By Clay Boggs
Cuba announced on July 1 in its official Granma newspaper the opening of 124 cooperative enterprises. These new cooperatives will include enterprises in the fields of construction, transportation, trash management, and agricultural markets; however, nearly all of the new cooperatives will be agricultural markets.
This announcement, like many in recent years, was long-awaited. The expansion of cooperatives was part of the Communist Party Blueprint for Economic Reform, Cuba’s multi-year plan for reforming its economy, and Cuba’s leaders have said that cooperatives would receive favorable treatment over private companies because they are “more socialized” than private companies. The Cuban government recognizes that it needs to shrink its inefficient and bloated state sector, but it is wary of the private sector; cooperatives are seen as a potential compromise solution.
The experiment faces important challenges.
First, there is no guarantee that cooperatives will turn out to be more productive than the state enterprises they are replacing. Traditional credit and service cooperatives, state farms that have been converted into cooperatives, and hybrid state enterprise-cooperatives have all existed in Cuba’s agricultural sector for decades. In fact, cooperatives represent 77 percent of overall agricultural production. But these cooperatives—especially the state farms converted into cooperatives—suffer from inefficiency and low productivity: Cuba imports most of its food, and production remains anemic despite recent attempts by President Raul Castro to reform the sector. And the new cooperatives are unlikely to be free from state interference; some, in fact, are to be created by local governments or state enterprises.
Second, there is no guarantee that cooperatives will actually be better for worker rights than private companies. International experience shows that there is a great variance in the management and ownership structures of cooperatives. Workers in some cooperatives do experience greater participation in decision-making, better wages, and better working conditions. But some cooperatives function in practice just like private companies. What kind of cooperatives will emerge in Cuba, and how these initial experiments will work out, is still largely an open question. Cooperatives could develop as efficient small to medium businesses that are managed for the benefit of all their members. But if the government ends up regulating cooperatives less strictly than private companies, there is a danger that workers in cooperatives could end up being more vulnerable than workers in private companies. (This problem is already occurring in the “self-employed” sector. Despite its name, this sector actually includes both employers and employees. But since all of them are technically self-employed, employees are not protected by the same labor regulations as state employees.) Some of these issues will have to be addressed in the revision of the labor code, which is pending.
The Cuban government is trying to perform a difficult balancing act—restoring productivity and dynamism to a moribund economy while limiting the power of market forces. As even the reforms’ greatest champions admit, there will inevitably be some losers in this process, and the prospects for success are by no means guaranteed. This is part of the reason why the government is proceeding at such a slow pace with rolling out the reforms.
Clay Boggs is a Program Officer at WOLA.