Where Communism ends...imploding

Cubans in shock at Raul Castro's warning of an end to their jobs for life

Since the revolution Cubans always thought they could depend on the state, but now Raul Castro says 500,000 must be laid off and look for jobs in the private sector instead.

Digna Martinez thought that the one thing she could count on in Cuba was a job for life. "But now I don't know if I'll be working next week," she said.

The 51-year-old mother of three was speaking in a whisper in the corner of a dingy clothes shop in Central Havana, where for the last 20 years she has been employed, by the government, as a sales assistant.

Like millions of her compatriots, she was, she said, astonished when Cuba's communist authorities announced an unprecedented move to cut public spending.

Across state media last month, the details were spelled out. In proposals which would make even the world's most conservative governments blush, 500,000 people - one tenth of the country's entire workforce - are to be made redundant by next April. The eventual aim is take a million people off the state payroll.

Perhaps even more surprisingly, those affected by the "personnel reductions" - Cuban state media studiously avoids the word "unemployment" - are being actively encouraged to seek alternative opportunities in the private sector.

Mrs Martinez was born in 1959, the year that the revolutionary firebrand Fidel Castro took power in Cuba. "I was always proud to call myself a child of the revolution," she said. "Now I feel like the abandoned orphan."

The shop where she works provides a glimpse of Cuba's currently moribund economy. Inside, there are five sales assistants, but not a single customer. A few nylon dresses hang from 1960s mannequins. A cotton shirt is on sale for around £3. That's a fortune for most Cubans who, whether they are surgeons or street cleaners, earn around £16 a month on government salaries.

To be self-employed in Cuba was once tantamount to being counter-revolutionary. But now Granma - the main Communist Party newspaper - has been busy promoting the merits of private enterprise. The edition immediately after the announcement published a list of 178 areas of self employment which are now legal.

The list does betray the fact that even as the government prepares to cede some control of the economy, its obsession with the minutiae remains. For example, Cubans will be permitted to set up a business mending mattresses. But actually selling a mattress remains forbidden.

Meanwhile, grooming pets, and being a clown, is legal.

The bureaucrats also appear determined to prevent any serious competition for existing government businesses from developing. So the private sale of old vinyl LP records will be deemed legal. But CDs will still only be sold in state run stores.

Many Cubans have greeted the changes with a sardonic disbelief. "For 50 supposedly glorious years of the revolution we have been repeatedly told that the state knows best," said Eugenio, a plumber. "Now, in year 51, we are told that it doesn't."

Private enterprise is hardly a novelty in Cuba: all the occupations to be legalised, and more, already exist - but within the island's illegal but flourishing black market. The government admits that one reason for its dramatic rethink of the rules is a desire to bring those who operate in the grey economy into the formal economy, and make them pay tax.

Cuba has previously attempted to open up its economy. In the 1990s, when the country was reeling from the demise of the Soviet Union, Fidel Castro reluctantly legalised possession of the US dollar, and allowed people to rent out their homes or operate private restaurants.

But many licenses were later revoked. Only a few businesses have survived the endless bureaucracy required to obtain licenses, and the punitive taxes.

This time, however, the changes seem certain to endure.

Hector, a mechanic who has been working unlicensed for the last 15 years, say he has no intention of applying for a license, let alone paying taxes.

"It's a trick," he says of the government's plans to encourage black marketeers to work legally. Like many Cuban's he has a deeply cynical view of the changes. "If they want me to pay taxes, does that mean they will pay me to attend their political rallies?"

The plan has been championed by Raul Castro, who took over the leadership of the country from his ailing older brother in 2006.

The younger Castro has openly criticised the inefficient economic system he inherited. Earlier this year he said in a televised speech that "we have to erase forever the notion that Cuba is the only country in the world where you can live without working".

He knows that Cuba is teetering on the edge of bankruptcy. The price of its main export, nickel, is down.

The Cuban government has just announced that its coffee harvest in 2009 was the worst in its history. The country - which was the world's biggest coffee exporter in the 1940's - last year produced less than 5,500 tonnes, not even enough to satisfy the domestic market. State media has blamed "inefficiency" for the dramatic drop in production, without going into details.

It is a similar story with sugar. Once a third of all the sugar in the world was exported from a single port in Cuba. Last year's harvest was the worst for a century.

The world recession has hit tourism revenues, and Cuba's most generous benefactor, Venezuela, is suffering its own economic difficulties under the rule of Hugo Chavez.

Raul Castro has repeatedly stated that the very survival of the Cuban revolution, which provides free health care, education, and subsidised housing for all its citizens, depends on economic reform.

But foreign observers wonder whether they are witnessing a rerun of "perestroika", the experiment in restructuring launched by Mikhail Gorbachev in the Soviet Union in the 1980s, which was designed to preserve the communist system, but ultimately led to its downfall.

Hidden in the small print of these latest reforms are revisions which may prove to be the seeds of the most profound change. Cubans are to be allowed to employ other Cubans in their businesses, so that - for the first time in more than half a century - a significant number of Cubans may have a legitimate employer who is not the state. Small businesses will be able to seek bank loans. There are no restrictions on the amount people can be paid.

The changes appear to end the dream, voiced by Che Guevara, that the Cuban revolution would create an egalitarian, moneyless society, peopled by a "new man", for whom material gain was no motivation.

For many, such as Mrs Martinez, the future they are confronting is frightening.

The Cuban government insists no one will be abandoned. Those who lose their jobs will be paid a percentage of their earnings for up to five months. But people are being sacked. Last week 200 workers at the Minsitry of Agriculture in Havana were dismissed.

But others relish the change. "Anything to loosen these stupid restrictions is good," said Lazaro, a streethawker selling bootleg cigars, in the shadow of the Capitolio, the 1920s building which housed Cuba's parliament before Fidel Castro deemed it unnecessary.

"Give us Cubans a chance, and we can make money."