Monday, September 27, 2010

Is Cuba following the path of China?

Is Cuba following the path of China?
September 25th, 2010 10:25 pm ET

Recently, long time dictator Fidel Castro (and recent retiree) shocked
the world by declaring "communism doesn't work." It would have been
great if he had figured that out fifty years ago. Now, Cuba's leaders
are applying Castro's declarations to the country's public policy in a
series of sweeping reforms.

According to the Associated Press, the "reforms - laid out in a
three-page spread in the Communist Party-daily Granma - seem sure to
create a society of haves and have-nots in a land that has spent half a
century striving for an egalitarian utopia." Of course, Cuba has never
been either utopian or egalitarian. No one believes that Castro or his
minions lived an existence that was anything similar to the average
Cuban. Furthermore, the gap between those who are affluent and those
who are not were greater in Cuba than any capitalistic nation. In fact,
the measures taken by Cuba actually offers hope to its people that a
ladder that can lead to economic growth is in the process of being
offered to them. However, those reforms promise to be painful in the
short term. The biggest concern is that they are too modest to ever
gain serious traction.

Roughly 85 percent of the working population is employed by the
government in Cuba. According to AP, "the government will lay off
500,000 workers by the end of March - or one-tenth of the country's
workforce - the biggest change in Cuba's economic system since the early
1990s." If this was the end of Cuba's actions, there would be massive
deprivation, but the government is also reducing government
restrictions. Again, AP notes that "For the first time, Cubans in 83
private activities will be allowed to employ people other than their
relatives, and they will be able to sell their services to the state as
private contractors. Accountants, currently only permitted to work for
the state, can set out on their own, keeping the books for the new

The government is also cultivating entrepreneurship in an industry that
is a natural to the island nation -- tourism. New reforms will allow
Cubans to rent their homes to travelers and will not have to live on the
premises. Furthermore, these home owners are also allowed to hire
staff. In fact, even citizens who are allowed to live outside of the
country "can take part in the economic changes by renting out the cars
and homes they leave behind."

In addition, Cuba is violating the centerpiece of communist doctrine by
allowing the Central Bank to explore ways to grant loans to small
businesses and entrepreneurship. This would have been a pipe dream a
few weeks ago, let alone just a year ago. Then again, if the country is
going to get economic legs of its own outside of government, small
business is going to have to find a way to get the necessary capital to
grow. The country's newspaper (Granma) stated that "The decision to
loosen the rules on private employment is one of the steps the country
has taken in the redesign of its economic policies to increase
production levels and efficiency," Amazing, capitalism increases
productivity and efficiency? This is Cuba, heads should certainly roll.

The devil is in the details and, according to the Granma (the Communist
Party's newspaper), those are still pending. However, Granma those
details promise better days ahead and that these reforms will provide
"another opportunity, under the watchful eye of the state" to "improve
the quality of life of Cubans."

China started a rather modest path towards capitalism in the late 1990s
after control of Hong Kong went back to that nation. China looked
"under the hood of Hong Kong" and determined that this thing called
capitalism could work. Today, China is the fastest economic power in
the world and recently passed Japan for the second greatest economic
power. It is amazing what a little free enterprise can do.

It is too early to say what will happen with Cuba and its reforms, but
it is clear that the nation is concluding that communism doesn't work.
It is ironic that Cuba, like most countries in the world at this time,
are moving towards a more free market system, while the US continues its
rapid pace towards socialism. It is my hope that our government leaders
have an epiphany like the Cubans. I also hope it doesn't require fifty
years for them to wake up and see the error of their ways.

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