Tuesday, September 14, 2010

Castro Throws Communism Under the Bus; Is a Cuban Economic Miracle Next?

Things have obviously been deteriorating in Cuba. Even the Catholic Church, no bastion of free market understanding, warned that the island was on the verge of economic and social disaster if the government didn't quickly make changes.

Last week, news came via the Atlantic that Fidel Castro said that perhaps communism had not worked even for Cuba.

Now we learn that Cuba will lay off more than half a million state workers and will hope the private sector tjobs for them.

Will we see a Cuban economic miracle?  It depends.

There are naysayers such as Jaime Suchlicki, director of the Institute for Cuban Studies at the University of Miami, who says laying off government workers is unlikely to do much to solve the country's problems.

But these naysayers fail to understand how free markets work and can turn things around.  They have never studied the German economic miracle following that country's inflation. They never studied how millions of returning soldier's found jobs almost immediately after the end of World War II.

The real obstacle to a Cuban economic miracle will be government obstacles.

As Carmelo Mesa-Lago, an expert on the Cuban economy who is emeritus professor of economics at the University of Pittsburgh says: "The question is how many obstacles [the government] will place in front of these people?"

WSJ reports:

Since Cuba first allowed self-employment in the early 1990s, thousands of Cubans have gone into business, often catering to tourists. Privately owned restaurants, known as paladares, emerged to serve visitors, usually in the crumbling but grand old homes of Havana. But restrictions on the paladares were so strict in recent years that many have since closed their doors.

Cubans who decide to go into business for themselves will find a series of obstacles, including very high taxes, lack of access to credit and foreign exchange, bans on advertising, limits on the number of people they can hire, and a litany of small-print government regulations, experts say.

Cuba's government has a list of 124 "authorized" activities for people who want to employ themselves. Among them: Toy repairman, music teacher, piƱata salesman and carpenter. Carpenters are allowed only to "repair existing furniture or make new furniture upon the direct request of a customer." They cannot make "furniture to sell to the general public."
These type of obstacles must be removed for free markets to have a chance in Cuba. Let us hope the chains of government micro-management of the economy are, indeed, removed, the Cuban people have nothing to lose except their poverty.


  1. Any previous posts about the Catholic Church's stance on Free Markets (Or lack thereof)? I am Catholic and have never really understood the Church's economic views...

  2. @Markie

    You should read "How the Catholic Church Built Western Civilization" by Thomas Woods. Awesome read.