Tuesday, July 31, 2012

Cuba’s Entrepreneurs: Foundation of a New Private Sector

Cuba’s entrepreneurs were viewed as a necessary evil in the 1990’s and as a strategic necessity now. 

They are essential to the government’s goals of cutting its own “inflated payrolls,” building a larger private sector, and improving productivity and fiscal balance.  This paper (pdf) examines the new policies that have enabled Cuba’s entrepreneurial ranks nearly to triple since 2010 and the policies that hold them back still, and looks at issues surrounding the larger “non-state” sector that must grow well beyond small-scale entrepreneurship if the government’s own goals are to be met.


Anonymous said...

Dear Mr. Peters,

Whatever growth occurred in the private sector resulted in part, in the absence of wholesale markets, due to the possibility that private enterprises could be supplied from abroad by mules.

This was due to the existence of low import duties for consumer goods which allowed these private businesses to offer them to the general public at prices that were lower than those at the government dollar stores.

Now that that the import duties will be raised in the immediate future, we must measure the effect of this policy on the number of private enterprises that will continue to exist.

Logically, the increase of import duties for cnsumption goods will make these enterprises less competitive with relation to the government dollar stores that will not be charged these tariffs.

This may even drive many of these private firms totally out of business if the cost of the goods they sell plus transportation costs plus import duties are higher than the retail prices in the government dollar stores.

We must also evaluate how these import duties and the existing taxes are applied to the different types of private businesses and whether these policies allow a fair competitive process or not in the private sector.

There is a very strong possibility that the taxes and import duties might only be applied, or be applied less leniently, to the private businesses that do not belong to the members or descendants of the existing governing elite.

This may very well be a corrupt way to use the totalitarian government supervision to promote an unfair competitive process that would ruin or not allow to grow most of the private businesses that do not belong to the members of families of the governing elite
while permitting the favored businesses belonging to the governing elite to prosper.


Anonymous said...

Applying government regulations in a corrupt manner to promote a process of primitive capital accumulation in the ruling elite's favor would facilitate its transformation from a nomenklatura into a neobourgeoisie.

It is too early to comment on the success or failure of the Cuban governments privatization reforms.

We must give some time to measure its statistical effects in terms of total number of firms, number of people employed and their contribution to the nations GNP.

But this is not the only indicators that we must consider.

We must also analyze the political, economic and social results of these reform policies.

Do they foster the development of a series of small independent private enterprises that will promote competition, foster economic productivity, increase social stability and aid a democratic transition or is this simply a new way to keep the old ruling class in power?

Is thsi simply what the Cubans would call "El mismo perro con diferente collar"?

Just because Cuba is veering towards a form of state monopoly capitalism with a certain degree of private enterprise does not mean that the ruling nomenklatura is willing to give up its hegemonic role.

The ruling elite might very well be seeking to transform itself into a new bourgeoisie by using its control over the government to rig the results of market competitive so that only the private enterprises belonging to the ruling elite survive.

These apparent reforms in favor of private enterprise might only turn out to be a means to allow the ruling elite to transform itself gradually from a nomenklatura running a totalitarian state's economy into a neobourgeoisie that created itself through its own active promotion of governmental favoritism and corruption.

I would suggest that we wait a bit longer before reaching conclusions as to the success of Raul Castro's privatization reforms.

The Cuban government is still making adjustmentes to try to reach its long run objectives and we do not know what these intended goals are.

Only time will tell whether these objectives are designed to benefit the country or simply to keep in power the existing elite or, if they both coexist, the intended weight that was assigned to each of these alternative goals.

US policy with regards to Cuba and specifically to the gradual negotiated lifting of the embargo will depend on discovering the true nature these objectives and backing or opposing them in accordance with their political, social and economic purposes.

This can only be accomplished through more observation and analysis.

IMHO it is too early to reach conclusions or call the shots right now!