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Wednesday, April 7, 2010 as of 11:14 AM ET

Economy

Phil Keating

Miami, FL

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Cuba Capitalism? Baby Steps.

February 11, 2011 - 10:28 AM | by: Phil Keating

Up and down Havana’s narrow streets, signs of free-market capitalism are blossoming.

And it’s all entirely legal, in a country which for 50 years has condemned the evils of capitalism.

Since September, 75,000 Cubans have become entrepreneurs. Some turn their homes into “paladares,” restaurants that cater to locals and tourists.

Barber shops, food venders and scooter repair businesses can also be found, some of the 178 money-making activities now sanctioned by Raul Castro’s government.

“Well, its a failure of Cuban Socialism, but we’ve known that Cuban Socialism is a failure for many years,” says Dr. Susan Purcell, Director of the University of Miami’s Center for Hemispheric Policy.

She says that part of this economic policy change is sheer necessity.

The cash-strapped government needs to shed millions of dollars from its enormous and bloated payroll. It recently laid off 500,000 workers in an island nation of 11 million people, where 84% of workers have government jobs.

And the government doesn’t have the money to support more unemployed Cubans.

“The government can’t afford to pay for all the people that are on the government payroll, but it doesn’t want them to rebel. So it allows them to make some money, in these mainly rinky-dinky kinds of private businesses.

“Businesses” that also include ‘bb gun games’, ‘umbrella repair’ and ‘button wrappers.’
But the carrot of capitalism is quickly frustrating in a poor country where supplies are far from abundant and inventories are minimal.

“As the time goes by, I am getting more customers,” says a Cuban woman who has turned the main room of her house into a restaurant that can seat up to 20 customers. “Some days, I make about 1000 pesos a day, but you have to rely on what you sell. Sometimes you don’t find good products and you can’t offer good deals.”

The illegal Cuban black market has been tolerated by the government for years, allowing Cubans to acquire necessities which government-run stores lacked on their half-empty shelves.

So another theory to explain Cuba’s economic change is that by legalizing these black market activities, the government can now tax them. That brings in much needed revenue, which helps keep the government afloat and–most importantly for Castro–keep Cuba communist and the regime in control.