Cuba finds go it alone economy still sucks after 50 years

Miami Herald:

Three weeks after Cuban revolutionaries claimed victory, Fidel Castro declared that the island wanted not only political freedom but also freedom from an economic system that at the time was intertwined with the United States.

It was Cuban sugar that Americans stirred into their morning coffee, and U.S. industrial and consumer goods that flowed to the island.

Castro called Cuba a ''colony of the United States'' -- and made it clear he wanted to break with old ways. But over the past five decades, Cuba has exchanged a sugar quota and trade and investment dependence on the United States for massive handouts from the former Soviet Union and, now, for big subsidies from oil-rich Venezuela.

''You have 50 years of the revolution, and, despite all the subsidies, Cuba has been incapable of changing the structure of the economy to be self-sufficient,'' said Carmelo Mesa-Lago, professor emeritus of economics at the University of Pittsburgh.

In the early years following their Jan. 1, 1959, triumph, Castro and his followers set out to create a ''new man'' who would respond to moral incentives rather than the profit motive.

But through the years, especially when times have been tough, Havana has invited back foreign investors, allowed self-employment, legalized and then prohibited the American dollar, and courted foreign tourists who were shunned for most of the 1960s and 1970s. In 1968, a mere 3,000 tourists -- mostly Eastern Europeans -- visited Cuba. This year, Cuba is expected to host a record 2.34 million visitors.

''Cuba has had an awful economic policy, which has changed every four or five years -- but always within the economic parameters of socialism,'' said Mesa-Lago.

Jorge Piñon, an energy fellow at the University of Miami's Center for Hemispheric Policy, said the problem isn't so much Cuba's centralized economic model as ``inefficiency and lack of strategic planning. Instead of setting the basic umbrella policy for the economy and bringing in the experts for day-to-day operations, Fidel Castro has always wanted to micro-manage.''

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Jorge is wrong. It is the centralized economic model. It just does not work because no one is mart enough to make it make sense. I often use the example of someone deciding how many eggs and slices of bacon are needed in New York City everyday.

The quants still could not figure it out with a super computer, but pricing based on supply and demand works everyday. Multiply the calculation by a whole country and it becomes a more impossible task. Take away incentives and watch things deteriorate. Control freakenomics just does not work and never will work. All Castro has accomplished is making everyone poorer.

For those who glorify Castro's health care plan, ask yourself why people are risking their lives to leave free health care?

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