Wednesday, September 15, 2010

Convertible Castros?

Convertible Castros?
Property rights are key to reforming the Cuban economy.

An old joke from the Soviet era had it that "We pretend to work and they
pretend to pay us." Most Cubans stopped pretending to work a long time
ago, and this week the Castro regime announced that it will now stop
pretending to pay them.

That might be the best way to think about the news, reportedly contained
in an Aug. 24 internal document, that Cuba's Communist Party is
proposing to lay off more than 500,000 workers by March 2011 because it
can no longer afford to maintain its "bloated payrolls." If nothing
else, this is an historic acknowledgment that the revolution has
failed—and from its own architects.

But the news may be less momentous than the headlines. Raúl Castro, who
took over as president from his ailing brother Fidel in 2006, has given
numerous speeches bemoaning the low productivity of Cuban workers and
the government's fiscal straits. Two hurricanes last year and the global
recession have hit revenues from tourism and nickel mining. The
government and the country—once the third richest in Latin America—are
as decrepit as the '57 Chevys on Havana's streets.

This is also not the first such bow in the direction of market reform.
After the fall of the Berlin Wall and the end of Soviet subsidies,
Castro courted foreign investment and allowed Cubans to open small
restaurants, ferry foreigners as taxis and use the U.S. dollar.

But as the state recovered financially and Hugo Chávez appeared as a new
source of subsidy, Cuban perestroika was put on ice. The limited
privileges of small entrepreneurs were withdrawn. Not coincidentally, a
crackdown on political dissidents began in 2003.

Now the regime claims it will again allow entrepreneurship. Cubans will
be allowed to raise rabbits, make bricks, collect garbage and grow
vegetables, among other things. And the state will again welcome foreign

Is Cuba moving in a new direction? Surely it wants the world to think
so. But the lack or property rights remains. Foreign investors from the
likes of Chile and Spain have learned the hard way that Fidel's inner
circle has the ultimate control about profits. That reality will deter
foreign investment until it changes.

The lesson of economic reform in China, Vietnam and other Communist
regimes is that they must include the genuine freedom to make and trade
goods, earn money and keep the profits. Cubans can only do that now on
the black market. The dual currency system, in which they can earn money
only in non-convertible pesos but must shop for most items priced in the
dollar-linked peso, condemns most Cubans to poverty.

The talk of reform is also an attempt to encourage the U.S. Congress to
drop the travel ban on Cuba. We long ago supported dropping the entire
embargo on Cuba, but the U.S. ought to at least get something for this
concession if the Castros are so eager for it. The deal could include
releasing political prisoners, repealing the laws that landed them in
jail and allowing foreign investors to directly hire and pay workers.
Meantime, we doubt Cuba will really change until Fidel finally goes to
his eternal punishment.

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