"Irritating privileges"

Fidel Castro’s “Reflections” published today, titled “Self-criticism of Cuba” (English here), begins with a discussion of student work brigades and ends with a long call for belt-tightening and conservation of resources. In between, it includes a three-paragraph comment on income inequality in Cuba.

Where does the inequality come from? Castro cites three examples.

First, Cubans in some enterprises receive incentive-based bonus pay in hard currency. This has not always been done legally, he points out, without making clear if he is referring to state enterprises or joint ventures with foreign investors.

Second, some receive remittances from abroad in hard currency – “something which is not illegal, but at times creates inequality and irritating privileges.”

Third, there are those who make large profits in black-market transportation activities. From earlier speeches, I assume he means unlicensed taxi drivers.

The result, Castro says, is that the “real and visible lack of equality and the lack of relevant information gives rise to criticism, above all in the neediest sectors.”

And the problem with this, he goes on to imply, is that those who have higher incomes nonetheless receive subsidized government services. But those services and their subsidies will continue as a matter of commitment, Castro says, and because “we are not a consumer society.”

Fair enough. I too would look askance, in Cuba or anywhere, at a system that provides government subsidies to people who don’t need them.

But another way of looking at all this is to say that Cuba’s real problem is not that some Cubans earn higher incomes, but that too many work hard and earn incomes that aren’t enough to cover their basic needs. And that the most important challenge for economic policy – if your goal is to wipe out inequality, black marketeering, and pilferage of state resources – is to raise the incomes of Cubans in the lower income segments.

Cuban policymakers are aware of this challenge and there is some public discussion of it.

Someday, if Cuba’s dual-currency system is ended and depending on how it is ended, lower-income Cubans could benefit (see discussion here). And Cuba’s labor minister says there is a new pay policy in the works, a counterpart to regulations tightening labor discipline, that is to tie pay to output and “guarantee” that workers “may live from their work” (more here).

We’ll see. I have no doubt that this debate will continue, and my guess is that it will frame the major decisions of the post-Fidel Castro government.