Translation: An old debt (Terrero/Bohemia)

Here, Cuban economic commentator Ariel Terrero argues that Cuba's inflated state-sector payrolls are an old problem that demands an urgent solution.

An old debt

By Ariel Terrero

Bohemia, September 20, 2010

Translation: Marce Cameron

It's not the first time that Cuban society proposes to pull itself out of the quicksand. On numerous occasions, speeches, studies and agendas have warned of its grave economic and political implications. But opposition to excessive personnel is usually confined to words rather than deeds, even though this is one of the most serious problems that has held back the economy for decades.

In the late 1980s, the process of Rectification of errors and negative tendencies was aimed at inflated payrolls and other related problems such as undue earnings and corrosive practices of workplace indiscipline.

It was probably the most concerted attack on this economic cancer. But it was an abortive operation. The grave [economic] crisis at the beginning of the 1990s led to the Special Period, which imposed another priority on the country: resistance.

Despite the vigorous criticisms made in the public assemblies in [the Rectification] process, I wonder if the country was ready in the 1980s to break with the dogmas of state paternalism and social egalitarianism, which had made employment the almost exclusive responsibility of the state and not, what's more, the duty of the individual worker. Perhaps not. Change is traumatic. It transcends the mere organisation of work and current estimates of a million excess state-sector payrolls; it also concerns everyone's habits, conceptions and attitudes to work, along with incomes, standards of living, economic structures and also with ways of conceiving of socialism, often ill-founded or at least outdated.

We confront this challenge once more today. With fewer alternatives.

The Cuban economy will never take off, with firmness and stability, while it is held back by labour distortions and the dead weight of billions of [regular Cuban] pesos expended annually on salaries in return for a meagre social contribution. The inflated payrolls generate an unfavourable relationship between productivity and salaries and become, as one of the more obvious consequences, a barrier to increasing the low wages of workers. Like the riddle of the chicken and the egg, low salaries for low labour productivity ... or low labour productivity for low salaries.

But excess personnel are just the tip of the iceberg of another evil, more acute and deplorable: underemployment, in some enterprises and budgeted entities more than others, of the most precious resource that Cuba possesses today: the human capital tenaciously forged in more than half a century of Revolution.

Despite the magnitude of the adjustment of employment policies and the consequent proposal to relocate, in a first phase, some half a million state-sector workers [to other state jobs and the expanding small-scale private and cooperative sector], there exists a national consensus on the need for change. The state cannot continue to bear alone, at the cost of deteriorating economic efficiency, our ambition of full employment and the financing of every little productive and service entity. The economy, weakened by a tense combination of internal and external factors, does not support this.

The transformation of the labour scenario goes hand in hand a series of economic reforms that transcend employment policies and imply a structural reformulation, defined as the updating of the Cuban economic model. Some changes were initiated in recent years — new forms of incentive payments in [state] enterprises and the leasing of state-owned farmland in usufruct, to cite two examples — while others are underway or will be implemented in order to create non-state employment alternatives: the expansion of self-employment, the renting of premises and equipment, the creation of non-agricultural cooperatives, adjustments to taxation policies.

And these are, I dare say, just a glimpse of all the changes that will be introduced in the Cuban economy, gradually but without vacillations, in the immediate future. The banking system, for example, needs modifications to facilitate the survival of the new options for private employment which will be massively expanded. And the state sector, in turn, needs profound adjustments to guarantee that elusive efficiency it has strived for since the 1960s. This is the way to ensure that we repay an old debt, to banish once and for all the evil of inflated payrolls and to restore work and wages to their pride of place, and that the socialist state enterprise continues to be the main pillar — deservedly this time — of the Cuban economy.