Cuba’s renovation of its socialism is opening space for an expanding non-state sector of its economy. The growth of small private businesses and of cooperatives is invigorating Cuba’s civil society. Whether this will be a socialist civil society depends on whether socialist cooperatives or the non-socialist private businesses predominate. President Obama’s new policies toward Cuba are designed to promote the latter as a nascent capitalist class. But these same policies also open the way for progressives to promote Cuba’s cooperatives. As a matter of solidarity, it is our responsibility to make the most of this opportunity.

Obama’s New Scheme to Reverse the Cuban Revolution

The change in US policy toward Cuba announced by President Obama on December 17 was a long overdue step forward in US-Cuban relations. Minimally it acknowledges that Cuba has a government. Yet, at the same time it was a continuation of objectives that have moved US policy makers ever since the triumph of the Cuban Revolution, viz. to prevent a successful construction of socialism in this hemisphere. Let me explain this by contrasting two documents from our political elite.

The foundation of US policy up to the present was laid in the Eisenhower years in an 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.]

This is the basis of the blockade and other aggressive actions over the last half century. The objective was to prevent socialism by promoting regime change by imposing hardship on the Cuban people.

Contrast that with today’s White House statements:

“It does not serve America’s interests, or the Cuban people, to try to push Cuba toward collapse…. [Instead] Our efforts are aimed at promoting the independence of the Cuban people so they do not need to rely on the Cuban state.” Rather than seeking to impose hardships on the Cuban people, policy statements emphasize helping the Cuban people, helping them “to improve their living standards and gain greater economic independence from the state.” This is to be accomplished by “providing… opportunities for self-employment and private property ownership, and by strengthening independent civil society.” [“Charting a New Course on Cuba”, Office of the Press Secretary, The White House, December 17, 2014.]

What we see here is a smarter policy that aims not at regime change but systemic change. The fundamental objective of the US political elite remains the same: bringing Cuba back into the capitalist orbit. Back in the 1960s toppling the Castro regime was the necessary condition for preventing the consolidation of socialism under a popular Revolutionary government. It was really opposition to socialism in “our back yard” that was the basis of US policy. That’s why Obama can now shift tactics with a new focus: undermining socialism in Cuba by promoting capitalism within Cuba’s civil society.

The blockade remains in place for the time being at least and support for so-called “democracy promotion” programs will continue. These involve support to opposition groups to strengthen civil society –as if there were no socialist civil society in Cuba. The civil society the US supports is those small groups who are against the government. What is new in Obama’s approach is not this but is his emphasis on economic rather than political subversion. Recognizing the Cuban government does not mean accepting its socialist economic system.

The opening for this strategy lies in Cuba’s efforts to renovate its socialism. That effort includes economic space for small to medium sized private businesses. It is these new entrepreneurs that the US will now be supporting with money, supplies and business training, thereby growing and strengthening a nascent capitalist class. It is not just the small group of political dissidents opposed to the regime who will be receiving US support, it will be ambitious businessmen receiving remittances from relatives in Miami and US tax dollars through other private channels. There is even an opening to trade, so long as it is with Cuban entities that are independent of the government.

The US has instituted numerous measures to assist in the development of a nascent capitalist class from the private business sector. A careful reading of the new Treasury Department and Commerce Department 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 Dec 17 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, exports of equipment and supplies to Cuba is allowed as well as imports from Cuba as long as the Cuban entity is independent of the government . The US 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.”

The Cooperative Alternative

But we should remember that it is not only private businesses that can benefit from these new regulations. Cooperatives are also independent of the government. Cooperatives can also receive remittance money. Cooperatives can also receive equipment and supplies from abroad. There is now the possibility for the solidarity movement in the US to support a socialist alternative in Cuba – an alternative to private business. It is projected that in the next few years the non-state sector will provide 35 percent of employment and, along with foreign and joint enterprises, 45 percent of the gross domestic product. Will the predominant portion of that non-state sector be cooperatives or will it be private businesses? Obama is pushing for the latter. We need to join with the Cuban government in promoting the cooperative alternative.

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.

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. 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.

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 Olga Fernandez pointed out to me, "Ours is a smart revolution, too. We are a smart people."

Regulating Private Businesses

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 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]

While promoting cooperatives with one hand, the Cuban state needs to carefully regulate private businesses with the other hand so as to assure that they do not accumulate great wealth. Why is this important? The political power of a class lies not just in its control of political institutions. It also lies in its weight in the economy. If private businesses were to come to dominate the non-state sector of the economy so that prosperity depended significantly on them, the state could find itself compelled to favor this non-socialist form of enterprise. Obama is determined to push Cuba down this slippery sloop toward capitalism. The Cuban Revolution needs to use its smarts to prevent that by containing the private sector while promoting the cooperative sector.

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.

Building a Regulatory Regime for Cooperatives

Cuba is poised to be the first country in history to have cooperatives as a major sector of its economy. With the opening to urban cooperatives three years ago, this country embarked on a project of world historical importance to construct a 21st century socialism. This is a project that uses the power of a socialist state to empower a socialist civil society by building democratically participatory economic institutions.

A half century ago the Cuban Revolution socialized the means of production. This was understood to mean that the revolutionary state was to be the representative of the working class in controlling the economy in a rational, planned way for the benefit of society as a whole. Social property meant state property and that meant state control. Now however, with the current program for the renovation of socialism, it has come to be seen that social property does not necessarily have to be under state control even when it is still under state ownership. Collectivities of working people at the point of production can directly manage social property themselves. Management does not necessarily have to be in the hands of the state. Ownership and management can be separated. This is the new understanding of socialism we are seeing today. It is a turn away from the state socialism of the last century.

It is no longer thought that only a revolutionary vanguard in control of the state apparatus can be trusted with the historical mission of building socialism. Now after a half century of socialist construction, ordinary people at the base of society are deemed to have developed to the point where they can be trusted with this historical mission. Indeed, it is through their participation in this project at the grassroots level that their capacity to “found society anew” can be further developed.

With a paternalistic state undertaking to do everything for the people, there was little space for initiative by the citizenry.

In effect, the state is devolving power downward -- economic power to cooperatives, political power to local levels of government. The central state remains the constituted power of society as a whole. The major means of production remain in the hands of the government and laws and policies continue to be made at the national level. The state is not being disbanded. It is just devolving powers downward in accordance with the principle of subsidarity. This means that decisions should be made at lower levels while the higher levels support them. This increases the constituent power that is the foundation of a socialist society.

It’s not that state socialism was a failure. It was necessary to move society away from the dead end of capitalism as well as to defend against the onslaught from other capitalist states. What is of long run consequence is the sense of social solidarity this engendered. A socialist consciousness and socialist values took root in the people. It is from this platform that today’s renovation is being launched.

At the same time, there was a serious limitation in state socialism. Although there were abundant opportunities for popular participation, this tended toward a passive participation. With a paternalistic state undertaking to do everything for the people, there was little space for initiative by the citizenry. As popular humor put it: “how do you conjugate the verb participar? Answer: I participate, you participate, we participate, they decide.”

The present withdrawal of the state from portions of the economy aims to expand the scope of participation at the point of production. Democratic worker owned cooperatives open space for an active participation in daily life at the workplace. No longer do workers have to wait for decisions to come down from above. They are no longer passive participants. Cooperative members are responsible for the running of their enterprise. New social relations emerge – socialist social relations. Socialist human beings are developed through practice. The resulting sense of collective empowerment becomes a motivator that is itself a force of production – a socialist force of production that produces not only use values, but also socialist human beings.

It was in December 2012 that Cuba embarked on this course when the National Assembly passed an urban cooperative law that established the legal basis for the new urban cooperatives. This was seen as experimental. Based on the results, a comprehensive law of cooperatives is planned for 2016. To date, 498 new cooperatives have been approved, mostly in and around Havana. Many others are awaiting approval.

The socialist state is supporting these new cooperatives in a number of ways. Capitalization is coming from bank loans and a new Finance Ministry fund for cooperatives, as well as member contributions. The tax rate is lower for cooperatives than it is for private businesses. They can buy from the state at a 20% discount. Where a cooperative is formed from a former state enterprise (which is the bulk of the cases so far), the new cooperative can have 10 year renewable leases for use of the premises, paying no rent in the first year if improvements are made.

Beyond these material preferences given to cooperatives, the state has begun to establish a legal framework for them in the 2012 law. This includes the following provisions:

A cooperative must have at least 3 members, but can have as many as 60 or more. One vote per socio. As self-governing enterprises, cooperatives are to set up their own internal democratic decision making structures.

Cooperatives are independent of the state. They are to respond to the market.

Member contributions to capitalization are treated as loans (not equity) and do not give additional votes. Loans are to be repaid from profits.

Cooperatives 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.

Cooperatives may hire wage labor on a temporary basis up to 90 days (this has now been expanded to one year). After that, a temporary worker must be offered membership or let go. Total temporary worker time cannot exceed 10% of the total work days for the year. This gives cooperatives flexibility to hire extra workers seasonally or in response to increased market demands, but prevents significant collective exploitation of wage labor.

While the state is to promote cooperatives, at the same time there are impediments to the cooperativization process coming from the state. These are a consequence of a contradiction between the old hierarchical structure of state socialism and the new participatory practices proclaimed for a renovated socialism. As has often been said, “there needs to be a change in mentality.”

In her study of the cooperativization process Camila Pineiro Harnecker has identified a number of shortcomings. She points out that the approval procedure to become a cooperative has too many steps, does not include timelines and is subject to administrative will. The conversion of a state business into a cooperative is at the initiative of the state, not the workers, who are not even consulted about becoming a cooperative. Typically there is no education of workers about cooperatives – a serious shortcoming. Sometimes state enterprises even refuse to deal with them. There is no institution to supervise the internal functioning of cooperatives or to mediate conflicts. There is no organization to represent the interests of cooperatives before the state, comparable to ANAP for small farmers. [ cf. Camila Pineiro Harnecker, “Cuba’s cooperatives: Their contribution to Cuba’s new socialism” in Moving Beyond Capitalism , Cliff DuRand, ed. (Ashgate Publishers and Fernwood Publishers, forthcoming)] Hopefully all of these defects will be addressed in the 2016 law.

In effect, private businesses and cooperatives are in competition for predominance in [the] non-state sector of the economy.

In addition to that, there is a vital political imperative for strengthening cooperatives. As pointed out earlier, along with private businesses, in the next few years they are expected to provide 35% of employment and 45% of the GDP. In effect, private businesses and cooperatives are in competition for predominance in this non-state sector of the economy. On a level playing field where each could develop based on their own strengths, cooperatives ought to prevail. And this is especially so given preferential treatment by the state. However, the playing field is far from level. Private businesses are receiving substantial capitalization from relatives living abroad in the form of remittances. To this there is now added further financial and material support due to changes in US remittance and export policies under the Obama Administration. These are designed to support “the independence of the Cuban people from their government.”

While these policies are aimed to benefit private businesses and develop a nascent capitalist class in Cuba, they also open the way for support of cooperatives. To take advantage of this opening, the cooperative regulatory regime being established will need to facilitate solidarity aid from abroad. Loans, material aid, technical assistance and training can help strengthen cooperatives in Cuba. The state can also promote exports by cooperatives to the US market of such things as handicrafts, art, and, especially, organics. This will enable them to earn hard currency foreign exchange.

For its part, the Center for Global Justice, located in San Miguel de Allende, Mexico, has begun a collaboration with the Instituto de Filosofia in its cooperative training program in Central Havana. Training of Cuban workers in the principles and operations of this unfamiliar business form is urgently needed if cooperatives are to succeed. The Center has been conducting workshops for Mexican campesinos for the last four years. The exchange of experiences and resources with our Cuban comrades promises to be fruitful for both sides. It is an example that hopefully others will also follow.

Consideration should also be given to the eventual conversion of private businesses into cooperatives. Those businesses are allowed to employ wage labor. This enables them to grow beyond the size of a small or even middle size enterprise. Although regulations limit the number of wage laborers, reportedly these limits are not being enforced. The exploitation of wage labor presents the opportunity for accumulation of wealth in private hands, something that current policy says will not be allowed. But how to prevent that?

One solution is to require private businesses once they have reached a certain size to convert into cooperatives so all who are employed there can enjoy the benefits equally (no exploitation) and participate in decision making (democracy). This could be done with tax incentives for conversion and political organizing of their wage labor force. Such measures would assure the predominance of the socialist form of enterprise over the nascent capitalist form of private business.

These then are some of the features of a socialist regulatory regime for cooperatives in the Cuban context.

As Gramsci pointed out, the state penetrates down into civil society. Foucault takes this a step further with his notion of governmentality. This refers to those systems of control that extend even into the subjectivity of the human, into the self. This is what makes a social system self-governing and self-replicating. Cooperatives educate their members to the values and practices of a participatory socialism. This is more than an invigoration of civil society, it is also construction of a socialist governmentality in Foucault’s deeper sense. It is a resocialization of workers away from their passivity under a paternalistic state socialism to protagonistic participants able to found society anew. Some Marxists see cooperatives as a step back from what they consider a more advanced state socialism, perhaps even a step toward capitalism. But my view is that it is a step forward toward a society ruled by the associated producers.

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.

At a time when global capitalism is in crisis, there is a pressing need for an alternative. At a time when the state socialist model no longer inspires, there is also need of a renovated socialism. Socialism needs a socialist state. But equally, a socialist state needs a socialist people. In this century we are beginning to see a socialist state empowering a socialist people. The future of humanity depends on its success.

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