The US strategy for undoing the Cuban Revolution was laid down in the Eisenhower years in this April 1960 State Department guideline:

“[E]very possible means should be undertaken promptly to weaken the economic life of Cuba…. a line of action which, while as adroit and inconspicuous as possible, makes the greatest inroads in denying money and supplies to Cuba, to decrease monetary and real wages, to bring about hunger, desperation and overthrow of the government.” [Office of the Historian, Bureau Of Public Affairs, U.S. Department of State; John P. Glennon, et al., eds., Foreign Relations of the United States, 1958-1960, Volume VI, Cuba -Washington D.C.: GPO, 1991, 885.]

Now 55 years later, the Obama administration has accepted that this hard line has not worked in Cuba. In any case, regime change would not produce a stable society – witness Iraq, Afghanistan, Libya etc.

Reforms involve moving away from the state socialist model toward one with a far more active civil society.

Nevertheless, the basic objective of US policy remains the same, namely to bring Cuba back into the capitalist orbit. What is new in President Obama’s strategy is to change Cuba, not through regime change, but by promoting capitalism within the country through support of a petty bourgeoisie. What is new in Obama’s approach is an emphasis on economic rather than political subversion. What is new in Obama’s policy is a turn away from regime change to systemic change. Recognizing the Cuban government does not mean accepting its socialist economic system. Our political elite still thinks it is entitled to remake Cuban society to its desires.

This strategy takes advantage of an opening to small private enterprise provided by the reforms now underway in Cuba. While not abandoning a central role for the state, basically, the reforms involve moving away from the state socialist model toward one with a far more active civil society. The opening section of the Guidelines on the Economic Management Model brings into focus the changed relation between the state and society that is envisioned.

The management model recognises and promotes, as well as the socialist state enterprise which is the principal form of the national economy, the legally sanctioned modalities of foreign investment (mixed enterprises, international contractual arrangements, among others), cooperatives, peasant farmers, lessors of state-owned farmland, lessors of state-owned premises, self-employed workers and other forms all of which, together, must contribute to boosting efficiency. [Guidelines #2]

Cuba is looking toward a far more mixed economy. Eighty-four percent of the Cuban workforce had worked for the state. This led to overstaffing and low worker motivation. The Cuban state has been the employer of last resort. One might even say, of first resort. As a result, at least 1 million state workers are redundant and the state can no longer afford that. So large numbers are being laid off and are shifting into the non-state sector of the economy. This growing sector encompasses the self-employed or cuentapropistas and the cooperatives. The small private businesses that had been expropriated in 1968 are now being recreated to absorb redundant state workers. There is a recognition that there is a place for a petty bourgeoisie in socialism. The state does not need to, nor is it able to do everything. Many economic activities can be left to individual entrepreneurs so long as they are regulated and taxed so the petty bourgeoisie does not become a big bourgeoisie. As the Guidelines state, “In the forms of non-state management the concentration of property [ownership] by juridical or natural persons shall not be permitted.”

The renovation of socialism now under way in Cuba is an effort to reinvigorate civil society, opening up spaces for initiative outside of the state. In the next few years, the non-state sector of the economy, consisting of private businesses and cooperatives, is projected to provide 35 percent of employment and, along with foreign and joint enterprises, 45 percent of the gross domestic product. Addressing the problem of the lack of worker incentives under state socialism, these reforms are unleashing new productive energies that will lift the economy. But beyond that, they stand to replace the passive participation of state socialism with the proactive participation better suited to a democratic socialism. This implies a new relation between the state and civil society.

Obama’s relaxation of relations with Cuba presents a new challenge for the revolution. While the belated decision to recognize that Cuba has its own government is to be commended, there is another, little noted aspect to the new US policy toward Cuba. This lies in numerous measures to assist in the development of a nascent capitalist class from the private business sector. A careful reading of the new US regulations reveals a concerted effort to direct resources to entrepreneurs within Cuba by means of remittances, material aid, training and trade.

For example, the level of remittances allowed is being increased so as to provide increased funding for private businesses. The December 17, 2014, White House press release says: “Remittance levels will be raised from $500 to $2,000 per quarter for general donative remittances to Cuban nationals (except to certain officials of the government or the Communist party.)” Similarly, the US Commerce Department announced in March that exports of equipment and supplies to Cuba are allowed as well as imports from Cuba – as long as the Cuban entity is independent of the government. The United States seeks to expand “opportunities for self-employment and private property ownership … strengthening independent civil society.” The White House explicitly states, “Our efforts aim at promoting the independence of the Cuban people, so they do not need to rely on the Cuban state.”

As of July 2014, 498 urban co-ops had been authorized.

Many observers expect a flood of US businesses into Cuba. But they forget that the embargo is still in place. Obama has relaxed aspects of it, but ending it would require congressional action – not a likely prospect in the near future. In any case, Cuba has been very open to foreign investment for 20 years. Cuba recently enacted a new law on foreign investment designed to make it more attractive to investors from abroad. US corporations are eager to get a piece of the action that the embargo has long denied them. But when they are able to get in, Cuba will no doubt apply the same kind of limits as it does on other foreign investment. That means the corporations will be in partnership with the Cuban state and for a specified number of years. Cuba is not about to give up its sovereignty.

What is more likely to transform Cuban society is the increased flow of money to individual private entrepreneurs in hopes of building the germ of a new capitalist class. This method takes advantage of Cuba’s opening of a non-state sector of its economy.

But this non-state sector also includes cooperatives, which are a socialist form of property. While Cuba has had cooperatives since the early years of the revolution, they were limited to agriculture. As part of the reforms, in December 2012, the National Assembly passed an urban co-op law that establishes the legal basis for new urban co-ops. Here are some of its main provisions:

A co-op must have at least three 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, 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 workdays for the year. This gives co-ops flexibility to hire extra workers seasonally or in response to increased market demands, but prevents significant collective exploitation of wage labor.

As of July 2014, 498 urban co-ops had been authorized. There are additional co-ops that are functioning but not yet recognized as legal entities. This is a big step forward for Cuba. Cooperative members have an incentive 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 made. Co-ops combine material and moral incentives, linking individual interest with a collective interest. Each member prospers only if all prosper. In a study of 29 new cooperatives, Camila Pineiro Harnecker [Camila Pineiro Harnecker, “Un acercamiento a las cooperativas en Cuba” (in publication).] found that incomes have increased an average of threefold and as much as sevenfold.

One of the new cooperatives I visited in June 2014 was a small bar and restaurant in a poor section of central Havana. A former state enterprise, the Okinawa bar cooperative has five members. It had been a cooperative for only eight months and the president told me that being able to make their own decisions is one of the greatest benefits they find. He was elected by his fellow workers. Interestingly, the former state manager, who is also a member, was not selected to lead the new cooperative.

Co-op members are motivated by the fact that for the first time, they control their work. They make the decisions.

The motivation engendered by this empowerment was dramatically demonstrated by a self-organized construction cooperative we met at the Institute of Philosophy. They were repairing the Institute building that had been badly damaged two years ago when the ceiling of the main first floor room collapsed, rendering most of the building unusable. A state construction company had made little progress on the repairs for the previous two years. But now the Institute has been able to engage this newly formed cooperative and in a short time, they have made major progress. Our group was scheduled to have a meeting at the Institute on a Monday morning. And between the previous Thursday and that morning, the ceiling had been rewired and plastered. And by the following week, the Institute staff was moving back into their offices on the second floor. The 20 co-op members are motivated by the fact that for the first time, they control their work. They make the decisions. This is a powerful demonstration of the strength of cooperatives.

What we are seeing with the promotion of new cooperatives in Cuba is the constituted power of the state nurturing constituent power in civil society. Cooperatives are a socialist form of property under democratic management. As such, cooperatives have the virtue of nurturing socialist values, responsibility, democratic decision-making, cooperation and social solidarity. They are little schools of socialism. They embed socialism into the daily life of working people, engendering a socialist civil society.

In this respect, they contrast with the new petty bourgeois, small- and medium-sized private businesses now also being opened by the self-employed. A petty bourgeoisie is seen as compatible with socialism – compatible as long as it is regulated and taxed so it doesn’t become a big bourgeoisie. Great inequalities of income and accumulation of wealth are to be avoided – a cautionary note made in the Guidelines. But it is clear a petty bourgeoisie is not socialist; it does not nurture a socialist consciousness, but the narrow mentality of the petty shopkeeper. It does not nurture socialist social relations, but individualism. A petty bourgeoisie is compatible with socialism when kept within limits. But it is not socialist.

There is a race for the soul of Cuba between the cooperative movement and expanding private businesses.

But cooperatives are socialist. They represent associated producers coming together on a small scale to govern their work life in a democratic way. It is this relation that the socialist transition needs to point toward. With the current opening to cooperatives, Cuba’s state socialism is finding a new road forward. Socialism cannot be built top-down by state power alone. It has to be rooted at the base of society among ordinary people. Its values, its practices and its social relations have to be built into daily life where people live and work. This is the virtue of cooperatives. Cooperatives thus can help make socialism irreversible.

If a social order is to be sustainable over the long run, it needs to be rooted in the character of the people. Their values, their sensibilities, their taken-for-granted understandings, their very subjectivity needs to be consonant with its institutions. The socialist transition is a process that needs a people with a socialist character if it is to continue. The social relations of cooperatives help build such a character among the people.

That’s why it is of the utmost importance that cooperatives be widely promoted. The benefits of cooperatives need to be publicized and training in cooperative practices needs to be available. There needs to be a network of promotoras who go out into society like the literacy workers in the early 1960s and teach the co-op way. The Cuban Institute of Philosophy is doing just that in central Havana. And our Center for Global Justice, which has been offering cooperative workshops for several years, here in Mexico, is collaborating with the Institute.

To state the current juncture in Cuba’s efforts to construct socialism in bold terms, there is a race for the soul of Cuba between the cooperative movement and expanding private businesses. Which will make up the larger part of that one-third of non-state employment? Will it be socialist enterprises or proto-capitalist ones? The Cuban government is favoring the development of cooperatives. Obama is promoting private businesses. This is a smarter policy on his part. But, as a Cuban friend pointed out to me, “Ours is a smart revolution, too. We are a smart people.”

Clearly, there are new challenges for the Cuban Revolution. How can the petty bourgeoisie be limited while still taking advantage of its dynamism? Here are some measures presently available:

Promotion of an ideology of social responsibility for private businesses, perhaps enforced by the local community.

A steeply graduated tax on private business profits.

Steep import duties on imported supplies for private businesses.

Requirement of a generous minimum salary.

Unionization of employees and vigorous enforcement of workers’ rights.

A limit on the number of wage employees allowed in private businesses.

Requirement that when a private business grows to a certain size, it be converted to a cooperative so all employees can share in the profits and decision-making.

A regulatory regime needs to be developed for the private sector. The state seems to be slow in developing this and some complain it is a wide-open free-for-all. Others see that as a virtue, pointing to small- and medium-sized private businesses as well as foreign investment as the key to needed economic growth. There are conflicting tendencies stirring in Cuba today among policy makers and their advisers. [Camila Piñeiro Harnecker, “Visiones sobre el socialismo que guían los cambios actuales en Cuba” TEMAS 2012]

But there are also strong advocates for cooperatives as the key to Cuba’s future. Camila Piñeiro of the Center for the Study of the Cuban Economy at the University of Havana is prominent among them. She argues that “these socioeconomic organizations are better prepared than private enterprises for economic management that satisfies social needs and promotes socialist social relations…. they facilitate the fulfillment of their members’ material and spiritual needs, their full human development, … they allow for socialist social relations based in equality, solidarity, democracy and justice.” It is for such reasons that the state gives preferential treatment to cooperatives over other non-state businesses. [Camila Piñeiro Harnecker “Cuba’s Cooperatives: Their Contribution to Cuba’s New Socialism” in Moving Beyond Capitalism, Cliff DuRand, ed. (forthcoming).]

Obama’s aim is to help private businesses occupy as much of the non-state economic space as possible.

And that is also why Obama’s aim is to help private businesses occupy as much of the non-state economic space as possible. Nevertheless, his new regulations apply to any Cuban entity that is “independent of the government.” That includes cooperatives. So it is now legal for organizations in the United States to send donations to Cuban cooperatives, to send material assistance, to provide training and education, and even import goods from Cuban cooperatives, providing a wider market for their products. Progressives need to think seriously about how we can support the growth of cooperatives – genuine democratic worker-run cooperatives. Cuba is now open to that and Obama has cleared the way for us to accept this unique opportunity.

Obama’s strategy is to change Cuba, not through regime change, but by promoting capitalism within the country through support of a petty bourgeoisie. After all, the fundamental objective of US policy has always been to bring Cuba back into the capitalist orbit. We have a unique situation in Cuba today. A socialist state is actively promoting cooperatives, thereby devolving economic power to people at the grassroots level. There is a rejuvenation of civil society underway – a socialist civil society. Solidarity calls on us to help it move forward along the road to a socialism for the 21st century.

Short Bibliography – Changes in Cuba

Beatriz Diaz, “Cooperatives Within Cuba’s Current Economic Model” https://www.globaljusticecenter.org/cooperatives_in_cuba_s_economic_model

Cliff DuRand, “Cuban National Identity and Socialism” https://www.globaljusticecenter.org/cuban_national_identity

____ “Humanitarianism and Solidarity Cuban-Style” https://www.globaljusticecenter.org/humanitarianism

____ “Cuba Today: A Nation Becoming a University” https://www.globaljusticecenter.org/nation_becoming_a_university

____ “The Uniqueness of Cuba” https://www.globaljusticecenter.org/uniqueness_of_cuba

____ “Cooperative Cuba” https://www.globaljusticecenter.org/cooperative_cuba

____ “US Cuba policy: from Regime Change to Systemic Change” https://www.globaljusticecenter.org/obama_s_new_cuba_policy

Marta Harnecker, A World to Build: New Paths Toward 21st Century Socialism (Monthly Review Press, 2015)

Michael A. Lebowitz, The Socialist Alternative: Real Human Development (Monthly Review Press, 2010)

Miguel Limia David, “The Training of Activists in Local Development” [2005] https://www.globaljusticecenter.org/training_in_local_development

Steve Martinot, “The Nation-state and Cuba’s Alternative State” https://www.globaljusticecenter.org/cuba_s_alternative_state

Camila Piñeiro Harnecker, “Visions of Socialism Guiding the Current Changes in Cuba” https://www.globaljusticecenter.org/visions_of_socialism

____ ed. Cooperatives and Socialism: A View from Cuba (Palgrave Macmillan 2013)

Henry Veltmeyer, Human Development: Lessons from the Cuban Revolution (Fernwood 2014)