Friday, December 3, 2010

Report from Cuba - Day 3

An interior at the Ernest Hemingway house

At the Hemingway house
 Today was the most interesting day so far. This morning we visited Hemingway's House, which is in a small village outside Havana.
But that wasn't the interesting part. This afternoon we met with a young Economics professor from the University of Havana, Dr. Omar Everleny. Dr. Everleny is one of the primary architects of the proposed plan recently announced by President Raul Castro to lay off 1 million Cuban state workers and to expand the possibilities available to start free-enterprise small businesses and cooperatives. We all left the meeting thinking if Cuba can pull this off, Dr. Everleny deserves to win the Nobel Prize for Economics.

Dr. Everleny is an out-spoken critic of socialist economics. As he put it, socialism is "interesting, but theoretical, and depends upon the creation of a new type of man who doesn't exist." For 50 years, he told us, Cuba has had socialism and inefficiency. Until 1989, when the Soviet system collapsed, the inefficiency was invisible because the Cuban economy was supported by the former Soviet states. But now, economic growth is declining steadily, and by his calculation while "official" unemployment is only 1%, fully 25% of the Cuban work force is unproductive.
Me ringing the porch bell at
Hemingway's house

Hence, the plan to lay off 1 million Cuban workers. If the plan is adopted, each entity that employs workers will be required to assess job performance and lay off the bottom performers in its work force. Government "businesses" will be streamlined to increase efficiency, services will be consolidated and, as he put it, "whole Ministries will disappear -- government doesn't have to run business, just regulate it." At the same time, the Cuban government will allow the creation of small businesses and cooperatives in many fields in which free enterprise is not currently allowed. The free enterprise businesses will be able for the first time to hire employees outside of the family, and if they earn 50,000 pesos or more a year, will be required to keep formal books and records (thus creating a need for accountants, because currently no businesses must report on their financial status or transactions). The role of cooperatives will also be expanded if the plan is adopted.

Free enterprise entities will pay taxes on income at percentages up to 40%, but the average business is expected to be in the 25-30% tax range. They will also be required to pay social security taxes for the workers who they employ. The taxes will be used, in part, to provide social services to those "particularly vulnerable persons" who are laid off.

Alderman Ed Burke and Justice
Anne Burke at the Old Fort in Havana
Quoting Raul Castro, Dr. Everleny told us, "We have to erase forever the notion that Cuba is the only country in the world where one can live without working." Dr. Everleny believes it is significant that Raul, "one of the Revolutionary Generation," is supporting these reforms. He believes that Raul does not want to leave the legacy of the country being worse off after his generation than before the revolution. Dr. Everleny stressed that this plan has just been announced, and discussion is just beginning about it, so many elements of the plan remain to be fleshed out. But President Castro will take the plan to the National Assembly of the Peoples' Power for discussion in December, and to the Communist Party in April 2011.

A poster of Fidel at the School of Economics
 Dr. Everleny firmly believes that the Cuban economy must be changed if it is to survive. "If we have to keep thinking in terms of perfect equality [as in the Socialist economy], that will lead to failure." "Poverty distributed is more poverty."

 The reforms sure sound like capitalism to me. It was refreshing to hear Dr. Everleny's views. I think that everyone who attended the meeting left with the feeling that we had observed a little bit of history being made.