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-->The Challenges of Regulatory Reform: The Example of Labor Cooperative RegulationsOn July 1, 2013, the official organ of the Cuban Communist Party announced the approval of 124 cooperatives to operate in the non-agricultural sector (Puig Meneses and Martínez Hernández 2013). Grisel Tristá Arbesú, head of the Business Improvement Group of the Permanent Commission for Implementation and Development (Grupo de Perfeccionamiento Empresarial de la Comisión Permanente para la Implementación y Desarrollo), was quoted as explaining that this push to open a small area for private economic activity focused on activities in which state enterprises had not been efficient and which were not critical to the national economy (Ibid.). The majority of the first batch of state approved cooperatives represents efforts to devolve operation of non-essential state enterprises (Ibid.); only twelve cooperatives were approved from the non-state sector (Ibid.). And indeed, it was made clear that the object of these efforts was not to expand a private sector or to introduce a market economy, but rather to devolve administration of economic activity from the ministries to non-governmental workers (Ibid., “Ellas están llamadas a ocupar un lugar importante en la economía del país, aunque el papel principal lo continuará teniendo la empresa estatal socialista,”enfatizó. Las cooperativas no son resultado de un proceso de privatización — aclaró — , sino que administrarán la propiedad estatal que es, en definitiva, de todo el pueblo” [“‘These have been called upon to serve an important role in the national economy, though socialist state enterprises will continue to maintain their principal role in the economy,‘ he emphasized. Cooperatives are not the product of privatization, he clarified, rather they will administer state property which is and remains the property of the nation”](quoting Rubén Toledo Díaz, jefe de grupo en la Comisión Permanente para la Implementación y Desarrollo.)” ).The emergence of the cooperative marks a multi-year effort to reform the Cuban economy while preserving the fundamental character of the Cuban political economy characterized by strong central planning and state control of productive capital. Indeed, the announcement was careful to remind readers that though the operating premise of the new regime was grounded in markets to determine demand and prices, the state retained unconstrained authority to intervene to set prices (Puig Meneses and Martínez Hernández 2013). That sets up the fundamental contradiction of the reforms. On the one hand, there is an acknowledgement of the utility of the markets as efficient regulators of economic activity. On the other hand, these efficiencies must be managed under the fundamental economic principle that characterizes markets as inherently corrupt and corrupting since its methods could not be entirely detached form the ideologies of capitalism. Reconciling this contradiction defines the challenge of regulatory reform that is the object of this chapter. The way that political ideology is translated into specific legal structures in the context of reform illustrates the limits of reform and the difficulties of translating the two contradictory trajectories of that reform into coherent regulatory structures.The road to this point has neither been easy or straightforward. Even a change at the margin of economic activity of the nation—the creation of a small, though tightly regulated space within which individuals may provide goods and services without direct state direction or control—required a substantial amount of debate within the Cuban Communist Party (the “PCC”). That debate, in turn, exposed the contradictions of Cuban Marxist-Leninist political economy—one with the objective of creating an appropriate role for the control and exploitation of capital consistent with Marxist principles but which acknowledge that the Soviet experiment, turning the state into a monopoly capitalist and the Communist Party as its operator, has not produced the movement toward socialism intended after 1959. To complicate the debate, Cuban Communists have rejected the approach of Chinese and Vietnamese Communist Parties, which have moved to more indirect control of capital and markets as part of their development of Marxist economic principles since the 1970s. As a consequence, the range of flexibility left to the PCC is quite limited.Central to the debates, and one of the most difficult issues facing Cuba today, is the problem of structuring aggregations of economic activities (Backer 2013). In most states, individuals are understood to be able to aggregate capital in corporate or partnership form and to aggregate productive activity otherwise through co-operatives. But Cuba’s version of Marxism Leninism has complicated that structure, producing a political culture whose ideology views formal aggregations of individuals with some suspicion, as a challenge to the paramount role of the PCC. More importantly, the current economic system is based on the premise that only the state, under the leadership of the PCC, may own and direct the use of productive capital for economic production. These issues are bound up in recent efforts by the PCC to change the economic model that has been substantially unquestioned since the early 1960s, without changing, in any significant respect, the premises of that organizational model. Thus while it has become clear that aggregating productive activity is critical to expanding economic activity, and for aiding in Cuban economic growth, as an economic matter, the forms of permissible aggregation remains contested, as a political matter.This Chapter first reviews the new conceptual and regulatory structures for cooperatives. This requires understanding the Communist Party line expressed after 2011through the Lineamientos de la Política Económica y Social del Partido y la Revolución [Guidelines on the Political and Social Policies of the Party and the Revolution] (Communist Party of Cuba 2011, hereafter Lineamientos). The development of the cooperative initiative was undertaken under the guidance of the Lineamientos. The Chapter then focuses specifically on the form of the economic cooperative, the only type of economic aggregation that the Cuban state has tentatively opened to individuals, examining in some detail cooperative regulations promulgated in December 2012. The cooperative form represented a core advance in the project of reform of the Cuban economic model and the lynchpin for augmenting the private sector as a complement to the state run centrally planned economy. And yet at the same time, that reform was viewed, even in law, with some trepidation. The cooperative was characterized from the first not as a strongly supported step in a coherent path toward reform, but rather as an “experiment” targeted toward the solution of economic development at the local level (Lineamientos ¶ 15). These approaches were then effectively conformed in the structures of the principles of political and economic organization adopted in the wake of the 7th PCC Congress in 2017 ((Communist Party of Cuba 2016); discussed in Chapter 5) and have been embedded in the proposed constitutional reforms of 2018 (discussed in Chapter 12).The Chapter then suggests structural issues and consequences of the new regulations within the context of the larger issues constraining Cuban economic reform. It concludes that, like China before it in the 1970s, the issue for Cuban Marxism is not how to resolve the issue of capital, it is instead the question of labor under Marxism as something other than a commodified form of useful capital. Successful resolution of this issue will test the Cuban legitimacy of the current political economy of the state. Cuba has sought to nod in the direction of labor through its focus on labor cooperatives. But it remains very much committed to the primacy of capital. Until that contradiction of Cuban Marxism is solved, the best one will be able to hope for are small steps toward the amelioration of the subordination of labor in a system that remains very much grounded in the primacy of capital. Even then, the steps will be small indeed as long as Cuban Marxism rejects the role of the market in managing economic activity, and insists on the primacy of state objectives for private economic activity.