Camila Piñeiro Harnecker: Risks in expanding non-state enterprises in the Cuban economy

[For more analysis and discussion on the economic changes in Cuba, click HERE.]

By Camila Piñeiro Harnecker

October 7, 2010 -- Links International Journal of Socialist Renewal -- This article is intended to call attention to the most important negative consequences that the recently announced decision to permit free hiring of salaried labour could generate in Cuban society. It also attempts to suggest some measures to increase the possibilities that the new non-state enterprises (self-employment, cooperatives and conventional private businesses) may contribute to the development of the Cuban economy in consolidating our socialist development; that is, the creation of a more just and humane society. It is a synthesis drawn from the paper “New enterprise forms in the Cuban economy”, prepared for the seminar “Economy and administration” organised by the Economics Department of the University of Havana and Humboldt University, Berlin, September 24-25, 2010.

Risk: the expansion of capitalist practices and values

As it has been argued in other works, a socialist enterprise (that is, one in which “social property” takes shape) is not necessarily a business administered by the state. What defines an enterprise as socialist is the degree to which its management is democratically controlled by society, by its worker collective, by the communities where it is located and by other social groups impacted by its activities. As analysed below, the intensity and extent of the control that the representatives of the affected social interests exercise upon the democratic management of a worker collective (those affected more directly) will depend on the activity of the business and how social interests are defined.

Following this logic, the self-employed worker or the democratically managed enterprise (a self-managed enterprise like cooperatives), that are also guided by social interests, are socialist enterprises. They are genuine examples of social property. Their introduction does not represent a retreat from the development of socialism.

Nevertheless, a business controlled by one person (in the form of self-employment or some other legal form) that hires a permanent work force, is not a socialist enterprise. It is a business in which there is a capitalist who controls the decision-making process and does not allow the salaried or wage workers to participate in decision making. The workers, by selling their labour-power, surrender their ability to take part in management; to control it. According to Marxist theory, this private (not social) control or “private property” that is materialised in the capitalist-wage labour relation of production is the basis for the functioning of capitalist society. From the daily workings of that relation, both capitalists and wage earners, develop the values of individualism, egoism and apathy or insensitivity to the needs and interests of other human beings.

What makes the condition of the wage workers unjust is not simply the amount of pay they receive -- whether it is equal to the value of what they produce or whether the pay is sufficient to satisfy their basic needs. The injustice lies in the undemocratic character of a management that sees the workers not as human beings with intellectual abilities but as mere machines or inputs in the productive process. The capitalists (those who own the business, the capital) may have good intentions, but as long as they do not share management with workers, they maintain an unjust social relation.

Therefore, when we promote the unlimited hiring of salaried workers without the possibility of creating self-managed enterprises for those activities where more than one worker is necessary, we promote the expansion of capitalist practices and values. We prevent those who are obliged to sell their productive capacity from developing as full human beings, seeing themselves less capable and less worthy in society. We also favour individual solutions above collective ones, authoritarian methods of management over democratic ones, and egoism above solidarity.

Recommendation: to favour self-managed enterprises over the hiring of salaried workers

To promote socialist relations of production, which Karl Marx defined as the free association of workers united under a plan, it is not necessary or advisable to prohibit the hiring of salaried labour. But it is necessary to establish clear limits and to regulate it in such a manner that those who have the advantage of financial resources and entrepreneurial initiatives will find it more attractive to set up self-managed enterprises, and similarly, that the less fortunate will prefer to join them rather than becoming salaried workers.

A strict option is to require that workers be hired only on a temporary basis to meet seasonal needs or unforeseen situations that might require more labour force. But, if the permanent hiring of workers is to be permitted, the tax the business must pay for each hired worker could be higher for permanent labour. It would also be advisable that the tax (for permanent and perhaps temporary) be progressively increased according to the increase in the number of employees. If we seek that businesses do not to hire more than a certain number of workers, the tax for adding workers above that number could be drastically increased.

Of course, these regulations or negative incentives are not going to prevent capitalists from using various methods to augment their individual benefits such as: setting up other businesses in the name of persons in their confidence in order to recruit more workers; repeatedly hiring temporary workers for situations that in reality are permanent; hiring unofficially to avoid paying taxes; or other schemes. Therefore, it is important to create positive incentives that make the promotion of socialist enterprises more attractive.

If we wish to promote the creation of socialist rather than capitalist enterprises, we need to pass legislation for cooperatives that facilitates their creation and makes state institutions responsible for supporting them. To be more inclusive, such legislation could also allow for the creation of other types of self-management such as co-management and partnerships. To do this, it will be necessary to create an institution with offices in the localities (as the National Association of Small Farmers -- ANAP -- does in attending the agricultural cooperatives) that processes the legal registration and the issuance of the corresponding operating licences for these enterprises.

The institution should also offer access to training in business administration, in the particulars of democratically managed enterprises, accounting and legal services, technical assistance, certification that their management is truly democratic, among others. An important task would be to audit those enterprises registered as self-managed, by requiring periodic reports of their economic activity (their books) and social activity. The latter might include the minutes of general assemblies that show participation in major decisions, a list of all associated workers or members, temporary workers and, if it is decided to allow them, of permanent wage workers. Reports on these and other matters of interest can ensure that a given enterprise is really self-managed and not a capitalist business trying to pass itself off as self-managed in order to have access to their privileges.

Self-managed enterprises, such as cooperatives and other types of democratic enterprises that might be legislated, should not have to pay tax on hired workers since those making up the workforce, to the degree that management is truly democratic, are partners, associated rather than wage workers. When self-managed enterprises recruit salaried workers, they should pay the same tax as paid by a capitalist business. Since the self-managed business, upon registering as such, assumes the logic of satisfying the needs of its members, rather than seeking the maximisation of profit, perhaps it would be advisable to restrict their hiring to temporary workers or to limit the number of permanent salaried workers to a fixed percentage of associates. (In other countries it is 10%-30%.)

Another possible measure that would be effective in promoting self-managed enterprises is to require state institutions to give preference to them over capitalist enterprises in their procurement of goods and services. Self-managed enterprises could be given greater access to the production inputs they need at non-subsidised prices or on more favourable credit terms. Advantages in access to financing, such as grace periods and lower interest rates, would also have a great impact.

To prevent businesses from registering as self-managed enterprises and enjoy those privileges while behaving in a capitalistic manner, they should be effectively supervised by the institution mentioned above as well by any citizen, and especially by its own workers. Key to this is that the enterprises must be completely transparent in their management, that is, enterprises should keep proper record of their operation and make that information available to public scrutiny through the oversight institution. Its rights and obligations, as well as the consequences of not complying with its responsibilities, should be made clear in legislation governing self-managed enterprises.

Nevertheless, before the Cuban state gives advantages to the self-managed enterprises, it should first clarify its position regarding the hiring of permanent salaried labour. It should define whether Cuban socialism is or is not characterised by a degree of social justice in which this would be incompatible. This would depend on whether we include in our understanding of social justice the right of people to develop themselves as full human beings, keeping in mind not only their material needs but also their spiritual need to fulfill themselves as complete individual and social beings.

Risk: orientation of economic activity toward profit instead of satisfaction of social interests

For Marxist thinkers, the most important elements in regard to the organisation of work in socialist construction were essentially two: that enterprises be associations of free workers democratically managed; and that these be united and guided by a plan that guarantees the satisfaction of social interests, which essentially implies a democratic management of the economy by society, the exercise of social property. The need for planning or ex-ante coordination is not just to avoid the cyclical crises of capitalism but also so that society may direct productive activities to satisfy the most important needs and not just those that generate more profits for business.

Indeed, when society does not exercise control to guarantee that the economy responds to its interests, what guides the functioning of enterprises is the maximisation of profit according to the logic inherent in mercantile or market relations, which rarely coincides with basic social interests. According to that logic, enterprises tend to prioritise production that makes the greatest profit at the expense of other production required to satisfy basic needs, to concentrate supply in sectors of the population with greater buying power but not of greater need, to set prices well above costs whenever possible, to evade taxes, to use the cheapest raw materials and technology that damages health and the environment, to discriminate against those with lower productive capacity for reasons beyond their control, along with other behaviour that violates legal obligations and produces evils such as shortages, inequalities, unemployment, and health and environmental problems.

As everyday reality and even neoclassical theory demonstrates, if its tenets are carefully analysed, the laws of the market are not effective in guaranteeing that the required supply of products of low elasticity of demand, such as basic goods and services that people cannot do without even if the prices rise and they cut consumption of other products. Furthermore, those laws come into operation after the problem has already been created. The market system is even more inadequate in satisfying such other social interests as the maintenance of certain levels of equality, non-discrimination of gender and other types, internalisation of social costs such as environmental contamination and unemployment, externalisation of social benefits such as sharing its knowledge or other resources, etc. In general, any genuine intention of business to act in a socially responsible manner results in an opportunity cost that affects its position in the market.

It should be emphasised that it is the very logic of market operations that generally prevents a business from orienting its activities in accordance with social interests. Furthermore, encouraging the maximisation of individual benefits – the justification that is usually used to promote market relations – is not the same as promoting the satisfaction of even basic material necessities.

On the other hand, it is important to clarify that the state enterprise (one administered by representatives of the state) is not necessarily under social control or oriented toward the satisfaction of social interests, for that depends on state administrators responding effectively to the directives they receive from the agencies to which their enterprise is subordinated, and more importantly, that those directives accurately reflect social interests. Many economists have identified the limitations of a system of authoritarian planning (non-democratic and excessively centralised) both in identifying social interests and in motivating state administrators to supply the necessary information for effective planning as well as to later comply with the assigned directives.

Recommendation: promote social control of non-state enterprises by local governments and their citizens

But a market system is not the only alternative to authoritarian planning. A number of economists have shown how institutions can be designed to promote and facilitate relations of horizontal exchange with logic compatible with the social interest, that is, non-market exchange relations. Rather than accepting market relations as unavoidable – given the indisputable advantages of relations of horizontal exchange (rapidity, flexibility and the possibility of choosing among various options) and the ineffectiveness of authoritarian planning – it is possible to establish a better synthesis that combines the advantages of decentralised activities with the advantage that those activities be guided by social interests defined in the localities and social groups where their impact is felt. This may consist of merely verifying that enterprises – whether state-run or not – operate according to a logic that rewards socially responsible behaviour and penalises behaviour that works against the social interest.

To ensure that businesses contribute to the satisfaction of social needs and expectations, interests must first be identified and articulated as social interests. Given their bilateral character, horizontal relations by themselves do not allow buyers and sellers to identify and take into account the interests of others. To define social interests, it is necessary for these actors and others affected by their activities to participate within spaces of democratic coordination where their particular interests are identified and articulated into social interests as close as possible to the interests of all. Then, the operational logic of the enterprises must promote the internalisation of those interests.

Since the impact of the activity of these new, presumably small and medium non-state enterprises will basically occur at the local level, the social control necessary to ensure that they respond to social interests can focus on institutions and policies at the municipal or popular council level. Therefore, local government should assume responsibility for orienting businesses in their locality toward the social interest. To do this, it would be advisable to create spaces for democratic coordination that would include representatives of non-state enterprises (associations or councils of the self-employed, cooperatives, other self-managed enterprises and capitalist businesses) as well as representatives of the social interest, such as delegates from popular power (i.e., government) and social organisations in those localities. All them, by consensus, would design development plans, agree on policies to achieve those stated goals and monitor compliance with them.

To the extent that local governments achieve a genuine articulation of social interests in their territories, faithfully represent local development plans and effectively implement them through policies and institutions, their control over enterprises will be that much more legitimate. Thus, if businesses understand that their contributions are going to be used effectively for the satisfaction of social needs or, better yet, if their representatives can participate in the decisions about how to use those contributions (through democratic methods such as participatory budgeting) and can control their use (through a truly transparent accountability by the local government), it will be more difficult for businesses to evade taxes and other social responsibilities.

Of course, the extent and degree of social control that local governments exercise over enterprises should vary according to the strategic or basic (related to the satisfaction of basic needs) importance of the work those businesses do. In most cases it will be enough to clearly define in the operating licences and in usufruct, financing and sales contracts, what is expected of them without interfering in their decision making. Depending on its activities, a business can be asked to: contribute from its profits to the social consumption fund of the local, provincial and national budgets; to use a certain criteria for setting prices based on social costs and benefits; produce at determined levels and with a required quality; commit part of its production to sales to public institutions; among other obligations.

All businesses should contribute to the social security system so that workers can count on resources to satisfy their basic needs when they reach retirement age or suffer an illness that prevents them from working.

All businesses should also pay progressive taxes on their net profits or earnings so as to contribute to social consumption, from which their workers would also benefit. However, these taxes should not be excessive. They should allow businesses to restart their production cycle without having to seek funding. It is also important that taxes on sales – although recommended to assure taxes are paid since enterprises can decide to spend more than necessary to reduce their taxes on profits  – should not be very high for products that are considered basic or whose production it may be desirable to promote, because those constitute an operating cost passed on to the consumer. In general, to avoid going to extremes that sacrifice the interests of the business and its workers to the social interest, thus discouraging business activity, their obligations must be consistent with the objectives of the local plans for democratic development as determined with the participation of their representatives.

As mentioned above in relation to the hiring of permanent salaried workers (whose eventual eradication should be of interest to any society committed to socialism), to ensure compliance with the social interests set out in the legal agreements that businesses establish in their operating licenses and contracts with state institutions, they must be transparent and supervised not only by the corresponding state institution but also by any citizen interested in seeing that the social interest is respected. Besides the negative incentives associated with sanctions for non-compliance with legal obligations, the same positive incentives previously proposed to favour self-managed over capitalist businesses should be used to reward those that contribute to the satisfaction of social interests.

Finally, it is important to clarify that this social control over business activity does not mean that enterprises would be barred from establishing horizontal exchange relations. Decentralised relations are critical for enterprises that need to act with flexibility and speed. Nor is it intended to prohibit them from trying to increase their profits, since that is clearly not possible or desirable. The idea is to ensure, through democratic planning and a comprehensive system of positive and negative incentives, that the logic of horizontal exchange guiding business activity should not be merely the maximisation of its narrow individual interests, but the internalisation of the social interest.


There are other negative consequences that can arise from promoting non-state enterprises without really perfecting the management of state enterprises (that is, the decentralisation and democratisation of its management), such as the weakening of the state enterprise by the diversion (i.e., emblezzement) of its inputs and workers to the non-state sector. Therefore, it would have been better to have begun reforming management of state enterprises before the opening to non-state enterprises.

On the other hand, if the minimum conditions are not created for the new non-state enterprises to be successful before the planned layoffs occur, we run the risk that a large number of them will fail. Many of the initial entrepreneurs will lose confidence in their ability to try again. Moreover, there will be the serious consequences that unemployment brings for the unemployed and society in general.

Doubtless, the opening to small and medium non-state businesses in our economy can have very positive consequences, such as job creation and the satisfaction of some consumer needs that today are not satisfied. But how well they reach these and other important goals and avoid the negative consequences discussed here will depend on the decisions taken and on all who attempt to influence those decisions.

To maximise Cuba’s chances for success as a society, even more as a society committed to the building of socialism (a more difficult but necessary goal) it is important that those decisions be thought out with care, keeping in mind various point of view but maintaining as a guide the interests of all of society. To identify that social interest – the vision that guides us as a nation –  it is imperative and urgent to define the essential principles that must characterise Cuban socialism, as Cuba's President Raul Castro stated in his speech to the National Assembly on August 1, 2009.

[Camila Piñeiro Harnecker is a teacher, researcher and consultant at the Center for the Study of the Cuban Economy, Havana University.]


BY Anneris Ivette Leyva

December 2, 2010 -- Granma -- MANY people are questioning the current process of redeployment and the reduction of inflated rosters, coming as it does two years after discussions on the need to increase the retirement age in Cuba. However, this does not in any way mean taking contradictory steps: in the case of inflated rosters, it is about confronting a matter of immediacy, while Social Security Law 105 proposes to confront a phenomenon in a gradual way over 15 to 20 years.

Updating the Cuban economic model, stripping it of obsolescence and obstacles, involves moving those people whose current work does not take advantage of their creative potential to jobs where they can make better use of that potential and comply with the principle of compensation according to quality and quantity of work.

In the same context of excess personnel, this is also about defending the working life of collectives in need of new faces, whose workforce needs those surplus people from a neighboring entity, but ones who fit the requirements, otherwise it would be a worthless exercise.

On the other hand, it is possible that certain services with shortcomings are calling for the opportunity to operate on the basis of their own efforts, attention and ingenuity, given that they do not function well under state formulas.

What is a definite truth is that none of this has the goal of discounting, suppressing or marginalizing, all of which are notions antagonistic to the spirit of the Cuban socialist state. Under the safekeeping of the Revolution – as President Raúl Castro assured in the closing session of the 9th Congress of the Union of Young Communists in April – no Cuban will be left unprotected, nor will they lack the opportunity to enjoy a dignified job.

Understanding the essence of adjustments in the labor sector is beginning to happen, but has to start out from a strong conviction: that nobody is surplus in Cuba.

Reasons like the above invalidate a possible contradiction between the current redeployment process and reduction of inflated rosters and the decision to raise the retirement age by five years (from 55 to 60 years in the case of women and from 60 to 65 in the case of men).

The central arguments that led to Law 105 being passed and coming into force in January 2009, responded to the need to update a regulation which no longer bore any relation to its citizens.

When the first Social Security Law 1,100 came into force (1963), the Revolution was barely undertaking the climb toward social justice and dignity, and the vast majority of people still bore the scars of the serfdom described by Fidel in History Will Absolve Me. Bearing the weight of this social burden like leg irons, Cubans at the end of the 1950s could only aspire to live to 60 years.

In half a century of Revolution, the life expectancy rate has increased by close to 20 years, now standing at 76 for men and 80.02 for women, giving a general average of 77.97 – according to data from the National Statistics Office (ONE).

In parallel, we have experienced a sustained declining birthrate, which has led the country rapidly along the road to populational aging. Since 1977, the average birthrate of Cuban women has not guaranteed their replacement; in other words, they have just one daughter during the reproductive stage.

Figures point to the fact that in 20 or 30 years Cuba will have the oldest population in Latin America, and thus, under the old legislation, it will not be too long before many more workers leave the labor market than those who join it.

This being the case, there would be no capacity to generate the funds to meet the retirement pensions of the 1.6 million social security beneficiaries and the 426,000 covered by social assistance, who receive different benefits.

As Juan Carlos Alfonso Fraga, director of the ONE Population and Development Study Center, clarified for Granma newspaper, social security is a system that has to retain a balance. We have to be sure that sufficient workers make productive contributions in order to create the funds needed by those within such a regime, as well as those who have still not reached working age.

This is independent of the number that we might be, it is a matter of proportion, he noted, where the number of people working must always be higher than those who are retired; if not it is impossible to guarantee its sustainability.

At the present time, approximately 65% of the Cuban population is of working age (although not all of them do so) and the other 35%, not being in that age group, are dependent on it. The shifting of the working age, Alfonso Fraga stated, guarantees the vitality of the system.

The imbalance between those of working age and those retiring was calculated to begin in 2014-2015, just around the corner, he noted.

"With the new legislation, we have achieved a deferment of this situation up to 2020, when Cubans of 60 years or more will represent 22%. We will reach this point with a smaller gap between people entering and leaving, thanks to the measure adopted."

More years of life and fewer births lead to a aged society, characteristic of developed countries which, while it denotes the excellence of Cuban social policies, imposes the challenge to appeal to these forces in order to attain an economy free of damage and inefficiencies, where there is no place for a battle of false contradictions between the redeployment process and Social Security Law 105.

Before housing fears, we need to look again at untapped reserves in sectors such as construction, which is in need of approximately 30,000 people, or in agriculture, still with 50% of idle land to be put to use.

By working as custodians in the above sectors – a tendency that was growing – we will not be able to contribute to the country’s industrialization, nor plant the vegetables whose shortage we then decry in the market.

On the other hand, more and more countries in the world are asking for Cuban professional knowledge, and thus services provision is increasing, dignifying the soundness of our greatest capital: human capital.

Extending the working age is not opposed to the imperative of being where we are most ideally suited; it is above all, as has been explained, a necessity emerging from the growing phenomenon of populational aging; we should also see it as an opportunity to be useful, at this cardinal time for Cuba’s future.

Written by Alan Woods Tuesday, 23 November 2010

Wednesday 3 November in Havana marked the start of a three day conference on “Socialism in the XXI century” organized by “Cuba, theory and society” under the auspices of the Havana Institute of Philosophy. Among a small number of foreign guest speakers was the editor of, Alan Woods. We publish here the report written by Alan on his return.

Alan Woods with Juan Sánchez Monroe
The meeting, which was held in the Cuban Institute of International Relations (ISRI), was attended by about a hundred prominent Cuban intellectuals, academics and veterans of the Communist Party, including several members of the Central Committee. It was held at a critical moment on the history of the Cuban Revolution, when the future of the Revolution will be decided in one way or another.

During the course of the conference, the date of the long-awaited congress of the Cuban Communist Party was finally announced. It will take place in April of next year and will debate a number of proposals regarding the economy contained in the document Draft guidelines for economic and social policy (Proyecto de lineamientos de la politica economica y social), copies of which were immediately snapped up from the news vendors’ stalls.

In this context, the discussions about the meaning of socialism in the XXI century took on a very concrete, relevant and urgent character. The vociferous campaign against Marxism and socialism that reached a deafening crescendo after the fall of the USSR has been echoed by revisionists who are doing everything possible to introduce bourgeois ideas into the labour movement. The struggle against bourgeois ideology is therefore an urgent task, and nowhere more urgent than in Cuba and Venezuela.

In the course of three very intense days, many hours were spent discussing themes such as crisis of capitalism, socialism and science, the national question (introduced by Juan Sanchez Monroe, a former ambassador to Yugoslavia and the Ukraine), the revolution in Latin America, Marxism and the ideas of Bolivar and Marti (introduced by veteran Cuban communist Olivia Miranda Francisco) and many other questions. To deal with every contribution would be an impossible task, which I will not even attempt to do. I will therefore limit my report to what I was able to jot down in my notes. As many points have had to be reconstructed from memory, this must not be taken as a stenographic report but rather my impressions of it.
The first session

Cross section of meeting
On the first day, Juan Luis Martin Chavez gave a devastating indictment of capitalism on a world scale. He pointed out that the three richest men in the world have a greater income than the 48 poorest countries. Humanity is threatened by environmental degradation on a vast scale. Desertification threatens 250 million people or one third of the earth’s surface (4,000 million hectares). Vast sums are wasted on arms while 1.2 billion people live on the edge of starvation. He gave the figure for total world arms spending as $1.1 trillion, with the USA accounting for 48 percent of world arms production.

In recent years there has been considerable interest in the ideas of Trotsky in Cuba. In the course of the conference, several people mentioned The Revolution Betrayed as a book that explained what had happened in the USSR – a subject that obviously has enormous importance for Cuban communists. The historian Felipe de Jesus Perez Cruz gave a very good Marxist analysis of Stalinism and the reasons for the collapse of the USSR, quoting from the book by two Cuban authors, Ariel Dacal and Francisco Brown, Russia: from real socialism to real capitalism (for which I wrote the introduction).

In his speech, comrade Felipe stressed the importance of the Bolshevik Revolution (“something that had never been seen before that changed the history of the world”) that was brought down by “mistakes and corruption”. Here are some of the points he made:

“Lenin had tried to combat the rise of bureaucracy by emphasizing the need for control by the workers and peasants and the soviets. But after Lenin’s death, there was a process of bureaucratic degeneration.” Felipe delivered a blistering attack on Stalinism, which he said “was responsible for the physical liquidation of the Old Bolsheviks.”

“In theory it was socialism but in practice power was in the hands of a minority of functionaries and administrators. The workers were alienated from control of production, the state and the Party. Recruitment to the bureaucracy was on the basis of unquestioning loyalty to the ruling circle, a privileged layer that took all the decisions and was hostile to all criticism. All criticism was seen as counter-revolutionary. The intellectuals were silenced and subject to censorship or self-censorship.”

He explained how under Stalin and his successors a growing part of the wealth produced by the working class was absorbed by the bureaucracy. This ended in the crisis of the 1980s, and ultimately capitalist restoration. “I am convinced that if we don’t want to repeat what happened in the USSR we must return to the ideas of Lenin,” he said.

Replying to questions and discussion, Felipe said:

“Instead of the word bureaucracy, I prefer to use the word funcionariado (officialdom – civil service). What I mean is rule by a group that has its own interests and is defending them. When the funcionariado takes power and wields it against civil society, it becomes a bureaucracy. The officials cannot transmit their privileges to their children as property, so they do so through political power and corruption. Can we build socialism like that? After Lenin died the potential of the Russian Revolution was lost. We now need to redirect the Cuban Revolution. In Cuba there are many forms of direct democracy that can be developed, including the trade unions.”

On the second day the chair was taken by Juan Sanchez Monroe. The subject was “socialism in the XXI century”. The first speaker Juana Rosales Garcia, who pointed out that the Venezuelan Revolution has opened up a fruitful debate with the participation of thinkers from different countries, including Noam Chomsky, Istvan Meszaros, Alan Woods and Mike Lebowitz.

She was followed by Olivia Miranda Francisco, who stated that after the fall of the USSR there had been a period of confusion “even in organizations calling themselves ‘socialist’” She attacked the detractors of Marxism and stressed that the genuine ideas of socialism go back to Marx, Engels and Lenin. “In the debate on socialism in Latin America there has been a deafening silence on the ideas of the founders of socialism – including Mariategui - and the first socialist revolution. Mariategui, Marti and Mella all had a close connection to the collectivist indigenous traditions of Latin America”, she affirmed.

She continued:

“The struggle cannot only be against imperialism. It must also be against capitalism. Mariategui and Fidel Castro both excluded the bourgeoisie from the revolutionary popular bloc, which consists of the workers, peasants and progressive intellectuals under the leadership of the Party. Only under socialism can full independence be achieved.”

“Socialism of the XXI century”

Alan Woods addresses the meeting
I spoke on the subject “Socialism of the XXI century: nothing new under the sun”. A paper I had written on the subject had already been printed and distributed ( The following is a rough transcription of my speech:

“I am glad to see that the title of this session is ‘socialism in the XXI century’ and not ‘socialism of the XXI century’. The latter suggests something entirely new and original, different from anything that has gone before. In reality, there is nothing new here: only a regurgitation of old ideas taken from the utopian socialists in the prehistory of the movement.

“It calls to mind the story of Aladdin in the 1001 Nights, when a crafty old wizard goes through the streets crying: ‘new lamps for old’. Aladdin’s girlfriend, who was not very bright, exchanges his valuable old lamp for a new shiny one, which is utterly worthless, and lands in a mess as a result.

“The theory of socialism of the XXI century, however, has one great advantage over all other theories: nobody knows what it is. It is an empty bottle that one can fill with any content.

“We must put this in its correct context. In the last period we have witnessed an unprecedented ideological offensive of the bourgeoisie against socialism and Marxism. The worst thing is that this noisy campaign has had an effect inside the communist movement worldwide. All kinds of revisionist ideas are circulating, and the most serious thing is that they are being echoed by people who call themselves communists.

“The assertion that the “free market” gives better results than a nationalized planned economy can easily be answered by an historical example. In Britain in 1940, when things were very serious, with Hitler’s armies poised to invade, what did the British ruling class do? Did they turn to “free market” policies? Did they say: everyone must do their own thing? No, they nationalized the war industries, they centralized and introduced measures of planning. Why? Because they give better results.

“The USSR defeated Hitler’s armies because the colossal superiority of a nationalized planned economy enabled them to produce more and better arms and machinery more rapidly than the Germans, who had all the productive resources of Europe behind them. The advantages of a planned economy are also shown by the transformation of backward Russian tsarism into an advanced modern economy that had more scientists than the USA, Japan, Germany and Britain together.

“In the end the USSR was undermined by bureaucracy. But bureaucracy is not an inherent result of a planned economy. It is a product of backwardness, as we see in Pakistan and Nigeria, which have nothing to do with socialism. A nationalized planned economy needs democracy as the human body needs oxygen. I do not speak here of the fraudulent bourgeois democracy that is only a fig-leaf for the dictatorship of the big banks and monopolies, but of a genuine workers’ democracy as advocated by Lenin in State and Revolution – the control of the working class from the bottom up.”

Speaking in the debate the economist Professor Ernesto Molina said that he read an article by Dietrich in Rebelion, which he replied to, quoting Lenin’s words on Rosa Luxemburg “sometimes an eagle can swoop lower than chickens,” adding humorously: “I must make a self-criticism. I now realise that Dietrich never flew higher than the chickens.”

One of the speakers from the floor, Fabio Grobart, a son of one of the founders of the Cuban Communist Party, emphasized the need for an internationalist policy. Another veteran Cuban communist, comrade Olivia Fernandez, said: “I am glad Alan Woods has stressed the question of Marxism. I wish to emphasize the point that whatever problems have arisen in socialism, it is not the fault of Marxist theory but the [incorrect] interpretation and application of these ideas.” And she quoted the words of Che Guevara: “Socialism and communism are a process of searching and discovery.”

Somebody asked: “What is wrong with an unfinished theory [referring to the “theory” of socialism of the XXI century]?” To this I answered as follows:

“We need to have a more rigorous approach to ideas. If this were a conference of physicists, just imagine that somebody says: ‘I have not done any experiments and have no proof whatsoever, but here is my theory.’ Such a person would be laughed out of the room. Or just imagine going to the dentist with a toothache and the dentist says: ‘Actually, I have never studied dentistry, but open your mouth anyway and I’ll have a go.’ You would run out of the surgery. Or a plumber knocks at the door and says: ‘I know nothing about plumbing, but let me get my hands on your central heating.’ You would throw him out of your house. But when it comes to Marxism, it seems that anything goes. Well, that is not the case. The ideas of Marxism are essentially the same as 150 years ago. This or that detail may have to be modified, but what is astonishing is how little needs to be changed.”

The Chinese road?

Cross section of meeting
The debate on Cuba was opened by the economist Ernesto Molina, who began by listing the waste and inefficiencies that are inseparable from bureaucratic methods. He then went on to express his opposition to subsidies that the Cuban state pays for basic foodstuffs and other necessities (“we can’t afford them”):

“As long as the capitalist world market exists, prices must reflect world market prices. Cuba is a small open economy in a turbulent capitalist world. We have always had to import goods and we must maintain our armed forces for defence. We have some big tasks to tackle, for example on the sphere of housing. Some of the problems we can solve within Cuba. Others are outside our control, in the world market.

“After the fall of the USSR we managed to resist. The main thing is for the people to be united. We must defend our conquests. But the state cannot control everything…”

In her speech about Vietnamese and Chinese “socialism” Gladys Hernandez Pedraza clearly indicated the dangers of following this line. While the figures indicate important gains in economic growth, this has been at the cost of huge and growing social inequality. In China there is inequality between “haves” and haves not”, between town and countryside, between East and West and between Chinese and non-Chinese nationalities, she said. Officially, 270 million Chinese are on low wages. Both China and Vietnam are facing serious environmental problems. In Vietnam the rivers, deltas and cities are badly affected. The contradictions in Chinese society are “explosive” she explained.

The general attitude towards the “Chinese model” was negative. Jorge Santana said frankly: “We cannot speak of socialism in China.” Speaking from the floor I stated that what was happening in China was a warning for Cuba:

“When Deng Xiaoping began his reforms in China he had no plan to go back to capitalism. But after 30 or 40 years of ‘market reforms’ the movement to capitalism assumed an irresistible character. The conditions of the Chinese workers in the privatized industries are reminiscent of the conditions described by Engels in The Conditions of the Working Class in England or the novels of Charles Dickens.”

The decline of theory has been reflected in terminology. The constant references to “neo-liberalism” imply that there are different kinds of capitalism – a “good” capitalism, Keynesianism or capitalism with a human face, and a “bad” capitalism (neo-liberalism). In fact, the crisis of capitalism renders reformism impossible. The huge deficits force the bourgeoisie to attack living standards and take back the concessions made in the past in such areas as health, housing and education. All Cubans are aware of the importance of these things and would not be happy to see them abolished in the name of “market socialism”.

It seemed to me that most (if not all) of those present were well aware that in talking of the Chinese (or Vietnamese) model, we are talking about capitalism. I pointed out that the so-called market socialism was a contradiction in terms. You can have socialism or a market economy, but you cannot have both. Yet among some layers there is clearly an attempt to confuse the issue, referring in ambiguous terms to “a market economy with a socialist orientation” – whatever that might mean!
Workers control

Jorge Santana, Concepción Nieves Ayús and Fabio Grobart
On the last day, the central question was finally debated: the future of the Cuban Revolution. The session was chaired by Jorge Luis Santana Perez, who on the first day had quoted the words of Rosa Luxemburg: the only alternatives before humanity are socialism or barbarism.

Speaking from the floor, an economist (I do not recall his name) said: “After 50 years I am not at all satisfied with the way we have run the socialist economy. Just look at agriculture. We statized all the land but we were not able to cultivate a big part of it. Let us take the bull by the horns. We made a serious mistake at all levels by copying the model of the USSR. We confused state property with state control. The worker does not control production – that is what Marx called alienation. There has been a lot of talk as to whether we produce commodities or not. But we have to produce goods the value of which should reflect the costs of production.”

Juan Sanchez Monroe said: “I have seen all this before. I have heard the same discussions. In Russia, where the greatest revolution in history took place, there was a Party with 20 million people at its head. But what happened? Why was it overthrown? It was because we could not achieve the quality in the area where it was most important – in the goods produced for human consumption – to satisfy the requirements of the people.”

I was interested to hear what Camila Piñeiro Harnecker would say. Since the subject she was speaking on was The Risks of expanding non-state enterprises in Cuba and recommendations as to how to avoid them, I assumed she would make out a case against privatizations.

From her written contribution I could see that Camila is opposed to the introduction of capitalism and wage labour, but I found her contribution to be insufficiently clear. For example: “Sometimes it is necessary to admit non-public elements, but this must be considered temporary and something to be overcome.” “Non-state enterprises can be socialist. A work collective must be able to run its own factory. Consumers also.” etc. This seemed very much like advocating co-operatives, which can easily be a stepping stone to outright privatization.

The most positive side of this speech was the emphasis on workers’ control: “Workers must feel motivated, part of the decision-making process.” That is one hundred percent correct and goes to the heart of the problem. But this was spoiled, in my view, by an excessive stress on “horizontal” (as opposed to “vertical” control). It is a regrettable tendency of some “twenty-first century socialists” to lay stress only on control, and not on ownership. But, important as the question of control is, the question of ownership – that is, property relations – remains decisive. Workers control, unless it leads to nationalization, can only be a transient phase and can be realized only partially. Under no circumstances can it be posed as an alternative to nationalization.

Confusion on what is meant by workers’ control would be disastrous for Cuba, as it was for Yugoslavia. The Leninist conception of workers’ control and management has nothing in common with the anarcho-syndicalist notion whereby the railway workers would run the railways, the miners the mines, etc. Such a notion would have the effect of pitting factory against factory, worker against worker, worker against peasant, producer against consumer and so on. It would be the cause of great inequality.

In such a system, those workers in the more efficient and productive factories would be better off than those in the older and less efficient factories. They would end up with the mentality of proprietors and would act as such. This would undermine central planning utterly and deal a fatal blow to the nationalized planned economy. Thus “horizontalism”, despite the good intentions of its supporters, would lead directly to the capitalist market. For this reason, we firmly defend central planning and nationalization and are implacably opposed to any kind of privatization (except for some small shops and businesses) and “horizontalism”.

The Leninist idea is completely different. We are the most fervent defenders of centralized planning, but this must be accompanied by the democratic control and administration of the working class at all levels, both in drawing up the plan and putting it into practice. In this way, centralism and democracy are not incompatible but completely inseparable. The voice of the workers is heard at every level of the process, which involves a free flow of information and comments, from “top” to “bottom” and from “bottom” to “top”.

When we speak of workers control we do not have in mind only the workers of the particular enterprise, but the working class in general. A whole series of issues like safety, working conditions, etc., will be directly in the hands of the workers, but the general plan must be decided by the whole of society, reflecting the general interests and priorities of the working class as a whole. That is what we mean by central planning.

What if there is a conflict between the views of a particular workplace and the general interest? In that case, the latter must take precedence over the former; just as in any democracy the minority must accept the views of the majority. One possibility would be run the workplaces on the basis of a tripartite committee, composed of one third from the state, one third from the trade unions, and one third directly elected by the workforce. However, for this to succeed, it is essential that both the unions and the state should be under the democratic control of the working class.

Speaking from the floor in the course of this debate, I said:

“I hesitated before speaking in this debate because the problems of the Cuban Revolution can only be solved by the Cuban people, and in the first place the Cuban communists. However, the fate of the Cuban Revolution is a matter of great importance, not only for the Cuban people, but for the workers of the whole world. The liquidation of the gains of the Cuban Revolution would be a terrible setback for the labour movement in Latin America and internationally. We have seen a catastrophe in Russia and now China and Vietnam are going the same way. We don’t want to see a repetition in Cuba.

“Let us speak clearly. There are people in Cuba who would like to go back to capitalism. They think that things will be better. They are wrong. It is said that people do not work in Cuba and in a market economy those who work are rewarded and those who do not are sacked. But that is not true. When the bosses close a factory they do not distinguish between a good worker and a bad one. All alike are thrown on the streets. Do not believe that things cannot be any worse. They can be a whole lot worse! We must not jump from the frying pan into the fire!

“Now to the point: we know that capitalism is an unjust, inhuman and wasteful system. Anything you like. Nevertheless, capitalism works, and has been working for about two hundred years. By the way, it is not the case that there is no planning in capitalism. In every capitalist enterprise there is a plan. The problem arises outside the enterprise, in the anarchy of the market, where everything is decided by the blind play of market forces, by the law of supply and demand.

“One can say that the market acts as a rough and ready control that limits waste, corruption and inefficiency. If a particular firm goes too far in this respect, it will have to close, driven out of business by more effective competitors. But what happens in a socialist planned economy? If all the major firms are nationalized, how can we prevent corruption, waste, mismanagement, bureaucracy and inefficiency? There is only one way possible: the conscious control of men and women through workers’ control and management, as Lenin explained many times.”

Jorge Luis Santana, quoting from The Revolution Betrayed, pointed to the danger of capitalist restoration in Cuba:

“I ask myself to what extent our ideas are correct and realistic? What do communism and socialism mean for the average Cuban today, or for the world today? We need a cause to defend and hope for the future in a world that is torn by wars and crises. We need a profound analysis of our old positions, a complete remodelling of revolutionary positions on a world scale. We need to innovate as Lenin did.”

Discussion in the Institute of Philosophy

Alan Woods addresses Institute of Philosophy
After the Workshop had finished I was invited to deliver a lecture to the teachers and students of the Havana Institute of Philosophy on the subject: why the USSR fell. This was the very day the Sixth Party Congress had been announced. In his introductory remarks, comrade Jorge Santana said: “Cuba is today a melting pot of ideas and nobody can say that Alan Woods is not part of this.”

Whereas at the conference the time available for contributions was limited by the large number of speakers, I was able to speak for an hour, in which I attempted to explain the reasons for the collapse of Stalinism on the lines of The Revolution Betrayed and Ted Grant’s Russia, from Revolution to Counterrevolution.

What surprised me favourably was the degree of agreement among virtually all who spoke. Nobody expressed any real differences with the analysis I had provided, including veterans of the Communist Party. There was a lot of interest and a lively session of questions and contributions. Here are some of the comments (I was not always able to get the names):

“In the CPSU there were supposed to be 18 million Communists. But they were not able to prevent what happened. They were waiting for a lead from the top, and when it never came they were disoriented.”

“Yes, but if you were to ask people today, many would say: things were better before…”

“The big failure was a lack of freedom to discuss. This did great damage to art and culture. It was a closed culture, not open to ideas from the outside.”

“What happened in the USSR was not inevitable. It could have been prevented.”

Somebody asked about the theory of state capitalism, to which I replied:

“The so-called theory of state capitalism is a theory that explains nothing. It is wrong in theory and disastrous in practice. If one characterises the Soviet Union as state capitalism, then it must have the law of motion of capitalism: booms and slumps, which was not the case. One is then left with the conclusion that there is a social system called state capitalism, which is completely unknown to Marxism, a form of capitalism that is capable of a long period of high growth rates and no unemployment, that is to say, a system that is historically progressive in that it develops the productive forces to an unheard-of degree. This would require a fundamental revision of all the basic postulates of Marxism. One would have to re-write the three volumes of Capital.

“In fact, no such revision is necessary. In The Revolution Betrayed Trotsky provided a Marxist explanation of the phenomenon on the lines of the classical ideas of Marx and Lenin. This analysis has stood the test of time.

“While superficially attractive, the theory of state capitalism was disastrous in practice. When faced with the threat of actual capitalist restoration in Russia, what could the defenders of this theory say? That there was basically nothing to choose between the two things? That it made no difference if nationalized property was privatized? It is only necessary to formulate the question concretely to see the mess one gets into with confused theories.”

I was pleased to note that my most recent book Reformism and Revolution has aroused a lot of interest in Cuba. The one copy in the library of the Institute of Philosophy has been read so much it was in a sorry state, and the few copies I was able to bring with me were in much demand. The editorial Ciencias Sociales, which previously published the Cuban edition of Reason in Revolt, has agreed now to publish Reformism and Revolution.
The debate has begun

Discussion with students
I also spoke at Havana University and in another meeting of Latin American and Cuban students. I was invited to speak at the University of Santiago, but had to refuse because of lack of time. For the same reason, I was unable to speak at a meeting of Venezuelan students that was to be organized in the Venezuelan embassy.

From my brief visit, one thing is clear: everybody in Cuba has an opinion about the economic changes proposed for the Party Congress.

While it is possible to draw comparisons with Russia, there are also important differences. By 1989, the October Revolution was a distant memory for most Russians. The old traditions had been buried by the bureaucracy for decades. But in Cuba the Revolution took place within living memory. Most Cubans are fiercely proud of the gains of the Revolution and would not be prepared to surrender them without a fight. The same goes for members of the Communist party, who are painfully aware of the catastrophe that capitalist restoration has meant for the people of the former Soviet Union and Eastern Europe.

In private conversations, many expressed their firm opposition to any attempt to drag Cuba down the capitalist road. Juan Sanchez Monroe told me: “Do you know how many people I have known in Russia and Eastern Europe have committed suicide, have hanged themselves or put a bullet in their brain? No, nobody speaks of such statistics, but there are many. That must not happen here.”

The Party Congress is eagerly awaited and expectations are high. The future of the Cuban Revolution is too important to be decided by a small group. There must be a thorough and democratic discussion at all levels, starting with the Congress. This debate has already begun.

London, 21 November 2010


Camila's paper is an excellent contribution to the debate on Cuban socialism, the nature of socialism and the way forward for Cuba. I will admit an obvious bias; the views expressed are very similar to my own so perhaps I am not very objective.

Alan's comments however demonstrate a strange understanding of Marxism. For example, I am not a "Trot" or a member of the SWP, but the reason for or against describing the USSR as "state communist" cannot be based on the lack of economic cycles. The USSR and its allies were in a permanent state of "bust" - the USSR was all about managed scarcity and, as one East German farmer once said, "the economically unsustainable nature of a system that paid us more for the food we produced than the people paid for it in the stores."

Cuba faces many of the same challenges and distortions as did the USSR - the question is what to do about these serious problems. Many ordinary Cubans are frustrated with the manner (and quality) in which goods and services are delivered in Cuba, even at the same time as they support "socialism" and the Revolution. It will be up the Cuban people to decide how to creatively address these issues without resorting to the "easy" but ultimately destructive route of capitalism. That is what makes Camila's contribution so interesting and Allan's somewhat dogmatic and sterile.

I wonder if anyone will even reading this? But I hope many Cubans read Camila's piece.

It is unfortunate that his debate did begin much sooner. I hope this is a lesson for the Cuban Revolution on the importance of public debate, participation and freedom of expression.