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STEVE CHIOTAKIS: Cuba says it's eliminating half-a-million state workers over the next year. In return, the government says it'll allow some people to become self-employed, or even try and spur hiring at private firms. The communist government currently employs about 95 percent of the Cuban workforce. George Montalavan is an international economic consultant and expert on the Cuban economy. He's with us live from Washington, D.C. Good morning, sir.
GEORGE MONTALAVAN: Good morning. How are you?
CHIOTAKIS: I'm doing well. So why now? Why is Cuba making these layoffs right now?
MONTALAVAN: Well, the Cuban is in the midst of a very severe economic and leadership crisis, maybe the worst in the revolution's 50 years. The idea -- and you mentioned this -- that the government could be the only employer is unworkable anywhere, including Cuba -- but especially when there's an extreme, acute budget crisis and it can't continue to keep 5.1 million workers, virtually the entire labor force on the payroll. The other thing is the productivity has plummeted in recent years because thousands of young people have been immigrating -- many to the U.S. -- for many years. And there are strong dis-incentives to work hard for those who remain.
CHIOTAKIS: Was this Cuba's only option for saving the economy there? Were there other plans perhaps?
MONTALAVAN: Well, they need to do much, much more in order to survive this crisis -- which also comes at a time when the leadership is fading, as we all know, due to old age. Eventually the system will have to be dismantled.
CHIOTAKIS: The communist system?
MONTALAVAN: Yes, the socialist, communist, totalitarianism system will have to be dismantled. You know, much is made of the U.S. embargo on Cuba, but a far more severe embargo is the one placed by the Cuban government on its own citizens by not allowing them to establish businesses and invest, among other things.
CHIOTAKIS: You know, layoffs are obviously bad for the economy, but can anything positive come out of this?
MONTALAVAN: The Cuban economy is too small and cannot absorb 500,000 self-employed workers. The layoffs will only be positive only if those laid off are allowed to establish small businesses and cooperatives, hire other Cubans, and as I said before, invest, etc. They will require capital and this will be a major challenge to overcome.
CHIOTAKIS: It's a tall order. George Montalavan joining us from Washington. Thank you, sir.
MONTALAVAN: My pleasure.