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The Opening of Cuba’s Private Sector

Cuba's Private Sector
A couple of days after the closing of the Cuban border, 16,000 private workers, upon sensing danger, requested the labor ministry suspend their licenses so they could avoid paying taxes. That number rose to 119,000, 19% of the private workforce, in a few more days and threatened to annihilate the Cuban economy. The implementation of the global travel restrictions had a devasting impact on the country’s tourism sector, which is the second-largest revenue generator for the island nation. As a result, selective private businesses took a massive hit and the government lost a crucial foundation for foreign exchange. By December 2020, Cuban tourism had fallen by 16.5%, followed by an 11% drop in the country’s GDP. Worried by the lingering economic collapse, the government began opening Cuba’s private sector, providing Cubans with self-employment opportunities and allowing them to operate businesses in added sectors.

What Did the Government Do?

Previously, the communist-led government allowed Cubans to participate in merely 127 officially approved private sector activities. Some of the legalized activities included working as a barber, working in gastronomy or transportation or renting rooms to tourists. To expand the private sector, the government eliminated the previous list of 127 activities. Instead, it created a new list of 124 jobs prohibited in the private sector. The rest of the 2,000 legal activities, which the government recognized, will be open to Cubans. In the past, state-owned businesses have always dominated the Cuban economy. However, the private sector has managed to make a mark over recent years. Presently, 635,000 people occupy the private sector, which is roughly 14% of the Cuban workforce. The introduction of the long-awaited economic reform might increase diversification in the private sector and could spur economic growth for Cuba.

The Effects on Cuba and its People

The economic reform will allow Cubans to partake in additional economic activities. It will help eradicate bureaucracy in the governmental arrangements, as the Cubans will no longer have to manipulate their business documentations to fall under the list of legalized activities. Now, they only have to confirm that they are not running any business from the list of prohibited activities.

Further, the liberalization of the private sector will bring about a change in the career patterns of Cubans. Previously, apart from the underpaid state-run jobs, the only other viable option for Cubans were low-skilled jobs. Now, Cubans will have countless other opportunities in technical fields like engineering and economics. Still, professional fields like medicine, law and teaching could open to state employees only. Additionally, the opening of the private sector will increase employment opportunities, which will rapidly develop the private sector. Private business owners currently make up 13% of Cuba’s workforce. This number will spike due to the relaxation of the private sector.

The Future of Cuba’s Economy

Ricardo Torres, a pro-reform economist at the University of Havana’s Center for the Study of the Cuban Economy, stated that the opening up of Cuba’s private sector will diversify jobs and boost the GDP. This, in turn, triggered a shift in economic arrangements in Cuba. But the chances of the private sector dominating the economy soon are bleak, mainly due to the political settings of Cuba. Therefore, expectations have determined that state-owned businesses will direct the economy. Rather than rushing into free-market forces, the Cuban government must seek inspiration from other countries and establish a solid institutional framework. Several European states, the U.S., Japan and other East Asian countries have proved that by focusing on macro and microeconomic policies and planning and investing in citizens, an economic upliftment should be possible.

Cuba’s Relationship with the US

The economy was booming under the Barack Obama Administration. Things, however, took a turn when former President Donald Trump overturned Obama’s agreement to ease travel restrictions on Cuba. Donald Trump also ended the U.S. cruise travel to Cuba, disallowed many Cuban Americans to send remittances back home, pressured a U.S.-run hotel out of Cuba, forced countries not to hire Cuban doctors and nurses during the pandemic and re-enlisted Cuba on the list of countries that sponsor state terrorism. Cuban businesses suffered a great deal due to this. The labor reform could not have been timelier for the Cuban government as it could present a sturdy case for amendments in the U.S. policy.

One of Obama’s main objectives was to expand the private sector in Cuba. Therefore, on the back of the opening of the private sector and the appointment of Joe Biden as President, the Cuban government can look to persuade the U.S. to consider a policy reform. Although Cuban had to wait a long time for labor reform, it is crucial to mend unemployment rates, boost the GDP and restore Cuba’s unsteady economy through Cuba’s private sector.

– Prathamesh Mantri
Photo: Flickr

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What to Know About the Dutch Housing Crisis

The Dutch Housing Crisis
The Netherlands is a small country in western Europe. Its population is beginning to outstrip the amount of available and affordable housing. There is an overall housing shortage of more than 300,000 homes in the Netherlands. Additionally, the homeless population has grown by more than 70% in the past decade. Some social housing waiting lists can span for up to 15 years in certain cities. As a result, the Dutch housing crisis is becoming a bigger problem for the nation.

Many students have delayed their plans to move out of family homes. This is due to the lack of affordable housing. Thus, this delays certain life milestones such as finding a long-term partner or starting a family. The Dutch housing crisis also presents barriers to employment, as people are unable to find housing within the city centers. Furthermore, students’ inability to find housing generates economic vulnerability within their families. No social benefits exist for households if a person over the age of 21 lives in the home.

What is Causing the Problem?

A lack of construction sites, a rise in buildings, an increase in land costs and a devastating shortage of construction workers is causing the Dutch housing crisis. This shortage of construction workers stems from the financial recession of 2008. Many construction companies declared bankruptcy due to the economic crisis. Additionally, about 483,000 construction workers were in the Netherlands in 2008. Moreover, about 251,000 construction workers lived there in 2016. Only 15% of construction workers have returned to the industry since 2008.

Growing privatization affects the Dutch housing crisis as well. More than 100,000 homes are no longer in the social sector. They have been either undergone privatization or demolishing. It is not uncommon for investors to buy private rural land that they refuse to develop. Investors do this to drive up the prices in urban areas. In addition, shelters for the psychologically vulnerable have received less support from the ruling cabinet. As such, an influx of psychiatric patients who require residential care has emerged. Thus, the ruling party’s policy is to shrink the social sector in favor of the private sector. Privatization has weakened tenants’ rights. As a result, private landlords and developers gained a monopoly over the housing market. In some instances, landlords keep hundreds of living spaces empty due to their selectivity over tenants.

Verhuurdersheffing Tax

The policy of privatization means that project developers are responsible for the majority of housing construction. These developers greatly reduced construction activities after the introduction of a new tax. This tax is called verhuurdersheffing (landlord levy) and it taxes those who own more than 50 rental properties.

The cost of rent in both the social and private sectors has also risen significantly. As the purchasing power of lower-and-middle-income households has not risen, many are unable to afford adequate housing. This is especially true for middle-income people, who occasionally struggle financially but fall just outside of the requirements for social housing assistance.

What are the Solutions?

The Netherlands has a well-cultivated reputation for coming up with creative solutions to the challenges it faces. Most political parties in the Netherlands have acknowledged the urgency of the Dutch housing crisis, and each has proposed various policies to remedy the issue. Some of these policies focus on abolishing the landlord levy, increasing construction and offering protection for alternative forms of housing and the acquisition of unused private land.

There are also copious amounts of humanitarian groups that focus on providing solutions to the crisis. Kamers met Aandacht (Rooms with Regard) is one organization that brings struggling young people together, especially those emerging from the youth-care system into adulthood. Sympathetic landlords or housing organizations provide aid for them.

Humanitas Onder Dak (Humanitas Under Roof) is an organization that also offers shelter, guidance and counseling to homeless people. The goal is to help them become fully independent. Lastly, Vluchteling Onder Dak (Refugee Under Roof) connects refugees who often become homeless after their first bid for asylum receives rejection. With a national network of humanitarian aid, asylum seekers obtain housing, food, education and more.

In addition to the aforementioned groups, a growing number of people are also pursuing alternative forms of housing such as the Cube Homes of Rotterdam. Although the situation appears dire, many actors are seeking to improve the housing situation in the Netherlands. Projections have determined that the Dutch housing crisis will worsen in the upcoming years. However, the efforts of local actors in cooperation with one another could reverse this trend.

– Olivia Nelson
Photo: Flickr

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Ethiopia Turns to Privatization to Further Economic Growth

Ethiopian PM Turns to Privatization to Further Economic Growth

In a move atypical of his political alignment with the Ethiopian People’s Revolutionary Democratic Front (EPRDF), Prime Minister Abiy Ahmed announced in June 2018 that the government will begin procedures to implement privatization in Ethiopia of various state-owned enterprises (SOEs) in telecommunications, energy and transportation.

Already one of the fastest growing economies in the world, Ethiopia hopes to continue this trend by selling shares in some of the country’s most profitable and promising industries. In this announcement, Ahmed proposed that privatization of these booming enterprises will aim to increase foreign direct investment (FDI), lessen the unemployment rate and reduce poverty.

Ethiopia’s Recent Improvements

The second largest country in Africa and home to more than 100 million people, Ethiopia has been experiencing tremendous economic growth in recent years. Unemployment has dropped from more than 26 percent in 1999 to less than 17 percent in 2015. The poverty rate has decreased from nearly 46 percent in 1995 to less than 30 percent in 2010.

While Ahmed has only been in office since April of 2018, his vows to reform Ethiopia economically and socially have surprised many. Since their coming to power in 1991, the EPRDF’s has had a history of complete state-ownership of the majority of the industry. The state, however, will remain in control of the majority of shares in the industries being opened up to foreign investment.

His promises of calming social tension and revamping the economy have been met with some skepticism, but Ahmed fervently retains that his intentions are to restore Ethiopia to a place of social stability, economic prosperity and peace. Ahmed has even gone as far as to reach out to Ethiopia’s long-term enemy, Eritrea, to find common ground.

The Prime Minister’s Plans

Although the government has yet to release detailed plans as to how they intend to implement privatization in Ethiopia, they have been working with consulting agencies abroad such as PwC and McKinsey to determine a practical and sustainable way to carry out an economic overhaul of such magnitude.

Among the SOEs the government plans to privatize, the introduction of Ethiopian Airlines to the private sector, in particular, represents a key component in Ahmed’s economic plan; Ethiopia will experience a shift from an agrarian society to a modern, competitive, industrial society. As the country’s national flag carrier and a symbol of state pride, Ethiopian Airlines has garnered an intake of hard currency (currency unlikely to be affected by inflation) three times that of coffee, a long-standing staple of Ethiopia’s economy.

Increasing Foreign Investment

The privatization of Ethiopian Airlines also indicates Ahmed’s desire to transform Ethiopia into a major air travel hub, similar to Emirates’ position in the United Arab Emirates. This will serve as a way to bring in foreign investors and to present Ethiopia as a modern contender in the world economy. By selling shares of Ethiopian Airlines and other rapidly-growing SOEs such as Ethio Telecom, Ethiopian Electric Power and Railway Corporation, Ahmed hopes to draw foreign investment since Ethiopia has experienced an alarming shortage of foreign exchange in recent years.

While privatization in Ethiopia is sure to be a slow transition, and the government will most likely remain majority shareholders in the enterprises they are selling, the country appears to be heading in a positive direction. Between 2004 and 2014, Ethiopia averaged annual economic growth of 10.9 percent and is projected to grow another 8.7 percent in the next two years.

With a goal of reaching lower-middle income national status by 2025 and a government promising major social and economic reform, Ethiopia has established itself as a nation in the midst of a true revival. Hopefully, Ahmed’s plan of privatization in Ethiopia will prove to be a positive step for the country’s future economic growth.

– Rob Lee

Photo: Flickr

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Water Privatization’s Biggest Offenders

Water Privatization’s Biggest Offenders-TBP
An estimated 783 million people worldwide lack access to clean drinking water. Despite the importance of expanding access to this basic building block of life, many companies instead view water as a commodity to be bottled and sold at the expense of the world’s poor and the environment.

Bottled water is incredibly wasteful. The bottle itself also leads to widespread environmental damage, with more than 85% of globally consumed bottles being thrown in the trash, as opposed to being recycled. Furthermore, 10% of all plastic reaches the ocean, leading to the deaths of an estimated one million birds and marine animals yearly.

Yet, if the environmental impact of bottled water is disgraceful, its impact on human rights is horrifying.

Fiji Water has nearly exclusive access to a 17 mile aquifer on the north coast of Fiji while many Fijians have lived with water shortages resulting in rations as low as 4 gallons of water per family per week. Coca-Cola’s extraction of water in India to produce Dasani, meanwhile, has resulted in water shortages for over 50 villages.

Water extraction has also led to a variety of health problems. The inadequate and unclean water supply in Fiji, for instance, has lead to typhoid outbreaks and parasitic infection. The pollution caused by Coca-Cola through its Indian bottling plants has included dangerous compounds such as lead.

Of course, the causation of health problems through privatization only brings to attention a broader issue in the bottling and privatization of water—the philosophical denial of the right to water. Nestle came under fire in 2013 after the emergence of a video of CEO Peter Brabeck stating that water is not a human right, but a commodity to be given a market value and sold. Nestle owns over 15 bottled water brands, including Poland Springs and San Pelligrino, and has been criticized for its sale of Nestle Pure Life water to the developing world at the expense of the development of clean-water infrastructure. The sale and purchase of bottled water on its own denies the right to water as an infrastructural need, and instead treats it as a commercial product through which the wealthy continue to benefit at the expense of the world’s poor.

Protecting the right to water, globally, is highly important. It is a right which must exist to protect the health, agriculture and infrastructure of the developing world. Water privatizations, and the actions of the companies that control significant portions of the world’s water supply, deny the important progress to be made on this front.

– Andrew Michaels

Sources: Food Is Power, Mother Jones, World Watch, The Guardian, UN Water, Huffington Post,
Photo: Food and Water Watch