Cuba expands its limited free-market experiment


So, a Cuban walks into his neighborhood barbershop for a trim and a shave on a Havana afternoon. In all likelihood, haircutter and customer argue about baseball. Maybe they discuss CompaneroCompanero Fidel’s latest column in Granma. When they finish, the newly coiffed client pays for the services in Cuban pesos; about 15% goes to the state for taxes, and the owner legally pockets the rest.

Free-market barbershops: An April 15 editorial on the Cuban government turning over barbershops and salons to their employees said that since the 1959 revolution, Cuba had “privatized” most of its economy. It should have said “nationalized.” —

Private profits in communist Cuba? This is no joke. It’s Havana’s latest, limited experiment with the free market. The government is divesting itself of hundreds of state-run barbershops and beauty shops with three workstations or less, turning people who have been wage-earners for decades into small-time entrepreneurs who will pay the state 15% of average revenues in the area for the right to operate. Like some Cuban growers who are allowed to rent stalls from the government in farmers markets, and some cooks who run modest restaurants out of their homes, these hairstylists and manicurists will be entering the world of free-market competition. They will be allowed to set their own prices and presumably will succeed or fail on the quality of their cuts and mani-pedi services. Now, imagine that.

Since the 1959 revolution, Cuba has nationalized most of its economy, with about 90% of legal activity now concentrated in government hands. President Raul Castro appears committed to the basic model, at least as long as his big brother is alive. But the latest shift is driven by necessity. In addition to the U.S. trade embargo, Cuba is suffering the same hardships as most other countries in the global recession. Tourism, nickel exports and remittances from the U.S., all of which are key sources of foreign currency, have fallen off. Cuba’s elderly are living longer and the young need jobs. Castro recently declared that the government has a million employees too many on its payroll.

The cautious measures appear designed to relieve some of the pressure on the state without risking political challenge or creating significant private wealth. Furthermore, they are meant to limit opportunities for corruption, to encourage people to work harder and to draw some cash from the illegal, underground economy into government coffers; officials also have approved new licenses for private taxis while cracking down on unauthorized so-called gypsy cabs.

The changes are less ambitious than we’d wish and aren’t irreversible. The government legalized self-employment in several retail services in 1993, then strictly limited the number of licenses available. But for Cubans, who deserve a better standard of living, these are positive steps -- profit-making jobs and free-market pedicures.