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 freedom.

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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