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Cuba: Who's to Blame for
Corruption?
What if the corruption
problem lies not in the moral failings of
individuals, but in some aspect of the system
itself?
By Philip Peters. Latin
Business Chronicle, November 6, 2006.
Reporters from the Cuban newspaper Juventud
Rebelde went to El Manzanares, a Havana
cafeteria, in search of petty corruption.
They found it easily. Patrons who paid for
one-third of a liter of beer were routinely
being served a quarter liter. The reporters
confronted the manager, Alberto Osorio Ramos,
"who seemed infuriated" by his
subordinates' cheating.
To the reporters, Yailin Orta Rivera and
Norge Martinez Montero, the cheating was
no accident. In their October 1 article
titled "The Big Old Swindle,"
they pointed out that by cutting the size
of servings, the cafeteria's employees were
able to skim from the cash register the
equivalent of one worker's monthly pay every
day.
Around Havana, the reporters documented
many similar cases: state establishments
serving smaller quantities of food and drink
than customers had paid for, a watch repair
facility where workers charged prices higher
than regulations allow, and a taxi driver
who charged four times the fare on his meter.
These practices, the reporters said, reduce
the idea of consumer protection to a mere
"slogan."
PERCEPTIBLE EVIL
The Juventud Rebelde article, first of
a three-part series, called these forms
of petty corruption a "perceptible
evil" on the surface of Cuban society.
"Some state services are being used
for personal profit by insensitive people
who rig the prices and quantities of products,
crossing the boundary between what belongs
to the state and what is private,"
it said. The result is injury to consumers
and to "the moral principles that the
Revolution has always defended." And
the injury is extensive: 52 percent of state
retail establishments inspected this year
were found to be charging more or delivering
less to consumers than provided by official
norms.
The second article in the series appeared
October 15. It began with the reporters
seeking to have a pair of shoes re-soled
at a state repair shop. A repairman offered
to do the job, but he explained that he
would charge more than three times the official
price because he buys his own supplies and
has to recover his costs. A supervisor said
that repairmen are supplied the necessary
work materials "whenever we can."
There were other state retail enterprises
- barber and beauty shops, a home appliance
repair shop, cafeterias - where the state
provides so few supplies that workers regularly
buy them themselves. There was even a taxi
driver who supplied the materials and labor
to repair a taxi that his company was preparing
to junk.
NEW DIMENSION
The reporters quoted an official who denied
that workers would ever need to buy their
own supplies, then they cast doubt on his
statement. They quoted a barber shop manager
who said that his workers altruistically
buy their own supplies just to keep the
shop open, and their only earnings are their
modest 300-peso monthly salaries. But the
article showed that there and in other businesses,
workers are in part in business for themselves.
The reporters observed that workers collect
receipts, put some in the cash register,
and keep some to buy supplies and for their
own income, above and beyond their salary.
Corruption in state enterprises has been
discussed before by officials and reported
in Cuban media. Last November Cuban President
Fidel Castro told how gas station receipts
doubled when young "social workers"
were assigned to keep track of inventory
and receipts; the extra scrutiny apparently
disrupted a large-scale employee scam. The
Juventud Rebelde series is therefore not
unique, but its reporting adds a new dimension
to the corruption story and carries important
policy implications.
What the reporters described were retail
businesses that would have to close if employees
truly followed the rules, and that stayed
open only because employees broke the rules
and engaged in private business (providing
capital, setting prices, pocketing revenues)
within these ostensibly socialist facilities.
They also showed that many of the central
state enterprises are dysfunctional, unable
to supply essential products and maintenance
materials to their retail outlets.
These are bitter facts to air in a place
where socialist state enterprises are said
to represent the revolution's values, delivering
services at fair, controlled prices without
the exploitation or inefficiency of capitalist
systems. Indeed, officials cite the superiority
of state enterprises when they explain why
Cuba allows such narrow scope for small
private entrepreneurship. (Interestingly,
the Juventud Rebelde article credits Cuba's
licensed entrepreneurs for paying taxes
and utility bills, in contrast to the state
employees they found earning private profits
within state enterprises.)
FAILURE OF SYSTEM, NOT INDIVIDUALS?
What is to be done?
On October 25, it was announced that new
regulations will go into effect next January
2 "to confront indiscipline and illegalities"
in state enterprises. This is a tried-and-true
response implying greater scrutiny and law
enforcement efforts to respond to illegal
actions of individuals. It recalls Fidel
Castro's statement in last November's speech,
where he said that following the successful
exposure of fraud in gas stations, social
workers might be deployed to bakeries, cafeterias,
pharmacies, and other installations.
But what if the problem lies not in the
moral failings of individuals, but in some
aspect of the system itself?
That question is raised in the third Juventud
Rebelde article, where it is disclosed that
a team of academics from Cuba's Institute
of Philosophy will undertake a study of
"socialist property." The objective,
the article says, is for "science to
go to the causes of the problems" affecting
Cuba's 3,800 state enterprises.
The authors interviewed Cuban academics
who indicate where solutions might possibly
be found. Remedies such as new forms of
"organization," improved "control
mechanisms," a better supply system,
and creating "conditions that make
the citizen function as part of a collective"
are cited.
CHANGING THE SYSTEM
But other possibilities are mentioned that
move beyond the predictable: creating a
system of state enterprises that are "freed
of bureaucratic shackles;" allowing
more decisions to be made by the "productive
base," i.e. in the enterprises themselves;
and changing a system where employees have
no "direct relationship with profits."
These ideas recall a state enterprise reform
program that was initiated in the 1990's
and had partial success. This program, called
perfeccionamiento empresarial, forces enterprises
to adopt honest accounting practices and
to make a profit-oriented business plan
based on an inventory of their strengths
and weakness and the opportunities they
face in the marketplace. It results in less
bureaucracy and greater authority for managers,
including the power to hire and lay off
workers as needed. It also requires that
workers be offered incentive pay based on
the profits of the enterprise. This program,
which borrows capitalist management ideas,
originated in the 1980's in the enterprises
run by the Cuban armed forces, under the
leadership of defense minister Raul Castro.
It is impossible to predict whether the
"socialist property" study will
result in reforms that use decentralization
and profit motives to eliminate the causes
of petty corruption in state enterprises.
Expectations of economic reform in Cuba
have come and gone before. And one must
question whether any reform of the state
enterprises themselves can succeed as long
as Cuba's partially reformed economy is
marked by serious income inequality (see
table, below).
GOVERNMENT ADMISSION
What is clear is that the Juventud Rebelde
articles have told Cuban consumers in a
frank and dramatic fashion that their government
recognizes that state enterprises do not
serve them well - "customers are left
dancing with the ugliest one," one
article concluded - and that law enforcement
alone is not the solution to the problem.
In effect, the government has challenged
itself to act, and has raised a new public
expectation.
Before Raul Castro turned 75 years old
last year, a 5,800-word survey of his career
and personality appeared in Granma, the
official organ of the Cuban communist party.
Raul recognizes, the article said, that
"today's youth are more demanding,"
and that "is not a bad sign."
He believes, the article continued, "that
every generation needs its own motivations
and its own values, at the same time he
insists on making it very clear that no
one will become a revolutionary today simply
because we explain to them the extreme hardships
that their parents and grandparents suffered."
The article did not say what Cuba's interim
president believes would inspire allegiance
to the revolutionary project if old war
stories do not suffice; that question was
left hanging. The coming year will tell
us if economic policy change is his answer.
Philip Peters is vice president of the
Lexington Institute.
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