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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | JANUARY 26, 2004
By David E. Gumpert Cuba's Entrepreneurs Come Creeping Back In Fidel Castro's topsy-turvy workers' paradise, hard-currency tips mean that street performers and self-employed chefs live better than surgeons If you're worried that your business might fail and you'll wind up as a bellhop, hotel maid, or street musician, I have some glass-is-half-full news for you. Such nightmare scenarios may not be as bad as you imagine, especially if the U.S. ever reestablishes relations with Cuba. At that point, you'll always have "the Cuban option" for beginning life anew. You see, Cuba is a place where the structure of working life has been turned upside down. Whereas ambitious young Americans push to become doctors, lawyers, and architects, in Cuba the situation is completely reversed. Professionals are at the bottom of the economic totem pole, earning $10 to $30 a month. (Imagine, trial lawyers and surgeons making a dollar a day!) Menial service providers are the nation's entrepreneurs, at the top of the economic ladder, earning hundreds, and sometimes thousands of dollars a month. MARX AND ANGLES. I learned about Cuba's unusual approach to entrepreneurship during a recent five-day tour of Havana and environs. I was there as the closest thing to a tourist American law will allow -- I went with a group from my synagogue under a special "license" issued by the Treasury Dept., to visit and support Cuba's Jewish community. But, of course, I played tourist as well, and could only marvel at the revised economic order Fidel Castro has created. We in the U.S. know Cuba best as one of the last remaining sad-sacks of the rigid Communist economies. But there has been an important loosening in the dominant ideology during the last few years that has permitted a reawakening of the island's entrepreneurial instincts. In a desperate effort to turn its terribly depressed economy around during the early 1990s in the wake of the Soviet Union's collapse, Cuba began focusing heavily on tourism. It restored dozens of crumbling buildings in historic Old Havana and transformed them into first-class hotels and attractive restaurants. It promoted tourism to audiences in Canada, Europe, and the rest of the world outside the U.S. And it shrewdly made legal the American dollar, allowing its arch enemy's currency, flowing via Miami expatriates and international tourism, to turn things around. HAVES AND HAVE-NOTS. Today, tourism accounts for about 60% of the country's "exports." In the process, though, Cuba's supposedly classless society now consists of two classes: the destitute class, including many professionals, who rely on Cuba's nearly worthless pesos, and the entrepreneurial class, which works in Cuba's tourist industry, earning the dollars that make the wheels go round. The most enterprising Cubans find a way to work with tourists, and acquire dollars via tips. Bellhops, waiters, hotel maids, tourist guides, and street musicians earn anywhere from $150 to $1,500 a month from tourists, astronomical sums in a country where the typical salary is $20. The maids in our hotel scrawled daily notes, in English, wishing us a nice day, and arranged towels into heart shapes on our bed. Professional tango dancers performed extemporaneously at a restaurant during lunch, then passed the hat. A parade of clowns on stilts, complete with trombone players, ambled down a side street during the same lunch, with the last clown holding a pail that quickly filled with dollars. A teenage boy with some artistic talent appeared out of nowhere as my group was taking a walking tour of Old Havana and sketched impressive caricatures of us at $1 apiece. In a further concession to the pressures of tourist-based entrepreneurship, the government even permits individuals to establish restaurants, known as paladares, in their homes. One I went to charges $24 per person for a four-course gourmet meal, and can serve 30 or more people per evening, six days a week. That's a cool $4,000-plus per week, or $16,000 a month, of revenues, before tips -- though there are more in the way of fees and taxes for these regulated businesses, not to mention food costs, than for bellhops and tour guides. Rents are not a problem, since Cuba's brand of socialism limits rent to 10% of income, and often less.
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