Private Self-Employment under Reform Socialism in Cuba

By Gonzalez-Corzo, Mario A.; Justo, Orlando | Journal of Private Enterprise, Summer 2017 | Go to article overview

Private Self-Employment under Reform Socialism in Cuba


Gonzalez-Corzo, Mario A., Justo, Orlando, Journal of Private Enterprise


I.Introduction

The expansion of private self-employment is one of the principal economic reform strategies implemented by the Cuban government to "update" the country's socialist economy. In spite of being tightly regulated, private self-employment has been tolerated and used cyclically in periods of economic recessions since the 1959 Cuban revolution (Jatar-Hausmann 1999; Pérez Villanueva and Vidal Alejandro 2012). It was one of the principal economic reform measures implemented to cope with the economic crisis caused by the fall of the communist bloc (Carranza Valdés, Gutiérrez Urdaneta, and Monreal González 1996; Jatar-Hausmann 1999; Mesa-Lago 1994; Perez Villanueva 1998, 2010; Ritter 2004), and this sector has experienced an unprecedented revival since 2010. Unlike past attempts, which tolerated some limited forms of private self-employment in a few economic activities, the reform measures implemented since 2010 represent a deeper transformation of this vital sector of the Cuban economy. As Pérez Villanueva and Vidal Alejandro (2012) note, this process has been driven by the need to reduce inflated state payrolls and by increased official acceptance of private self-employment as a viable alternative to employment in the state sector. The reduction of the state's share of total employment, combined with the implementation of policy measures to promote private-sector self-employment and to gradually transform other areas of the Cuban economy, suggest the transition from the excessively paternalistic and centralized classical socialist model to a uniquely Cuban form of reform socialism.

This paper analyzes the recent evolution of self-employment under reform socialism in Cuba. Section 1 discusses the principal characteristics of reform socialism, with a particular emphasis on private-sector expansion, reforms to improve the performance of state-owned enterprises, and the gradual modification of the price system. Section 2 examines the evolution of Cuba's emerging self-employment sector since the reforms in 2010 and the principal challenges confronted by these workers. Finally, section 3 presents the study's conclusions and discusses future prospects for private self-employment as the Cuban economy continues to transition from classical to reform socialism.

II.Principal Characteristics of Reform Socialism

The transition from bureaucratic to market coordination that took place in reforming socialist countries (e.g., Hungary and Poland) after the de-Stalinization of their economies in the late 1950s and early 1960s was initially based on the "conception of reform as a mix of plan and market within the State sector" (Stark and Nee 1988). In the case of Hungary, the process, commonly known as "reform socialism," expanded with the introduction of the New Economic Mechanism (NEM) in 1968, paving the way for "a conception of reform as the transition to a mixed economy of public and private property forms with implications for the emergence of new social groups and autonomous social organizations" (Stark and Nee 1988). According to Stark and Nee (1988), under this reconceptualization of reform socialism,

The socialist state would control the commanding heights of the economy, regulating the market mechanism by manipulating investment credits, amortization rates, depreciation allowances, interest rates, prices, wage structures, and other macroeconomic controls. With the correct mix of plan and market, the market mechanism would not generate spontaneous economic processes but instead would serve as an instrument to reduce the transaction costs of central planning. In short, early reformers believed that the most efficient governance structure for socialist economies was a combination of market and central planning.

Kornai (1992, 2008) defines "reform socialism" as "regimes that differ from the Stalinist model of classical socialism in several important aspects" and have "made some steps towards liberalization in the political sphere, somewhat decentralized the control of their State owned sector, and allowed some larger scope for the private sector. …

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