The daily drama of massive exodus from this communist island state has obscured a series of radical internal reforms that mark one of the most fundamental transformations in the 21-year history of the Cuba revolution.

Both the exodus and the reforms stem in large part from the same root -- a deep economic slump that has brought long unfulfilled mass expectations into the open along with government acknowledgement that the Cuban economic model contained some near-disastrous miscalculations.

Even before the refugee crisis, the government had introduced the first in a series of structural changes, aimed at reducing the state's omnipresence in daily life and creating more room for private enterprise and personal initiative. Western Cuba-watchers have described the changes as "important ideological concessions."

Although still visible only on a small scale, the changes pose a stark contrast to Cuba's past economic policies. Nearly alone among Soviet-allied states, Cuba had obliterated all vestiges of private commerce. While some small farmers were permitted to keep their property, all produce had to be sold and distributed by the state. Every worker, from auto repairmen to physicians, was employed by the government, and every Cuban was guaranteed a job even if make-work had to be invented to occupy him.

The result, Cuban officials now admit, added up to inefficient production and distribution, lact of initiative, high absenteeism and nationwide frustration.

On a human level, continued shortages of housing, consumer goods and spare parts, poorly made clothes and long lines for everything from vegetables to bus ride have taken their cumulative toll. Although Cubans have better balanced diets than most Latin Americans, many are tired of the lack of variety and constant lines.

For the government, internal problems were only exacerbated by international trade and financial difficulties. Extensive trade and barter with the Soviet Bloc, the ongoing U.S. trade embargo and near total dependence upon the vagaries of the international market for sugar, which provides 80 percent of Cuba's earnings, have made for ongoing foreign exchange shortages. This year, sugar and tobacco blights destroying large portions of the export crops dealt a near killing blow.

The new rules imposed by the government include the sale of farm products in free markets and the issuance of licences for craftsmen and entrepreneurs to go into business for themselves. State companies have been told their priority is to make profits rather than simply producing goods or providing jobs. The managers' new freedom to hire and fire personnel ends the official myth that there can be no unemployment in Cuba.

"It's like wakening up the spirit of competition again," said one European observer. "The absence of this, we've seen, has led to high costs, low productivity and boredom in the welfare states of socialism and capitalism alike."

On the zigzag course of the Cuban revolution, the new measures signify closing of the "idealist period when Cuba's leaders believed that socialist conscience would be enough motivation for people to work.

Although by the early 1970s, the ideologues began to admit that material incentives were iindispensable and started providing a few more consumer goods, this thinking was not followed up with any significant changes in the economy.

Now, like the Soviet Union and China before it, Cuba is unabashedly reestablishing the relationship between efforts and rewards as a way to stir the slugish economy.

The first changes are already visible. Last week, in Havana and several provincial towns the first free farmers' markets opened. By all accounts people pounced on them. They sold out within a few hours. They are modeled after the Soviet markets where peasants can sell "surplus" after complying with the quota they must sell to the state. For the first time in years outside the black market, prices were set by bargaining and not by the government.

A foreign agronomist said he had visited several farms participating in the experiment. "A pleasant will have three acres, two for state production and one for himself. You look at that one acre and you've never seen such a well-tended field," the agronomist said.

After years of quiet moonlighting, often charging in goods rather than cash, carpenters, electricians and other repairmen have now started to work for themselves legally. They buy a license, equivalent to paying a tax, and take on private jobs. If they want to expand their business, however, they may not hire any staff, but can associate with other equals.

On the streets of Havana, a few shoeshine boys and guitar-playing troubadours -- not seen for many years -- have appeared and tipping in hotels and restaurants is no longer frowned upon.

Most significant, perhaps, are the impending changes in the factories. In the drive for profits, management is to get more responsibility, and freedom to dismiss unwanted workers.

Unless workers got in trouble with police or wanted to emigrate, they were almost completely cushioned against being fired. The Ministry of Labor had to authorize every move. Officials have now recognized that job security, combined with the fact that there is little to buy with extra earnings, has led to high absenteeism and sloppiness.

Even the universities are not escaping the new cost-oriented and competitive approach. A student cutback of close to 30 percent is reportedly planned for the near future, a major concession for Cuba that prided itself in the universal accessibility to higher education. The measure may put an end to the perennial student who would collect not one but two or three degrees at the state's expense.

To start with, a new salary scheme spells out that employes will no longer be paid by the number of diplomas and academic titles they hold, but according to their performance on the job.

Drastic as these changes are in the Cuban context, officials here indicate they are only a beginning and may not add up to the powerful medicine needed to reactivate the economy.

In a series of public mea culpas over the past months, President Fidel Castro and his brother Raul said the economic crisis is more one of mismanagement than lack of resources.

At the same time, Cuba's credit rating in Western Europe, traditionally high because of prompt debt payments, reportedly has been badly hurt by the Soviet invasion of Afghanistan.

"European banks have suddenly become reluctant. The issue is politics, not the Cuban economy. Banks are getting problems with their shareholders following Afghanistan," a European economist here said. Although he had no figures, he said Soviet action was "clearly affecting Cuba's cash flow."

The $3 billion worth of aid Cuba is believed to have received from the Soviet Union in 1979 largely came in the form of subsidies -- buying Cuban exports at inflated prices and selling Soviet products at discounts. Very little of this Soviet aid represents cash, which Cuba could use to balance its payments with the West.

Either an increase of Soviet aid or new sources of convertible cash are regarded as indispensable for buying basic supplies and making up for the most pressing shortages to avoid further demoralization of the population. It is clear to the leadship that both critics and supporters of the government are feeling they have had to tighten their belt for too long.