The Cuban Incentive System

http://www.economictheories.org/2009/10/economic-incentives-in-cuba.html

On July 26, 1968, Castro gave his blueprint for the future. Material incentives will be phased out and replaced by moral ones; the connection between work for and wages from an enterprise will be broken, and citizens will develop a relationship between their effort on behalf of the society and the free goods and services directly granted by the state. (The government already supplies free education, medical care, social security, burials, telephone calls, nurseries—and, for some, recreation and housing.) In the future, all housing, meals, clothing, transportation, communication, public utilities, and entertainment will be free. Income differences will be gradually abolished and distribution made accord­ing to needs. Hence, there will be no social classes. In the future Cuban society, an engineer will earn as much as a cane cutter.

How did this extreme reliance on nonmaterial incentives come about? In one sense the economy has always operated on a form of moral incentive —the popular support of Fidel Castro (among those who stayed in Cuba) and the opposition to American military and economic threats to Cuba. The primary source of motivation in the years after 1959, however, was material rewards. In agriculture, renters of small plots received de facto ownership in the initial Agrarian Reform, and workers on sugar-cane co­operatives and people's farms received guaranteed wages. As peasant in­comes rose, the incentive for greater productive effort declined. "All his traditional, one might almost say inborn, reasons for working hard disap­peared. Unless new reasons could be substituted, the most natural and human thing in the world was for him to stop working any harder than required to enjoy his new and much higher standard of life."51 The 1970 harvest campaign thus became an attempt to supply a new set of reasons for working hard.

"Apart from land, the most commanding rewards for farmers in all of Latin America are schools, hospitals, roads, teachers, doctors, and trans­port."53 After 1962 more and more emphasis was placed on these collec­tive material incentives. Doctors and teachers were strongly encouraged to serve periodically in rural areas; thousands of rural children were sent to boarding schools, where they received a combination of political indoctri­nation and basic education. One is impressed, in recent accounts of every­day life, by the pride that ordinary Cubans take in the educational achieve­ments of their children under the present system.

Wage policy outside the agricultural sector went through several stages:
We saw that wages inherited from the capitalist period were frozen. Then in 1962-63 the new system of "wage scales and work norms" was painstakingly adopted from Soviet manuals and soon implemented, as it was in China. In fact, there was confusion in the implementation of the new wage policy, although Cuban officials claim actual completion of the process of introducing the new wage policy by late 1964 or early 1965. In late 1966 and early 1967, there was a gradual reversal of policy in favor of straight time payments and a severe narrowing of the moderately wide salary differentials of the new wage scales.

Workers have generally renounced any remaining vestiges of over­time wages (which have become something of a symbol of an unpatriotic attitude). Managers are paid on the scale of civil servants and often receive no more than veteran workers. Except for a few scarce technical skills, wage differentials are not widely used today as a labor-allocating device.

The shortage of consumer goods and the rationing of meat, rice, coffee, and many other items meant that there was little to buy when mate­rial incentives were increased in the mid-1960s. Rationing quotas became the effective determinant of real income. All available evidence points to even greater equalization of wages in the future. As the system of free sup­ply gains further headway, it is possible that moral incentives will almost completely replace wages as a stimulus to labor.

The core of the system of moral incentives, however, is the system of voluntary labor, which sends thousands of students and office workers to work in the cane fields every year. No one has ever claimed that cutting sugar cane under the tropical sun is much fun for a bureaucrat or an intel­lectual; the cane is sharp, flies abound, and backs and arms soon give out. By rational measures the cost of transporting and feeding volunteer work­ers largely outweighs the work they produce. Cuban leaders place such a high premium on the moral value of volunteer labor that they disregard such considerations.

How many "volunteer," and for what reasons? "The following facts were widely publicized in 1968 and were typical: 240,000 renounced pay­ment for overtime work; 25,350 men turned their jobs over to women in order to join agricultural brigades; 3448 switched from city to country for two years and thousands upon thousands aspired for Heroes of Moncada Banners, and so on. 5 Also important in this respect is the increasing use of elite army units or semimilitary youth groups as agricultural task forces. The contrasts in attitudes of volunteers are shown in the following reports:

I asked a friend of mine whether he cut cane. He said shortly, "Enough." Why does he go? Because there is moral pressure on him to go. But it is moral pressure. If he has no morality he needn't go. He can stay in the office and still draw his salary. There is a legal necessity to go to the fields only one day a week. .. . The militant twenty per cent set the work pace in Cuba and most of the country follows... . The hostile twenty per cent neither attend meetings nor do the extra work. They get cold-shouldered, called gusano [worm], a lift attendant might force them to walk up the stairs. Food gets roughly shovelled on to their plate in the cafeteria.

One daughter bubbled in, the mechancial engineer. She was muddy. She chatted, waiting to get into a shower which they shared with about twelve neighbors. She'd been doing voluntary work in the fields. "How many hours?" "Oh, a few." "Don't you watch the clock?" She laughed. All the people she'd been responsible for had turned out, she said. The work wasn't all that efficient, the daughter said, but at least it wouldn't have to be done all over again.

Che Guevara believed that moral incentives would eventually prevail if only a few enthusiastic workers in each group would serve as examples for others. There are strong incentives for at least "going through the motions" of participating in voluntary work projects—the local Committee for the Defense of the Revolution is on the alert for slackers. It seems that more government officials and other administrators in Cuba, as compared to China, do so with a sense of reluctance and duty, in the spirit of an American boss putting in an appearance at the annual company picnic. "The second stage [of volunteer labor], now under way, is to deepen peo­ple's understanding of shared labor as the key to a classless, educated society and to raise individual productivity, express revolutionary idealism in work, break economic bottlenecks that choke men with hunger and frus­trate their ideals everywhere."58 Much depends on the generation of post-revolutionary young people now entering the labor force.