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Brooks Wilson's Economics Blog: Cuba’s Long Road to Capitalism

Friday, November 4, 2011

Cuba’s Long Road to Capitalism

A few communist era jokes from behind the Iron Curtain touch on the nature of communism.  A polish worker observes, “We pretend to work and the communist pretend to pay us.”  A Soviet economist opines that “communism is the slowest, most painful road to capitalism. 

Mankiw’s sixth principle of economics reads, “Markets are usually a good way to organize economic activity.”

According to an AP article (Cuba legalizes sale, purchase of private property) written by Paul Haven.  The economy has not thrived under communist rule.  Eighty percent of workers are employed by the government.  The workers are paid $20 per month and receive free but bad medical care, transportation, and education. 

The housing sector provides an example how bad property rights destroy wealth. Shortly after the revolution in 1959, Castro gave title to those living in an apartment or house but not the right to sell it.  People are mobile but buildings are not.  Without the right to sell, and with few incentives to improve property, the quality of buildings deteriorated.  Complex barter transactions and black markets based on extralegal property rights developed that returned some degree of mobility. 

Those interested in the Cuban economy should read Arch Ritter’s blog, “The Cuban Economy La Economia Cubana.”

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