Tuesday, September 14, 2010

Cuba encourages private enterprise. It's not just capitalism that is broken...

4 Years ago I visited Cuba, renowned for its communistic and highly centralised economy. I was surprised to find that actually around 15% of Cubas work force were not employed by the state but instead were allowed to run taxis, cafes and market stalls. This was apparently allowed to help support the growing tourist industry that was developing in Cuba.

One night in Varadero I decided to go off of the hotel complex we were staying in and instead visit a small night club that conveniently sold beer at around 10% of the price of a pint in the UK. The bar was full of local Cubans who worked in the tourist industry all with western clothes and disposable income to drink beer with. It was clear to me that since the introduction of foreigners and foreign currency a significant black market was starting to develop. In addition to this black market global forces such as the credit crunch were affecting Cubas economy. The price of one of its major exports nickel has dropped and tourist revenues have decreased as people don't travel so far afield on their holidays.

I believe this black market has continued to grow and grow and the state has no way of taxing it. Cuba has recently announced that it will be removing 1,000,000 state jobs over the coming year - encouraging people to start their own businesses and form a larger private sector sector. I estimate that if these reports are true then private enterprise will in future make up 35% of the Cuban workforce. People will be able to start their own businesses and even employ people (with a permit of course.) and best of all for the Castro administration they will be able to tax people. Businesses will be able to open bank accounts and even borrow money for land, and equipment - let's hope the Cubans act a little more responsibly than we did when it comes to private banking.

Hopefully these recently announced reforms will help to end the trade embargo with the United States bringing with it the possibilities of cheap grain imports and more income from tourism.

Venezuela has announced that it is building a fibre optic Internet link to the island which should be operational by 2012. These are massive changes for the Cuban people, possibly the biggest changes since the 1959 revolution.

Part of me is sad that one of the final bastions of communism is slowly moving right. But if Cuba can by making these reforms improve the quality of life of its citizens then it should. At a time when many in the western world believe that capitalism is broken countries like China and Cuba seem to be moving further in that the capitalist direction. Maybe it's not capitalism that's broken after all. Maybe this is just the end of the western empire.

1 comment:

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