The new measures taken to streamline the operations of the State Socialist Company in Cuba, recently announced, match the process of adjustments needed to include the island in a coherent dynamic model with proven performance and the proper decentralization of the state as microeconomic administrator.
We cannot see this as a step forward in itself or as an achievement: it is simply correcting an error that has led to inefficiency, lack of control, mismanagement and corruption. The models established from the institutionalization process, and the role of ministries and institutions administrators, conditioned the loss of entrepreneurship and an extensive web of regulations that made it almost impossible for companies to fully function and be productive.
A key aspect is that the policy of stimulus from the seventies and mid-nineties was made on erroneous bases, based in ideological and non-productive postulates. Moral incentives, diplomas and medals, attached to the granting of proletarian televisions, refrigerators and fans and, in the case of the most selfless, beach houses and hotel stays, were just not conducive to the needed productivity gains.
Importantly, the flexibility of the corporate purpose of the company enables entities, which by their nature can do so, to instrument secondary ways of generating profits.
Another important shift is that administrative restrictions on wage formation are lifted, so this will be instrumental in the regulation of supply and demand, and may be a standard reference on the actual role of professions and services.
Although encouraging, these measures still drag vices of the past. While companies enjoy relative autonomy and are released from the yoke of the central leadership of the state, plans still must be approved by the President of the Higher Business Management Organization (OSDE) that, in practice, replaces the relevant Minister. It is not a step forward: the replacement of an entity for another just mask the centralization of decisions.
If there is a logical network of business performance, collective agreements, consistent tax system and public and private guarantees of distribution of utilities, the creation of supra entities of controllers is meaningless. The bureaucracy is not removed by creating more bureaucracy.
Clearly there is a desire to relieve the State of functions that hinder its full operation. The State company, which is not unique to socialist society, must be efficient. If the process of making executive decisions has to wait for the signing of a President, the necessary link of productivity with the public purpose of the company will be limited in time and possibilities.
The measures adopted also point “indicators” to evaluate the performance of companies: total net sales, profit, satisfaction of state demand, export sales, working capital turnover and the contribution of foreign exchange. The latter notes that while there is monetary duality, which demonstrates the wrong way to understand the monetary coexistence, an obvious flaw of the past that still considers the Cuban Convertible Peso exchange alone in its expression and not as a national currency. In this respect it should perhaps be more flexible and consider official exchange as unique pattern of monetary reference.
Good news is that the surplus on State demand may be marketed in relation to the prices according to supply and demand. A truly novel aspect is that for the first time in a socialist state enterprise in Cuba the government renounces the imposition of regulated prices and services, and let the market mechanism to define them. In order to consider the Cuban economy in accordance with the admitted as functional systems, this is a great step forward.
Furthermore, the possibility of selling to a wholesale market the surplus will make other sectors of the economy energize. Although they are not defined either in one direction or another, the regulations do not preclude a commercial connection between the state and private sector.
The relationship between state enterprise and self-employment could be a dowry axis that gives autonomy to the procedures that are, at least today , not too transparent. It is vital that a natural relationship between companies, not to adjust them only to its status in society, but for the benefits they generate. One of the complaints of the self-employment (euphemism for small business) is that it makes it difficult for them to access certain products and services that the state company is not authorized to offer them. Perhaps these regulations will correct this nonsense
Another element to consider is that a greater say in business, the possibility of falling into corrupt conduct is greater; hence the need that the pay compensation will become a fair compensation element and , together with the tax system and control , avoid theft, embezzlement and abnormal situations .
The Cuban state has to stop definitely of being a business manager. The possibility that both state and private business entities operating in mutual relationship and naturally, is not only advantageous for these , but also allows the State to fulfill its function, which is solely to ensure the proper distribution of public goods. No function of government is to decide prices, production levels or allocation of raw materials.
Despite suspicions still beats in the decision makers who release the Ministries but create OSDE eliminating some bureaucracy to do with others, it is undeniable that this is a step forward that says that updates and economic reforms undertaken by the Cuban government are irreversible. Cuba is increasingly closer to efficient operation schemes, essential for ensuring a better future for all.
Author
Jorge de Armas
