Behind the layoffs in Cuba

Cuba’s trade union confederation announced in September that half a million state-employed workers are to be laid off by May 1. Over the next five years, Cuba’s socialist government plans to shift a further half million workers from the state-owned economy to the self-employed, small business and cooperative sectors. In October, new regulations that loosen restrictions on self-employment and small businesses and a new tax regime for the private sector came into effect. Cuban President Raul Castro has made it clear that these reforms are not aimed at the restoration of capitalism, but at making Cuba’s post-capitalist, centrally planned economy more productive. To achieve this, Cuba’s Communist Party (PCC) leadership insist that a rationalisation of the state-sector workforce to reduce bloated payrolls is unavoidable.

Productivity, bloated payrolls, rationalisation. Isn’t this the same neoliberal mantra we’ve heard for decades in Western countries to justify economic “reforms” to shore up corporate profitability at the expense of working people? It may sound ominously familiar, but the Cuban context in which these sackings are being carried out is entirely different: there are no big Cuban capitalist enterprises, and no plans (other than those drawn up by US imperialism) to create them. So whoever will benefit from the “updating”  — as Raul Castro calls it — of Cuba’s post-capitalist economy, it won’t be the likes of the Bacardi family, who lost their Cuban rum distilleries back in 1960, when they were nationalised by Cuba’s revolutionary government.

Productivity is important because in any economy, labour productivity growth is the wellspring of economic and social progress. A future, fully socialist (communist) society would have to be based on a very high level of labour productivity, considerably higher even than that of developed capitalist societies today. The generalisation of fully automated robotic production on a world scale could produce such an abundance of the goods people need that all members of the global community could be freed from the compulsion to work for wages, and class distinctions would wither away. So while productivity has become a dirty word in the mouths of neoliberal ideologues, genuine social progress, that benefits working people rather than the parasitic capitalist class, rests on labour productivity growth.

When state power serves the class interests of working people, as in socialist-oriented Cuba, the rationalisation of the workforce in socialist state enterprises should benefit working people as a whole. By increasing productivity across the economy, it will allow workers’ incomes and living standards to rise and the state to have more resources with which to subsidise free services such as health care and education, two pillars of the social justice embodied in the Cuban Revolution; to support those who cannot work, such as single parents caring for young children and retirees; and to expand and modernise Cuba’s socialist state enterprises.

Combating ‘the bureaucracy’

Here, a caveat must be added in light of the experience of bureaucratic “socialism” in the Soviet Union, Eastern Europe and China in the 20th century: such a rationalisation will benefit ordinary working people if it is not held hostage to an entrenched governing stratum of bureaucrats (privileged administrators). While the economic reforms initiated by Raul Castro’s government have come up against passive resistance from many administrative personnel, in Cuba these administrators do not constitute a hardened bureaucratic ruling stratum such as existed in the USSR from Stalin to Gorbachev.

Furthermore, the economic reforms tend to undermine, rather than strengthen, the bureaucratic tendencies in Cuba’s socialist state. The long-term aim of Cuba’s economic “updating” is to have 80% of the workforce engaged directly in production and services, with far fewer professional administrators. The workforce rationalisation is not aimed at socially productive workers, but at reducing unnecessary administrative personnel; it is aimed at cutting the size of what is often referred to, misleadingly, as “the bureaucracy”.

If increased productivity is inherently desirable in any society, so, too, is the reduction of bloated government payrolls. We’re used to capitalist politicians telling us that the “public sector” is “bloated” and must be “rationalised”, which usually means that social services that benefit working people are to be cut back, or privatised, so that more tax dollars can be spent on subsidising capitalist profitability. In Cuba the aim of the production of goods and services is not the maximisation of capitalist profits, but the social needs of the working people. As a result, rising productivity means being able to reduce what it costs the working people as a whole to produce the goods and services.

In Cuba, however, there has been a rather loose relationship between the numbers of workers needed to do the job well and the numbers of employees “on the books” in most state-owned enterprises. Some employees, particularly some administrative workers, quite literally hardly work at all, either because they’re absent from the workplace for long periods during work hours, or because there is little for them to do when they do show up for work. In Cuba, payrolls really are bloated.

This irrational use of the work force is the unintended consequence of a noble objective. For decades, the socialist state has ensured essentially full employment by seeking to provide everyone with a job, even during the deep and prolonged economic crisis known as the Special Period that followed the demise of the Soviet Union, Cuba’s main trading partner, at the beginning of the 1990s — a crisis from which Cuba’s centrally planned economy has yet to fully emerge.

The price paid for achieving nominally full employment in a small Third World economy, subject to a 48-year US economic siege and an unwillingness to accept small-scale private and cooperative enterprises in Cuba’s cities and towns, was a milder version of the old joke about workers in the Soviet Union: “We pretend to work, and they pretend to pay us”. As L. Sanchez, a reader of Granma, the PCC daily that carries a lively debate on Cuba’s economic reforms, pointed out in a letter to the editor published on October 29, Cuba’s policy of full employment created unnecessary work posts. “[M]any managers never thought about the danger to our people of inflating their payrolls and bureaucratising everything without any control ... thus arose hundreds of functionaries and secretaries, and secretaries of secretaries, office workers and advisors, many with little to do, but with a certain degree of power and recourse to office materials not limited to pens, erasers, pencils and paper ... [but] sophisticated furniture ... computers, mobile phones, cars and fuel, among other things.”

By the time of the third PCC Congress in 1986, it was obvious that something was seriously wrong with Cuba’s economic model which, along with its own errors, had copied much from the ill-fated Soviet Union. The congress launched a process of “Rectification” to disentangle the Cuban Revolution from the Soviet “model”. The rectification process, however, was interrupted by the Special Period. Today, having come through the worst years of the Special Period with the social gains of the revolutionary period still largely intact, and with Venezuela’s Bolivarian socialist revolution unfolding on the other side of the Caribbean,  the Cuban Revolution strives for a new Cuban model of socialist development that is more efficient, dynamic and participatory, and less bureaucratic. This implies dismantling, or moving away from, concepts, structures, methods and mentalities that are either obsolete or tainted with the malign influence of Soviet bureaucratic “socialism”.

Elimination of small urban businesses

In 1968, shortly before Cuba become integrated into the Soviet economic bloc, Cuba’s revolutionary government nationalised all urban small businesses. At the time, this was justified as both a step towards socialism and an economic and political necessity given the turbulence of the revolution’s confrontation with US imperialism. Today, after decades of experience, it is clear that small productive and service entities cannot be run efficiently, if owned and managed by the socialist state, that is, as part of the centrally-planned economy. The wholesale expropriation of Cuba’s urban petty proprietors, rather than the gradual conversion of some of their properties into production or service cooperatives, has been, to put it bluntly, an economic disaster. Cuba’s cafes, restaurants, corner shops, and many of its small-scale production workshops are plagued by inefficiency, corruption and poor service.

As a letter to the editor in the December 4, 2009 edition of Granma observed: “From their nationalisation by the Cuban state in 1968, small businesses and retail firms were converted, little by little, into a source of illicit profit, the robbery of the state, inefficiency and maltreatment ... Arguably socialism, by definition, necessitates social ownership of the fundamental means of production, and this is not at odds with personal, family or cooperative property over some means of production or services. The  state must free itself from the yoke of these [small] entities which, far from being social property, have become a means for the enrichment of a minority group that exploits [the majority] to the detriment of the satisfaction of the needs of the client, that is, the people.”

The 1968 expropriations were justified in part by the need to undermine hoarding of, and profiteering from, scarce consumer goods by small business owners seeking to maximise their profits. Yet the system of rationed goods and other universal state subsidises that aim to guarantee food security, such as the workplace canteens that are now being phased out, have not solved the problem of hoarding and speculation but merely driven such activities into the shadows of Cuba’s thriving black market. During the Special Period, petty theft from the socialist state, and petty corruption, such as illicit payment for the speedy processing of applications, has become generalised. Despite free health care and free education and other universal state subsidies, the salaries paid by the state are insufficient to cover all basic living expenses. This leaves workers with little choice but to turn to the black market to make ends meet.

Meanwhile, the centralised administration of all these small productive and service entities, from bakeries to watch repair shops, necessitates a huge, unproductive administrative apparatus that is a drain on state coffers. By allowing self-employment, small private business and urban cooperatives to absorb excess workers in the state sector — by legalising some small businesses already operating on the black market, and by allowing new businesses and cooperatives to become established — Cuba’s socialist state will not only save money by not having to pay the salaries of many idle administrative personnel. It will also gain tax revenue from the expanded private and cooperative sector. This will allow the socialist state to increase wages in the state sector, which will still account for more than three quarters of Cuba’s workforce, in step with rising labour productivity. In turn, increased state sector wages will tend to rein in the black market, which thrives on theft from state enterprises. This will further boost productivity in the dominant state sector, thus establishing a virtuous cycle that, it is hoped, will allow the Cuban Revolution to leave behind the Special Period.

Social justice not income equality

The rationalisation and reorganisation of Cuba’s state sector workforce is being accompanied by the gradual withdrawal of universal state subsidies — other than for such things as free health care and free education which are enshrined in Cuba’s socialist constitution — and the reassertion of wages as a means to allocate the distribution of goods and services according to the individual’s labour contribution to society. “Socialism means social justice and equality, but equality of rights, of opportunities, not of income”, Raul Castro said in a speech to Cuba’s National Assembly of People’s Power on July 11, 2008. “Equality is not the same as egalitarianism. Egalitarianism is in itself a form of exploitation; exploitation of the good workers by those who are less productive and lazy”, he added.

This is not a new idea, but a reaffirmation of the necessity, during the transition period between capitalism and socialism, for the distribution of goods and services to be linked to the individuals’ or work collectives’ social contribution through their work, as the founders of scientific socialism, Karl Marx and Frederick Engels, explained in the 19th century. Only in a fully communist society, a remote objective for the Cuban Revolution today and conceivable only long after capitalist rule has been abolished on a world scale, could distribution conform to the communist principle “from each according to their ability, to each according to their needs”. Reasserting the socialist principle “to each according to their work” is both an ethical and an economic necessity in Cuba, where a waiter in a tourist hotel can earn more in tips in a single night than a heart surgeon earns in a month.

The withdrawal of universal state subsidies and the rationalisation of the state-sector workforce will do more than any number of political speeches to recover something that Cuba has been losing during the Special Period: the understanding that without labour there cannot be social wealth and social wellbeing. One of the most difficult problems of the transition to socialism is how to cultivate a sense of individual responsibility for social property, one of the thorny issues at the heart of the debate in Cuba over how to renew the country’s socialist project. Raul Castro touched on this in a speech to Cuba’s National Assembly of People’s Power on July 11, 2008: “For the worker to feel like the owner of the means of production, we cannot rely solely on theoretical explanations — we have been doing that for about 48 years — nor on the fact that his opinion is taken into consideration in the labour meetings. It is very important that his income corresponds to his personal contribution and the fulfilment by the work centre of the social object for which it was constituted”.

Leftist critics

Some leftist critics of the Cuban Revolution, such as Australia’s Socialist Alternative, have thrown up their hands in horror at the mass layoffs now underway in Cuba. Closing their eyes to the necessity of a rationalisation of the state-sector workforce if Cuba is to pull itself out of the Special Period, these leftist critics propose a one-point plan for the “solution” of inflated payrolls and, it would seem,  every other problem facing Cuba’s embattled socialist revolution: “real” workers’ democracy. If they cared to look closely, they’d see that the way this rationalisation is being carried out, with the active participation of Cuba’s trade union movement, is an example of workers’ democracy in action, as are the public debates on the future of socialism in Cuba that were initiated by President Raul Castro in 2007. Such critics cannot explain, without invoking an alleged Cuban police state that is entirely fictitious, why there have not been any reports of strikes, protests or other signs of workers resisting these layoffs.

There is no doubt that the Cuban Revolution needs more socialist democracy. This has been a constant theme of the public debate in Cuba over how to “change everything that must be changed”. Respected Cuban journalist Luis Sexto, for example, who has a weekly column in Cuba’s Communist youth daily Juventud Rebelde, argues that “a hierarchical de-verticalisation of society to allow democratic horizontality” is needed. But Western-based left critics’ abstract calls for “real” workers’ democracy as a supposed alternative to the rationalisation of Cuba’s state-sector workforce betrays their ignorance of the concrete problem that Raul Castro addressed in his July 11, 2008 speech, and the leading edge of its solution: higher wages derived from and fostered through increased workplace productivity.

If the workforce reorganisation is followed by significant wage rises linked to productivity gains, the remaining state sector workforce will have more of a material interest in ensuring that other workers, including administrative workers, are not stealing from their workplaces, since every worker’s standard of living will be more closely tied to the output of the state sector. Overhauling the system of bloated payrolls, low wages and excessive subsidies, which guarantees nominal full employment at the cost of stagnation in labour productivity growth and indifference on the part of workers who feel like they’re not needed — how demoralising for a class-conscious worker! — is the material basis for improving workplace democracy, which means, among other things, workers taking an active interest in the productivity of their own workplace and the post-capitalist economy as a whole.