Llewellyn H. Rockwell, Jr.
the ouster of Fidel Castro now inevitable, the most important issue
for Cuba is the future of the economy, which has been devastated
by socialism, price shocks, trade embargoes, and the cutoff of Russian
welfare. The Cuban population is one third larger than it was at
the time of the revolution, but the economy is less than half the
Castro, Cuba can learn from the post-socialist blunders of Eastern
Europe and the former Soviet Union. With the partial exception of
the Czech Republic, these countries have squandered a historic opportunity
to rescue their people from poverty and degradation, and to show
the world what capitalism can do. Instead of the free markets we
all hoped for, we've witnessed the creation of state-controlled
social democracies that still keep the masses under the thumb of
The creation of a free market in Cuba would be a poke in the eye
of international and U.S. bureaucrats who intend to control Cuba's
post-Castro destiny. It could also serve as model for the U.S. to
follow when time comes to reestablish a free market at home.
essential contribution of the free market is that it allows the
economy to ran itself, so long as the legal structure protects property
and freedom of contract. Somehow this was forgotten after the events
of 1989. In Eastern Europe, for example, governments adopted heavily
interventionist IMF plans, and Russia renamed Gosplan, the former
central planning bureaucracy, the Ministry of Privatization. It
wasn't, of course.
these governments made the frightful mistake of instituting progressive-income
and capital-gains taxes to mimic the West. Yet these taxes can only
retard economic growth by penalizing wealth and capital accumulation.
If Cuba eliminated all capital-gains and income taxes, it would
immediately become a magnet for investments from all over the world.
Cubans themselves would have the incentive to work, save, invest,
and produce because they would be able to keep the fruits of their
labor. Cuban standards of living would reach pre-Castro levels in
no time, and eventually could exceed Florida's.
Eastern Europe, new governments have been tempted to mulct the public
to pay off Communist debts and raise new revenue, which has also
impeded recovery and growth. There is also a moral issue: why should
the victims of communism be taxed to pay off those who were stupid
or evil enough to loan money to the communists? The new Cuban regime
should cut its ties with the communist past by repudiating all of
Castro's debts. If it hurts the creditworthiness of the new government,
fine: it should stay out of debt anyway. Creditworthy governments
have too often become uncreditworthy by borrowing.
is one link to the past that Cuba should not cut, however, namely
who owned what before the revolution. The new regime will have to
reassign property titles to demonstrate a commitment to justice.
Land and buildings confiscated during the revolution should be returned
to the original owners or their heirs. Industrial capital created
under Communism should be given to the workers as shares of stock.
property should go to those who have homesteaded it: apartments
to apartment dwellers, buses to busdrivers, streets to the businesses
and homes on them, etc.
technique of privatization aside, the important thing is to move
quickly from collective ownership to private ownership, and not
to try to manufacture a compromise between the two. Eastern European
and Russian reformers found that this was like trying to change
the direction of traffic a little at a time. The result is a pileup.
Complete and immediate privatization is the only answer.
Cuba should also establish the freest labor markets in the hemisphere,
the only real full-employment policy. This would help cushion the
necessary mass firings of bureaucrats. Cubans should be free to
work without regard to labor union restrictions, minimum wages,
or racial politics. In a country as diverse as Cuba, employers must
be free to hire and fire. And there should be no "unemployment insurance"
except private charity.
should also open its borders to imports from anywhere in the world,
and put no restrictions on the flow of money and goods out of the
country. Let other nations worry about economic "protection." But
it should not subsidize any foreign companies, especially American
ones, as the pre-Castro regime did. T'his not only causes economic
discoordination, it fuels understandable resentment against foreigners
with special privileges.
has been a temptation for all former communist countries, but it
would be the kiss of death for Cuba's people. As in the old Soviet
Union, many Cubans have become used to life without work. That's
understandable in a system where pay and production have no relation
to each other. This dilemma can only be solved by asking people
to make their own way. The Church and other charities will meet
the needs of those who suffer. Welfare only creates suffering for
doubt Cuba will have to deal with a vast underground economy. In
all countries, shady characters those who aren't in the government,
anyway dominate underground markets. There's an easy answer: legalize.
Let anyone who can make a product or a service do so without interference,
and let him sell it to anyone who will buy it, for whatever price
he will pay, so long as no fraud is involved. What Marx derided
as the "anarchy of production" must reign supreme.
Cuba took these steps complete privatization, zero income
and capital-gains taxes, free labor markets, free trade, a legalized
underground, and no regulatory or welfare state the economy
would boom. In fact, Cuba would develop immigration problems, as
other Latin Americans sought to move to a free-market paradise right
off the coast of the U.S.
to do all this, Cuba needs political independence. U.S. bureaucrats
will try to prevent a free market from being established in Cuba,
as they have in Eastern Europe and Russia, by sending missionary
teams from U.S. regulatory agencies, and by refusing aid to anything
but a mixed economy with privileges for U.S. special interests.
new Cuba should not take a nickel in U.S. foreign aid, or a penny
from the IMF or the World Bank. In Russia, for example, the IMF
has been behind such crazy policies as currency switches, forced
devaluations, and high tax rates.
foreign aid would also subject Cuba to environmental and labor treaties
that are incompatible with high economic growth. For example, Cuba
should have nothing to do with Nafta, this hemisphere's answer to
the bureaucratic monstrosity called the European Community.
Nafta would impose on Cuba the worst sort of statist policies, from
minimum-wage and "child-labor" laws to "clean air" acts and land-use
restrictions. As U.S. Trade Representative Mickey Kantor wrote in
the Wall Street Journal, Nafta will ensure law "that no nation
will lower labor or environmental standards, only raise them." "If
a country doesn't go after its polluters," Kantor adds, "we will."
country, including the U.S., that stays away from Nafta and its
even more statist "side agreements" will have much more chance for
economic growth than those that go along. By cartelizing governments
so they can gang up against small entrepreneurs and taxpayers, Nafta
prevents experimentation with free markets, deregulation, and free
have a good reason to hope for a free-market Cuba. It would be an
example to this country, just as we were a good example to the world
from 1776 to 1933. If a free Cuba's per capita wealth ever surpasses
ours thanks also to our own departure from free-market principles
U.S. citizens may demand the kind of radical changes Cubans
now want. And besides, if Clintonian socialism is fully fastened
on America, the middle-class will need some place to move.