HAVANA, Cuba (AMG) — Several years ago, in an effort to jump start Cuba’s sluggish economy, the administration of President Raul Castro initiated a series of largely market-oriented economic reforms. These changes – dubbed as “Guidelines on Economic and Social Policy for the Party and the Revolution” when they were first approved by the Cuban Sixth Communist Party Congress in 2011 – are designed to gradually shrink Cuba’s extensive, but hard-pressed, public sector and promote the development of more dynamic private enterprise in its place.

Like the Chinese regime before it, the Cuban government is attempting to liberalize its country’s economy without abandoning the core socialism of Cuba’s official state ideology, and the successful aspects of their country’s half-century revolutionary experiment – most notably their popular and internationally lauded healthcare and education systems.

The Cubans appear wary of the experiences of post-Soviet states like Russia, where a wholehearted and hasty embrace of dislocating capitalist reforms in the 1990s gave rise to a sort of oligarchic gangsterism that scholars have since dubbed a kleptocracy.

“The model is different from China and Vietnam,” a Cuban economist said of the reforms. “We have the advantage of learning from their experience.”

Growth of co-operatives

At the centre of Cuba’s model for reform is a dedication to the expansion of private cooperatives. Cooperative businesses are generally for-profit enterprises which are collectively owned and democratically managed by the workers who staff them. This arrangement differs from the statist model of control by government bureaucrats, or control by shareholders as in capitalist models.

Like other private firms, they succeed or fail largely based on the dictates of the market. Importantly, cooperatives’ decentralised and direct internal management often yield enhanced productivity, wages and longevity, and promote notions of solidarity and equity. In this way, cooperative businesses form a viable middle path between the extremes of fully market and state-based economic models, a path that the Cuban government is currently attempting to chart.

Prior to the implementation of 2011’s reforms, Cuban cooperatives were relegated to the agricultural sector; last year, agricultural co-ops were responsible for 70 percent of Cuba’s farmed land. The Castro regime’s new liberalisation program opens up most of the rest of Cuba’s economy to private — though state-approved and monitored — cooperative enterprises.

Today, Cuba is home to nearly 500 non-agricultural cooperative businesses in a range of sectors – including restaurants, cafes, wholesale and retail produce markets, construction firms, manufacturers, beauty salons, night clubs and other industries.

A new 21-member cooperative – a formerly state-owned Havana-based nightclub called Karabali – has seen its workers’ salaries triple since going private in late 2013.

“We have more of a sense that this belongs to us,” Heydell Alom, an employee-owner of Karabali told reporters. “Here no one steals. This place belongs to everyone. We earn depending on what we can accomplish without any problems from the government.”

Challenges remain

Despite the success stories of new firms like Karabali, the burgeoning Cuban cooperative movement faces a number of serious challenges. Persistent state encroachment, uneven and inconsistent government policy and limited access to national and international markets – owing to political factors like the U.S.’s trade embargo – combine to stifle the growth of new Cuban cooperatives.

These obstacles -and others- will need to be surmounted if the full potential of the Cuban cooperative movement is to be realized.

Cover image: Kathryn Allard, CC BY-ND 2.0

How co-operatives are transforming Cuba’s economy

Jake Bolton

Jake is a graduate of Drew University with a B.A. in Political Science. He focuses on U.S. foreign policy and labour issues, and resides in Egg Harbor, New Jersey.

PUBLISHED — March 4, 2015

Category: BusinessCARICOM & Foreign Policy