Laboratory For A New Society

Cuba is poised to be the first country in the world to have co-operatives make up a major portion of its economy. Cuba is engaged in a fundamental reshaping of its society. Calling it a renovation of socialism or a renewal of socialism, the country is re-forming the economic system away from the state socialist model adopted in the 1970s toward something quite new. This is not the first time Cuba has undertaken significant changes, but this promises to be deeper than previous efforts, moving away from the statist model. Fidel confessed in 2005 that “among the many errors that we committed, the most serious error was believing that someone knew how to build socialism.” That someone, of course, was the Soviet Union. So, Cuba is still trying to figure out for itself how to build socialism.

To understand the current renovation, it is important to distinguish between ownership and possession of property. The productive resources of society are to remain under state ownership in the name of all the people. Reforms do not change the ownership system. Reforms are changing the management system, bringing managerial control closer to those who actually possess property. So while the state will continue to own, greater autonomy will be given to those who possess that property. In effect, Cuba is embracing the principle of subsidiarity, which holds that decisions should be made at the lowest level feasible and higher levels should give support to the local. This means more enterprise autonomy in state enterprises and it means co-operatives outside of the state.

It is expected that in the next couple of years, 46 percent of the country’s GDP will be in the non-state sector of the economy. That includes co-operatives and private small businesses. Co-ops are likely to become the dominant part of that non-state sector.


Already 83 percent of agricultural land is in co-ops. Much of that has been in the UBPCs (Basic Units of Co-operative Production) formed in the 1990s out of the former state farms. But these were not true co-operatives since they still came under the control of state entities. Now they are being given the autonomy to become true co-ops.

Even more significantly, new urban co-ops are being established in services and industry and 222 experimental urban co-ops are to be opened in 2013. As of July 1, 124 have been formed in agricultural markets, construction, and transportation. A big expansion in this number is expected in 2014.

In December 2012, the National Assembly passed an urban co-op law that establishes the legal basis for these new co-ops. Here are some of its main provisions:

  • A co-op must have at least 3 members, but can have as many as 60 or more. One vote per socio. As self-governing enterprises, co-ops are to set up their own internal democratic decision making structures.
  • Co-ops are independent of the state. They are to respond to the market. This is to overcome the limits that hampered some agricultural co-ops in the past.
  • Co-ops can do business with state and private enterprises. They will set their own prices in most cases, except where there are prices established by the state.
  • Some co-ops will be conversions of state enterprises, e.g. restaurants. They can have 10 year renewable leases for use of the premises, paying no rent in the first year if improvements are made.
  • Others will be start-up co-ops.
  • There will be second degree co-ops which are associations of other co-ops.
  • Capitalization will come from bank loans and a new Finance Ministry fund for co-ops and member contributions
  • Member contributions are treated as loans (not equity) and do not give additional votes
  • Loans are to be repaid from profits
  • Co-ops are to pay taxes on profits and social security for socios
  • Distribution of profits is to be decided by socios after setting aside a reserve fund
  • Co-ops may hire wage labor on a temporary basis (up to 90 days)
  • After 90 days a temporary worker must be offered membership or let go
  • Total temporary worker time cannot exceed 10 percent of the total work days for the year, which gives co-ops flexibility to hire extra workers seasonally or in response to increased market demands, but prevents significant collective exploitation of wage labor

This is a big step forward for Cuba. Since 1968, the state has sought to run everything from restaurants to barber shops and taxis. Some were done well, many were not. One problem was worker motivation. Decisions were made higher up and as state employees, workers enjoyed job security even with poor performance. However, their pay was low. Now as socios in co-operatives they will have incentives to make the business a success. The co-op is on its own to either prosper or go under. Each member’s income and security depends on the collective. And each has the same voting right in the General Assembly where co-op policy is to be made. Co-ops combine material and moral incentives, linking individual interest with a collective interest. Each socio prospers only if all prosper.

Remittances: Much of the start-up capital from members is likely to come from remittances sent by relatives living abroad. This is a good way to harness for the social good some of the $2.455 billion of remittance money (2012 figures) that comes into Cuba. Although 62.4 percent of the population receive remittances, the bulk of this money is likely to come to whiter Cubans. As a result, Black Cubans will end up being underrepresented in this sector of the economy. In the long run, this presents social dangers.

Recommendation: Preferential bank lending policies can avoid this problem. Cuba does not need to adopt race-based affirmative action policies to correct this imbalance. Banks can give preference in their lending policies to those co-ops that lack funding from remittances. To each according to his need.

State Plan. If co-ops are truly autonomous, how can this sector of the economy be articulated with planning? Guideline #1 says the socialist planning system is to remain “the principle means to direct the national economy.” How can market and plan work together? In addition to responding to the market, co-ops are also charged (by charter?) with a “social object.” In addition, local entities can also request that they assist in specific social projects. Their participation is voluntary. This applies to individual co-ops.

But beyond this, the investment function can be used to direct the development of this sector. Bank lending priorities can be based on state development plans. The model for economic democracy developed by U.S. philosopher David Schweickart shows how this can operate. In After Capitalism, Schweickart envisions a society made up of democratically managed co-operatives exchanging goods and services in a free market. But the allocation of investment capital is made by government bodies at national, regional and local levels based on social criteria democratically decided upon. Something like this would seem to fit well the new economy developing in Cuba today.

Co-ops are recognized as a socialist form of organization in the Guidelines or lineamientos. In part, this is because they foster a social consciousness. By bringing people together in their daily worklife in democratically self managed organizations, co-ops nurture the democratic personality and the human being is more fully developed. This point has been strongly advocated by Cuban economist Camila Piñeiro Harnecker. She argues that co-ops “promote the advancement of democratic values, attitudes and habits (equality, responsibility, solidarity, tolerance for different opinions, communication, consensus building).” Co-ops are little schools of democracy in which the new socialist person can thrive, more so than was possible under state socialism. Thus co-ops spontaneously generate at the base of society momentum toward that society of associated producers that is the aim of socialism. Co-ops are the kind of institution that can make socialism irreversible by embedding its practices in daily life.

Private Businesses

The other component of the non-state sector is made up of private businesses. These small- and medium-sized private businesses are called self employment or cuentapropistas. While limited areas of self employment were opened up in the 1990s (e.g. paladares), this was expanded to 178 occupations in 2011. In part, this was designed to quickly absorb the large number of redundant state employees that were to be dismissed. It also allowed underground activities that had flourished since the Special Period to come out into the open and operate legally where they can be licensed, regulated and taxed.

The acceptance of small private businesses signifies that the leadership recognizes that a petty bourgeoisie is compatible with socialism. As it is often said, the state cannot do everything. Contrary to a common claim in the U.S. media, this is not the beginning of capitalism. The Guidelines say that the accumulation of wealth is to be avoided. This means the petty bourgeoisie will not be allowed to grow into a big bourgeoisie, a capitalist class.

Unlike co-ops which nurture a social consciousness, private businesses foster individualism. Self interest becomes the primary concern of private businesses. For that reason the petty bourgeoisie is a decidedly non-socialist class. While its existence is allowed, its growth should not be encouraged where co-ops can do the job instead.

Unlike the paladares, which could employ only family members, these private businesses can hire others as well. While this is also called self employment, in reality it is wage labor. While the private exploitation of wage labor is widely understood to be incompatible with socialism (as well as in violation of the Cuban constitution), it is accepted as necessary to quickly absorb surplus workers.

In recent years, small private businesses have been the fastest growing element in the Cuban economy. If they were to come to make up a sizable portion of the non-state sector, they could easily acquire significant political influence, moving Cuba away from socialism. This is because class power is fundamentally rooted in the significance a class has in the economy as a whole and thus the dependence other classes and groups have on its success.

For that reason, the continued development of socialism requires that co-ops rather than private businesses come to make up the bulk of the non-state sector. That is likely to be the case for several reasons:

  • Co-ops are favored by the state in terms of tax policy and loan policies.
  • In direct competition between co-ops and private businesses, co-ops are in more advantageous positions, e.g. state restaurants that convert to co-op restaurants generally have better locations than private restaurants.
  • Labor efficiency and productivity is high in co-ops due to the greater incentives for socios.

Recommendation: In the long run it would be desirable to convert many private businesses into co-ops so all who are employed there can enjoy the benefits equally (no exploitation) and participate in decision making (democracy). This could be done by restrictions on the size of private businesses, tax incentives for conversion, and political organizing of their wage labor force.

Role of CTC (Central de Trabajadores de Cuba)

In view of the new and growing diversity among Cuba’s workers, the role of its labor movement needs to be rethought. Under state socialism, the CTC represented the interest of the working class as a whole in the councils of government. Unlike unions in a capitalist society, which represent workers in an industry or particular workplaces in an adversarial relationship with capital, in state socialism the state and the working class are considered to be united in their interests. It is for this reason that the CTC has been given a central position in the political structure. Its role is not to represent workers in negotiations with their employers, but to be their voice in making public policy in a socialist society.

Previously only 9 percent of employment was in the non-state sector. Now it is 22 percent and is expected to grow to 35 percent. This raises new questions for the labor movement. Reportedly, 80 percent of cuentapropistas have joined unions.

How can the CTC represent the interests of those cuentapropistas who are private business owners?

The petty bourgeoisie has interests different from the working class (even though they do work in their businesses). How can CTC at the same time represent the interests of the cuentapropistas who are in fact the wage laborers they employ (and exploit)?

And how can the CTC represent the interests of co-operative socios given the fact that they are at once both owners and workers? As I have suggested above, the CTC can advance socialism by advocating for the co-operative sector as a whole over the private business sector. Beyond this, the CTC might also take on an entrepreneurial role for co-operatives, doing market research, organizing workers for new start-up co-ops, providing training in self-management, etc. It might even monitor co-ops to ensure compliance with their own self-governance processes.

21st Century Socialism

The project called 21st Century Socialism has been associated primarily with the Bolivarian Revolution in Venezuela. It is an attempt to reinvent socialism after the collapse of the state socialism that characterized the 20th century. In Venezuela this has involved using state power to promote co-operatives and communal councils at the base of society as seeds of a future socialism. Social transformation is constructed both from above and from below. In Venezuela this is taking place in what is still overwhelmingly a capitalist society. In Cuba we see a very similar process in the context of a state socialist society. Here the state is also promoting co-operatives, relaxing administrative control over enterprises and decentralizing governmental power to the local level. Both see the empowerment of associations at the base of society and the active participation of working people in directing their affairs as key to building the new socialism. In the Venezuelan case, this is seen as eventually replacing the existing bourgeois state with a new communal state, the beginnings of which are being constructed by associations of communal councils.

In the case of Cuba, resistance to this dispersal of power away from the state is reportedly coming from the state bureaucracy itself. Some see this as motivated by the self interest of an entrenched bureaucratic class that will block Cuba’s reforms. Others see the resistance as due to bureaucratic habits that are slow to change. In that case it can be overcome by a change of mentality. There is also bureaucratic resistance in Venezuela. That is why power and resources are being sent directly to communal councils, effectively by-passing traditional channels. Something like that same strategy is being used in Cuba as some taxes are being collected at the local level rather than nationally to be distributed downward. This then shifts the capacity to initiate action to the local level, a far cry from the vertical structure of state socialism.

Democratically self governing co-operatives are an essential feature of 21st century socialism. They empower the associated producers in their daily work, giving them some control over their lives. At the same time, these little schools of democracy are the soil in which the new socialist person will thrive, more so than was possible under state socialism. And with that it becomes possible to envision the state eventually withering away as society comes more and more under the direction of a truly civil society.

Cuba is poised to be the first country in the world to have co-operatives make up a major portion of its economy. Those who are implementing the Guidelines are aware that they are redesigning society and approach the challenge in an experimental way. The new urban co-ops are being set up as experiments. As difficulties emerge lessons are to be learned so as to improve the process as it goes along.

One difficulty that is already evident is the need for education in co-operativism. Previous experience in the UBPC agricultural co-ops showed that workers were not practiced in democratic decision making. Nor did the co-ops have the autonomy necessary for them to feel they were really in control. The UBPCs were actually under the control of state enterprises, such as the sugar centrals. Now for the first time they are being given real autonomy.

Likewise, the workers in urban state enterprises now being co-operativized have deeply established habits of compliance with higher authority. Under state socialism decisions came from higher up, breeding passivity. That is part of the “change in mentality” so often talked about these days that needs to take place.

Many years ago, Cuban philosopher Olga Fernandez pointed out to me that under the model of socialism Cuba had adopted, rather than the state withering away, it was civil society that was withering away. Today’s renovation of socialism is an effort to rejuvenate civil society, to construct a socialist civil society. Co-operatives may be a key link in that rejuvenation that can sustain Cuba on its way to a society run by the associated producers. If it can succeed, it will be of world historical importance.


Cliff DuRand is a research associate at the Center for Global Justice and professor emeritus of philosophy at Morgan State University, Baltimore. He is coauthor and coeditor of Recreating Democracy in a Globalized State (