Cuba: Socialism, Private Property and Wealth

By Fernando Ravsberg

HAVANA TIMES — The Cuban Parliament has finally approved the groundwork for the reforms process put forward by President Raul Castro and his government. However, it has done so with some reserves, the most sensitive subject seems to revolve around private businesses and a consequent accumulation of wealth.

Legalizing private property over modes of production has raised clear suspicions among some legislators. They fear that wealth will start becoming concentrated and that this will lead the country to experience a social inequality similar to that in the rest of Latin America.

However, economists ensure them that without the accumulation of capital, private businesses won’t be able to develop to such an extent. Business people need to reinvest, they need funds to put up with losses, they need tax breaks from the start and personal financial incentives.

So then we reach a point where social differences will inevitably deepen. The national economy can no longer be regulated by the socialist laws of “From each according to his ability, to each according to his contribution”, not even in theory.

Although, it’s only the shreds of this economic principle that remain in reality and it’s been like this for a long time. Ever since salaries lost their real value in the ‘90s, the prevailing axiom in the economy seems to be “From each according to his/her astuteness, to each according to their cunning.”

“Meritocracy” has also lost popular support, according to which those who piled up revolutionary duties could live better than the rest of Cubans. The problem here is that it became hereditary and today their children are enjoying these privileges, even though they have no track record of contribution of their own.

Inequality isn’t the result of “updating the system”, it has been growing since the ‘90s because of many different factors such as family remittances, dollarization, opening the national economy to foreign investment, tourism or children of the elite reaching adulthood.

The reforms seek to “legalize” the country that currently exists, in some way or another. Self-employment, the underground small and medium sized business person or those alleged Cuban managers of foreign companies who are in actual fact the real company owners.

With these changes, the national economy will start to integrate this underground world, which has been operating on the side for many years. This grounding in reality will allow a better distribution of wealth because the government will be able to charge taxes to those people who have never paid them.

Of course, now there are new dilemmas, like what always happens whenever you leave stagnation behind and begin to move forward. Some economists claim that if you don’t allow the self-employed to accumulate a bit of wealth, they will never be able to become business people.

Without accumulation of capital, the only people who can become owners of small and medium-sized companies are those who receive money from abroad or those who managed to accumulate it during socialism, a significant part of whom are corrupt and/or criminals.

In one way or another, this concentration of wealth will lead to deepening social differences between Cubans and in a poor country this can even lead to a few people taking the largest slices of cake for themselves, leaving others without even a taste.

However, the truth is that there is still a lot to establish: How many employees can a medium-sized company employ? What are the limits on the accumulation of capital? What government mechanisms will redistribute wealth? How will the government ensure that there are equal opportunities for all Cubans in this kind of society?

The terms “private enterprise” or “wealth accumulation” can scare a few people a lot and encourage others too much, but until details are revealed, we are only dealing with abstractions. And it will be these details that then define the country’s future socio-economic model.