Speaking of enterprises and entrepreneurs (II)

Our entrepreneurial world of today is surprisingly diverse, in the types as well as the size of the enterprises and in the regulatory systems they are subordinated to. We have everything, from the big enterprises to the personal endeavors that are barely enterprises, and from the foreign enterprises to the family enterprises.

My friend Goyo, who doesn’t know about enterprises, gave me his own classification, very distant from academia, but also legitimate, and he defines them as follows: wishful enterprises, quasi enterprises, enterprises, non-enterprises, anti-enterprises, superenterprises and omnienterprises. His explanation of each one of them would fill many pages. He doesn’t make distinctions regarding forms of ownership or origin of the capital, it is about what is understood by the matter of “aptitude and attitude,” although appealing to theory we could say it is about matters associated to entrepreneurial culture, leadership and the environment.

In fact, Goyo is capable of explaining how some of those existing today in our country have several types of the attributes he has invented; for example, he tells me, there are non-enterprises that are omnienterprises and superenterprises that are also anti-enterprises.

We have gotten to this colorful and also mixed entrepreneurial world after a long process of more than 50 years of continuous and at times superimposed transformations of the Cuban entrepreneurial universe and of its different management and regulatory systems.

Many periodizations can be made of the fate of the Cuban enterprise after 1959. I propose the following:

1959 – 1975: Passage from the private capitalist enterprise to the socialist state enterprise. Emergence of the consolidated enterprise as the predominant social entrepreneurial subject and disappearance of the small and middle private enterprise.

1975 – 1986: Consolidation of the socialist state enterprise. Creation and adoption of the Management and Economic Planning System. Emergence of the “legally private” state enterprises known as S.A. It is also the period of the emergence and expansion of a sui generis entrepreneurial form, the “contingents.” The first self-employed also appear.

1988 – 1998: Appearance and expansion of the foreign enterprises (in different forms of association and also as “branches” of foreign commercial enterprises, the so-called “firms”). Resizing of the entrepreneurial system as a result of the resizing of the Cuban industrial system. Emergence of the enterprises of the Biotechnological Cluster at “full production cycle.”

1998 – 2006: Appearance of the “perfecting” and “perfected” enterprises. Stagnation of self-employment. Expansion of military enterprises toward the civilian sector. Consolidation of the foreign capital enterprises.

2006 – 2011: Stagnation of the foreign capital enterprises and of the “commercial branches or firms.” Exhaustion of the “perfecting” process. Consolidation of the role of the military sector’s enterprises in the country’s economy. Consolidation of the enterprises of the Biotechnological Cluster.

2011 – 2016: Relaunching of the foreign capital enterprises and of the national ones of the non-state sector (private and industrial and services cooperatives). Transformation of the entrepreneurial system; creation of the OSDEs and the UEBs – Higher Organization of Entrepreneurial Management and Basic Entrepreneurial Units, respectively.

During this process our enterprises have also been subject to different “rules of the game” in a same period of time. This happened when the economic calculation and budgeted system coexisted, or when in the 1980s different rules of the game were established for those enterprises that were “state-run legally private,” and others for the contingents, still others for the enterprises that still remained under the management and economic planning system, and even others for the foreign capital enterprises.

Every 10 years, these rules of the game have been changing for the socialist state enterprises. However, there are some questions very associated to the environment that have been common to all these periods:

1- This entire evolution has been conditioned by the U.S. blockade, and by our special relationship with the Union of Soviet Socialist Republics, until the end of the 1980s.

2- The socialist state entrepreneurial system has enjoyed a very permissive fiscal arrangement, with a large backing from the State Budget.

3- Since the early 1960s our enterprises worked with an overvalued exchange rate in relation to the dollar, as in relation to the convertible ruble, something that apparently in those times was not of very much importance.

4- The Cuban banking and financial system played a very passive role (this still happens today).

5- Vertical and monopolistic structure with low complementariness. Today this is still a characteristic of the Cuban entrepreneurial system.

Thus, by the mid-1980s a group of problems that directly affected our entrepreneurial system were being recognized, some of which were:

-Excessive protection by the central administration agencies and their interference in the enterprises’ management.

-Distancing of operational decision making from the links that must carry them out.

-Distancing from the world advances and the foreign market.

-Lack of close linkage between the research and production centers.

-Delay in the introduction of scientific and technological achievements and advances.

-Formal and insufficient participation of the enterprises and work teams in the planning process.

-Exaggerated demands from the enterprise in terms of statistic information.

In the early 1990s, a study carried out by professors from the Faculty of Economy of the University of Havana confirmed this situation, as follows:

-Excess centralization.

-Predominance of administrative methods over the economic ones.

-Lack of understanding of the mercantile monetary categories and their role.

-Scientific technical progress was considered only formally.

-Obstacles to personal and collective creativity because of excess regulations.

-Formal recognition of the socialist enterprise as the basic link versus real limitation of the independence of its management.

-Lack of real functioning of monetary-mercantile relations.

-Deficient price system.

-Passive tax system.

-Credit does not play a real role.

A good exercise is to try to identify which of these problems is still part of the environment that “saddles” our state enterprise.

By 2012 a work by economist Luis Marcelo illustrated how in the different state entrepreneurial models adopted since 1962 up to the perfecting initiated in in 1998, decisive functions like sales, remuneration, distribution of profits, investments, prices and production of our state enterprises had a degree of very reduced autonomy, even the autonomy reached in the period of the system of economic calculation (1962-1966) got to be greater than the one achieved in the rest of the systems in all these functions, with the exception of that related to the function of production and that of the hiring of personnel in the period of entrepreneurial perfecting of 1998.

Since 2014 we have returned to the effort of achieving that state enterprise we have sought so much. The OSDEs and the UEBs have appeared with the aim of separating them from the ministries and giving them the “autonomy” or “relative independence” they need and that is so frightening. In the end the system has again been structured vertically and the decisions are again made far from the place where “the game is decided.” Thus the structure of the state entrepreneurial system takes up the following shape (the OSDEs do not exist in all of them):

The OSDE in turn has its own structure, with its managements that respond to the functions (112) that have been defined for it, for which it demands certain information from the enterprises and these, in turn, from the UEBs. It still doesn’t seem to have been able to separate from the protection of the ministries, since these in turn continue responding and are demanded to respond, for “their enterprises.”

The geographic fatalism also plays a role here, almost all the OSDEs are in Havana as well as almost 40 percent of the enterprises! What would happen if the decision were made to bring the OSDEs closer to the territory where the fundamental part of their business is carried out?

That is our story, very synthesized it is true, of this long process of making of the state enterprise an agile and efficient enterprise that responds to the needs of our development.

We have repeated once and again how decisive the socialist state enterprise is for our future project. Once and again we have heard how the socialist state enterprise and our entrepreneurs have been demanded efficiency, productivity and even competitiveness. Why is it so difficult for our socialist enterprise to reach those aims?

We could follow some guide, we should ask ourselves:

Is our institutional arrangement (the rules of the game) the adequate one?

Do we have the adequate infrastructure so that our enterprises can be truly productive?

Does the current macroeconomic environment favor the conditions so that our state enterprises are efficient, productive, competitive?

Are our markets efficient?

Do the necessary incentives exist so that our enterprises can export?

Can our enterprises seek aid from the developed financial markets that can facilitate and boost their activities?

Are our enterprises close to the advanced technological development in their sphere of activity? Is the closing of the gap facilitated for them?

Are there adequate incentives so that our socialist state enterprises can be proactive toward innovation?

If the majority of the answers to these questions are negative for the majority of our enterprises, then we must think that not only must we bring about changes inside them, but also and decisively in the environment in which they move. What prevents us from doing this?

Since 2014 we started implementing this new process of transformation of the socialist enterprise. According to my calculation it is the fifth. Will they be sufficient?

We must also achieve that our entrepreneurs in our socialist state enterprises really be entrepreneurs and not just mere administrators of goods and scarce resources, squeezed by institutional, cultural arrangements and structures that prevent them from using all their potential. We will have to devote a future work to the current Cuban entrepreneur.

 

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