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April 12, 2012

12 April 2012

Communist Cuba's Collapse (Really, Are You Surprised?)

www.huffingtonpost.ca/michel-kellygagnon, p. Web

The weeks surrounding spring break see floods of Canadian tourists flocking to Cuba, one of our most popular vacation destinations. Each year more than a million of us visit its beautiful beaches, more than from any other country.

Sadly, few of those tourists ever leave their vacation compounds. If they did, they would see a massive transformation taking place in this island nation, which many once hailed as a budding socialist paradise.

Communist Cuba, beset with an oppressive bureaucracy, an anachronistic cradle-to-grave welfare state, a hopelessly subpar economy, and widespread poverty, is gradually shifting to private sector solutions.

Starting when Raul Castro "temporarily" took over power from his brother Fidel six years ago and culminating with the Communist party's approval of a major package of reforms last year, Cuba has taken a series of increasingly bold steps to implement free market reforms.

These range from providing entrepreneurs with increased flexibility to run small businesses, and use of state agricultural lands by individual farmers, to the elimination of a variety of burdensome rules and regulations.

Ironically, there is a lot that Canadians, who are constantly debating their government's involvement in the economy on a variety of fronts -- ranging from health care and retirement savings plans, to the armed forces' use of private sector trainers -- can learn from that shift.

As anyone who has spent any amount of time in Cuba outside the tourist compounds can tell you, socialism, particularly the unsubsidized version that we have seen since the fall of the Soviet empire, has been a disaster.

On paper, Cubans have access to free education, medical care, and guaranteed jobs. The reality is far grimmer. Many of Cuba's supposed accomplishments are in fact non-existent in real life. The hospitals which supposedly offer free care only do so quickly and effectively to the politically connected, friends and family of staff members, and to those who pay the largest bribes, as explained by Sergio Díaz-Briquets and Sergio, Jorge Pérez-López in their book, Corruption in Cuba.

Even for those with the money, advanced hospital equipment and medication is almost non-existent, or outrageously expensive.

That "free" university education that many Cubans get in technical fields is rarely worth much more than what students pay for it. There are few books in the country's schools, and those that can be found are years, if not decades old. The country's libraries are empty, with illegal private libraries being the only place that one can find modern works.

The guaranteed jobs that all Cubans have are fine, until you realize that the average salary is in the range of $20 a month.

Worse, the food and other staple allotments that Cubans have long felt entitled to, have shrunk over the years. Tourists often marvel at how thin and healthy Cubans look. Sadly many of them are outright hungry.

The failure of Cuban communism can be seen both in the number of people who want to leave the island, and in the government's systematic refusal to issue exit visas (which are not needed in almost any other country) for fear that its talented professionals would abandon the country en masse.

In short, the government has had no choice but to look for new ways to get its economy going again. In the past, it has tried broad central planning measures ranging from a focus on industrialization, to devoting massive efforts towards its sugar industry. None of these worked well.

However in the early 1990s, following the end of Soviet subsidies, the government opened the island to international tourism and investments by major private sector hotel chains. That move has been a huge success. The 2.7 million tourists who visited there in 2011 provided Cuba's largest source of foreign currency. Ironically, another of the island's largest source of income is also related to free markets: the remittances that Cuban immigrants in the United States send their families back home.

Similar efforts were made to open other areas of the economy to companies like Canadian-based Sherritt which runs the Moa nickel mining concession and other interests there.

Detractors say that Cuba's "descent" into market solutions may put some of the island's very real accomplishments, notably those related to life expectancy, child nutrition, literacy and other education milestones at risk. But those accomplishments were likely greatly exaggerated to begin with.

That's because governments of countries like Cuba that lack a free press (Soviet bloc countries were a prime example) have tended to fudge, if not outright falsify economic and societal achievement numbers.

Others might say that because Canada and Cuba are in such different stages of economic development, we have little to learn from this poor island nation. However, Canadians who bathe in the Cuban sun ought to take a moment to actually visit the country they are in.

A brief reflection upon the disastrous job that government did there would provide valuable insights as to whether governments should be doing more (or less) here.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute.

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