of Economy
Granma, 24 September 2010
It is clear that access to basic resources will not be facilitated. It will be necessary to purchase them in the retail market, with similar prices for those who purchase in quantities for consumption as for those investing in large quantities
This, of course, affects prices and profits of the self-employed.
But more serious is that the retail market in Cuba is almost without supplies of products for the consumer. How could it supply the mass of self-employed persons that could be generated?
The articulation of a financial infrastructure would be necessary and important.
“… discussed with the Central Bank of Cuba how to make viable the possibility so that those who decide to return to work on their own can access a bank loan to jump-start their chosen activity”
Granma, 24 September 2010
It is laughable that it would be necessary to apply for credit for the kinds of self-employment published in the list of the Ministry of Labour and Social Security. The lack of resources experienced by the average Cuban is obvious to everyone. However, what is needed is the possibility of obtaining credit to streamline and revitalize the changes that are hoped for with the new openness to self-employment. Because it is needed now and because we hope that it could be used in the future to expand businesses.
But the lack of security for self-employment hinders the possibility of credit. Making access to bank credit viable is a mechanism already established and experienced since the rise of central and commercial banks, long ago. The problem is not the mechanism but the circumstances. A self-employed person who is exposed to the possibility of losing the business at any time because of the need to engage in illegalities will not qualify for bank credit, unless the Central Bank of Cuba establishes very flexible credit standards and is willing to take a risk that can not be calculated without a large margin of error. Bad credit policy will over the long run harm the national economy just as it has recently hurt the global economy.
It would require the establishment of fair and affordable taxes.
The enforcement mechanisms, some of the most anticipated information for those involved, have already been published. Taxes continue to pose an unreasonable burden on the self-employed. It is obvious that the self-employed worker desires to earn an income slightly higher than a state employee who delivers only his labor without risking anything. Taxes almost extinguished the burgeoning self-employment in the nineties. Thanks to the burden they represented, a large percentage of businesses had to shut down. With the publication of the new system, I believe that before too long the first businesses that open will close, and that the number of start-ups will be significantly lower than in 1994.
One of the objectives of the Cuban government in stimulating self-employment is the raising of revenue, by means of taxes. Therefore, self-employment will also take a hit in the event that the State does not get the expected amount of revenue from taxes.
A workable system of control of revenue and expenditures would be necessary.
This was one of the main weaknesses of the previous system of taxes. And the conditions are there for this to not improve. The current self-employed persons have income and incur expenses that are very difficult to control. The sources of raw materials and goods are mostly illegal (obtained on the black market) and it is impossible to use legal sources, either because they do not exist or because they are expensive and constitute an unbearable burden for business.
Until now, neither efficient nor sufficient mechanisms to control expenditures and revenue have been established. So fiscal policy will try to be as restrictive as possible, without a reliable base of information. And once again this will put an end to self-employment.
It would be necessary to expand the domestic market.
As long as foreigners who invest in Cuba can invest in big businesses, discrimination against Cuban nationals is also strongly reflected in the economy. The legalized self-employment does not cover activities with large and important revenue for the Cubans. A glance at the aforementioned list is sufficient to be convinced of that. However, some may be lucky enough to obtain significant profits by special opportunities and advantages of place, time, and ability. How to invest that money in Cuba? Unable to expand the business (the list is restricted to a minimum), you cannot buy a home, you cannot buy a car, you cannot travel freely. The money will go from hand to hand and will be little more than the exchange of goods in the early years of prehistoric trade. If the money is going to circulate only among the self-employed, the level that is set by law, Cuban economic development cannot be glimpsed on the horizon.
Clearly, those who get fairly significant amounts of money will try to raise their standard of living by means of the black market. But we will always be exposed to the implementation of the ley maceta* (still in effect).
The expansion of commerce should place private and state enterprises on an equal footing. Working under normal conditions, little time will be needed to develop a broad and diverse market.
After the disappointment.
Of course, in verifying this reality and, perhaps, others not mentioned here, one is discouraged. It is very probable that of those who build up hopes at the beginning, only a small percentage will be able to bring their own business to reality. I am inclined to think they will not be able. I hope this is not so. Hopefully, as has happened on other occasions, despite everything, new self-employed people can emerge. Hopefully we will not be faced with disappointment and we will fill small spaces with small businesses that are always more efficient than the large state enterprises that we have to cope with, at a disadvantage, in unfair competition. Perseverance has saved the Cuban nation many times from succumbing to calamity. Self-employment is an economic right based on the natural right to private enterprise, of achieving survival by our own efforts.
If there is a fence that limits the exercise of this right, push it calmly but firmly, with nothing more than the serious and constant exercise of it. It is legitimate and necessary.
It is not a matter of self-employment to passively accept all the absurd conditions that constrain it. The only novel element of the new self-employment legislation is the hiring of labor. It does not represent in any way a sign of voluntary openness. But it is a step that the Cuban government has been forced to take and could be the economic rift that breaks the dam of the totalitarian system, if we do not yield to the temptation to conform without trying to open it further day by day.
Every time we gain degrees of personal freedom in the economic sphere, we will gain degrees of personal freedom at all levels, and we will need more and greater freedom, for which we have the necessity, and the moral obligation to demand for ourselves for others.
With this we will be helping to convert what in Cuba has been called “self-employment” into the free exercise of private enterprise; what have been called timbiriches*, into respectable micro businesses, and what has been called “the self-employed” into small, private entrepreneurs. Finally, we will be contributing to the birth of an open market economy, efficient, supportive, and subsidiary.
This is really the only thing that can save the Cuban economy: freedom of economic initiative, taking into account the laws of the market, with a genuine openness to domestic and foreign investment, with the principle of efficiency, and seeking equality of opportunity.
Karina Gálvez Chiú (Pinar del Río, 1968)
Degree in economics, Professor of finance.
Director, Grupo de economistas del Centro Civico
Founding member of Editorial Board of the Magazine Convivencia (Coexistence)
Lives and works in Pinar del Rio.
Ley maceta is the popular name for laws that punish illicit enrichment
Timbiriche is the popular name for a very small business such as a stand or a kiosk.
Translated by ricote
November 25 2010