Can Cuba Turn to Capitalism?

Can Cuba turn to capitalism? It seems that the answer is yes. In any case, this is what can be concluded from the words uttered by head of state Raul Castro on August 1.

Speaking on Sunday, the brother of the leader of the Cuban Revolution said that the country will have an “updated economic model.” It will include restriction of government intervention in private business development, changes in the tax system, as well as layoff of every fifth employee working for state enterprises. As it turned out, they are simply redundant.

So far Cuba had been building socialism, the main economic component of which is known to be a complete predominance of the public sector in the economy. Strictly speaking, this is where 95 percent of Cubans are currently employed.

Moreover, socialism does not entail unemployment. People seem to be always attached to some company or organization. Now every fifth employee of state enterprises will lose her job. This is a huge number as it involves 19 percent of the adult population.

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Of course, such changes are fraught with social upheaval. The Cuban authorities addressed the issue to prevent it from happening. They promise that all laid off employees will be retrained or reassigned. However, a question arises: if every fifth job is redundant, then where can these people be employed? The answer is the private sector.

A small number of entrepreneurs appeared in Cuba in the early 1990s. Then the socialist camp collapsed, Cuba lost the old Soviet support, and the United States tightened the embargo of the island. Under these conditions, Cuba plunged into a severe economic crisis. In order to give people at least some means of livelihood, the government had to allow small and medium businesses.

Hairdressers, owners of small cafes and restaurants opened private institutions, and became very successful. Supporters of “traditional socialist values” sounded the alarm and forced the government to introduce restrictions for the “bourgeois.” Taxes were raised for the private businesses and the rules for obtaining licenses were tightened. As a result, only five percent of Cubans were employed outside of the public sector.

From: Nuzban

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