The state lightens its burden

It took a while, but the Cuban government appears to be launching a solution to problems it identified long ago in its small state retail enterprises.

Reuters broke the story here, and it has to do with ending state control of barbershops and beauty salons. That may seem like small potatotes – and it obviously is small potatoes in terms of Cuba’s overall economy – but the idea behind it is important if you consider this clarification in the middle of the Reuters story:

“Cuba and North Korea are the world’s only remaining Soviet-style command economies in which the state controls more than 90% of economic activity. Other communist countries such as China and Vietnam have long since liberalized retail trade, services and small business.”

More than three years ago, a series of articles in Juventud Rebelde detailed the problems in small state retail and service businesses: petty corruption, pilferage, bad service, and lack of consumer protection. In several cases, the paper reported that there was no functioning supply system, so workers in barbershops or shoe repair shops would buy their own supplies, set their own prices, and decide on their own how much revenue to leave in the government’s cash register at the end of the day.

The articles also discussed possible solutions: fixing the supply system, putting more decisions in the hands of workers, and giving workers a “direct relationship with profits.”

So the solution, reportedly in the process of implementation in hundreds of smaller barber and beauty shops around the country, is effectively to end the state enterprise and give workers an offer whereby they can operate on their own. The terms are that they pay a monthly fee that amounts to 15 percent of their average revenue, they pay utilities, they buy their own supplies, they set their own prices, and they keep their profits.

Now we have an idea what Cuba’s economy minister meant last December when he said the government is undertaking “experiments…to lighten the state’s burden in the provision of some services.”

From the report, it sounds as if each worker will be licensed individually, so this is not a move to a cooperative model.

Nonetheless, it moves some economic activity across the line from the state sector to the private sector. In Cuba, that’s a big deal.

And considering that the government is fixing just a small part of a retail service sector that it has shown to be riddled with problems, this could point to more changes ahead.