Wealth, property and other evils

HAVANA — The basic purpose of the special session of the National Assembly on June 1 was to approve two of the documents that are key to the agenda of transformation of the Cuban government: the Conceptualization of the Cuban Model of Economic and Social Development, and the new version of the Guidelines that will become effective until 2021.

According to reports in the Cuban press, one of the topics that attracted the greatest attention (and probably controversy) involved the concentration of wealth and property in the non-state sector, particularly in the private sphere.

It’s appropriate to recreate the context in which this discussion takes place. The start of an economic reform with impacts beyond the economy, such as Cuba is undertaking right now, responds to a pragmatic evaluation of Cuba’s society that enjoys a minimal though broad base.

In general, the reforms address the irrevocable need to introduce a new economic model that answers the aspirations of the Cuban people in the particular conditions of the 21st Century, within the geopolitical environment that identifies Cuba.

One of the great merits of the Raúl Castro government is its capacity to place this need and the subsequent debate at the center of the domestic agenda, and having advanced — in seven years — some changes that seemed unthinkable one decade ago, when the conditions for its full comprehension in large sectors of society were not yet created.

At the risk of being reductionist, the holding of property is possibly the issue that generates the most heat in the debate, within certain Cuban sectors. But if this issue is discussed in Cuba today it’s because the focus adopted in the past simply did not give a proper answer to the singular needs of integral development in our country.

Not even the patches applied grudgingly in the 1990s were sufficient. Lamentably, this — which seems obvious — is often overlooked.

The bases of the debate remain anchored in the past, while the leadership casts aside useful arguments that emerge from an examination of other realities, or contradictions that have been described and analyzed broadly by the social sciences.

The notion that state property (which has replaced social property) is an automatic vehicle toward the satisfaction of the needs of the people doesn’t go beyond an aspiration. For example, let us look at the issue of wealth distribution.

For various reasons, we have uncritically accepted the supposition that social justice and equality of opportunities require that state property be in the majority, leaving aside an impressive number of mediating factors that weigh on the direction and nature of this relationship.

A phrase that on occasion is used unclearly says that state property must be exclusively or broadly dominant in the so-called “strategic sectors,” without establishing what these sectors are.

A look at the current world does not provide a conclusive answer to that question. We can name many contemporary countries where private property is in the majority (that might be the case in 99 percent of the world’s economies) yet their indicators of inequality of income are lower than in Cuba.

Estimates circulating now indicate that the Gini Index (which is not the only index or the best index but is used most often) has surpassed the 0.40 barrier in Cuba, where private property has a minimal presence in terms of the means of production that it controls, on which there are no precise data. Several countries in Europe and Asia and Canada stand below this level.

In the late 1980s, Cuba occupied some very outstanding positions, but it was not the only country to do so. Some would justify that situation by the fact that they are mostly rich countries with great resources and that Cuba follows a random trajectory, especially because of the U.S. siege.

But that’s the point: development means achieving rising levels of wellbeing in contexts that are not necessarily favorable. Nobody said it would be easy, much less obvious.

The growth of enterprises (regardless of the type of property) requires the reinvestment of revenues and access to credit. When this happens within a regulated framework, benefits to society are generated that are hard to ignore, such as the creation of jobs, the payment of taxes, and the supply of goods or services that were once nonexistent.

The current regulatory framework severely penalizes Cuban private enterprises that are successful, because they pay more taxes than any other business (50 percent, beyond a net income of 2,000 CUC per year). The hiring of workers beyond a minimum also results in an additional tax burden, and private firms are denied access to many sectors that — in stark contradiction — can legally be accessed by foreign private companies.

It is difficult to imagine how an economy where 30 percent of the workers are employed outside the State (a percentage that will continue to grow) can experience healthy growth when entrepreneurial success (the concentration of wealth and property) is seen as an evil.

It is well known — though not much talked about — that state property also generates numerous contradictions. Who exercises real control (and how) over these means of production said to be in the public domain, in terms of the fundamental decisions on their use?

The historical experience of the once-socialist states is overwhelming, in the sense that real socialization through the so-called state property was merely a legal and administrative reality. The real control over those states ended up in the hands of the bureaucracies, which grew increasingly distant from the original purposes of Marxist ideology.

For a long time now, social sciences have described the problems associated with the tragedy of the communes, or the contradictions between agent and principal. This is the case where an economic actor (the principal) requires the mediation of another (the agent) but does not have sufficient information to determine and control the latter’s decisions.

In our context, we can easily describe situations of this kind. The people (the principal, owner of all the means of production) need administrators and bureaucrats (the agents) to manage that property, because it would be impractical to do so directly.

However, for various reasons (national security, secrecy, the self-interest of the administrators to conceal bad work, a deficient system of control and a long et-cetera) the principal has neither information nor the mechanisms to control and evaluate the agents’ performance.

An extreme situation arises when any demand associated with the agents’ accountability is interpreted as an attack on the model itself. As the situation ends, the agents’ decisions are frequently not totally aligned with the interests of the principal.

Another interesting case would be the so-called “tragedy of the communes.” This describes a situation where the independent action of individuals ends up compromising the availability of a shared property resource, which in turn affects them long-term.

This is frequent when the behavior of individuals is not adequately regulated to take into account this tendency to act in isolation, not pursuing the collective interests.

In our case, we often read analyses in the media about the care of “social property,” i.e., parks, public buses, beaches, etc. It is another example that public property does not automatically resolve these issues, which greatly affect the people’s well-being.

Let’s turn to a concrete example derived from the singular position occupied by the state monopoly of telecommunications — ETECSA. It s a good example because, given that it’s the only provider, the people are at once the company’s owners and clients.

What happens when the company has to fulfill a revenue plan for the State that involves a set structure of fares that limit access to the company’s services to a substantial part of the people?

These problems are present in all societies and in all forms of property but they illustrate perfectly how state property (not even social property) is not the automatic answer to the challenges of contemporary society.

In many cases, these contradictions require a more complex and diverse structure of property, where the private and the cooperative sectors occupy an outstanding place. In other cases, it is necessary to endow social property with a regulatory environment much more sophisticated than the one that exists in Cuba. Above all, an environment that can evolve as time goes on, so as to serve the interests of the principal, not of the agents.

An honest and open debate about these issues is necessary and pertinent. The question cannot be reduced to whether the economic surplus is appropriate, either individually or collectively.

If a state-owned company does not perform well enough to pay better wages to its employees, or does not create jobs, or if it pollutes the environment or treats its clients inadequately, it will not be serving the interests of the people.

It is urgent to leave behind the senseless behavior of the past 30-some years, where Cuba exhibits a mediocre economic performance and a simultaneous increase in inequality. That’s the worst possible combination.

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