Wednesday, December 21, 2016

The market trumps planning once again

The market trumps planning once again
ORLANDO FREIRE SANTANA | La Habana | 21 de Diciembre de 2016 - 14:35 CET.

Section 102 of the Conceptualization of Cuba's Economic and Social Model
of Socialist Development indicates that the State will combine direct or
administrative management instruments along with indirect or economic
ones in order to impact society.

At the outset of the economic changes implemented by ruler Raúl
Castro it seemed that the pendulum would swing towards indirect or
economic methods, without any doubt less traumatic, and those more in
accord with the spirit of a reform measure that, though on a secondary
level, granted the market some leeway. At least this seemed to be the
case with regards to the commercialization of agricultural and livestock

The Government, above all in the capital, expanded the network of state
agricultural markets featuring price ceilings, in such a way that they
could compete with markets rooted in supply and demand - operated by
private operators - and induce the latter to lower their prices. At
first the reformist elements in the regime managed to prevent ceilings
from being placed on prices at supply and demand markets, and from
administrative measures being taken against them.

The government's stance, however has changed recently. The main reason?
Once again, they have lost to the competition. In a range of different
ways one can detect an escalating campaign against supply and demand
markets, and there have even been some indications that they will all be

First the agricultural market at Cuatro Caminos, perhaps the most
important in Havana, was affected. It has been closed for around two
years, and what will be done with the premises occupying the block is
currently a mystery.

More recently, the Plaza de Marianao was closed, another well-known
supply and demand market that was a key fixture in that capital
municipality. Apparently the place is being refurbished for a new
market, this one run by the state, and with price ceilings.

And then, on 31 December, the closing of the market on the Calle Egido
in Old Havana was announced. A visit to the area allows one to
appreciate the uncertainty amongst most of the merchants offering their
products there, who have not received other job offers, and could end up
out of work. Also palpable is the disappointment among many customers,
who counted on the market in Egido for high-quality products often
absent from other establishments.

The authorities' rhetoric portrays these actions as a way to protect
consumers from the high prices imposed by unscrupulous elements at the
supply and demand markets.

Their reasoning suggests that capped prices represent the solution to
the problem.

But history has demonstrated that it does not work that way. Because
price limits, sooner or later, undermine motivation along the
supply/marketing chain, which results in a decrease in supply. Hence,
most state markets with capped prices, just months after opening, are
racked by shortages, and consumers have no choice but to turn to supply
and demand establishments.

And yet, this does not seem to faze hardline elements in the regime,
who, apparently, are now predominant. They care about nothing but
preserving their privileges, so they fear potential political changes
that a greater market presence could engender in society.

What is clear is that whenever the Government must resort to
administrative instruments (closures, prohibitions, price caps) to the
detriment of economic instruments, like on this occasion, in which the
State has again been incapable of competing with the individuals, we are
witness to yet another chapter in a much larger story: planning is, once
again, trumped by the market.

Source: The market trumps planning once again | Diario de Cuba -

No comments:

Post a Comment