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Saturday, November 26, 2016

Fidel Castro's Economic Disaster In Cuba

Fidel Castro's Economic Disaster In Cuba
Tim Worstall , CONTRIBUTOR
I have opinions about economics, finance and public policy.

Fidel Castro, the Communist Dictator of Cuba, has died at the age of 90.
There have been those, over the decades, who have held him up as some
paragon of a new world order, one in which people will not be
subservient to either America nor capitalism. The truth is that he
visited an economic disaster upon the island nation of Cuba. No, it was
not the US, it was not any blockade or embargo, not anything external to
Cuba that caused this, it was quite simply the idiocy of the economic
policy followed, that socialism, which led to there being near no
economic growth at all over the 55 years or so of his rule. What little
that did occur happening when the strictest of his rules were relaxed.

It is polite, human and common to with hold criticism of the dead in the
immediate aftermath of their demise. But leaving 11 million people
grossly poorer than they ought to be in the name of a bankrupt ideology
is not the stuff of which hagiographic obituaries are made.

The news itself:

Former Cuban leader Fidel Castro has died at age 90, according to Cuban
state media, confirms NPR.

Castro, who took power in the Cuban revolution in 1959, led his country
for nearly 50 years.

True, infirmity made him relinquish some power in this past decade:

Fidel Castro ruled Cuba as a one-party state for almost 50 years before
Raul took over in 2008.
His supporters said he had given Cuba back to the people. But he was
also accused of suppressing opposition.

There will be much of this sort of stuff:

Transforming Cuba from a playground for rich Americans into a symbol of
resistance to Washington, Castro outlasted nine U.S. presidents in power.

He fended off a CIA-backed invasion at the Bay of Pigs in 1961 as well
as countless assassination attempts.

The problem being that the economic policy followed, that of socialism,
didn't achieve the first thing that an economic policy is supposed to
achieve: make the people richer. We will be awash, for months, in stuff
like this:

Imran Khan ✔ @ImranKhanPTI
1. Today the world lost an iconic revolutionary leader Fidel Castro who
liberated his nation from all vestiges of imperialism.
7:21 AM - 26 Nov 2016

His greatest legacy is free healthcare and education, which have given
Cuba some of the region's best human development statistics.

Amazingly, large parts of the world have both of those and all without
killing anyone nor trying to impose socialism. As The Guardian itself
notes in its very next sentence:

But he is also responsible for the central planning blunders and
stifling government controls that – along with the US embargo – have
strangled the economy, leaving most Cubans scrabbling for decent food
and desperate for better living standards.

It's that strangling of the economy which is the great disaster.

To give an idea of how bad that was we should use the Angus Maddison
numbers. You can download the spreadsheet here. These are in
international dollars, so we have already adjusted for price differences
across geography. And they are in chained dollars, so we have already
adjusted for price differences, inflation, across time.

And in 1959, when Castro took power, GDP per capita for Cuba was some
$2,067 a year. About two thirds of Latin America in general and about
the same as Ecuador (1,975), Jamaica (2,541), Panama (2,322) and two
thirds of Puerto Rico (3,239). Despite that playground of rich Americans
thing it was, by the standards of the time, doing reasonably well.

By 1999, 40 years later, Cuba had advanced hardly at all, to $2,307,
while Ecuador had, relatively, jumped to 3,809, Jamaica to 3,670, Panama
to 5,618 and Puerto Rico to 13,738. GDP isn't everything of course but
it's still hugely important. For it's the basic measure of what it is
possible that people, on average, can consume. And we don't tend to
think that Ecuador, Jamaica, Panama and Puerto Rico were particularly
well run in the latter decades of the 20 th century but at least they
didn't have a government actively conspiring to keep them impoverished
like Cuba did.

And that was the great economic disaster, the grand mistake. That
scientific socialism of the Soviet type makes one great claim–or at
least it did when it could still be said without people bursting into
great gales of laughter. That by planning the economy, by doing away
with the exploitation of capitalism and the chaos of markets, socialism
would make the people rich. We then ran the world's largest economic
controlled experiment, something we call the 20th century, and found
that socialism does not achieve this.

It is possible, if you really want to stretch matters, to say that this
was not known in 1959. But all knew it by 1989, and that's where the
Cuban system really deserves excoriation. And thus so does Fidel Castro,
who imposed said system. In 1991 Albania was poorer than Cuba (1,836 as
against 2,590) but that simple switch to a market economic system,
however chaotic, near tripled the standard of living in only 20 years
(5,375 in 2010).

For the result of that controlled economic experiment is that we have a
fairly narrow spectrum of socio-political systems that actually work.
Work here meaning doing what an economy is supposed to do, increase the
living standards of the average person. This runs from the near laissez
faire free market of Hong Kong to the tax and redistribution heavy free
market of Sweden's social democracy. Any non-market system does not work.

And do note that Puerto Rico result. That Caribbean island remained
under that American domination, that cruel capitalism and the chaos of
markets. It was never enriched by the scientific planning of socialism.
And living standards soared by a factor of 4 while those in Cuba
stagnated for 5 decades. And the Cuban system justified itself by
freeing Cuba from such American hegemony.

For that Fidel Castro should not be forgiven.

We also need to heed this lesson. Non-market economic systems do not
work. We do only have that spectrum available to us, laissez faire all
the way to social democracy. Socialism, not even once people, not even once.

Source: Fidel Castro's Economic Disaster In Cuba -
http://www.forbes.com/sites/timworstall/2016/11/26/fidel-castros-economic-disaster-in-cuba/#1c5ce634668e
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