By Oscar Fernandez Estrada (Progreso Weekly)
HAVANA TIMES – A person goes to the market. It might be a father or mother, young or old, maybe a government employee, or someone who’s unemployed, a housewife, a business owner, or a journalist … a Cuban. He or she goes to the market as a regular consumer in need of certain products that will satisfy his needs or preferences.
The market, on the other hand, is not a specific physical space. It is a set of options offered in service of the demand, or that the demand is able to mobilize in the supply, always mediated by government regulations. Suppose this person decides to go to the market starting with a physical store in the formal economy, where he or she should usually find these goods.
Arriving at the store, this person faces three scenarios. In the first, he or she does not find what they are looking for. The person then becomes frustrated, continues to search for, or tries to replace the product sought with a similar one that could possibly satisfy the preferred choice. Over time the need for a replacement will strip that person of personal tastes and reduce his/her expectations until they find themselves settling for something of lesser quality. The situation influences — although it is not the only factor — in the configuration of that person’s individual behavior towards society — be it as producer, seller, administrator, public servant, or whomever. The person ends up performing his/her duties poorly, and with a lack of rigor, responsibility, neglect, or simply looking for the easy way out.
If the aforementioned individual does not settle for a substitute product, the other option is to search in the illegal sector of the second-hand economy. Tapping into this black market on a daily basis naturalizes the illegal behavior, which then becomes normal. This attitude, morally justified as a need for survival and legitimized by society, then becomes part of other areas of this person’s life.
The second storyline occurs when, through the classic serendipity, you go to the store and find something that you were not looking for, but that has been scarce in the past. Even if you don’t need it, you may decide to buy it with your eyes on the future.
A third possibility is one where the consumer goes to the market and finds what he/she needs and buys it, but does so in large quantities. This approach guarantees future availability of the product.
These large acquisitions we accusatorially refer to as hoarding. However, this logical response mode to the nature of the markets would be better identified with the term keeping in storage. If the individual is a legally recognized private entrepreneur, the demands of the business, combined with the absence of other supply options, drives him/her to the same market of goods as other ordinary consumers, although obviously with larger needs.
On the other hand, there are some who see a business opportunity and create a business out of searching, storing, and reselling. Information on when the next sale of scarce products will occur becomes an asset thereby creating a sometimes illegal network that corrupts some in the legal economic system consolidating what is being offered in the second-hand economy.
No apples or tomato sauce: No money, no solution
About a year ago there was the complaint against a government-owned store that sold 15,000 apples to one customer. The workers who participated in the sale were sanctioned in varying degrees. The situation was repeated recently. The product this time was tomato sauce. And again, severe measures were taken against the culprits.
Other than a reprehensible conspiracy, that someone wants to buy whatever quantity of something sold in a store, and is able to pay the price imposed by the State with their high taxes, should not represent a problem. Something is not working right in the mechanics of the economy when this is considered a punishable act. The problem needs to be solved in how the offer is structured.
It should be considered good news when a big sale is consummated by an establishment. When the stock is reduced, a natural reaction would be to place a new order to one’s supplier in order to restore the inventory, and a new sales cycle can be started hoping for other similar sales which improve your performance indicators.
But the store cannot request more products because it cannot produce more. In other words, whoever imports supplies cannot import more, even if sales are breaking records. And this happens because the store-producer-importer system cannot automatically close its cycle. It does not have the autonomy to do so, above all, and beyond centralist practices, because it does not operate with a currency that minimally fulfills its monetary functions. Its income in CUC (convertible pesos equivalent to the dollar), coming from sales within the national economy, does not have the power to buy imported products because the company cannot convert them directly into international currencies. This procedure requires a central authority that prevents them from reacting in a timely manner to changes in demand — something we long for.
Connecting the business system directly with the international economy by decentralizing export and import processes was the key to the recovery strategy of the toughest years of the special period. Implementing a variant in state enterprises equivalent to partial dollarization, and the income and expenditure budgets of the 1990s, is necessary in order to restore the productive dynamics that help overcome most of our short and medium term economic ills. Operating with a currency that serves as a means of payment and saving, whatever it may be, so that companies can function, is a more pressing need than monetary reunification itself.
Given the permanent circumstances brought on by external forces that greatly complicate the performance of the Cuban economy, the inability of the current mechanism of centralized allocation of resources to guarantee stability in supply has created a long list of goods that have often disappeared. The examples are infinite and continue to occur.
Once a product can’t be found for the first time, the second-hand economy adds it to its list of favorites. Every time there’s a shortage of something in the supply chain, the State allows products to be consolidated — although they continue to be offered by the government store system — by the second-hand economy. This happens until they are restored in a stable manner destroying the arbitrage generated by the shortage.
Understanding the basic psychology of the consumer and how he/she develops and consolidates rational behaviors in response to the conditions they face on a daily basis in the markets, would contribute to finding a scientific way — instead of martyrizing the person responsible for the sale — to permanently correct distortions such as hoarding. Disregarding the causes of these phenomena and pretending to confront them at the last second, in addition to folly, becomes another obstacle to the development of the productive forces.
Oscar Fernández Estrada is an economist and University of Havana professor.