Cuban Free-market Exercise Lays Off a Half Million State Workers

Cuba has decided to allow for private entrepreneurship through the establishment of free-markets.  The decision is a strategy to decentralize a percentage of services from government control to private industries through the use of private state contractors.  The current weakening of global markets has forced Cuba to re-convene the former strategy first approached in the 1960s when they were, for a period of time, allowed to hire outside of the government.  As a result of the September announcement made by President Raul Castro, the brother of Fidel Castro, a half of million state workers will be laid off by March 31.

Newly licensed private entrepreneurs will face a uphill battle as high taxes, bureaucratic rules, access to start-up capital, and a uncertain customer base are just a few of the most urgent obstacles that must be hurdled in a short period of time.  A lack of raw materials will also prove to be a mitigating issue since newly formed enterprises must purchase materials from currently established majority state owned businesses.  The state has pledged an initial investment of $130 million dollars to procure the materials that the new businesses will need.  These issues paired with the other business cultural woes may have a detracting effect on the realization of gross marginal yields.  Cuba, however, is anticipating an immediate boost in revenue by eliminating millions of dollars from its payroll while collecting on the products of taxation and business license funding.  By January 7, over 75,000 people had purchased a license to operate a business on the island.  This decision also serves as a means to legitimize the burgeoning black market of consumer goods that already operates free of commercial business expense.  By acknowledging the existence of consumer markets, Cuba hopes to create a formal consumer class by promoting the circulation of consumer spending while lessening government economical control as Cuba currently controls 90% of its own economy.

Cuba is a traditionally Marxist government that has built its infrastructure on socialist ideology.  They are not the only country on the globe to practice communism but they are a country in which the United States has had an embittered legacy of entanglements.  The United States led economic sanctions of trade embargo has stood as a determent for international trade agreements with other countries.  Although Cuba provides free health-care and free education K-PHD, a question has remained surrounding the future economy of their island without democracy. While Cuba attempts to provide the socialist Utopian dream of overcoming social conflict through government control and income distribution, the government suffers from an inability to support the majority of its 11.2 million populations on a state administered employment labor market.

As of January 2011, Cubans will be allowed to employ people other than their relatives in 83 private activities, as they will now be able to sell their services to the state as private contractors. The number of activities newly freed from government sanctions is much lower than the anticipated 173 activities first reported in the fall of 2010.  Currently over 84% of Cuba’s workforce is employed by state government with the average pay of approximately $20 a month.  Cuba has the lowest penetration of Internet usage in the Western Hemisphere with very few people having access to the World-Wide Web.

The deepest concern should not only be placed on business operational function but also the advantages of functioning responsibly.  What current organizational information, practices, and policies will they adopt in launching this new initiative?  Are they aware of LEED Volume building construction certifications or sustainable information systems practices?  Are they promoting conservation and proper waste management through recycling programs?  Also, what raw materials will be used is just as important as how the materials will be handled, processed, and stored.  Let us not forget the entire world is facing an energy crisis of mammoth portions and the fight over precious resources is the undertone of many military theatres of conflict.

Havana, Cuba Shopping District

Havana, Cuba Shopping District

Cuba is one of the last bastions of communism and as such they are one of the last adopters of current capital business organizational practices. Cubans suffer from the disadvantage of little experience or expertise in organizational hierarchies of business operations. Consequently, since the leadership and guidance of this project is an unknown at this point, Cubans will have to engage in more of a rudimentary form of businesses organizing without the assistance of Internet research, cloud computing, financial advisers, or open source software.  As reform gradually sprouts, the development to ignite a cohesiveness of government coupled with private free-markets within Cuba could become a negative spiral of implementation leading to the decline of Cuba’s stabilization among other current unstable regions.  Pockets of free radicals are often the precursor to terrorism when unemployment and joblessness reach staggering levels.  Currently there exist over 140,000 private sector workers remaining from Cuba’s last failed attempt at capitalism. Thus, Cuba should tread wisely and cautiously while implementing its latest capitalistic efforts.