Photo courtesy of The Cuban Economy
By Cliff DuRand
Published in Z Magazine, October 2013, under the title “Laboratory for a New Society: Moving toward a cooperative economy.”
Cuba is engaged in a fundamental reshaping of its society. Calling it a renovation of socialism or a renewal of socialism, the country is re-forming the economic system away from the state socialist model adopted in the 1970s toward something quite new. This is not the first time Cuba has undertaken significant changes, but this promises to be deeper than previous efforts, moving away from that statist model. Fidel confessed in 2005 that “among the many errors that we committed, the most serious error was believing that someone knew how to build socialism.” That someone, of course, was the Soviet Union. So, Cuba is still trying to figure out for itself how to build socialism.
To understand the current renovation it is important to distinguish between ownership and possession of property. The productive resources of society are to remain under state ownership in the name of all the people. Reforms do not change the ownership system. Reforms are changing the management system, bringing managerial control closer to those who actually possess property. So while the state will continue to own, greater autonomy will be given to those who possess that property. In effect, Cuba is embracing the principle of subsidiarity, which holds that decisions should be made at the lowest level feasible and higher levels should give support to the local. This means more enterprise autonomy in state enterprises and it means cooperatives outside of the state.
It is expected that in the next couple years 46% of the country’s GDP will be in the non-state sector of the economy. That includes cooperatives and private small businesses. Coops are likely to become the dominant part of that non-state sector.
Already 83% of agricultural land is in coops. Much of that has been in the UBPCs (Basic Units of Cooperative Production) formed in the 1990s out of the former state farms. But these were not true cooperatives since they still came under the control of state entities. Now they are being given the autonomy to become true coops.
Even more significantly, new urban coops are being established in services and industry. 222 experimental urban coops are to be opened in 2013. As of 1st of July, 124 have been formed in agricultural markets, construction, and transportation. A big expansion in this number is expected in 2014.
In December 2012 the National Assembly passed an urban coop law that establishes the legal basis for these new coops. Here are some of its main provisions:
- A coop must have at least 3 members, but can have as many as 60 or more. One vote per socio. As self-governing enterprises, coops are to set up their own internal democratic decision making structures.
- Coops are independent of the state. They are to respond to the market. This is to overcome the limits that hampered some agricultural coops in the past.
- Coops can do business with state and private enterprises. They will set their own prices in most cases, except where there are prices established by the state.
- Some coops will be conversions of state enterprises, e.g. restaurants. They can have 10 year renewable leases for use of the premises, paying no rent in the first year if improvements are made.
- Others will be start-up coops.
- There will be second degree coops which are associations of other coops.
- Capitalization will come from bank loans, a new Finance Ministry fund for coops and member contributions. Member contributions are treated as loans (not equity) and do not give additional votes. Loans are to be repaid from profits.
- Coops are to pay taxes on profits and social security for socios.
- Distribution of profits is to be decided by socios after setting aside a reserve fund.
- Coops may hire wage labor on a temporary basis (up to 90 days). After 90 days a temporary worker must be offered membership or let go. Total temporary worker time cannot exceed 10% of the total work days for the year. This gives coops flexibility to hire extra workers seasonally or in response to increased market demands, but prevents significant collective exploitation of wage labor.
This is a big step forward for Cuba. Since 1968 the state has sought to run everything from restaurants to barber shops and taxis. Some were done well, many were not. One problem was worker motivation. Decisions were made higher up and as state employees, workers enjoyed job security even with poor performance. However, their pay was low. Now as socios in cooperatives they will have incentives to make the business a success. The coop is on its own to either prosper or go under. Each member’s income and security depends on the collective. And each has the same voting right in the General Assembly where coop policy is to be made. Coops combine material and moral incentives, linking individual interest with a collective interest. Each socio prospers only if all prosper.
Remittances: Much of the start-up capital from members is likely come from remittances sent by relatives living abroad. This is a good way to harness for the social good some of the $2.455 billion of remittance money (2012 figures) that comes into Cuba. Although 62.4% of the population receive remittances, the bulk of this money is likely to come to whiter Cubans. As a result Black Cubans will end up being underrepresented in this sector of the economy. In the long run, this presents social dangers.
Recommendation: Preferential bank lending policies can avoid this problem. Cuba does not need to adopt race based affirmative action policies to correct this imbalance. Banks can give preference in their lending policies to those coops that lack funding from remittances. To each according to his need.
State plan. If coops are truly autonomous, how can this sector of the economy be articulated with planning? Guideline #1 says the socialist planning system is to remain “the principle means to direct the national economy.” How can market and plan work together? In addition to responding to the market, coops are also charged (by charter?) with a “social object.” In addition, local entities can also request that they assist in specific social projects. Their participation is voluntary. This applies to individual coops.
But beyond this, the investment function can be used to direct the development of this sector. Bank lending priorities can be based on state development plans. The model for economic democracy developed by US philosopher David Schweickart shows how this can operate. In After Capitalism (1) Schweickart envisions a society made up of democratically managed cooperatives exchanging goods and services in a free market. But the allocation of investment capital is made by government bodies at national, regional and local levels based on social criteria democratically decided upon. Something like this would seem to fit well the new economy developing in Cuba today.
Coops are recognized as a socialist form of organization in the Guidelines or lineamientos. In part, this is because they foster a social consciousness. By bringing people together in their daily worklife in democratically self managed organizations, coops nurture the democratic personality and the human being is more fully developed. This point has been strongly advocated by Cuban economist Camila Piñeiro Harnecker. She argues that coops “promote the advancement of democratic values, attitudes and habits (equality, responsibility, solidarity, tolerance for different opinions, communication, consensus building).” (2) Coops are little schools of democracy in which the new socialist person can thrive, more so than was possible under state socialism. (3) Thus coops spontaneously generate at the base of society momentum toward that society of associated producers that is the aim of socialism. Coops are the kind of institution that can make socialism irreversible by embedding its practices in daily life.
The other component of the non-state sector is made up of private businesses. These small and medium sized private businesses are called self employment or cuentapropistas. While limited areas of self employment were opened up in the 1990s (e.g. paladares), this was expanded to 178 occupations in 2011. In part, this was designed to quickly absorb the large number of redundant state employees that were to be dismissed. It also allowed underground activities that had flourished since the Special Period to come out into the open and operate legally where they can be licensed, regulated and taxed.
The acceptance of small private businesses signifies that the leadership recognizes that a petty bourgeoisie is compatible with socialism. As it is often said, the state cannot do everything. Contrary to a common claim in the US media, this is not the beginning of capitalism. The Guidelines say that accumulation of wealth is to be avoided. This means the petty bourgeoisie will not be allowed to grow into a big bourgeoisie, a capitalist class.
Unlike coops which nurture a social consciousness, private businesses foster individualism. Self interest becomes the primary concern of private businesses. For that reason the petty bourgeoisie is a decidedly non-socialist class. While its existence is allowed, its growth should not be encouraged where coops can do the job instead.
Unlike the paladares which could employ only family members, these private businesses can hire others as well. While this is also called self employment, in reality it is wage labor. While the private exploitation of wage labor is widely understood to be incompatible with socialism (as well as in violation of the Cuban constitution), it is accepted as necessary to quickly absorb surplus workers.
In recent years, small private businesses have been the fastest growing element in the Cuban economy. If they were to come to make up a sizable portion of the non-state sector, they could easily acquire significant political influence, moving Cuba away from socialism. This is because class power is fundamentally rooted in the significance a class has in the economy as a whole and thus the dependence other classes and groups have on its success.
For that reason, the continued development of socialism requires that coops rather than private businesses come to make up the bulk of the non-state sector. That is likely to be the case for several reasons.
- Coops are favored by the state in terms of tax policy and loan policies.
- In direct competition between coops and private businesses coops often are in more advantageous positions. E.g. state restaurants that convert to coop restaurants generally have better locations than private restaurants.
- Labor efficiency and productivity is high in coops due to the greater incentives for socios.
Recommendation. In the long run it would be desirable to convert many private businesses into coops so all who are employed there can enjoy the benefits equally (no exploitation) and participate in decision making (democracy). This could be done by restrictions on the size of private businesses, tax incentives for conversion, and political organizing of their wage labor force.
Role of CTC (Central de Trabajadores de Cuba)
In view of the new and growing diversity among Cuba’s workers, the role of its labor movement needs to be rethought. Under state socialism the CTC represented the interest of the working class as a whole in the councils of government. Unlike unions in a capitalist society which represent workers in an industry or particular workplaces in an adversarial relationship with capital, in state socialism the state and the working class are considered to be united in their interests. It is for this reason that the CTC has been given a central position in the political structure. Its role is not to represent workers in negotiations with their employers, but to be their voice in making public policy in a socialist society.
Previously only 9% of employment was in the non-state sector. Now it is 22% and is expected to grow to 35%. This raises new questions for the labor movement. Reportedly, 80% of cuentapropistas have joined unions. How can the CTC represent the interests of those cuentapropistas who are private business owners? The petty bourgeoisie has interests different from the working class (even though they do work in their businesses). How can CTC at the same time represent the interests of the cuentapropistas who are in fact the wage laborers they employ (and exploit)?
And how can the CTC represent the interests of cooperative socios given the fact that they are at once both owners and workers? As I have suggested above, the CTC can advance socialism by advocating for the cooperative sector as a whole over against the private business sector. Beyond this, the CTC might also take on an entrepreneurial role for cooperatives, doing market research, organizing workers for new start-up coops, providing training in self-management, etc. It might even monitor coops to ensure compliance with their own self-governance processes.
21st Century Socialism
The project called 21st Century Socialism has been associated primarily with the Bolivarian Revolution in Venezuela. It is an attempt to reinvent socialism after the collapse of the state socialism that characterized the 20th century. In Venezuela this has involved using state power to promote cooperatives and communal councils at the base of society as seeds of a future socialism. Social transformation is constructed both from above and from below. (4) In Venezuela this is taking place in what is still overwhelmingly a capitalist society. In Cuba we see a very similar process in the context of a state socialist society. Here the state is also promoting cooperatives, relaxing administrative control over enterprises and decentralizing governmental power to the local level. Both see the empowerment of associations at the base of society and the active participation of working people in directing their affairs as key to building the new socialism. In the Venezuelan case this is seen as eventually replacing the existing bourgeois state with a new communal state, the beginnings of which are being constructed by associations of communal councils.
In the case of Cuba, resistance to this dispersal of power away from the state is reportedly coming from the state bureaucracy itself. Some see this as motivated by the self interest of an entrenched bureaucratic class that will block Cuba’s reforms. Others see the resistance as due to bureaucratic habits that are slow to change. In that case it can be overcome by a change of mentality. (5) There is also bureaucratic resistance in Venezuela. That is why power and resources are being sent directly to communal councils, effectively by-passing traditional channels. Something like that same strategy is being used in Cuba as some taxes are being collected at the local level rather than nationally to be distributed downward. This then shifts the capacity to initiate action to the local level, a far cry from the vertical structure of state socialism.
Democratically self governing cooperatives are an essential feature of 21st century socialism. They empower the associated producers in their daily work, giving them some control over their lives. At the same time these little schools of democracy are the soil in which the new socialist person will thrive, more so than was possible under state socialism. And with that it becomes possible to envision the state eventually withering away as society comes more and more under the direction of a truly civil society, or what Marx called the associated producers.
Cuba is poised to be the first country in the world to have cooperatives make up a major portion of its economy. It is a laboratory for a new society. Those who are implementing the Guidelines are aware that they are redesigning society and approach the challenge in an experimental way. The new urban coops are being set up as experiments. As difficulties emerge lessons are to be learned so as to improve the process as it goes along.
One difficulty is already evident. That is the need for education in cooperativism. (6) Previous experience in the UBPC agricultural coops showed that workers were not practiced in democratic decision making. Nor did the coops have the autonomy necessary for them to feel they were really in control. The UBPCs were actually under the control of state enterprises, such as the sugar centrals. Now for the first time they are being given real autonomy.
Likewise, the workers in urban state enterprises now being cooperativized have deeply established habits of compliance with higher authority. Under state socialism decisions came from higher up. It was a structure that bred passivity. That is part of the “change in mentality” so often talked about these days that needs to take place.
Many years ago Cuban philosopher Olga Fernandez pointed out to me that under the model of socialism Cuba had adopted, rather than the state withering away, it was civil society that was withering away. Today’s renovation of socialism is an effort to rejuvenate civil society, to construct a socialist civil society. Cooperatives may be a key link in that rejuvenation that can sustain Cuba on its way to a society run by the associated producers. If it can succeed, it will be of world historical importance.
1. David Schweickart, After Capitalism (Rowman and Littlefield, 2nd edition 2011), pp. 47-58.
2. Camila Piñeiro Harnecker, “Las cooperatives en el Nuevo modelo economico cubano” http://rebelion.org/mostrar.php?tipo=5&id=Camila%20Pi%F1eiro%20Harnecker&inicio=0, also Cooperativas y socialismo: Una mirada desde Cuba (La Habana: Editorial Caminos, 2011).
3. Michael A. Lebowitz, The Contradictions of Real Socialism (Monthly Review Press, 2012).
4. Dario Azzellini, “The Communal State: Communal Councils, Communes, and Workplace Democracy” NACLA Report on the Americas (Summer 2013), pp. 25-30.
5. Olga Fernandez “Socialist Transition in Cuba: Economic Adjustments and Socio-political Challenges” Latin American Perspectives (forthcoming).
6. This has been emphasized by Beatriz Diaz of FLACSO in “Cooperatives in the Enhancement of the Cuban Economic Model: The Challenge of Cooperative Education” Latin American Perspectives (forthcoming). Camila Piñeiro Harnecker has proposed establishment of a special department to train coop members for their new role. Op. cit.