Self-Employment Poses Challenges for Cuba’s Socialism

Patricia Grogg


HAVANA TIMES, Aug. 23  (IPS) — The announcement of a plan to expand the practice of self-employment in Cuba as an alternative for the ”excess” workers who are to be slashed from the public workforce presents several challenges to the socialist model that the government is seeking to modernize.

First and foremost, the alternative must meet the expectations of people who might be interested in getting involved in private enterprise and those who have been self-employed — known here as ”cuentapropistas” — since the mid-1990s and now, with years of experience under their belt, could take advantage of newly legalized opportunities like hiring staff or setting up small businesses.

”Everyone hopes they will relax the rules for private enterprise,” a plumber who has a steady clientele after working for several years on his own commented to IPS. ”They (the authorities) are apparently studying the whole question very closely.”

According to the National Office of Statistics (ONE), the number of people working in remunerated jobs in this Caribbean island nation of 11 million people rose last year to just over 5.7 million, including nearly two million women.

And the legally registered cuentapropistas, a sector that does not include farmers who own land, numbered 143,800 last year, 30,300 of whom were women. In 2004 they amounted to 166,700, including 39,600 women.

When the phenomenon was at its peak, in the mid-1990s, there were more than 200,000 cuentapropistas. But the number of people who were legally registered as self-employed gradually dropped after that, partly because the government did not renew permits for many activities that were initially allowed.

The plumber, who did not want to give his name, never applied for a permit because he worked in a public company until 2009 and, to boost his income, offered plumbing services on the side. ”Last year my wife fell seriously ill, and I left the company to be able to take care of her. But I have never lacked work,” he said.

Summer in the capital.

Like him, there are a significant number of Cubans who have chosen to work for themselves on the side, but without giving up their jobs in the public sector — and without registering as cuentapropistas.

”I hope that if I get a permit, my business and income will grow, because if they put in place a lot of restrictions or charge taxes that are too high, it won’t be worth it,” the plumber said.

The government decided to allow more people to work for themselves because it plans to lay off more than one million workers over the next five years as part of a ”rationalization” of the labor force.

President Raul Castro said the measure would do away with ”various existing prohibitions for the granting of new permits and the commercialization of some production.”

Hiring workers will also be allowed

It will also allow cuentapropistas to hire paid workers, which they are currently unable to do legally.

In his brief address to parliament on Aug. 1, Castro announced that in mid-July, the Council of Ministers had approved a tax regime for those who are self-employed, aimed at responding to the new economic reality and guaranteeing that cuentapropistas pay into social security, pay income and sales taxes, and pay taxes for hiring others.

Information on the new tax system has not been made public, however.

Cubans do not currently pay taxes on wages, with the exception of staff hired by foreign companies who earn significantly more than state employees.

Agro market.

People familiar with the labor system say legislative reforms supporting and facilitating self-employment, which can now include collective undertakings and joint administration by two or more people, are urgently needed.

Economist Omar Everleny Perez said this new process must solve the problems that have burdened cuentapropistas, such as difficulties in purchasing inputs and materials, and the lack of credit or other financial aid mechanisms.

Perez said it is feasible to once again consider the creation of small and medium-sized enterprises (SMEs), which were to be allowed in the mid-1990s, before such plans were scrapped.

He said SMEs fit within the concept of the broadening of the practice of self-employment, and could generate a wider range of employment alternatives, help improve living standards and boost incomes, and help decentralize certain areas of production and services.

Another benefit mentioned by Perez in a not-yet published research study seen by IPS is the increased offer of goods and services. The economist underscores that at a global level, there is a growing tendency towards SMEs in productive sectors.

SMEs are flexible and depend on highly qualified labor, one of Cuba’s main advantages, said Perez, who said they are also highly competitive.

He added that the government is studying the possibility of allowing some kinds of SMEs.

Several economists suggest the possibility of associations between cuentapropista companies and the state, or between self-employed individuals and cooperatives, that would allow production and its benefits to be more widely socialized.

”Cuba has to turn its economic situation around in the next few years, and given the lack of capital in the economy for a broad process of investment by the state…SMEs could play a complementary role,” Perez says in his study.

One thought on “Self-Employment Poses Challenges for Cuba’s Socialism

  • Patricia, thanks for a good article.

    One of the theoretical problems inherited by the Cuban system is the old idea that all or most of the exploitation of the excess-value (surplus-value) produced by workers occurs at the point of production–at the workplace. But this idea doesn’t stand up to critical analysis.

    In a modern capitalist economy the employer can only take a small portion of this excess-value, and must pay most of it to others: most to the worker who produced it, but also to the state in income and social security taxes, health insurance companies and so on. Most however–let me repeat–is paid to the worker in wages or salary.

    The workers’ take home pay is then set upon in the community and at the point of consumption by landlords, retailers of all sorts, mortgage banks, insurance companies, local government, and a multitude of entities, most of which are capitalistic enterprises.

    This proves that most of the excess-value produced at the primary workplace does not go to the employing capitalist, but to the capitalist state and the capitalist class in general, extracted from what is paid to the producing worker.

    There seems to be a problem in a country like Cuba however as the leading socialist party clings to the old, 19th Century dogma put forward by an unqualified economic theorist. What is needed is a realization that those who produce excess-value, whether through labor and genius at a state or private workplace, contributes to the general prosperity of the society.

    For Cuban society to prosper the major part of the excess-value produced by workers needs to pass into the hands of the productive working people as wages and salaries. The service sector, made up of both state and private business enterprise may then serve the daily needs of the people.

    Cuba should allow people to produce in whatever venue is possible. Those who organize production, whether a small entrepreneur or a state bureau functionary, should be able to live well financially. Those who are “organized” or “employed” should be able to negotiate for an appropriate and fair piece of the pie they create.

    The best, most democratic and dignified way for this division of excess-value creation to take place is through direct ownership of the instruments of production, especially through Mondragon-type cooperative corporations, with partial, non-controlling state co-ownership in lieu of taxes.

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