Communist Cuba embracing entrepreneurship, with limits
I was fortunate enough to spend some time in Cuba recently and saw the changes that have occurred due to an increase in entrepreneurial activity.
The U.S. reestablished relations with Cuba in 2015. Diplomatic efforts with Cuba ended in 1961, after Fidel Castro took control of the country. Cuba still is a communist state ruled by Raul Castro, who took over after his brother Fidel died in 2016.
In 2010, Cuba’s government laid off 10 percent of the labor force and told them to go start their own businesses. Since then, nearly 600,000 Cubans have become “cuentapropistas,” entrepreneurs who have opened all kinds of small businesses.
They rent spare bedrooms in their homes, use family cars as taxis and invested their savings into enterprises that have led to an additional 400,000 jobs and a much-needed increase it the Cuban tax base. Many Cubans now earn much more than when they worked for the government. The average state wage is 848 Cuban pesos ($33) a month; independent taxi driver can make more than 10 times that amount.
Our tour guide was a young woman who left her job as a language professor at the state university making $25 a month to make several times that amount working for the tour company. She said she has colleagues who are ex-doctors who made $80 a month and left their practices in the government health system to make more money leading tours of Havana.
Forty percent of the population of Cuba now works in the private sector. The guide was more than happy to point out and encourage us to patronize the privately owned restaurants and other businesses as we passed them on the tour.
The Cuban government has expressed its concern about the number of people starting and succeeding in their own businesses. In December, the government proposed new laws that would restrict the number of different businesses one person could own based on the government’s classification of businesses.
For example, the government classified bars and restaurants as different businesses. As a result, someone who owns a restaurant and a bar would be forced to shut down one part of the business. The government said the new regulations were intended to reduce black-market trading and tax evasion, and reduce inequality in income.
The state has found other ways to limit the wealth of successful businesses. Government rules limit restaurants to only serving 50 people at a time. This was done supposedly to keep owners from using too many resources. Entrepreneurs who want to hire more than 20 workers must pay higher taxes for each additional employee.
Just before the new laws were to start, the government changed its mind and decided not to implement them. When asked about how this happened, the tour guide either did not know what happened or did not want to say what happened. When asked if there were protests by the business owners, she made it quite clear there is no protesting going on by anybody against anything the government does there.
One of the most interesting parts of the tour was a stop in a pharmacy. Cuba has free health care for its citizens. The pharmacy looked like a museum, showing off the free pharmaceuticals that are available to the citizens. The free health care system was clearly a point of pride for our guide.
There were no images of Fidel or Raul Castro. No paintings, no statues, nothing. When asked about this, the guide said Fidel Castro wanted to promote his philosophy, not himself. However, fellow revolutionary leader Che Guevara’s image is featured on T-shirts and posters in gift shops.
It is going to be interesting to see how growing entrepreneurial economies like those in Cuba and China will work with the communist governments in those countries.
Perry Haan is professor of marketing and entrepreneurship at Tiffin University. He can be reached at (419) 618-2867.