Wednesday, September 29, 2010

Cuba mulls economic freedom -at last

Cuba mulls economic freedom -at last
Mark Milke, Financial Post · Wednesday, Sept. 29, 2010

In Fidel Castro's recent interview with Atlantic magazine columnist
Jeffrey Goldberg and in response to the question, "Is the Cuban economic
model still worth exporting?", the retired dictator made this admission:
"The Cuban model doesn't even work for us any more."

Several days later, Castro backpedalled. He claimed he actually meant
the opposite. "My idea," said Fidel, "is that the capitalist system no
longer works for the United States or the world. How could such a system
work for a socialist country like Cuba?"

Goldberg didn't buy the post-interview spin and neither should the rest
of the world. Castro only admitted what was obvious to any tourist and
what the economic data has shown for years: Cuba's detour into economic
tyranny produced a half-century of suffering for Cubans. It's why many
of them risked their lives on rickety rafts to get to Florida.

Castro's recent frankness was of particular interest to me because in
February 2008 I was in a hotel bar in Varadero, Cuba, when Castro
announced his resignation. A friend and I toasted his departure.

The tourist resort was not the real Cuba, so I spent two days there and
five in Havana. With rare exceptions, crumbling buildings and rationing
for ordinary Cubans were the norm. One guidebook said 45% of Cubans live
in substandard shelter. When it came to food, the Varadero resort had
full trays of scrambled eggs for tourists. But in Havana, the average
Cuban faced rations. I snapped a picture of one store that sold eggs; a
nearby sign noted a limit of five eggs per person.

Since Fidel's brother Raoul took over power in 2008, the reforms have
mostly been minor; all Cubans were finally allowed to own cellphones,
but all the more serious restrictions remained. Recent reforms might now
be more consequential. In conjunction with Fidel's recent interview,
Cuba's government just announced one-10th of the island gulag's
workforce, or 500,000 people, will be laid off from inefficient state
enterprises (there are rarely any other kind).

Revolutionary as that realization of state inefficiency is, even more
surprising is the statement from Cuba's only legally allowed union, the
Cuban Workers' Confederation. It supported the cuts to state enterprises
with this language: "Our state cannot and should not continue supporting
businesses, production entities and services with inflated payrolls, and
losses that hurt our economy are ultimately counterproductive, creating
bad habits and distorting worker conduct."

Granted, the Cuban union is a mouthpiece for the Communist government,
but that's the point. Along with Fidel's comments, they both underline
how serious the regime may be about opening the door a crack to economic

It's been a long time coming. In 1958, the year before Fidel Castro came
to power, Cuba was better off than most developing nations with a $2,363
per capita GDP close to the Latin American average of $3,047 and
exceeding all Caribbean countries save Costa Rica, Jamaica, Puerto Rico
and Trinidad/Tobago.

Cuba's per-capita GDP was higher than some East Asian jurisdictions such
as Singapore, Taiwan, and South Korea, and two-thirds as rich as Japan.

Castro's Jan. 1, 1959, revolution promised prosperity, democracy and the
restoration of Cuba's (1940) constitution; Cubans have seen none of it.

Five decades after the revolution, by 2008, Cuba's per-capita GDP was
just $3,764, due mostly to growth in the past decade, and presumably
from growth sectors such as tourism. As recently as 2000, Cuba's
per-capita GDP at $2,422 was almost exactly the same as it was in 1958.

In comparison, the economy of another Latin American country also run by
a dictator for a time, Chile, grew from $4,392 per-capita GDP in 1958 to
$13,185 in 2008. That transformation occurred because its rulers at
least embraced the market economy.

Meanwhile, the East Asian jurisdictions that half a century ago were
either below or barely above Cuba's economic status have long eclipsed
Castro's island. In 2008, per-capita wealth was $19,614 in South Korea,
$20,926 in Taiwan, $28,107 in Singapore and $31,704 in Hong Kong. In
real terms over five decades, Hong Kong's per-capita economy grew by a
factor of 11, Singapore's by 12, and South Korea and Taiwan by a factor
of 16 -- this while Cuba's equivalent didn't even double from its
prerevolutionary state.

- Mark Milke is director of the Fraser Institute's Alberta office and of
the Alberta Prosperity Project.

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