Can co-operatives revive Cuba's sagging economy?

Cuba is pinning its hopes on co-operatives, but will officials give co-ops the political space to develop their own independent agendas and goals? John Restakis investigates

On 5 August 1994, residents of Havana poured on to the fabled Malecon, the wide, salt-sprayed boulevard that separates the city from the sea, and mounted the largest public defiance of Cuba's government since the revolution. The 'Maleconazo Uprising' as it came to be known, was ignited by a host of factors. The day before there had been harrowing reports that some 40 people were left to drown by security forces when a leaking tugboat carrying refugees bound for the US had sunk seven miles off the Cuban coast. The reports, vigorously denied by the government, gave focus and immediacy to a simmering discontent that finally spilled into the open. Rarely, if ever, had anyone heard such calls for an end to Fidel Castro's rule.

But the defiance was charged with desperation. In the aftermath that followed the collapse of the Soviet Union, Cuba's economy had gone into a tailspin. With the loss of its primary trading partner, 80 per cent of Cuba's trade came to an end. So did the billions in Soviet economic aid. Overnight Cuba was plunged into a period of such hardship and deprivation that there were stories of people eating the animals at the Havana zoo. It was christened, in characteristic state speak, as the 'Special Period in the Time of Peace'. That was 22 years ago, and the 'Special Period' is still in full effect. The uprising on the Malecon, although brief, was taken as a wake-up call by the leadership.

Today, Cuba is at a crossroads. Caught in the opposing tensions of economic survival on one hand and adherence to its socialist revolution on the other, the country is embarking on a process that will either salvage the meaning of socialism, or bequeath the country to those who are waiting, once and forever, to bury the ideals of its revolution.

It's not a new problem.

Cuba, sheltered for so long under the umbrella of its Soviet protector, is among the last in a long string of socialist states that have had to confront the failures of centrally planned economies in the age of capital. But Cuba is utterly determined not to fall prey to the free-market fictions that led to such wreckage in Russia and in all those former Eastern Bloc countries that had been lured down the capitalist path.

Cuba is taking a different route – one that seeks to reconcile socialist ideals with enterprise. Slowly, reluctantly, Cuba's leaders, spearheaded by Fidel's brother, Raúl Castro, are flirting with the market. They are relaxing the stranglehold of the state on the private economy. They are restructuring large swathes of Cuba's agricultural sector. They are devolving a measure of economic planning and control to municipalities. They are allowing the emergence – very limited to be sure – of private enterprise. But most interesting of all, they are paying serious attention to the role of co-operatives in transforming the Cuban economy.

Co-op autonomy is key

I was in Cuba as part of a Canadian delegation of co-operators that had come to learn what this transition to a co-op economy meant and to offer what support we could. It was my second trip to the country and I could immediately see the differences. There were cafés, restaurants and small businesses everywhere. Fruit stalls and craft markets abounded. Havana was brimming with entrepreneurial life. Nevertheless, my own feelings about the new direction were mixed – a combination of sympathy with the stated goals of the effort, and misgivings about whether the particular brand of socialist ideas – and practices – that govern Cuba's political realities were at odds with the task.

Can co-operatives save socialism in Cuba? Or will they suffer the fate of co-ops in other countries where they were used to serve the needs of the state rather than those of the citizenry? This was the question in my mind. In every case where governments have sought to bend co-operatives to state interests, three results have followed: a hollowing out of co-op principles and the reduction of co-ops to mere extensions of the government; the ultimate failure of these enterprises and a dependence on the state; and the defamation of the co-op model which came to be seen, quite correctly, as a means of state control. In the countries of the former Soviet Bloc, co-operatives have yet to salvage their reputation. Will this happen in Cuba?

After the revolution and the expropriation of the big agricultural estates, co-operatives were viewed through a Soviet lens, as a way to achieve large-scale production through state-controlled collectivization. As a result, co-operation as a form of mutual self-help, independent from the state, is little understood – either by the state or the populace. Co-operatives are still viewed as a means of helping the government solve the failures of a command economy. But the questions of co-op autonomy and open markets are the keys that will determine whether co-ops will play the role that is hoped for them, or whether they will survive at all.

Cuba's newfound affection for co-operatives is entirely understandable. Faced with the enormity of the economic challenges, the leadership realizes that something has to change. In sector after sector, inefficiencies and dysfunctions are staggering. In a country whose prime challenge is to feed its people, 50 per cent of the state-owned arable land is uncultivated and unproductive. Only 18 per cent of the land is irrigated. Since 1989, agricultural exports have declined from 80 per cent to 18 per cent of the national economy. The agricultural question is paramount in Cuba and it is here that much of the focus on co-operatives lies.

In 2008 the government sought to improve agriculture production by turning state farms into co-operatives. These co-ops, called UBPCs, were turned over to the farm workers to own and operate under a lease arrangement with the state. But unlike co-ops that had been organized by independent farmers to share land, farm equipment and labour, many of these state-mandated co-ops floundered. There was no effort to teach former state employees how to run a co-op, no experience in managing an independent enterprise, no choice over where co-ops could purchase supplies, or what they could produce, or to whom they could sell their produce. Supplies were bought from state departments, quotas still had to be sold to state agents. And if a co-op wanted to pursue a new business that was not mandated in its charter, it could not do so. In short, the co-ops were hamstrung by a closed market system dominated by the state.

But lessons are being learned. Constraints are being lifted and a more open system may emerge for co-ops to access supplies and sell produce independently. Comprehensive co-op training is underway across the country.

Slow motion demolition

Housing is another sector in deep trouble. When the 'Special Period' came, 80 per cent of skilled labour abandoned the farms and fled to the cities. A major housing crisis followed. In Havana today, 11,000 people are living in shelters. Almost 120,000 people are on waiting lists for housing. In all cases, including those who own their homes, people live in housing that is crumbling into the ground. This is why a visit to Havana can be such a heartbreaking experience. How to reconcile such elegance with the corrosion and decay that eats away at these colonial buildings that now linger, ghost-like, from another era? In Havana, an average of 3.1 buildings collapse every day. The graceful old city is caught in something like a demolition progressing in slow motion.

Housing is clearly one area where co-operatives could play a crucial role. Others include the provision of much-needed social services – like childcare and services to the elderly and the disabled. What is still lacking, however, is a legal framework to allow for such collective and civic forms of property. It is rumoured that co-op legislation will be introduced in 2013. But unless these co-ops can independently access labour, capital and supplies it is hard to see how they could function as autonomous enterprises. This is even truer in sectors like light industry where the government hopes co-ops can kick-start new enterprises.

Cuba has to marry the market freedoms that are the precondition for co-operative enterprises with the controlling reflexes of an anxious – not to say paranoid – state. Not that the paranoia is unfounded – only that it is unhelpful. The threats that crowd Cuba are very real and very obvious. The bellicosity of the US shows no sign of letting up. Expatriate fanatics still nurse their revenge fantasies from nearby Florida. And there are other, more subtle dangers.

The 'Special Period' now comprises 40 per cent of the time since the 1959 revolution. An entire generation has grown up knowing nothing else. A survival mentality has taken hold that corresponds to what is essentially a war economy of scarcity and subsistence. It is a corrosive environment that breeds individualism and alienation, and undermines the social solidarity that is, in the final analysis, the last refuge of the revolution.

Socialism was always a top-down affair

The opening of new sectors like tourism and the adoption of a parallel dollar currency in the 1990s created new class divisions that separated those who had access to dollars from those who didn't. Moreover, decades of state paternalism have ingrained socialism as a philosophy imposed from above. As one Cuban economist told me: 'Socialism was always a top-down affair. It never developed as a change in the mutual relations among people at the level of community.'

Co-ops are a key to making this possible.

The political leadership today clearly understands what is at stake. Raúl Castro and his allies know that if the revolution is to have a legacy beyond them, change has to come and that they are its stewards. Despite the hardships and the discontent, the old revolutionaries still retain an allegiance from their people. The ideals of the revolution remain vital. But there are fears that those that come after will lack the moral authority to drive the changes that a new era demands. They are profound and mark a turning point for the country.

Gone is the egalitarianism that Raúl Castro now says fostered a pervasive idleness that is distinctly unrevolutionary. Gone are the massive subsidies that propped up the state enterprises. They are required to earn their way or perish. Gone too is the use of government sinecures to absorb unemployment and to dispense patronage favours. The state intends to lay off 1.3 million workers in a system where the government, directly or indirectly, employs 85 per cent of the population. Where will these people go?

Cuba's leaders hope that a combination of co-operative restructuring and independent entrepreneurship will take up the slack. Without further measures to free the economy from state controls this is not likely. But beyond this, there looms what is perhaps the single greatest threat to reform in Cuba – the state bureaucracy. For the thousands of functionaries that handle the patronage networks of the state and its enterprises, reform can only mean trimming back the powers that bestow their status and livelihoods. They will resist change at every turn.

Ultimately, the future of socialism in Cuba rests on its leaders accepting that society is not the state and that the interests of the two are not the same. The survival of socialism depends on finding economic models that marry the ideals of solidarity and equity and social justice with that of open markets and free people. Co-operatives are a natural choice but it will take additional risk from its leadership and a trust in their people to make this bold experiment work.

Despite the enormity of the challenge, and the grip the old socialist ideas still have on the political imagination, there is an unbounded pride in Cuba born of struggle and endurance against impossible odds.

Cubans are survivors. They are resourceful and innovative, and among the most educated people in Latin America. Given the chance, they have created thousands of enterprises everywhere in the small spaces and crannies opened up by the new freedoms. And if Cuba's leaders can place their trust in their people, and in the endurance of the ideals they have fought so hard to protect, the co-operative economy they hope to build might yet forge a new kind of civic socialism for a world in desperate need of new visions.

This essay was written by John Restakis for the New Internationalist. John is executive director of the BC Co-operative Association in Vancouver and has been active in the co-op movement as a researcher, educator, writer and advocate for 20 years. His most recent book is 'Humanizing the Economy – Co-operatives in the Age of Capital' (New Society, 2010).