Cuba move to cut 500,000 government jobs is biggest change in decades

Former revolutionary leader of Cuba Fidel Castro may claim he was misinterpreted by a US reporter last week when he stated that the Cuban model no longer works. But his words were bolstered Monday when Cuban authorities announced the biggest economic shift in decades: Half a million state workers will be laid off by next year and more private enterprise will be tolerated.

The news generated concern across the communist island nation, but also hope that a more liberalized economic policy is in sight.

“It is a very good development toward harnessing the entrepreneurial spirit and know-how of the Cuban people,” says Ted Henken, a professor at Baruch College-CUNY who has studied private enterprise in Cuba. “It will hopefully be a beginning of the end of the Cuban government´s 'internal embargo' on the inventiveness of the Cuban people.”

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Raúl Castro, who has led the nation since his older brother Fidel Castro fell ill in 2006, has long been seen as the more pragmatic brother, open to a new, more functional economy. When he took power, he raised expectations that big economic changes were under way.

Under his recent leadership, Cubans have been given the right to buy cellphones and own other electronics. Some licenses for private taxis have been granted and land for private farmers distributed. But the changes announced Monday are by far the biggest to date, influencing huge swaths of the country.

This goes further than the economic opening of the 1990s, which was also spurred by economic crisis, notes Philip Peters, a Cuba expert at the Lexington Institute, in his Cuba blog.

“When self-employment was last expanded in the early 1990s, the government seemed to view it as a necessary evil or, at best, a small-potatoes option for providing a few services in which the state had no interest. This is different,” he writes. “The expansion of self-employment and cooperatives today is subsidiary to a larger goal, which is to shed unproductive people and activities from government payrolls.”

10 percent to be unemployed

According to the Associated Press, some 5.1 million people work for the Cuban state, or 95 percent of all workers, which means that 10 percent of the workforce could soon be unemployed.

The government also announced that more Cubans will be allowed to create their own employment opportunities, form employee-run cooperatives, and lease more state land and businesses. Those Cubans who are not made redundant in state jobs will also face a new salary system that rewards productivity.

But the details of how this massive change in the economy will be carried out is still unclear, and it will require not just logistical support but the acceptance of new values. “There needs to be a mentality shift in the government,” says Mr. Henken, “so that independent economic activities are not seen as somehow illegitimate or used as whipping boys for ideological condemnation even now that they will be legal.”

Fidel Castro's recent appearances

The news comes as Fidel Castro made a stir last week, after being quoted in an Atlantic blog by reporter Jeffrey Goldberg that the Cuban economy does not work.

"The Cuban model doesn't even work for us anymore,” Castro was reported by the journalist as saying, when asked if the model should still be considered for export. The comments were printed widely, with some speculating it was a commentary on the failures of communism, while others saying it was a nod toward the economic path of Raúl Castro.

On Friday, Fidel Castro admitted he was quoted properly, but claimed that the reporter misunderstood his larger meaning.

"The reality is that my response means exactly the opposite," the recuperating leader said. "My idea, as the whole world knows, is that the capitalist system now doesn't work either for the United States or the world, driving it from crisis to crisis, which are each time more serious."

A 'trial balloon'?

On Monday, Mr. Goldberg said on a conference call with reporters that he stands by his story and suggested the intent of the revolutionary, who invited Goldberg to Cuba after reading his recent Atlantic article on Iran and Israel, was perhaps to float a “trial balloon.”

"We see this in Washington all the time. Somebody floats a trial balloon, it unsettles some people, so they walk it back a little bit," he said, according to Reuters. "I think the underlying reality supports absolutely that the Cuban government has recognized that the Cuban model doesn't work, so they're looking for another model.”