Cuba’s Reforms: State-run Companies and the Private Sector

By Fernando Ravsberg

HAVANA TIMES — “Mistakes are mistakes, and they are our own mistakes, and if we are going to measure them against the hierarchy among us, these mistakes are first and foremost mine,” President Raul Castro told Parliament, referring to illegal activities picked up on in the private sector of the economy.

However, he warned the ultraconservatives not to try and use these problems “as a pretext to criticize a decision which is fair,” adding that “we haven’t given up on developing self-employment, nor are we stopping our experiment with cooperatives.”

He made a call to private business owners, hoping for “the support of the majority of citizens who honestly operate within this sector,” but he warned them “that the pace and extent of these changes” will be conditioned by the government’s capacity to do things the right way.”

The problem with independent laborers, cooperatives and small private businesses is that a part of their supplies come from the state-led sector. This phenomenon is called “the detour of resources” but it isn’t anything more than theft within State-owned companies themselves.

Those who are against the economic reforms blame private businesses from causing this drain but they seem to forget that stealing from the State is a practice that dates way back before the national economy opened itself up to private property, services and production.

The problem is really very old; in 2005, Fidel Castro carried out a spectacular nationwide campaign when he discovered that a large part of fuel supplies were being diverted to the black market.

If we took the private sector to court, they wouldn’t even be able to accuse them of theft because the thieves work within public companies. Nevertheless, self-employed people commit the crime of receiving these stolen goods, buying them on the black market.

A recent example is that of employees at a state-run store in Trinidad who stole almost $5 million USD in cement. Over 50,000 sacks of cement disappeared; they created a fake shortage and forced everyone to buy it from resellers.

To stop this hemorrhage of resources, a bit of order needs to be established within public companies, if the level of stealing is reduced, the black market can’t exist. However, breakthroughs are fleeting in this field, sometimes because the corrupt and incompetent are “recycled”.

Another much-needed step is to ensure that the private sector, in all fields, has access to the supplies it needs. It’s the Cuban authorities themselves who promote crime when they allow carpenters or body shops to exist when they don’t sell wood or sheetmetal.

Not all private companies are angels; there are bar owners who make 20,000 USD in profits per month and buy alcoholic beverages which are stolen from the State companies. Likewise, there are those who own several private taxis and make a lot while buying their diesel off the black market.

The subject of the “botero” (collective taxi drivers) is a good example of poor government administration. Chaos was inevitable if they didn’t allocate routes to them; if they don’t demand operation frequency; if buying fuel legally isn’t made compulsory, or if they don’t make spare parts available to them.

Money laundering also could be better controlled so that investigations don’t start when illicit money has already been used to found three restaurants and to buy several homes. Whoever wants to invest should have to show the origin of their financial resources a priori.

The State can seem like it’s an abstract entity but it is much more than this, it’s the apparatus that uses society to self-regulate itself, to establish laws of cohabitation and to force us to respect them, to redistribute wealth and invest money for the common good.

It isn’t about taking the State out of the social equation like “worshipers” of the free market propose so that later, when the crisis comes, they can demand the government of the hour to use everyone’s money to rescue their banks and large companies.

It’s about the State playing the function it’s supposed to play: establishing the rules of the game, efficiently managing modes of production which are under its control, drawing up tax policies, simplifying paperwork, establishing sanitary regulations, applying the labor code, controlling where money comes from and ensuring safety for its citizens.

Today, however, some officials spend their time arguing about the exact size a private business billboard can be, while public companies put everyone in danger when they refuse to give fire sprinklers to private businesses.

The President’s self-criticism was correct, the State hasn’t been up to the economic changes, bureaucracy weighs down on it, their prejudices against the private sector, the centralization of their decisions and the old mentality that it has to control everything down to the last detail instead of focusing on what’s important.